Politics & Government

Criminal investigation into state contracts closes

Federal prosecutors have closed their investigation into expensive contracts for high-ranking employees and consultants at the state Department of Health and Human Services with no finding of criminal wrongdoing.

John Bruce, the acting U.S Attorney for the Eastern District of North Carolina, and David A. Bragdon, a federal prosecutor in the criminal division, informed attorneys in two letters dated Aug. 10 that also went to DHHS.

“As we’ve always said and expected, we were notified by the U.S. Attorney’s office that both reviews of the Department of Health and Human Services have been closed and this matter is concluded,” DHHS communications director Kendra Gerlach said in an email.

The letters referred to two July 2015 subpoenas signed by former U.S. Attorney Thomas Walker and another prosecutor, Banumathi Rangarajan, which requested that DHHS provide documents by mail or bring them to a grand jury meeting.

“This letter does not grant immunity from prosecution to anyone,” each of the two-paragraph letters said. “If new evidence comes to our attention, the investigation could be reopened, or a new investigation could ensue.”

The U.S. attorney’s office had demanded records related to the Washington, D.C., consulting firm of Alvarez & Marsal and several people who worked or had formerly worked for the state, including:

▪ former DHHS Secretary Aldona Wos.

▪ Joe Hauck, who received a no-bid contract and worked as a senior adviser to Wos, taking a leave from his regular job with her husband’s company. He was paid $310,000.

▪ Thomas L. Adams, who served as chief of staff to Wos for a month, then received $37,227 in severance pay.

▪ Les Merritt, a former state auditor who received a no-bid contract to be chief financial officer for DHHS’s mental health division.

▪ Angeline Sligh, a former manager who supervised the replacement of North Carolina’s Medicaid billing system.

The probe began after state audits accused Sligh of wasting more than $1 million and hiring people with whom she had personal connections. Federal authorities sought job postings, applications, payment records, performance evaluations, emails and other records related to Sligh and 30 other people identified as DHHS employees.

The U.S. attorney’s office asked for Wos’ job application and employment contract and any communications among Wos, Merritt, Adams, Hauck and the Alvarez & Marsal firm.

Alvarez & Marsal was hired on a no-bid, $3.2 million contract to oversee Medicaid finances that later was expanded to more than $9 million.

Merritt joined the department shortly after Gov. Pat McCrory took office and left after a year, for which he was paid $312,000. Over six months in 2013, Merritt said he worked 200 hours and he was paid $52,000, a rate of $260 an hour that made him the highest-paid hourly employee working on a personal services contract in state government that year.

Merritt said in an interview he was surprised the investigation into his contract wasn’t dropped months ago.

He said he promptly gave investigators all the documents they asked for, including a record of the work he did and his time sheets.

“I had a contract and I could prove I did the work,” he said.

Merritt said he was never called for an interview or for grand jury testimony and doesn’t think he was the target of the investigation.

“I did expect it to turn out this way,” he said. “I can’t imagine it turning out any other way.”

Wos, appointed by McCrory as he took office in 2013, announced her resignation on Aug. 4, 2015 — a week after the department received the subpoenas. Wos and the McCrory administration have said she made the decision to resign before the subpoenas arrived.

McCrory said at the time that Wos, a physician and wealthy political fundraiser from Greensboro, exceeded his expectations in overseeing the state’s largest agency and that she brought “incredible passion” to the job.

Anne Blythe: 919-836-4948, @AnneBlythe1