WRAL Investigates

Tax flap prompts appointee to withdraw from mental health post

Posted May 24, 2010

— Instead of settling into a new role overseeing the state's mental health programs, John Tote withdrew from consideration for the post Monday amid allegations that he had left his previous employer with a huge tax bill.

Tote met Monday afternoon with Secretary of Health and Human Services Lanier Cansler, and the two agreed that he wasn't the right person to lead the state Division of Mental Health, Developmental Disabilities and Substance Abuse Services at this time.

"It is very much how did we get here," a stunned Tote said. "I mean, it's been very much a shock to the system."

John Tote Appointee says he was treated unfairly by state

The longtime executive director of the Mental Health Association in North Carolina, Tote was hailed last Tuesday as a solid pick to oversee the mental health programs because of his years as an advocate for the people the agency serves.

The following day, WRAL News uncovered almost $1.5 million in federal tax liens against the Mental Health Association for failure to pay employee withholding taxes as far back as 2006. More than $617,000 of the total was assessed the day before Tote was named to the state post.

Neither the IRS nor the state Department of Revenue could say if any of that money has since been paid. Tote maintains that the taxes have been paid up to 2009.

Cansler acknowledged that he knew about some of the tax liens when he offered Tote the state job. But the publicity about the tax troubles Tote was leaving behind at the nonprofit prompted him and Gov. Beverly Perdue to reconsider the appointment.

"I was aware of some of it. I was not fully aware of the length of time over which it took place," Cansler said Monday. "Obviously, I did not vet that issue the way I should have vetted that issue, and I'll take responsibility for that."

In a memo to Department of Health and Human Services staff, Cansler said the "complicated management decisions" at the Mental Health Association have created "a distraction and diversion" that DHHS couldn't afford if Tote moved to the state post. He said the position would be reopened to applicants.

Mental Health Association officials said they never tried to hide their tax troubles, noting that they went to the IRS to report the non-payment of employment taxes.

They blamed their financial troubles on state budget cuts and delays in being reimbursed by the state for mental health services. Reimbursements sometimes take up to six months, they said.

Tote's salary almost doubled between 2001 and 2007, from $94,000 to $181,000, and he received raises in years when the association was in the red, according to tax records.

He said Monday that the Mental Health Association grew in that time from a 125-employee organization with a $4 million operating budget to 550 employees and a $26 million annual budget.

Still, he said, the financial issues didn't warrant the treatment he's received in the last few days.

"Nobody should ever have to be put in the position myself and my family have been ever again in this political appointment process," he said.

Perdue praised Tote's leadership and advocacy efforts, noting "he's well regarded across the state and in mental health circles." She said his withdrawal wouldn't affect her efforts to reform DHHS, expand the number of available in-patient treatment beds statewide and clamp down on Medicaid fraud and waste.


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  • mbloomer May 25, 2010

    Is it possible that Lanier Cansler is the greatest strategist ever? With the publishing of an editorial a few months back, John Tote had to be seen as a thorn in Cansler’s side. John Tote lamenting the “betrayal by my friends” of public mental health in a very public forum could not have sat well at DHHS. Cansler publicly admits that he was aware of the MHA tax problem. Could he have offered Tote the job and then tipped off WRAL to Tote’s problems? It effectively removed Tote from both positions, discrediting him completely.

  • nic May 25, 2010

    Perdue says "he said his withdrawal wouldn't affect her efforts to reform DHHS, expand the number of available in-patient treatment beds statewide and clamp down on Medicaid fraud and waste"
    If she wants reform she needs to let Canslier go
    She wants to increase inpatient beds yet in the proposed budget they will close Dorothea Dix therefore closing >200 beds
    Clamp down on medicaid fraud? She can't even clamp down on fraud in her own administration.

  • NCTravellinman May 24, 2010


  • beachlvr0804 May 24, 2010

    Our Govenor at work again. There's probably more to this than we'll ever know.... Bev, you dropped the ball again....geeezz

  • hardwork919 May 24, 2010

    "Hey Lanier....ever hear of a BACKGROUND CHECK?" gingerlynn

    You'd be surprised how often this doesn't happen with government entities... Bill Bell had a similar situation and his answer was basically "Well, I guess they were a good hire... I don't really know" I was like "Huh?" On the flipside, let me try and apply at McD's and they want five references...

  • commonsensical May 24, 2010

    Lanier Cansler's performance should be called in to question after this. It's his JOB to select the right candidate for the position, and it's obvious he can't do his job. (WRAL had to do it for him) Time for a replacement.

  • mwagner52 May 24, 2010

    As I understand it, MHA receives funding thru Medicare and Medicaid. In order to be eligible for Medicaid/Medicaid reimbursement a provider must have an accreditation. MHA boast a CQL accreditation. One standard required in order to obtain accreditation is financial viability and stability, so this begs the question: How did MHA get their accreditation if they have been operating in the red and owed employment taxes since 2006?

  • TontoKozlowski2 May 24, 2010

    Seems like he is the perfect candidate for a government position!

  • nanasix May 24, 2010

    There's something wrong in almost every office of state, especially the SECRETARY OF STATE/CORP DIV. Her malfeasance and total neglect of state records have cost us millions of dollars that will never be recovered. There has been absolutely no management since she took office, and she's allowed state records to be destroyed beyond repair. She notices thousands of corp's that don't owe an annual report, and 90% of the others shown the wrong number due. She's gone 8-12 yr never doing anything to bring them current. She notices corp's that have been revenue suspended, when she can't allow them to be reinstated if they file. You would not believe the multitude of screw-ups she's done to state records that banks and businesses rely on when doing business with a corporation. She has placed our state in a position of liability that if we're sued, it could force us into bankruptcy. She is an unbelievable individual, claiming to have degrees, most of which are honorary, yet she has no manageme

  • BE May 24, 2010

    Looks like the Gov. needs to find a new DHHS Secretary. Thanks to WRAL for putting the light of day on the tax sitution.