Tobacco commission reforms needed, Baliles says

Former Gov. Gerald L. Baliles says it’s time for Virginia to act on reforms his blue-ribbon panel recommended for a state commission that was defrauded of $4 million in tobacco-settlement money meant to improve education in the state’s struggling tobacco belt.

Baliles, a champion of education in his native Patrick County, said the panel recommended more than two years ago that Virginia require greater accountability from the Tobacco Indemnification and Revitalization Commission, created more than a decade ago after a $206 billion national settlement of state claims against the tobacco industry.

Former Gov. Gerald L. Baliles says it’s time to act on reforms his panel recommended for the Virginia Tobacco Commission.

Former Gov. Gerald L. Baliles says it’s time to act on reforms his panel recommended for the Virginia Tobacco Commission.

The commission granted $5 million in 2001 to a foundation created by one of its members, then-Virginia Finance Secretary John W. Forbes II, who used $4 million for himself and sprinkled the remainder for educational programs in Southside and Southwest Virginia.

“It certainly confirms the need to adopt the recommendations of the blue-ribbon commission,” Baliles said Friday, “especially the recommendations that dealt with fiduciary responsibility.”

The former governor said in a phone interview that the state also should enact the panel’s recommendations for restructuring the tobacco commission and its operations, its strategic planning process “and to focus their efforts on regional revitalization rather than local spending.”

The blue-ribbon panel recommended that the Joint Legislative Audit and Review Commission study how the commission issues grants and monitors performance. The study was blocked early last year by Republicans in the House of Delegates, but it was revived this year by language inserted by the state Senate into the state’s two-year budget. The study is expected to be completed by early summer.

But scrutiny of the commission has sharpened with the disclosure last week that Forbes had pleaded guilty to wire fraud as part of an agreement with federal prosecutors. The agreement included a statement that outlined in detail how he misused the money.

Forbes, 54, secretary of finance from May 2001 until January 2002 under then-Gov. Jim Gilmore, pleaded guilty in August to one count of wire fraud. He is to be sentenced Nov. 23.

Gilmore declined to comment, according to spokesman Dan Kreske, who said Friday, “He doesn’t have anything to add.”

As secretary of finance, Forbes sat on the board of the commission. In June 2001, he won a $5 million grant from the commission for the Literary Foundation of Virginia, which he founded with the stated purpose of providing educational benefits to residents of economically hard-hit parts of the state.

It was around this time, his lawyers say, that a teenage son died of leukemia and Forbes had an alcohol problem.

Forbes picked the literary foundation’s board, which included his sister, his then-wife’s best friend and her best friend’s live-in boyfriend and a co-worker, none of whom had any experience in adult education. Forbes controlled the foundation’s bank accounts and, after he left office as secretary, he became its executive director at a salary of $130,000 a year.

Forbes also created the Community Development Council that was supposed to perform public outreach services. In all, Forbes admitted spending $4 million of the $5 million for personal uses. Between Feb. 4, 2003, and June 6, 2006, Forbes wired $2.22 million from the foundation to the Community Development Council.

He was not keeping everything he did a secret, however.

Chesterfield County property records show that Forbes and his wife at the time bought a 2.9-acre, waterfront lot on Chesdin Landing Drive for $325,000 on Feb. 10, 2003 — less than a week after Forbes wired $650,000 from the literary fund to the Community Development Council.

By 2005, the lot had a 2½-story, 5-bedroom, 5-bath home assessed at $890,000, and the property had a total assessed value of nearly $1.2 million.

A public-record deed of trust filed in the courthouse shows that the Community Development Council Inc. loaned the Forbeses $625,000 for the property in a note dated Jan. 3, 2003 — the same date a contract was signed for the development council to perform public outreach services for the literary foundation.

The $625,000 note, however, apparently remained unsecured for nearly three years because the deed of trust was not dated and recorded in Chesterfield Circuit Court until November 2005, almost three years after it was signed and just seven months before Forbes sold the property for nearly $1.8 million in 2006.

In October 2006, Forbes bought a more modest home for $544,000 on Banff Court in the Woodland Pond subdivision that now has a “for sale” sign out front.

According to real estate websites, it was put up for sale in June, just a few days after he was charged by the U.S. Attorney’s Office with wire fraud in a criminal information filed under seal because he was covertly cooperating with authorities.

The initial asking price, $469,950, was dropped to $419,000 in August a few days after he pleaded guilty under the terms of an agreement with the government that calls for him to reimburse the commission $4 million and to forfeit appropriate assets.

“We’ll get that back,” vowed former state Sen. Charles R. Hawkins, R-Pittsylvania, who is chairman emeritus of the commission and sponsor of the 1999 legislation that created it.

The legislation divided Virginia’s $4 billion share of tobacco-settlement money among programs to pay Medicaid costs for smoking-related diseases, prevent smoking and help tobacco growers and their economically devastated communities.

Commission officials said last week that Forbes pitched his proposal at a perfect time. The commission was anxious to go beyond compensating tobacco growers to investing in communities that were losing jobs and failing to graduate many students from high school, much less prepare them for college.

“There was a lot of pressure on the commission to push money out into communities impacted by the loss of tobacco income,” said Frank S. Ferguson, general counsel to the commission and a former deputy attorney general.

Forbes had promised to invest the $5 million in Sallie Mae and other financial institutions to triple the value of funds to create educational opportunities in the region. But the literary foundation’s assets had fallen to $3.5 million in 2002, the last tax year that it filed a tax return as a tax-exempt organization. Earlier this year, the literary foundation filed a return for 2004 as a non-exempt private foundation with no assets.

One organization that was helped by the foundation was the Patrick County Education Foundation, started by Baliles a decade ago to boost educational opportunities in his home county. The Patrick foundation issued a news release in early 2004 that announced the second of a pair of $25,000 grants, which Forbes presented to Baliles and the foundation’s executive director at a ceremony in Richmond.

Baliles, who remembers the occasion as “a photo-op,” said the Patrick foundation has found $7 million in financial aid for college-bound students from the county and raised $3 million over 10 years to raise high school graduation levels and improve access to community colleges and four-year universities for local students.

“It’s a remarkable trajectory of progress over the last 10 years,” he said.

His blue-ribbon panel found, however, that the tobacco commission had devoted far more money to local economic development projects than to regional initiatives to improve education.

“Without a highly educated work force, the regions will continue to suffer population declines, low wage rates, and high unemployment,” the report states.

While the tobacco commission’s 31 members include the secretaries of finance, commerce and trade, and agriculture, they do not include the secretary of education, the blue-ribbon panel noted.

“That says a lot about the direction of the investment of funds,” Baliles said on Friday.


Similar Posts:

If you enjoyed this post, make sure you subscribe to my RSS feed!