Raleigh, N.C. — At a legislative hearing Wednesday, Public Safety Secretary Frank Perry and budget chief Lee Roberts repeatedly said Gov. Pat McCrory had done nothing wrong or unethical in the process that led to the renewal of a $3 million contract for a political donor.
"I am confident that the administration acted properly and with integrity throughout this process," Perry told the Joint Legislative Commission on Governmental Operations, a sentiment also expressed by Roberts.
However, Perry said he was aware that the donor, Graeme Keith, had expectations of "quid pro quo," yet did not report it to anyone.
Perry told the committee Keith had told him at least three times – once on a weekend phone call to Perry's home – that he had "made his political donations and he expected to get something in return."
Perry, who was opposed to extending Keith's contract for maintenance at three state prisons, said he didn't see the need to report the comments because he believed the state would not extend the contract.
"I didn’t see a comment as being a crime. It was inappropriate. It was uncomfortable to hear it, but there has been no quid pro quo, therefore no crime," the former FBI agent told the committee. "I know where the line is – I’ve worked those cases – and I felt no affirmative duty to report it."
Perry declined to confirm to the committee whether the FBI is currently investigating the agency.
Perry said he had warned his staff, as well as Roberts, about Keith but couldn't say whether the governor had been informed. He said a text he sent to Roberts in December, warning that the contract extension "will soil the governor," was in reference to the vendor's behavior.
"I had come to see that when [The Keith Corporation] was beginning to think that I was recommending that the contract expire, the tone and tactics of upper management at TKC were inappropriate in my presence and the presence of others who were deliberating this," Perry told lawmakers. "I did not want the governor to be exposed to those type of tactics."
Roberts said Perry told him in December that Keith "was the kind of guy who goes around bragging about political contributions," but he didn't see it as a reason not to extend Keith's contract. He said his independent cost analysis, requested by the governor at Perry's recommendation, had shown that the contract would save the state money, so he approved a one-year extension.
"It’s certainly distasteful, but to me, that didn’t give rise to a reason to stop the process we were engaged in," Roberts told the panel.
The process itself was the topic of an array of questions. Roberts said he was aware that Perry was opposed to the renewal but misunderstood an unrelated comment Perry made at a meeting shortly before the Dec. 31 deadline.
Perry said he had commented to Roberts that the meeting was "burning daylight" but that Roberts had taken it to mean that Perry would agree to the renewal because there was little time left for other options.
Asked bluntly by Sen. Harry Brown, R-Onslow, "Did the governor ever direct you to extend or expand the prison contracts?" both Perry and Roberts answered clearly and simply, "No sir."
Lawmakers also had a long list of questions about what appears to be a memo detailing an Oct. 28 meeting between McCrory, DPS staff and TKC. Perry said the document, which cites Keith's statements about "pay to play" expectations within earshot of the governor, was written by deputy DPS Secretary Joe Prater "a few days" after the meeting.
The document has no name, date or other identifying information, and lawmakers questioned why no electronic version of it has been found by DPS.
Perry said such memos aren't common at DPS. He suggested that Prater might have written the "subjective summary" as a "memo to self" for his own files.
In a statement issued late Wednesday, Keith called the memo "highly questionable" and Perry's statements to the committee "a gross misrepresentation," attributing the flap to DPS staffers opposed to privatizing services.
"It is nothing more than an attempt to discredit me and turn the conversation away from the dramatic savings that could be achieved by privatizing prison maintenance," Keith said. "As I have stated previously, neither I nor anybody at TKC Management Services has ever had or expressed any expectation that our company should be considered for or awarded state prison maintenance work on any grounds other than our experience and track record of delivering cost savings while providing high-quality service."