WRAL Investigates

Tax flap prompts appointee to withdraw from mental health post

Posted May 24, 2010 2:45 p.m. EDT
Updated May 24, 2010 7:14 p.m. EDT

— 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."

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.