Raleigh, N.C. — Les Merritt, a former state auditor, says he will step down from the North Carolina State Ethics Commission on Friday after WRAL News raised questions about whether his service as a contractor at the Department of Health and Human Services creates a conflict with his duties as a government watchdog.
Merritt said Thursday afternoon he did not know if he had a legal conflict of interest, but he said the dual appointments could create "a perception problem" for the commission.
"I am going to resign from the commission. I should have my letter to them tomorrow," Merritt said.
Merritt took his seat as an ethics commission member on Jan. 1. He signed a contract on May 13 to serve as as chief financial officer for the state Division of Mental Health, Developmental Disabilities and Substance Abuse Services. Merritt pointed out that the contract is actually between DHHS and his accounting firm. But, he said, the public may have a hard time making that distinction.
The commission serves as a legally empowered watchdog, ensuring that both elected officials and top administrators abide by the spirit and letter of state ethics laws. The statute that creates the commission says no member or employee shall "otherwise be an employee of the state." The prohibition is part of a longer list of entanglements commission members are directed to avoid, including holding political office.
Merritt said he had not thought about the possibility of a conflict until contacted by WRAL News.
Under Merritt's DHHS contract, he reports directly to Secretary of Health and Human Services Aldona Wos. The contract sets his pay at $312,000 through May 12, 2014, and includes two one-year renewal options.
No other member of the commission appears to have a similar contract or position with state government.
Merritt was appointed by state Sen. Phil Berger, R-Rockingham, the president pro tem of the Senate. Members of Berger's staff said no one had raised the question about Merritt's potential conflict with him before Thursday.
“Sen. Berger believes Mr. Merritt’s service on the State Ethics Commission while working as a DHHS contractor could create a perception of a conflict of interest," said Berger spokeswoman Amy Auth. "After learning about this situation earlier today, Sen. Berger spoke to Mr. Merritt, who understood the concern and said he will submit his resignation to the State Ethics Commission.”
Perry Newson, the executive director of the Ethics Commission, did not return multiple phone calls and an email this week seeking comment.
Lawmakers created the ethics commission in its current form in 2006 following a series of scandals involving former House Speaker Jim Black, a Democrat. The commission administers the State Government Ethics Act by collecting information from elected and certain appointed officials, issuing advisory ethics opinions and investigating complaints against state workers. The commission is also responsible for helping to interpret and enforce the state lobbying law.
Merritt, a Republican, served one term as state auditor from 2005 until January 2009. He is a Certified Public Accountant and served as executive director of the Foundation For Ethics in Public Service from May 2009 through April 2011. The foundation was a conservative-led effort to hold state officials accountable to ethical standards but currently appears to be dormant.
Under the letter of the law, Merritt may not be a state employee because he is working under a personal services contract. But ethics experts say the law was clearly drafted so that commission members would avoid entering into relationships with state agencies upon which they may have to pass judgment.
"It's a problem," said Bob Phillips, state director of the good-government group Common Cause. Merritt's dual jobs "violates the intent of what the legislature passed."
In a statement earlier this month, DHHS officials described Merritt's job as "working to analyze and correct the lack of oversight, accountability and poor system processes. Merritt is restructuring the division’s operational structure and establishing new policies."
Merritt said that the ethics commission and others needed to be careful in how the rule was applied to members. Construed too broadly, he said, it could keep accountants, lawyers and others who work for firms that provide services to state government from working for the commission.
But Phillips said the size of the CFO contract alone would almost certainly require that Merritt recuse himself from any cases involving DHHS. Given a spate of recent stories dealing with appointments, hirings and firings at the agency, Phillips said, it is not out of the realm of possibility the commission could be called on to review the conduct of individuals at the agency.
Merritt said he understands that line of thought.
"For me, being on the ethics commission was part of public service," he said. "I regret feeling like I should resign, but if it's the least bit clouded – and it is – I should resign."