WRAL Investigates

Lawsuit claims mental health execs misused money

Posted April 22, 2011 3:42 p.m. EDT
Updated April 22, 2011 5:04 p.m. EDT

— A year after financial troubles forced the Mental Health Association of North Carolina to close and led its former executive to withdraw from a state appointment, a lawsuit claims that the official misused money from the organization's health plan.

Donna Hoffer-McCoy, a former Mental Health Association employee, alleges in the federal suit that former executive director John Tote and Larry Lackey, the group's former financial chief, spent money on themselves, leaving the group's health plan unfunded and forcing former workers to pay for medical expenses that should have been covered by insurance.

The Mental Health Association shut down last July after it lost its accreditation and was unable to line up enough credit to continue providing service.

The group once billed itself as the oldest and largest nonprofit serving people with mental illness in North Carolina. It had 27 affiliates statewide to provide resources for consumers and professionals in the treatment and prevention of mental illness.

Almost $1.5 million in federal tax liens were filed against the organization in recent years for failure to pay employee withholding taxes.

Association officials blamed their financial troubles on state budget cuts and delays in being reimbursed by the state for mental health services. Reimbursements sometimes took 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.

More than $617,000 of the tax liens was assessed last May, one day before Secretary of Health and Human Services Lanier Cansler named Tote to lead the state Division of Mental Health, Developmental Disabilities and Substance Abuse Services.

Cansler said at the time 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 state officials to reconsider the appointment.

Tote withdrew his name from consideration days later.