You are on page 1of 10

UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF NORTH CAROLINA


EASTERN DIVISION
NO.

4:12-CR-88-1H(2)

UNITED STATES OF AMERICA )


)
v.
)
)
STEPHEN A. LaROQUE
)

GOVERNMENTS RESPONSE TO
DEFENDANTS SENTENCING
MEMORANUDM (DE-284)

The United States of America, by and through the United


States

Attorney

for

hereby

responds

in

the

Eastern

opposition

to

District
the

of

North

Defendants

Carolina,
Sentencing

Memorandum.
SUMMARY OF POSITION
The Defendant should be sentenced to a term of 30 months
imprisonment 1 for his theft of hundreds of thousands of dollars
from

defenseless

society

to

know

nonprofit
that

those

organization.
holding

It

is

high-paying

vital

for

fiduciary

positions (whether in Government or as head of a non-profit)


will be punished if they use such sacred positions to enrich
themselves.

To grant the Defendant a probationary sentence, as

requested by the defense, would signal to the public that such a


misuse of power is not to be taken seriously.
1

Such a sentence would be at the top of the advisory guideline


range of 24-30 months.
1

Case 4:12-cr-00088-H Document 290 Filed 07/06/15 Page 1 of 10

FACTS
By 2007, the Defendant had seized full control of a nonprofit

named

East

Carolina

Development

Corporation

(ECDC).

From this point forward, though the Defendant continued paying


himself a
loans. 2

hefty

salary,

ECDCs

began

making

See Summary of ECDC Loans as Exhibit 1.

fewer

and

fewer

On January 22,

2009, the Defendant authorized his attorney to begin preparing


civil complaints to be filed against his brothers in connection
with the distribution of his mothers trust and estate.
Exhibit 2.

See

On the same date, January 22, 2009, the Defendant

and his wife (on behalf of ECDC) signed a fraudulent employment


agreement in order to effectuate the Defendants plan to steal
$300,000 from ECDC.

The criminal charges in question focused on

the $300,000, rather than the amount misappropriated from ECDC


in

the

form

of

inflated

salary

and

unauthorized

expense

reimbursements. 3
The Defendant withdrew the $300,000 that he stole from ECDC
under the guise of four loan disbursements from ECDC to his
2

As shown in Exhibit 1, most of ECDCs loans during this period


were to the Defendants lawyer, an acquaintance of the Defendant who
lived outside of the area in which ECDC was empowered to make loans,
and to the Defendants own company (as part of his theft).
3

During the period from 1998 through 2012, the Defendant received
wages of $1.6 million and unauthorized reimbursement payments of
approximately $133,591.
2

Case 4:12-cr-00088-H Document 290 Filed 07/06/15 Page 2 of 10

management company, LMG.

Although the Defendant funneled the

money through LMG, the money was used to purchase assets held in
his individual name.

In the audited financial statement for

2008-09 (which covered the period during which the $150,000 loan
to

LMG

was

purportedly

made),

the

concealed as an organizational cost.

$150,000

bogus

loan

was

See Exhibit 3 at 14-15. 4

In April of 2010, the Defendant, in correspondence with the


North

Carolina

Board

following question:
profit

of

Elections

(NC-BOE),

was

asked

the

Does LMG receive any funds from the non-

organizations

[ECDC

and

PDC]?

In

response

to

this

inquiry, the Defendant misled the NC-BOE by stating as follows:


I have a management contract with the two
non-profit organizations to manage both of
them
in
all
aspects
with
the
primary
responsibility
including
Administration,
Marketing,
Loan
Packaging
and
Loan
Servicing.
LMG performs loan underwriting
for another non-profit organization on an as
needed basis for a fee.
See Exhibit 4 at 3.
In

the

fall

of

2010,

the

Defendant

ran

for

Carolina House seat for North Carolina District 10.

the

North

During the

campaign his opponent published mailed campaign fliers stating


that the Defendant uses Federal Government loans to finance his
4

It is also noteworthy that the audited financial statement fails


to identify the $150,000 zero percent interest loan to LMG in the list
of ECDCs notes receivable. Exhibit 3 at 9-11.
3

Case 4:12-cr-00088-H Document 290 Filed 07/06/15 Page 3 of 10

businesses.

The

Defendant

responded

by

sending

out

campaign mailings denying that federally funded loans had been


made to LMG and stating that he had filed a defamation suit
against his opponent.

See Exhibit 5.

During civil discovery in

the case, the Defendant refused to allow ECDC to comply with a


discovery

request

which

purported loans to LMG.

might

have

revealed

the

$300,000

in

ECDC would ultimately pay $40,796.75 in

legal fees and $17,250 in contempt fines to fund the Defendants


personal lawsuit.
In mid-2011, an investigative reporter from NC Policy Watch
began

making

inquiries

regarding

the

manner

Defendant compensated himself over the years.

in

which

the

See Exhibit 6.

After some negative articles were published by NC Policy Watch


referring to the Defendants refusal to respond to the NC Policy
Watch,

the

Defendant

conference

on

conference

the

August

responded
16,

Defendant

that

2011,

in

disclosed

he

would

Kinston.
neither

hold
At

the

press

the

press

existence

of

$300,000 of the purported loans to LMG nor the additions made to


ECDCs Board the day before the press conference.
On

August

Defendants

23,

2011,

instruction,

ECDCs
altered

accountant,
ECDCs

pursuant

completed

to

the

2009-10

Compilation Report (which had been executed by ECDCs outside


4

Case 4:12-cr-00088-H Document 290 Filed 07/06/15 Page 4 of 10

accountant on October 25, 2010) to include an accrued contract


services
Exhibit

liability
7

of

includes

$192,257.95.

the

pages

See

removed

Exhibits
from

the

and

8.

original

Compilation Report, while Exhibit 8 (which purports to be the


final

compilation

altered

pages

signed

generated

on
per

October
the

25,

2010)

Defendants

contains

instruction

the
in

August 2011.
On September 6, 2011, the day before federal grand jury
subpoenas began to be served in this case, the Defendant sent an
email

to

Debra

pertaining

to

Clary
an

requesting

alleged

her

employment

Development Corporation (PDC).

to

sign

contract

an

affidavit

with

Piedmont

See Exhibit 9 at 2.

In the

email the Defendant stated as follows: [a]ttached is a copy of


the contract and the board minutes authorizing you to sign the
contract (last page).
minutes
shown

the

on

Defendant

Defendant

the
then

official

Id.

On the last page of the attached

redacted

the

minutes.

attached

copy

unsigned

See
of

Exhibit
a

signature
9

at

corporate

resolution and an assigned employment contract.

block

5.

The

borrowing

Id. at 6-9.

copy of the same minutes from PDCs official records shows that
the Defendant redacted the unsigned signature block from the
minutes.

See Exhibit 10 (compare to Exhibit 9 at 5).

Case 4:12-cr-00088-H Document 290 Filed 07/06/15 Page 5 of 10

Soon

after

being

served

with

grand

jury

subpoenas,

the

Defendant began cashing out personal investments in an effort to


raise funds to pay back the bogus loans to ECDC. 5
was

able

to

raise

enough

cash

to

pay

back

Ultimately he

$200,000

$300,000 taken out of ECDC in the form of loans. 6

of

the

After paying

back the $200,000 bogus loan, the Defendant then withdrew this
amount in the form of bogus salary payments.

See Exhibit 11.

DISCUSSION
The Defendant claims that the facts of this case dictate a
sentence of probation and argues that a portion of his agreed
full restitution payment should be held back and used in payment
of his lawsuit against ECDC.

As discussed below, both of these

requests should be denied.


I.

A
probationary
sentence
appropriate in this case.

is

not

The Defendant suggests that he should be given credit for


paying back $200,000 of the stolen proceeds in September of 2011
(Def. Sent. Memo at 8).

This argument ignores the fact that

after paying back $200,000 of the $300,000 in bogus loans, the

It is the Governments position that this was done in an effort


to support a later argument that the bogus zero percent interest loans
were somehow legitimate.
6

As to the remaining $100,000 loan, the Defendant simple ripped


up the promissory note.
6

Case 4:12-cr-00088-H Document 290 Filed 07/06/15 Page 6 of 10

Defendant simply pulled the $200,000 back out of ECDC in the


form of bogus salary.
The

Defendant

next

claims

that

probation

is

warranted

because, in his opinion, the theft of $300,000 should have been


handled as a civil matter or, at most, as a misdemeanor charge
(Def. Sent. Memo at 6).
of

$300,000

from

This position is meritless.

defenseless

federal prosecution.

nonprofit

clearly

The theft
warrants

In this case, the use of a federal grand

jury was essential to develop the evidence necessary to trace


the

manner

in

which

the

Defendant

concealed

his

criminal

conduct.
The Defendant also argues that a probationary sentence is
somehow

warranted

because

he

had

to

endure

the

expense

and

embarrassment caused by a criminal prosecution (Def. Sent. Memo


at 1, 8).

Any argument that the Defendant is somehow a victim

in this case ignores the indisputable fact that the Defendant


could have avoided such expense and embarrassment by simply not
committing the crime.

Likewise, the Defendants suggestion that

his decision to plead guilty was motivated by a desire to save


substantial time and expenses for the court and the government
is inaccurate.

The Defendants plea came just a week prior to

trial and less than 24 hours before he was required, by Court


7

Case 4:12-cr-00088-H Document 290 Filed 07/06/15 Page 7 of 10

Order, to provide his computer to the Government for examination


of metadata.
Finally, the Defendant argues that probationary sentences
resulting from a number of white collar prosecutions throughout
the United States somehow require that he also be sentenced to
probation.

This argument ignores a history in this district of

strong white collar and public corruption prosecutions that have


resulted in lengthy sentences.
II.

The Court should order payment of


$300,000 in restitution to the United
States Department of Agriculture.

In the Memorandum of Plea Agreement the Defendant agrees as


follows:
To
make
restitution
to
East
Carolina
Development
Corporation,
Inc.,
a
North
Carolina non-profit corporation, in the sum
of $300,000, and to any other victim, in
whatever
amount
the
Court
may
order,
pursuant to 18 U.S.C. 3663 and 3663A.
Said restitution shall be due and payable
immediately.
Memorandum of Plea Agreement at 2(b).

This agreement contains

no reservation allowing for a portion of the restitution to be


held in trust in order to allow the Defendant to sue his victim.
The Defendant has pleaded guilty to stealing significant amounts
of

money

from

ECDC.

The

Defendant

has

also

agreed

Case 4:12-cr-00088-H Document 290 Filed 07/06/15 Page 8 of 10

to

pay

$300,000
payable

in

restitution

immediately.

and

that

such

Consequently,

amounts

the

are

Defendant

due
should

ordered to make full restitution.


Respectfully submitted, this 6th day of July, 2015.
THOMAS G. WALKER
United States Attorney

BY: /s/ Dennis M. Duffy


DENNIS M. DUFFY
Assistant U.S. Attorney
310 New Bern Avenue, Suite 800
Raleigh, North Carolina 27601
Telephone: (919) 856-4530;
Fax: (919) 856-4487
E-mail: dennis.duffy@usdoj.gov
NC Bar No. 27225

Case 4:12-cr-00088-H Document 290 Filed 07/06/15 Page 9 of 10

and
be

CERTIFICATE OF SERVICE
This is to certify that I have this 6th day of July, 2015,
served a copy of the foregoing upon the defendant in this action
either electronically or by depositing a copy of the same in the
United States mail in a postpaid envelope addressed as follows:

Keith A. Williams, Esq.


321 South Evans Street
Suite 103
Greenville, NC 27835

Christopher A. Rogerson, Esq.


123 East Caswell Street
Kinston, NC 28501

Elliot S. Abrams, Esq.


Cheshire Parker Schneider & Bryan
133 Fayetteville Street, Suite 500
Raleigh, NC 27602

THOMAS G. WALKER
United States Attorney

BY:

s/ Dennis M. Duffy
DENNIS M. DUFFY
Assistant U.S. Attorney
310 New Bern Avenue, Suite 800
Raleigh, North Carolina 27601
Telephone: (919) 856-4530;
Fax: (919) 856-4487
E-mail: dennis.duffy@usdoj.gov
NC Bar No. 27225

10

Case 4:12-cr-00088-H Document 290 Filed 07/06/15 Page 10 of 10