Two words leap out of State Auditor Les Merritt's audit report on the operations of the Northeast Partnership and Northeastern N.C. Regional Economic Development Commission. One is "greed"; the other is "incompetence."

Unfortunately for the state's taxpayers, both greed and incompetence were in abundant supply at what was supposed to be the northeast region's premier job generator but in fact was nothing more than a private slush fund for a privileged few.

As Merritt's report makes crystal clear, the primary focus of the Northeast Partnership in recent years hasn't been on bringing jobs to one of the poorest regions of the state. It's instead been on enriching the Partnership's own employees and contractors. The Commission, meanwhile, has been just as focused – on looking the other way or not looking at all while the thievery was running rampant.

Much of what went wrong at the Partnership and Commission that Merritt documents in his audit report is, of course, laid at the feet of Rick Watson, the Partnership and Commission's recently departed president and CEO.

It was Watson's call, according to Merritt's report, to pay himself $240,350 in total bonuses on top of the $503,413 he made in annual salary over the past three years. That's $743,736 in total compensation over three years – about 19 percent of the $4.1 million in state funds the entire agency received for that period. It was also Watson's decision to pay another $377,134 in bonuses to the Partnership's other 11 employees and contractors on top of what they made in salary or fees. The Partnership didn't have any rules or procedures for making these excessive bonuses, Merritt's report confirms; Watson's say-so was all that was needed.

It's also a safe assumption Watson was behind the Partnership's decision to sign contracts that Merritt described as potentially harmful to the agency. Merritt found that in 11 of 15 cases, the Partnership had signed agreements with employees or contractors that obligated the agency to pay them the equivalent of their annual salaries or retainer fees even when there was a good reason for firing them. Watson himself benefited from this sweetheart arrangement: the Partnership and Commission were forced to pay him $165,000 last month just to get him out the door.

Finally, Merritt's report also dismisses Watson's and other Partnership officials' contention that his financial involvement with an agency client – Randy Parton's Carolina Crossroads theater project – wasn't a conflict of interest. According to Merritt, Watson's involvement in the Parton project was a clear conflict of interest and violation of the Partnership's ethics policies.

But it's also clear from reading Merritt's report that the Commission, whose 19 members are appointed by the governor, House speaker and Senate president, are just as culpable, if not more so, for the public fleecing that's been allowed to go on at the Partnership.

As Merritt points out, the state auditor's office "saw little evidence of in-depth discussion or very little action taken (by the Commission) in regards to some major outlays and operational issues." As a result of this lack of oversight, Watson was allowed free rein to engage in the Parton conflict of interest; most board members had no clue who the Partnership's contractors were, why they were chosen, how much they were paid or why; and few board members knew how much Partnership employees were paid, why they received bonuses or that most couldn't be fired without large financial hits to the agency's bank account.

Merritt's report also notes that the Commission's laziness – nearly all of the agency's work was left up to Watson and small executive board – could have dire consequences for how the public views the agency, how the state decides to fund it, and how businesses trust it in the future.

Based on Merritt's findings, we don't see why anyone – the state, the public or businesses – should trust the Partnership and Commission with another dime of taxpayer money – at least not the way it's currently organized, operated and led. The problems go much deeper than just one individual and they won't be resolved until more than one individual departs.

The Commission immediately needs to dissolve the Partnership and retake control of the agency's resources. It also needs to demand the resignation of the Partnership's vice president, Vann Rogerson. Rogerson, a state Department of Commerce employee, didn't just know what was going on, he benefited from it – pulling in more than $101,000 in bonus pay over the past three years. The Commission also needs to shed itself of Cathy Scott, a consultant and close adviser to Watson. Scott raked in $87,450 in bonus pay over the past three years despite not being an official employee of the Partnership.

Finally, the Commission needs to demand the immediate resignations of its executive board. It was this tiny cabal – that includes the board chairman Jack Runion, past chairman Bob Spivey, treasurer O.S. "Buck" Suiter and secretary Fred Yates – that either didn't know what Watson was spending on himself and the rest of his staff or they did know and indulged it. Either way, they shouldn't spend another day directing economic development efforts in our region. They definitely shouldn't be anywhere near the process of choosing Watson's replacement.

No one will probably go to jail for the financial shenanigans at the Partnership. But that doesn't mean there shouldn't be stiff penalties. Until there are, the public should have zero faith that its money is safe with this organization.

http://www.dailyadvance.com/opin/content/news/opinion/stories/2006/04/16/20060416edaeditorial.html