May 27, 2007
McAllister's nonprofit activities are left off disclosures
John Fuquay - Fayetteville Observer

State Rep. Mary McAllister did not disclose on a required ethics form that she is a board member of a church-based foundation that receives state funding. 
 
She also did not disclose that HIV and communicable-disease services for people receiving substance-abuse treatment are among the services provided by another nonprofit organization for which she works as the paid executive director. 
Supporters of ethics in government say that without full disclosures, other lawmakers and the public would be unable to fully weigh whether McAllister has a potential conflict of interest by benefiting from legislation she votes for or bills she introduces. 
 
Perry Newson, director of the State Ethics Commission, said he does not comment on cases that could come before the commission.  
 
McAllister, a nine-term Democrat from Fayetteville, is the paid executive director of Fayetteville-based Operation Sickle Cell, which receives state and federal funding to serve as a health services contractor. 
 
She also is a director of Mount Sinai Foundation, a nonprofit group connected to Mount Sinai Baptist Church in Fayetteville that helps low-income residents pay for housing and provides educational programs for children. 
 
After being contacted by The Fayetteville Observer about the incomplete disclosure on her ethics form, McAllister’s lawyer, Jonathan Charleston, issued a statement from McAllister late Friday, saying she would correct her ethics form. 
 
“Recently, it has come to my attention that my involvement with Mount Sinai Foundation as a member of its board of directors was not disclosed on the statement of economic interest,” McAllister said in the statement. “This failure to disclose was not willful, but rather an oversight. ... I plan to amend the statement of economic interest to include disclosure of my involvement with Mount Sinai Foundation.” 
 
She also said failing to disclose Operation Sickle Cell’s work in HIV, AIDS and substance abuse programs on the ethics form was inadvertent. 
 
In a separate matter, McAllister is under a State Board of Elections investigation into whether her campaign repaid her more than twice the amount she reported loaning her campaign from 2002 to 2004. She has denied intentional wrongdoing. 
 
Lawmakers and their ties to nonprofit organizations have fallen under new and increasing scrutiny after a change in the law last year. 
Earlier this month, the State Board of Elections conducted a hearing about the dealings between a lawmaker’s campaign and his nonprofit organization and recommended the case be reviewed for criminal violations. Two lawmakers recently resigned from a nonprofit economic development board to avoid the appearance of a conflict of interest when they work on related legislation. 
 
A first for lawmakers 
 
This year was the first time state lawmakers had to disclose on ethics statements any ties they have to nonprofit organizations. The form requires disclosure by elected officials who are directors, board members or employees of religious, public health and safety, educational or charitable organizations. 
 
McAllister, who is paid $115,000 a year as Operation Sickle Cell’s executive director, disclosed the group’s sickle cell disease services but not HIV and other services. 
 
Senate Republican leader Phil Berger, who has an interest in ethics legislation, said the potential for conflict of interest with a nonprofit organization is heightened when a lawmaker receives a salary from a nonprofit that receives state funds. 
 
“The concern that I have is we’ve got the ethics bill that passed last year that requires a legislator or candidate to disclose any business that they have and any business with state government,” Berger said. “I’m not sure the law goes far enough in disclosing what the public needs to know about nonprofits that receive state appropriations, particularly when the nonprofit is one that the legislator is employed by or in control of.” 
 
Ran Coble, executive director for the N.C. Center for Public Policy Research, said full disclosure is critical for lawmakers involved with a nonprofit. 
 
“What I’m seeing is lawmakers start getting into trouble when they start treating the nonprofit like it’s theirs and not the public’s,” he said. “When state funds go to a nonprofit, which are formed for a public purpose, the rest of the legislature and the public would need disclosure that it could benefit her directly, that some of that money could end up in her salary.” 
 
Legislation support 
 
McAllister has backed legislation to send state money to Operation Sickle Cell and the church foundation, and both organizations have provided services to her campaign. 
 
During the 2005 legislative session, McAllister introduced a bill to give Operation Sickle Cell $500,000. The bill was co-sponsored by Reps. Margaret Dickson and Marvin Lucas — fellow Democrats from Cumberland County — as well as 10 other lawmakers. 
 
Dickson said she did not recall co-sponsoring the bill, but said it was customary at the time for lawmakers to support each other’s local bills. She noted that the bill died in a committee. 
 
The same year, Mount Sinai Foundation received a $5,000 grant to help children develop study, computer and job interview skills. The allocation was not a bill but was authorized when House members could submit projects of interest in their districts. The House has since changed that procedure. 
 
While it could be considered a conflict of interest for a lawmaker to vote for state spending on a program that could benefit his private business, lawmakers with ties to nonprofits often vote on social programs connected to the same field as their organization. 
 
Operation Sickle Cell received more than $275,000 this year as a contractor for the state Department of Health and Human Services. The organization received another $130,000 from federal sources that pass through the DHHS. 
 
Operation Sickle Cell provides testing, counseling and other support services for children and adults with sickle cell anemia, a blood disease found predominantly in African-Americans. The organization also provides substance abuse patients with HIV and sexually transmittable disease testing and counseling. 
 
As a lawmaker, McAllister has served on appropriations and health committees and sponsored and voted on many bills that would increase DHHS funding for AIDS and drug assistance programs, clean syringe exchange plans, minority health programs and community health centers. 
 
“It would seem to me the same rules ought to apply to a legislator over a nonprofit that would apply to a legislator with a for-profit business,” said Berger, of Rockingham County. “The key is salary, if there’s a pecuniary benefit.” 
 
Charleston said lawmakers have long been obligated to follow conflict-of-interest laws. 
 
“Whether or not a legislator inadvertently omits something on a form does not change the requirement imposed by the statute,” he said. 
 
In her statement, McAllister said, “Other than assisting Mount Sinai to obtain a grant from the state, which occurred prior to the enactment of the new ethics law, my involvement has been primarily limited to service on the board of directors. ... I have not and will not knowingly participate in any legislative action prohibited by the new ethics law.” 
 
Campaign ties 
 
Aaron Johnson, a former state prisons director and Fayetteville city councilman, is the board chairman for Operation Sickle Cell and was the longtime pastor of the Mount Sinai Baptist Church until his recent retirement. Johnson’s son succeeded him. 
 
McAllister’s campaign has paid the church’s kitchen supervisor for catering services and reimbursed Operation Sickle Cell for postage and use of the nonprofit’s facility. Operation Sickle Cell’s receptionist is McAllister’s campaign treasurer. 
 
Johnson said Operation Sickle Cell’s board is not concerned about the organization’s ties to McAllister’s campaign. A nonprofit organization could lose its tax-exempt status if it engages in partisan political activities. 
 
“We’re not aware of anything like that taking place,” he said. “The only thing we know about is what we’ve been reading in the paper. It would concern us if it were fact. I haven’t given it a lot of thought.” 
 
Johnson said the board has made no attempt to verify newspaper accounts of transactions between the nonprofit organization and McAllister’s campaign. McAllister’s campaign reported the expenses on publicly available campaign finance reports. 
 
Conflict-of-interest laws regarding nonprofits first surfaced in 2004 when former U.S. Rep. Frank Ballance was convicted of federal corruption charges. Ballance, while serving as a Democratic state senator from Warren County, pleaded guilty to funneling state money to his law firm through a nonprofit substance abuse center he helped create. 
More recently, the Board of Elections was alerted to potential wrongdoing last year during a review of campaign accounts controlled by Rep. Thomas Wright, a New Hanover County Democrat. In a hearing two weeks ago, the board found $411,000 in questionable spending, including more than $220,000 in unreported campaign contributions used for personal expenses. 
 
Wright has not publicly explained the spending, but he has denied wrongdoing and rejected calls for his resignation. The board referred its findings to the Wake County District Attorney’s Office. 
 
The board plans to call McAllister to a hearing sometime after June 1. Her campaign received a loan of about $5,600 from McAllister, and reported repaying her more than $13,000. 
 
Staff writer John Fuquay can be reached at fuquayj@fayobserver.com or (919) 828-7641.