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Wednesday, 22 February 2006 00:00

Closed session minutes reveal reasons for EDC probe

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By Sarah Kucharski • Staff Writer

A Superior Court Judge has ruled that Jackson County Commissioners acted illegally when they closed meetings to discuss Economic Development Commission dealings.

The ruling states that commissioners violated the Open Meetings Law when they discussed EDC chairman Tom McClure’s job and reviewed background information that led to commissioners passing a sweeping, five-part motion that removed McClure from all his posts and launched an investigation into the EDC. The EDC is not a county commission and McClure is not a county employee.

Minutes from the meetings — made public following the ruling — reveal much about why the investigation began and what commissioners expected to find.

Minutes from the Jan. 11, 2005, closed session — held just prior to commissioners’ launching the EDC investigation — show that Tamera Crisp furnished county manager Ken Westmoreland with a report about EDC-supported business QC Apparel indicating the textiles company was behind on its loan payments. Crisp was the county’s only employee dedicated to working with the EDC.

One of the few textile plants left in the region, QC struggled to make ends meet in an increasingly high-tech economy. Originally issued a $60,000 loan from the county’s revolving loan fund in May 1995, QC failed to make payments. Over the years, QC secured additional loans, renegotiated interest rates and payments. Despite still owing money, the company was issued another $300,000 loan.

In addition to owing such a large amount, Crisp said the company was not operating according to the business plan developed to secure its last $300,000 revolving loan from the county.

“Mr. Westmoreland stated that Tamera Crisp came to his office today and was literally frightened,” the minutes state. “She told him that Jackson Dev. Corp. and EDC are in serious financial trouble.”

The Jackson Development Corporation is a nonprofit private economic development organization that works closely with the EDC. It is able to buy and sell land, which the EDC can’t.

At the time, commissioners didn’t know that McClure had facilitated a special arrangement in which the EDC purchased QC invoices for a reduced rate, giving QC cash to pay off its loans to the county. However, the arrangement wasn’t entirely working. Closed session minutes state that QC had not made a payment in two years.

“Mr. Westmoreland stated that Tamera told him that she feels something is imminent...” the minutes state. “The question was raised that since this didn’t just happen over night — why has it come up all of a sudden. Mr. Westmoreland stated that apparently ‘they’ have been successful in getting out of these jams time and time again ... Tamera does not want to be the scapegoat or be blamed for the problems. Two things should be done: (1) find out what is going on, (2) do an audit.”

The following day on Jan. 12, county attorney Paul Holt reported in closed session that Triple S Partnership, the group that sold to the JDC the property and building in which QC Apparel is located, was considering foreclosure. Triple S had financed $250,000 of the money for the sale.

Consequently, then commission chairman Stacy Buchanan said several things needed to happen “regardless of how we go from here and to show that we are on top of this.” So came forth the sweeping, five-part motion in which the county effectively took over the EDC and removed McClure from all his posts.

“Mr. Holt recommended that a letter be written to McClure stating that all EDC responsibilities are being transferred to the county and he is to turn over all EDC and revolving loan documents, records, minutes, books, bank statements, etc, to the deputy and be signed by Chairman Buchanan,” the minutes state. “Write a second letter stating that he is hereby removed from all county committees, board, commissions, etc.”

Commissioner Joe Cowan requested that an audit be performed.

“An audit is needed so when the responsibilities are turned over to the county, it will know what is what. The audit will turn up a bad management letter such as how a loan was made on such a bad business plan, how could one get a line of credit to pay salaries. It will question the people who made the decisions and approved the loans,” the minutes state.

Revolving loans, such as those issued to QC, are considered high-risk loans and are managed by the county’s revolving loan committee — McClure, Crisp, Vickie Greene and Rick Kirkpatrick. The committee can only make recommendations for loan approval. The county commissioners must vote whether or not to approve the loan being issued.

An audit, performed by Mitchell Crisp of Dixon-Hughes, later showed that no monies appeared to be missing from EDC accounts. However, the audit also indicated there were three instances in which EDC actions did not appear to match up with the actions approved in EDC board minutes — one of which was that EDC meeting minutes showed that the EDC would hold a first deed of trust to the QC Apparel property; however, the deed took more than a month to record, placing the EDC second in line behind Triple S Partnership, the group that sold the JDC the property.

“This issue is significant due to the greater risk of loss created by taking a second position,” Crisp’s audit report stated. “In the event of foreclosure by the first mortgage holder the EDC would be required to increase its investment in order to protect its position.”

In the end, Triple S did begin foreclosure proceedings; however, McClure secured a private $175,000 loan from Jackson County landholder and Sevierville, Tenn., resident James Hooper. The loan resulted in Triple S calling off the foreclosure just hours before the property was to be sold at auction.

Hooper met McClure through land dealings that secured the land for Western Carolina University’s Millennium Campus. McClure’s full-time job is as Western’s director of local, state and federal government relations through the Center for Regional Development.

The EDC is continuing business as usual, though McClure chose not to seek reappointment to his position as chairman when the commission made appointments in mid-2005. The chair’s position is now shared by Sylva Mayor Brenda Oliver and Dillsboro Mayor Jean Hartbarger.

“We’re meeting,” McClure said. “I don’t know that we’re accomplishing a whole lot.”

While requests for information are coming in and businesses are calling about relocating to the area or getting assistance with expansion, not having a full membership may be hurting the commission’s ability to operate. The county pulled out of the EDC when it launched its investigation and Southwestern Community College — whose appointment, Gene Couch, was EDC treasurer — also stopped participating.

“I don’t believe the county will come to the table until there’s a new commission,” McClure said, referring to the county board.

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