June 21, 2012News that the Federal Bureau of Investigation (FBI) and the Criminal Investigation unit of the Internal Revenue Service (IRS) are investigating Guilford County Manager Brenda Jones Fox has created major concern among the Guilford County commissioners and other county officials.
Last week, The Rhinoceros Times reported that agents from both the FBI and the IRS have been asking questions of county officials and former county employees about a series of questionable actions and deals by Fox, and this week commissioners and others have been reacting to the news.
According to several sources, FBI and IRS agents have also been inquiring about actions of former Guilford County Commissioner Steve Arnold and others who were involved in real estate deals that have been the center of controversy since the facts surrounding those deals have come to light.
Commissioner Paul Gibson said this week that an IRS investigator had questioned him about Fox's actions and about other events related to the land deals under investigation. Gibson said the questions he was asked were largely about the county's purchase two years ago of the building at 325 E. Russell Ave. in High Point.
Gibson said he attempted to answer the questions from the IRS investigator to the best of his ability.
"I might lie to you; I might lie to someone else," Gibson said, "but I would never ever lie to the Internal Revenue Service."
Gibson said he didn't know if any of the information he provided was beneficial to the inquiry.
"I'm not sure how much help I was to them," Gibson said.
Shelley Lynch, a public affairs specialist for the FBI, said she was not at liberty to say whether or not an investigation of Fox, Guilford County or anyone else was taking place.
"As a matter of policy, the FBI can neither confirm or deny the existence of an investigation," she said.
While Lynch did not respond to answers regarding the situation in Guilford County, she said she could comment generally on FBI practices and matters of policy. She said there was a wide range of activities that the bureau investigates, including everything from suspected terrorist activity in an attempt to prevent terrorist attacks, to investigations into civil rights violations or matters of public corruption.
According to Lynch, there is no requirement that a crime cross state lines in order for the FBI to become involved.
Lynch said the existence of an investigation can sometimes become public knowledge in cases where the FBI files court documents. She added that, in other cases, court documents are sealed by a judge and therefore are not discoverable by public records requests.
Fox's attorney, Seth Cohen of Smith, James, Rowlett & Cohen, said, "Brenda Jones Fox has done nothing wrong much, less illegal. While it is our understanding that federal agencies have been asking questions, it is not our understanding that there is a formal investigation underway. The questions that are being asked are a result of individuals who have a personal vendetta against Ms. Fox, including a former disgruntled employee. It is our firm belief that within a matter of weeks this whole matter will be put to rest."
Guilford County Attorney Mark Payne said this week that there had been no records requests to Guilford County from either the FBI or the IRS. He also said he had not been interviewed by either agency.
According to Payne, public records requests are themselves public records.
Payne also said that federal agents seeking documents in the course of an investigation have other more private routes for obtaining that information. They do not have to go through the same channels as reporters or citizens seeking government records.
Many of the documents that could be of value in this type of investigation are already posted online for anyone to see at the county's website.
Commissioner Linda Shaw said she had heard absolutely no hint of any federal investigation until she read the June 14 Rhino Times.
"I didn't know anything at all," Shaw said.
She said her dog was being treated that morning by veterinarian and City Councilmember Trudy Wade.
Shaw said she read The Rhino Times in astonishment and asked Wade if she had read the article, and Wade said that she had.
Last week, former Guilford County Property Management Director David Grantham told The Rhino Times that two federal agents – a female special agent from the FBI's Charlotte office and a male agent from the Criminal Investigation unit of the IRS – had come to his house to ask a wide variety of questions about the purchase of the Russell Avenue building from High Point developer Wayne McDonald, as well as about the renovation of that building by McDonald.
According to Grantham, the federal investigators also asked questions about the $5.1 million loan deal Fox arranged with Wachovia Bank, which Grantham said he didn't know anything about.
In 2008, Fox allowed Wachovia Bank to change its bid in a sealed bid competition for a $5.1 million loan contract after the deadline for submitting bids had passed. That inexplicable move cost the county about $200,000 to the benefit of Wachovia for that same amount.
Grantham said the investigators also asked questions about a secret real estate contract potentially worth millions of dollars that Fox signed in 2010 with High Point real estate agent Dian Brigman, whom Fox maintains came into her office on "a cold call." Brigman is now deceased.
Grantham said he did know a lot about Fox's deal with Brigman because, once Grantham discovered the existence of the contract, he had a great many questions and objections that he raised at the time.
Grantham said he told the agents that the purchase of the McDonald building was a highly unusual deal in many ways. He said it was the first time in more than 30 years in county real estate management that Guilford County had bought a building without an appraisal, and it was also the first time the county had bought a building without attempting to negotiate down the seller's asking price. According to Grantham, unlike every other real estate deal he's seen Guilford County conduct, the county accepted McDonald's asking price without any negotiation.
McDonald was Arnold's friend and business associate, and, after the Board of Commissioners had voted to build a new Department of Social Services (DSS) building on the county's governmental campus in High Point, Arnold engaged in an extensive and intense campaign to convince the commissioners to stop that project and instead buy McDonald's building.
Due to the efforts of Arnold, Guilford County purchased that property for $6.9 million. The county also gave McDonald a nearby piece of property as part of the deal and awarded McDonald the contract to renovate the Russell Avenue building for the county. In normal circumstances, a renovation contract of that sort would be put out for competitive bids, but this one was not.
According to several sources, McDonald got highly preferential treatment from the county in many ways, thanks to Fox and Arnold, who were for all intents and purposes running the county in 2009 and 2010 when the sale and renovation of the Russell Avenue building was taking place.
Current Chairman of the Board of Commissioners Skip Alston was also chairman of the board at that time, and Alston was very active in county government as well. However, according to county staff, it was Arnold who was frequently down at the Old Guilford County Court House conferring with Fox and managing deals.
One top-ranking county official said of Arnold's role in the purchase and renovation of the Russell Avenue building: "I've never seen a commissioner so personally involved in a county real estate deal like that."
Commissioner Billy Yow said he believes there are many pieces to the puzzle and, once everything is known, people would be shocked at the breadth and extent of the backroom deal-making and the large number of players involved.
"They won't believe the matrix of it all," Yow said.
There is already a clear web of connection between the major players in the Brigman and Russell Avenue building deals.
Fox and Arnold were friends and political allies for over 20 years. Brigman was a friend and former employee of Arnold, and she was also an employee of McDonald.
According to one county employee, it was very common to see Arnold's truck parked in front of McDonald's office in High Point in 2009 and 2010. When a group of county commissioners viewed the Russell Street building, Brigman was the real estate agent who showed them around and asked questions. And when commissioners were taken on a tour of renovations of those buildings, Brigman was also the agent who handled that. Fox was on that trip along with the commissioners.
Yow said he believes that the deals involve backroom agreements that even tie into what he said was favoritism for a controversial hotel project planned for downtown Greensboro two years ago. Project backers were seeking to use beneficial federal loans that were part of the stimulus package.
"That's why the hotel kept popping up at the top of the list," Yow said. "It's about political ties – that's exactly what's been going on."
Alston was the real estate agent for that hotel deal that never transpired. As the agent handling the deal, Alston stood to make a great deal of money if it went through.
In late 2008, Alston and Arnold – longtime political foes until then, joined forces to make Alston chairman of the Board of Commissioners and Arnold vice chairman. Those two lead a coalition of commissioners that forced out former County Manager David McNeill, Deputy County Manager Ben Brown and County Attorney Sharron Kurtz.
Then, the Alston/Arnold-led board put Fox in as interim county manager and made her county manager a few months later. The board also made Human Resources Director Sharisse Fuller the assistant county manager and let Fuller keep her human resources director position as well.
At the end of the 2010, Arnold was stepping down from the Board of Commissioners and, at that time, many said that Fox was returning the county-manager-job favor to Arnold: Fox quietly created a new high-level county position that many also said was clearly designed for Arnold.
However, when The Rhino Times found out about and reported on the position, and the apparent attempt to fill it with Arnold, public outcry caused Arnold to withdraw his name from the pool of applicants and, a few days later, Fox did away with the position.
If Arnold had gotten that job, he would have been in charge of the county's property management and planning operations, and he would have also been in control of all of the county's real estate deals and construction projects.
If the contract with Brigman had been successful and Arnold had gotten the "construction czar" job, that would have meant that Fox, Arnold and Brigman would have had total administrative control over all of the county's real estate projects at a time when the county was embarking on a multi-year, $1 billion capital improvement plan that would have meant hundreds of millions of dollars in land purchases, renovation contracts, construction jobs and other real estate deals.
This was at a time when construction work was very hard to come by after the global economic collapse, and also at a time when Arnold was facing bankruptcy. Based on a consistent failure to pay property taxes during this time, it seems McDonald was also facing financial difficulty.
Arnold was not allowed to declare bankruptcy because a judge found that he had committed multiple actions of fraud during the bankruptcy proceedings, mainly attempts to conceal property that he owned.
One real estate expert who reviewed the Brigman contract for The Rhinoceros Times said that, with that contract, the county's Property Management Department could not have located and purchased property for the county – as it always had for years and years – without paying a commission to Brigman, since the contract that Fox signed with Brigman in secret gave Brigman "exclusive rights" to find property for the county to purchase.
Commissioner John Parks said this week that Brigman was the agent who showed him, Commissioner Bruce Davis, Fox and other county officials the Russell Avenue building. Brigman was also the real estate agent, Parks said, who led another group of county employees on a tour of a Kernersville property that McDonald had renovated. That trip was part of an effort to get the commissioners to go along with awarding McDonald the contract to renovate the Russell Street building.
A year before the county purchased the property for DSS, the county commissioners voted to build a new DSS building on the county's High Point governmental campus, and the board hired an architect and, by the time the county agreed to buy McDonald's building, had paid that architect $46,000 for the project on the governmental campus.
Many commissioners at that time said they wanted the county's new DSS building to be on the county's campus, since the users of social services also often use other county services.
When Parks was asked this week who had found the Russell Avenue building and brought it to the attention of the county, he said, "It wasn't John Parks."
Davis said he remembers clearly who it was that brought the 325 Russell Ave. property to the county.
"It was Steve Arnold," Davis said.
Fox sent a memo to commissioners on Monday, June 18 saying that she would be out of the office that day. The reason for her absence isn't known but some commissioners said it is not unusual for Fox to be out of the office for a day or two.
McDonald was in the news this week. He has had well-publicized tax problems for a long time, and, in recent years, he has seemed to have some sort of magical immunity from tax collection efforts by the county – but that ended this week when two of McDonald's recently seized properties were put up for sale by the courts.
Guilford County Tax Director Ben Chavis said this week that his office has felt no pressure from anyone to not collect back taxes from McDonald. Chavis said the rules for enforcement of paying taxes are enforced evenhandedly and said that McDonald was subject to those efforts just like everyone else.
The High Point Market showroom building at 101 S. Hamilton St., which has been owned by McDonald Capital Properties Alpha, was put up for sale this week by the court to pay the tax liens on McDonald's properties, as was the Centennial Station complex, off of Centennial Street in High Point. Centennial Station was owned by C. Wayne McDonald Contractor Inc.
The Guilford County Board of Commissioners meets next on Thursday, June 21. It's not known if there will be any public discussion of the investigation and the recent series of events, but those have already been a major subject of conversation among Guilford County commissioners behind the scenes.