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Federal prosecutors: LaRoque bought luxury items with stolen money

By Amanda Brannon
WCTI Staff
Published On: May 20 2013 07:11:11 AM CDT
Updated On: May 24 2013 05:33:10 PM CDT
GREENVILLE, PITT COUNTY -

Testimony continued in day five of the Stephen LaRoque trial in federal court in Greenville.

The former state representative is charged with 12 counts of corruption.

Federal prosecutors believe he used money meant for rural business to pay for luxury items. They believe he was a man who was living large on somebody else’s dime.

Since the late 1990’s, LaRoque worked for East Carolina Development Company. The non-profit group was supposed to give loans to small businesses. Instead, federal prosecutors believe he funneled cash into his own pocket and spent it on jewelry for his wife and a zamboni for an ice rink in Greenville.

On Friday, a witness testified about LaRoque’s spending in Las Vegas. He purchased two Faberge eggs for his wife in 2008. The eggs cost nearly $10,000.

Ten months later, prosecutors said the couple visited a store outside Washington, D.C. and bought nine Faberge eggs one day. Then, LaRoque purchased another Faberge egg the following day. The cost for that shopping trip was more than 16,000.

In 2009, federal prosecutors said LaRoque’s wife purchased "Bladez on Ice" on Red Banks Road for $525,000. When equipment failed, authorities said LaRoque bought a zamboni to dish out the ice and then keep it smooth.

Testimony will continue after Memorial Day.

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Federal prosecutors started the day bringing United States Department of Agriculture’s business programs specialist, Lisa Talley, back to the stand.

Talley handles the IRP (Intermediary Relending Program) loans from the USDA to East Carolina Development Company, otherwise known as ECDC. It’s the non-profit organization prosecutors believe former State House representative Stephen LaRoque pocketed hundreds of thousands of dollars from.

Talley testified on the witness stand one of her jobs is to make sure the annual audit's from the company are up to date. She stated on Wednesday there was an issue with several audits being late from ECDC and there was some missing information about a $150,000 loan listed in the "other" category.

According to Talley, Mr. LaRoque never disclosed to her that the money was actually being used for his own company, called "LaRoque Management Company" or "LMG" for short.

She assumed it was an organizational cost and so she didn't question it.

The defense countered that because the USDA didn't raise eyebrows over the $150,000, LaRoque assumed he was playing by the rules.

Later in the day, a former board of directors’ member for ECDC testified that he voted to increase LaRoque’s salary from $18,000 per year to $48,000 in 1999 because he cited "the company had increased."

However, he testified that he didn't know LaRoque had discussed having a yearly salary increase of 3% of the company's total assets with another member of the board.

LaRoque’s salary increased to more than $150,000 by 2011.

The board member said he wouldn't have agreed to that because ECDC is a non-profit and that would be too much money for one person to receive as their salary.

Court adjourned around 4 p.m. and is expected to resume at 9 a.m. on Thursday.

Stay tuned to NewsChannel 12 as we continue to follow this story.

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Witnesses were called to the stand in day two of the trial of a former North Carolina representative indicted on twelve counts of alleged corruption.

Former district 10 State Representative Stephen LaRoque is charged with funneling hundreds of thousands of dollars meant for rural business development, into his own pocket.

He was indicted by the grand jury and resigned in July 2012.

Six witnesses testified on Tuesday. The sixth witness, a business programs specialist for the United States Department of Agriculture, will continue her testimony on Wednesday.

NewsChannel 12 caught up with LaRoque's attorney, Joe Cheshire, at the end of the day.

“We’re feeling really good about our case. We think the issues are coming out in an understandable way. Ah, and that Mr. LaRoque's case his positions are just exploding in the courtroom,” he said.

The main points discussed in court were the large salary increases LaRoque received over a seven year period from the non-profit organization, East Carolina Development Company. His salary increased from $18,000 per year to more than $130,000.

However, the former president of the board of the directors for ECDC stated Tuesday on the witness stand he talked with LaRoque in the late 1990’s regarding a salary increase. The defense argued that the pair had a “verbal contract,” and LaRoque was to receive 3% of the total assets of the company as his salary. Plus, independent auditors and the USDA authorized the actions of the board, so LaRoque assumed they were following the rules and he earned the salary increase fair and square.

There were also questions concerning the potential conflict having LaRoque, his wife and brother as part of the board of directors for ECDC.

A lot of technical terms were also thrown at the jury, including the type of loans ECDC was applying for from the USDA.

We asked Cheshire how he plans to break down all the numbers for the jurors.

“That’s what we will keep trying to do. And that's make it simple, direct and understandable because the more understandable, the more we feel confident about our case,” Cheshire said.

The prosecutor, Dennis Duffy in this case told us he could not comment on an ongoing trial.

There are expected to be eighty witnesses called the stand. The judge anticipates the trial to last two weeks.

“Well, you know we're early into a trial that is supposed to be fairly long so one never knows what's going to happen. We'll just keep doing what we do just as much as we can,” Cheshire said.

Stay tuned to NewsChannel 12 as we will continue to be in the courtroom on Wednesday.

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Opening statements began Monday afternoon in the trial of of former State Representative Stephen LaRoque. The Kinston Republican is accused of using federal money for personal gains and purchases.

According to officials, the trial at the Federal Courthouse in Greenville is expected to last for two weeks.

Federal prosecutors allege that LaRoque scammed taxpayers to finance a lavish lifestyle that included $2.1 million in salary payments. LaRoque also allegedly used $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. The money was from federal funds loaned to LaRoque's company to benefit rural communities, according to investigators.

LaRoque was indicted last July. He is facing a dozen federal theft and money laundering charges. But his lawyers said he's not guilty because he was legally entitled to the money.

LaRoque was elected to three terms in the N.C. House and served as the powerful co-chairman of the House Rules Committee. He represented Lenoir, Greene and Wayne Counties, but resigned from the General Assembly on August 1, shortly after his indictment.

He faces a maximum sentence of 96 years in federal prison if convicted.