Jury seated in trial of ex-NC Rep. LaRoque - WSLS 10 NBC in Roanoke/Lynchburg Va

Jury seated in trial of ex-NC Rep. LaRoque

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RALEIGH, N.C. -

As a powerful member of the Republican leadership in the N.C. House, Rep. Stephen A. LaRoque railed for years against big government and those who take taxpayer handouts.

The former Kinston lawmaker was set to go on trial Monday on a dozen felony charges stemming from a pair of government-funded non-profit corporations federal prosecutors allege he used as personal piggy banks.

Twelve jurors and three alternates were seated shortly after noon.

According to a 77-page federal indictment, LaRoque scammed taxpayers to finance a lavish lifestyle that included a six-figure salary and $300,000 in interest-free personal loans used to buy a house, new cars, an ice-skating rink and a collection of jewel-encrusted Fabergé eggs.

LaRoque, 49, faces four counts of theft from programs receiving federal funds, four counts of transactions in criminally derived property, a count of cover-up by scheme or device, a count of fictitious and fraudulent representation, and two counts of making false tax returns.

LaRoque was elected to three terms representing a district that included Greene County and parts of Lenoir and Wayne counties. Rising to become the influential co-chairman of House Rules Committee, he resigned last year following his indictment and defeat in the May 2012 Republican primary.

Since then, the formerly outspoken politician has kept largely silent. Free on a $50,000 bond, LaRoque last week politely referred any questions to his lawyer, Joe Cheshire of Raleigh.

Cheshire did not return calls seeking comment. But in court filings, LaRoque's defense team says their client is not guilty because LaRoque was legally entitled to every penny.

"Theft is taking funds without authority," Cheshire argued in an unsuccessful motion seeking to have a federal judge dismiss charges. "Here, Mr. LaRoque had authority. Therefore, there was no theft."

The criminal case revolves around payments from East Carolina Development Company and Piedmont Development Company — two non-profit entities LaRoque created to serve as intermediaries for issuing small business loans backed by the U.S. Department of Agriculture.

Records show LaRoque appointed his wife, brother and close friends to the small boards overseeing the non-profit entities. Typically meeting at a local country club, the board members then approved what prosecutors allege were outsized compensation packages for LaRoque, some of them taking effect retroactively to give him raises paid for past years.

All told, LaRoque was paid more than $2.1 million in salary, bonuses and expense payments between 1999 and 2012. Nearly $338,000 of that came in just one year, despite having a relatively modest portfolio of loans to supervise.

Again, the defense says it was all perfectly legal and proper because there was no restriction on how much LaRoque could be paid for administering the federally backed loans.

"The prosecution's theory admits that the board authorized every transaction comprising the alleged scheme," says a defense motion filed in April. "Rather than alleging that Mr. LaRoque misled the board members, the government bases its theory of prosecution on an alleged violation of a fiduciary duty or organizational policies, or simply on the prosecution's belief that Mr. LaRoque received too much compensation."

Prosecutors say LaRoque falsified financial records to get millions in federal funds he then used to make low-or-no interest loans to his future wife, his lawyer, a fellow GOP politician, friends and himself.

The indictment also alleges LaRoque and his wife funneled hundreds of thousands of dollars in federal funds directly from the non-profit entities into his for-profit business, LaRoque Management Group. That company then wrote checks to help buy an ice skating rink in Greenville for his wife and to purchase a house for his stepdaughter to live in, according to court filings.

Federal money was also used to make loans to his political campaigns, pay for two new automobiles, purchase a Zamboni to smooth ice at the skating rink and cover credit card charges that included $37,000 in jewelry for his wife, according to the indictment.

As part of its proposed questions to select jurors in the case, the defense asks: "Do you understand that a non-profit entity may make 'profit,' but that it simply may not have shareholders like a traditional business? Do you understand that working for a non-profit entity does not require a person to receive minimum wage?"

The defense argues the level of compensation LaRoque received is nobody's business except his and the non-profit's board of directors — which for much of the period in question consisted of him, his wife and his brother.

"To find otherwise would expose to conviction ... every contractor or employee of an organization over which the federal government could exercise its prosecutorial jurisdiction if a jury believes that the person knowingly received 'too much' compensation. This too may be a basis for a civil proceeding against Mr. LaRoque, but it is a wholly insufficient basis for an attempt to put him in prison."

If convicted on all counts, LaRoque faces a maximum sentence of up to 96 years in federal prison and up to $3 million in fines. His trial, which is to be held at the federal courthouse in Greenville, is expected to last about 2 ½ weeks.

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