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Wednesday, 01 August 2012 13:17

Under-the-radar sublease of county building comes to light in convoluted civil case

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The director of a mental health nonprofit falsely posed as the landlord for a building he didn’t own for nearly a decade, collecting more than $371,000 in rent on office space that in fact belonged to Haywood County, according to a civil lawsuit.

Since 2003, Tom McDevitt, the director of Evergreen Foundation based in Waynesville, collected monthly rent on two office buildings in Waynesville that were owned by the county — unbeknownst to the county.

 

At first blush, it’s hard to understand how another entity could be leasing out office space owned by the county and collecting rent from the tenets all those years without the county realizing it.

The saga goes back to the late 1990s, when Haywood County gave the regional mental health agency Smoky Mountain Center free use of an old office building which had once served as nursing quarters behind the former hospital.

Smoky Mountain Center did a major renovation to the building and built a second office building alongside it. Smoky Mountain Center put up most the money for the renovations and construction, but the buildings and the land they sat on still technically belonged to the county.

In 2003, however, Smoky Mountain Center no longer needed the office space. McDevitt, who was the director of Smoky Mountain Center at the time, began subleasing the offices to Meridian Behavioral Health Services, a private counseling and psychological practice.

McDevitt placed the rent he collected into the account of a nonprofit called Evergreen. At the time, Evergreen was a nonprofit arm of Smoky Mountain Center, with McDevitt at the helm of both entities.

In later years, however, Evergreen split off from Smoky Mountain Center, and McDevitt stepped down. He continued to stay at the helm of Evergreen, however.

After the parting of ways with Smoky Mountain Center, he continued for collect rent on the building and kept the money — money that should have gone to benefit Smoky Mountain Center — for Evergreen, according to the suit.

It took several years for Smoky Mountain Center to realize that Evergreen was collecting and keeping rent on the building.

“The problem is, everybody assumed was what Evergreen did was for the benefit of Smoky Mountain, to the extent we considered them essentially our trustee. If they were doing something to collect rent, it was for us,” said John Zaloom, a Raleigh attorney who filed the suit on behalf of Smoky Mountain Center. “At some point in time, Evergreen said ‘No, we became our own thing, and we in fact weren’t doing this for you.’”

It simply wasn’t on anyone’s radar that Meridian was still paying rent to Evergreen, Zaloom said. The lease to Meridian had been set up by McDevitt when he still was the director of Smoky Mountain Center, and when McDevitt parted ways with Smoky Mountain Center, the institutional knowledge of the lease went with him, Zaloom said.

Smoky Mountain Center is now suing Evergreen for unfair and deceptive trade practices, unjust enrichment, trespass and tortious interference with prospective economic advantage. Smoky Mountain Center claims it is owed the back years of rent — totaling $371,000.

The dispute over the office buildings is part of a larger fight between Smoky Mountain Center and Evergreen over money and property Evergreen controls. Smoky Mountain Center claims Evergreen is holding hostage millions in assets that were amassed in the name of Smoky Mountain Center but have been walled off by Evergreen.

Where the county stands

Haywood County, meanwhile, had no idea that Evergreen had become a self-appointed middleman in the lease of the buildings.

The county technically owned the building but had given Smoky Mountain Center free use of the property and buildings in recognition of the valuable mental health services the agency provided to the public.

A resolution by the county commissioners laying out the agreement in 1996 stipulates that Smoky Mountain Center could use the buildings as long as it likes, with the caveat that the agency continued to provide mental health services for the public and that the office buildings were used for that purpose.

In 2003, however, Smoky Mountain Center stopped providing mental health services in-house. Mental health was privatized statewide. Instead of public agencies like Smoky Mountain Center employing their own counselors and psychologists, private practices assumed the role of providing mental health services.

Smoky Mountain Center continued to exist but became an administrative clearinghouse for patients, assessing their need for services and match them up with private practices for counseling or treatment.

The county clearly knew that Meridian was operating out of the office space previously granted to Smoky Mountain Center but didn’t realize there was a third-party acting as a de facto landlord.

“I don’t believe the county intended that property to be sublet for a profit,” said County Commissioner Chairman Mark Swanger. “We were never notified there had been a sublease on that property.”

The county has not decided whether to file a lawsuit of its own to get back any of the rent paid to Evergreen all these years.

“That remains to be seen,” Swanger said. “In any kind of lawsuit, the attorney fees can sometimes negate any kind of reward. So we have to determine whether it is in the tax payers best interest.”

Where Evergreen stands

McDevitt, meanwhile, claims that Evergreen was within its rights to act as the landlord for the office buildings.

Specifically, Evergreen had overseen the major remodeling and construction of the office buildings in the late 1990s.

Evergreen claims that in essence meant it was entitled it to serve as the property manager for the office space.

In a response to the lawsuit, Evergreen claims that Smoky Mountain Center was well aware that it was subleasing the offices to Meridian. Indeed, Evergreen had historically served as a property management arm of Smoky Mountain Center and was the whole reason Evergreen was set up in the first place.

Evergreen’s role when it was created was to amass and manage a vast inventory of office buildings across the seven western counties for mental health services on behalf of Smoky Mountain Center.

Smoky Mountain Center would give Evergreen money — in most cases money that came down from the state — to buy or build offices for its team of mental health counselors and psychologists.

But in 2002, when the state privatized mental health services, Smoky Mountain Center didn’t need all its office space anymore, so the offices were rented out — in many cases to the private mental health practices that had cropped up in Smoky Mountain Center’s wake, as was the case with Meridian.

In the meantime, Meridian is unsure who it is supposed to be paying rent to, as both Smoky Mountain Center and Evergreen claim they deserve the monthly rent. So for now, its monthly rent payments of $4,480 a month are being held in escrow by the court.

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