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The mental health system in North Carolina can use all the help it can get as it struggles with cuts in state funding, an increase in the demand of services and a shortage of local rural providers.

The director of a mental health nonprofit falsely posed as the landlord for a building he didn’t own for nearly a decade, collecting more than $371,000 in rent on office space that in fact belonged to Haywood County, according to a civil lawsuit.

Since 2003, Tom McDevitt, the director of Evergreen Foundation based in Waynesville, collected monthly rent on two office buildings in Waynesville that were owned by the county — unbeknownst to the county.

The former director of Smoky Mountain Center for Mental Health has lost his CPA license over allegations he backdated his first day of state employment to bolster his retirement benefits.

A lawsuit filed last week claims $17 million has been hijacked from public coffers over the past two decades by a mental health nonprofit.

A regional mental health agency filed the suit in hopes of recouping the lost money, as well as millions worth of property, that the nonprofit has amassed over the years.

The suit claims Evergreen Foundation strayed from its core mission of supporting mental health services in the region, and instead has been hoarding public money to build up its own war chest.

Smoky Mountain Center for Mental Health claims in the suit that millions in state mental health dollars were placed in trust with Evergreen Foundation, but Evergreen has violated that trust. Smoky Mountain Center oversees mental health services for a 15-county area and is based in Sylva.

Smoky Mountain Center for Mental Health established Evergreen as a support arm for the agency, but Evergreen has since severed its ties with Smoky Mountain Center and absconded with millions of dollars in cash and assets in the process, the suit claims.

Evergreen’s director, Tom McDevitt, previously served as the director of Smoky Mountain Center — in keeping with the historic practice of the sister organizations.

However, McDevitt resigned under pressure from Smoky Mountain Center four years ago amid allegations he used his position for personal financial gain. Even after he was no longer running the mental health agency, he managed to retain his position over the nonprofit Evergreen.

The relationship between the sister organizations became strained after McDevitt’s departure. McDevitt said he was not surprised by the suit, given that Smoky Mountain Center has been threatening one against Evergreen for two years. McDevitt also said that he is disappointed that both organizations will have to expend money on a lawsuit that could be used to help people with mental health issues and disabilities.

“Although Evergreen has tried to maintain a good working relationship with Smoky Mountain Center — and will continue to do so — SMC’s issue will now have to be resolved in court,” McDevitt said in a written statement.

The suit was filed by Attorney John Zaloom with Moore and Van Allen law firm in Raleigh. Evergreen has not yet filed a response.

 

Relationship gone awry

Evergreen once had a symbiotic relationship with Smoky Mountain Center. Evergreen was in fact created by Smoky Mountain Center, and for two decades Smoky Mountain Center ran the nonprofit.

Now, Smoky Mountain Center no longer has control over the nonprofit it birthed and has been unable to tap the $17 million in cash sitting in Evergreen’s bank account, according to the suit.

Evergreen amassed all that cash thanks to money funneled its way by none other than Smoky Mountain Center. Evergreen was initially set up by Smoky Mountain Center as a holding company for property — such as offices for mental health counselors, substance abuse treatment centers, group homes for developmentally disabled adults, and administrative office buildings for the agency.

State law prevented state agencies from buying and selling property, so Smoky Mountain Center used Evergreen as the holding company, which was the sole reason for creating the nonprofit in the first place.

In all, there are roughly 30 properties in Evergreen’s name that were bought and paid for by Smoky Mountain Center.

The lawsuit claims Evergreen unfairly profited off these properties — either in the form of rent or by later selling them — and failed to share those profits back with Smoky Mountain Center as its mission statement requires.

“The Foundation’s conduct has deprived SMC of the beneficial interest to which it is entitled in these properties,” the suit states.

The suit claims Evergreen was merely holding these properties “in trust” for Smoky Mountain Center, and the profits were not Evergreen’s to keep.

The suit claims Evergreen’s “breach and repudiation of the trust agreement” entitles Smoky Mountain Center to the $17 million in cash Evergreen has on its books.

At the very least, the suit says, the money given to Evergreen over the years by Smoky Mountain Center was not used for its intended purpose. The intended purpose was to support Smoky Mountain Center, and instead the money was used to enrich Evergreen, the suit claims, accusing Evergreen of “violation of the uniform trust act.”

Smoky Mountain Center has grown increasingly frustrated that it is expected to pay rent on buildings that it bought and paid for in the first place, allowing Evergreen to amass ever-more wealth.

In many cases, a contract between Smoky Mountain Center and Evergreen stipulates that a building should be provided for the “free and exclusive use” of Smoky Mountain Center, but regardless of the stipulation Evergreen has charged rent anyway.

The money to buy or build these offices to house mental health services originally came from state and federal funds. Nonetheless, Smoky Mountain Center has found itself paying rent to Evergreen — to the tune of $4.2 million over the years, according to the suit.

The lawsuit also alleges deceptive business practices and unjust enrichment by Evergreen. Specifically, Evergreen collected rent for years from a mental health counselors who occupied an office building in Waynesville.

The building, however, wasn’t owned by Evergreen. It is owned by Haywood County and leased to Smoky Mountain Center, yet Evergreen had claimed to be the landlord and was collecting rent from tenants, according to the suit.

 

Helping hand

The lawsuit alleges that Evergreen has been derelict in its mission of supporting mental health needs, and for “failing and refusing to use the trust assets for their intended purpose.”

From 2002 to 2008, it made only $33,000 in grants. Over the same period, its assets grew from $13.5 million to $20.7 million.

In the four years since McDevitt left Smoky Mountain Center, Evergreen has only provided financial assistance to the mental health agency one time, according to the suit. Evergreen in 2009 gave Smoky Mountain Center a $200,000 grant to help offset state budget cuts of $4.6 million.

But McDevitt claims Evergreen’s mission is not to provide financial assistance solely to Smoky Mountain Center, but rather to support the network of mental health providers in the region. Smoky Mountain Center once served as a service provider, but is now merely an administrative arm, McDevitt said.

“Evergreen has always existed for the benefit of the citizens of WNC with disabilities,” McDevitt said.

Evergreen has made a half dozen or so small grants for other mental projects over the past four years. Exactly how many and for how much is unclear as Evergreen has not provided that information to Smoky Mountain Center.

Evergreen’s unwillingness to share what grants it was making had been a source of contention with Smoky Mountain Center. The lawsuit asks the court to compel Evergreen to produce an accounting for the money coming in and going out, as well as its assets.

Smoky Mountain Mental Health appealed to Evergreen’s board of directors over the past two years to come to a better working relationship — one that would ultimately result in Smoky Mountain Mental Health being able to tap Evergreen’s wealth. But the two failed to come to a resolution, prompting the lawsuit.

At stake is the level of services available to hundreds of people in the seven western counties who suffer from mental illnesses. Smoky Mountain Mental Health has had to scale back mental health services in the face of state budget cuts.

The impact would have been lessened had Evergreen fulfilled its mission and provided financial support for Smoky Mountain Mental Health.

Evergreen’s board of directors has previously asserted that Smoky Mountain Center is trying raid its trust fund in what amounts to a money grab.

A state mental health agency and its sister nonprofit are locked in a debate over whether the nonprofit should continue operating independently.

Millions in state and county tax dollars have been funneled to Evergreen Foundation, a mental health nonprofit serving the seven western counties. Yet it operates without public oversight.

The board of Smoky Mountain Center, a state mental health agency for the western counties, fears Evergreen has strayed from its mission and needs realignment.

“I don’t know that anybody ever envisioned a day that there would be such a disconnect between Smoky Mountain Center and Evergreen Foundation,” said Shelly Foreman, community relations coordinator for the center.

Evergreen, meanwhile, is resisting forays by Smoky Mountain Center to exert control over the nonprofit and its finances. Evergreen has even accused Smoky Mountain Center of a money grab.

“I cannot in good faith stand by and let [Smoky Mountain Center] raid the foundation,” said Hugh Moon, a member of the Smoky Mountain Center board. “It sounds to me like [Smoky Mountain Center] is saying we want your money.”

However, the money in Evergreen’s coffers was given to it by Smoky Mountain Center in the first place. Evergreen has $20 million — and nearly all of it stems from tax dollars earmarked by the state for Smoky Mountain Center.

“The funds came from the public purse and have always been intended for use on behalf of Smoky Mountain Center and its constituents,” said Brian Ingraham, director of Smoky Mountain Center.

Instead, Evergreen has enriched its own balance sheet, according to Smoky Mountain Center (see related article).

Now, Smoky Mountain Center wants Evergreen to come back under its auspices rather than operate independently.

County commissioners from all seven western counties have unanimously joined the call.

“We unanimously concluded that the money was public money, and it should have public oversight,” said Joe Cowan, a Jackson County commissioner.

Smoky Mountain Center wants control over who sits on the Evergreen’s nonprofit board, with the aim of stacking the board with many of its own members. But to do so, the current Evergreen board would essentially need to dissolve itself and agree to the new structure.

“All the other disagreements can be overcome if we can figure out a system of governance that both boards support,” said Ronnie Beale, board member of Smoky Mountain Center and chairman of the Macon County commissioners.

But that seems unlikely. Instead, it appears the boards of Evergreen and Smoky Mountain Center have reached a stalemate.

“I will never vote to dissolve. I would never support any governance other than the way we are going right now,” said Don Bunn, an Evergreen board member from Swain County. “I was offended by the accusation that we were not properly handling the money.”

A joint meeting between the two boards will be held this week. The last such meeting failed to reach a consensus.

The board of Smoky Mountain Center has indicated in a letter to Evergreen that it will pursue legal recourse if diplomacy fails.

Evergreen’s board may well test Smoky Mountain Center’s resolve to follow through with that threat.

Moon said it would be “blatantly inappropriate” for the foundation to be under the oversight of Smoky Mountain Center.

“I will do my best to ensure it remains a private nonprofit,” Moon said.

The nine-member Evergreen board meets only four times a year. Its meetings are not open to the public, nor are its finances. That troubles Don Barrier, a board member of Smoky Mountain Center from Caldwell County.

“I do believe it is public money and deserves public oversight,” Barrier said in the last joint meeting between the boards.

Barrier said he is uncomfortable with a private organization — one with no obligation to disclose its activities — holding the purse strings to millions in public dollars.

Barrier also takes issue with the board appointing its own members. Known as a self-perpetuating board, existing members handpick who will join their ranks when someone steps down. There is no limit to how many years a board member can stay on.

That’s not how oversight of public money typically works, Barrier said.

“That is a point of disagreement,” said John Bauknight, an Evergreen board member from Cashiers.

Bauknight challenged the extent to which Evergreen’s assets can be traced to Smoky Mountain Center. Evergreen’s coffers have grown significantly in the past decade due to “real sharp investments,” Bauknight said.

“When public money is invested, then the interest generated is still public money,” Barrier countered.

Evergreen board members contested the notion that Tom McDevitt, the director of Evergreen, said any money given to Evergreen ceased to be public funds the minute they were given to the nonprofit.

Ingraham disagreed.

“The funds transferred from Smoky to Evergreen did not lose their identity as public funds,” Ingraham said.

Ron Yowell, a member of the Evergreen board, said the critical question is whether the funds are still considered public after being transferred to a private entity.

“Once that’s decided, answers can be found to all of these things,” Yowell said. “Until that fundamental question is answered, I don’t think we can resolve much of anything.”


Communication breakdown

Evergreen has grown increasingly estranged from Smoky Mountain Center over the past two years. Historically, the director of Smoky Mountain Center also served as the director of Evergreen. The dual roles worked well for three decades.

But two years ago, Tom McDevitt stepped down as the director of Smoky Mountain Center amid controversy. His departure from Smoky Mountain Center was less than amicable, yet the Evergreen board voted to keep him at the helm of the nonprofit. Relations between the two have since been strained.

“We all agreed there has probably been a disconnect,” Beale said.

For example, the director of the Smoky Mountain Center should be an integral player in handing out grants, Beale said.

“Nobody knows what the counties need more than the director,” Beale said.

It’s Smoky Mountain Center’s responsibility to know where there are gaps in mental health and substance abuse services, thus making it suited to know what grants are needed most.

“Why wouldn’t you want the organization involved that is recognized as the locus of control over planning and system development?” Ingraham said.

McDevitt said he, too, envisioned Smoky Mountain Center staff involved in ranking grants that come in to Evergreen.

“Evergreen had every intention of working hand and glove with Smoky Mountain Center, but when there isn’t a vehicle to sit down and talk with them and get feedback and do planning, we had no choice but to do it autonomously,” McDevitt said.

Evergreen board members say that communication is a two-way street. Evergreen invited a member of Smoky Mountain Center’s board to sit in on their meetings, but no one ever took them up on the offer.

Over the past two years, Evergreen has officially distanced itself from Smoky Mountain Center on paper. A new set of bylaws and new wording on its nonprofit tax filings have eliminated any reference to Smoky Mountain Center.

Historically, Evergreen’s tax filing listed its mission as “supporting Smoky Mountain Center.” But in 2009, the year McDevitt parted ways with Smoky Mountain Center, the wording was changed.

“[Evergreen] no longer characterizes itself as supporting Smoky Mountain Center,” said Jay Coward, the attorney for Smoky Mountain Center.

Beale said Evergreen appears to be moving away from what it was established to do.

But McDevitt said the changes more accurately reflect Evergreen’s mission today. In the past, Smoky Mountain Center was the primary conduit for all mental health services in the region.

But in recent years, the state has privatized mental health. Counselors and psycholoigsts are not longer employed by Smoky Mountain Center, but operate as private practices. The same goes for patient clinics once operated by Smoky Mountain Center.

Since Smoky Mountain Center is now solely an administrative arm, it made sense to have a more generic mission statement dedicate to supporting mental health services “and not specifically one government entity,” McDevitt said.

Evergreen has agreed to few concessions as a result of the prodding.

McDevitt said Evergreen will expand its board by three members. The seven western counties will take turns nominating people for those seats, but the Evergreen board will ultimately select the person.

McDevitt said Evergreen has already started doling out more in the form of grants. Evergreen will share its finances, and allow Ingraham to review grant applications that come in.

“We are not going to go back and jeopardize Evergreen to satisfy their control needs, but we will open up to generate public oversight,” McDevitt said. “I hope both sides will decide it is more important to concentrate on what we do rather than how it is done.”

Board members of Smoky Mountain Center, a state mental health agency for the 15 western counties, have questioned whether its partner nonprofit foundation does enough to benefit mental health and substance abuse services in the region.

Tom McDevitt, the director of the Evergreen Foundation, has kept a tight hold on the nonprofit’s purse strings. Rather than putting money toward the cause of mental health and substance abuse, McDevitt has instead focused on growing a nest egg to the tune of $20 million.

The nonprofit makes $1 million a year on average through investments and on rent from an expansive inventory of office buildings leased to those in the mental health and substance abuse fields in the seven western counties.

But Evergreen gave out only a single grant of $50,000 to benefit mental health services in the 2008-2009 fiscal year.

This upset board members of Smoky Mountain Center, who see needs going unmet while Evergreen’s coffers grow.

“A percentage of the money that Evergreen takes in each year after expenses should be returned back to the seven far west counties,” said Ronnie Beale, board member of Smoky Mountain Center and a Macon County commissioner.

Concern that Evergreen is hording its assets has led Smoky Mountain Center to attempt to regain control over the nonprofit (see related article).

County commissioners in the seven western counties unanimously endorsed supporting Smoky Mountain Center’s position.

“You’re really not helping your entity if you’re just sitting there with a pot of money,” said Haywood County Commissioner Bill Upton.

Smoky Mountain Center made rounds to each board of county commissioners seeking support. The counties all passed a resolution that hints at legal action if Evergreen won’t play ball.

“I’m doing this for the people that have mental illnesses in Haywood County, since this may free up some of the money that may benefit them,” Haywood County Commissioner Kirk Kirkpatrick said when voting on the resolution.


Where Evergreen

got its money

Evergreen owes its wealth in the first place to Smoky Mountain Center. Smoky Mountain Center funneled state and county tax dollars to the nonprofit over the years, allowing it to amass an inventory of 25 rental properties across seven counties, which is now a major source of revenue.

The real estate holdings include offices for mental health counselors and psychologists, group homes for people with disabilities, the Balsam Mountain Center outpatient clinic — and even the office headquarters for Smoky Mountain Center.

While the buildings were purchased or built with state tax dollars, Evergreen pockets the money it makes on rent. Evergreen even makes Smoky Mountain Center fork over $140,000 in rent a year for its offices — offices built with money from Smoky Mountain Center in the first place.

If Smoky Mountain Center was relieved from paying rent, it could spend that money helping people with mental health and substance abuse problems, said Brian Ingraham, director of Smoky Mountain Center.

But that was never the deal, McDevitt said.

“What the foundation is in the business of doing, and what is was contracted to do, was to build that building and then turn around and rent it,” McDevitt said.

When Evergreen was created in 1977, state agencies couldn’t buy and sell property. Evergreen was created expressly to manage an inventory of office buildings for Smoky Mountain Center’s therapists, psychologists and counselors. And that’s exactly what it’s done, McDevitt said.

As a charity, Evergreen gives mental health service providers discounted rent, which is an incentive to those in the field to locate here, according to McDevitt.

Smoky Mountain Center hired a private CPA firm to track just how much money Evergreen has gotten in state and county tax dollars. From 1977 to 2009, $13.7 million in public funds were funneled to Evergreen through Smoky Mountain Center. Another $4.2 million in state money has been paid to Evergreen by Smoky Mountain Center on rent for buildings.


Step up the giving

This year, under pressure to ramp up its grant making, Evergreen has given out $357,000 in grants. McDevitt said the foundation’s assets finally grew enough that it could part with some of its money without jeopardizing its long-term capital.

“The board said we did not need to accumulate money just for the sake of accumulating money,” McDevitt said.

But it still fell short of what Smoky Mountain Center wants to see.

Despite a $2 million state budget cut that forced Smoky Mountain to cut services to mental health patients, Evergreen only gave Smoky Mountain Center $200,000 to offset the cuts, when its deep pockets could have afforded more to help the center through the crisis, according to Ingraham. The budget cuts have been restored this year.

And when Smoky Mountain Center needed to expand the parking lot at the substance abuse and mental health outpatient clinic in Balsam, Evergreen agreed to foot 75 percent of the bill, even though it owns the building and collects rent on it.

Smoky Mountain Center would like something more concrete than a verbal pledge from Evergreen that it will start allocating more money to mental health. Beale wants a formula that guarantees a certain percentage of annual revenue will be put toward grants.

“Most foundations have giving guidelines they have the grant process it is usually a pretty established process so of course that is what we want to see,” said Shelley Foreman, community relations coordinator at SMC.

But Evergreen’s foray into grant making won’t happen instantly, McDevitt said.

“You don’t go from being an organization that builds buildings and rents them for less than fair market value to making $800,000 in grants over night,” McDevitt said.

Other grants by Evergreen this year included $80,000 to Haywood Vocational Opportunities for pilot program tracking developmentally disabled people from employment to retirement; $10,000 to REACH for workshop series to educate parents at risk of abuse; $20,000 to Meridian Psychological Services to develop volunteer network; and $15,000 to put on training workshop for substance abuse counselors.

It is past time someone looked closely at just what is going on with the Evergreen Foundation, because apparently those in control of a whole lot of what should be public assets have strayed very far from their original mission.

The nonprofit Evergreen Foundation was established way back in 1977 as a sister organization to the Smoky Mountain Center. Its mission is to bolster mental health and substance abuse services in the mountain region, and it carried that out by being the property holding agency for Smoky Mountain. At that time, state mental health entities like Smoky Mountain could not own property, so the foundation took possession of facilities like the Smoky Mountain Center in Webster and other facilities. It rented them back out to mental health and substance abuse providers.

According to Evergreen officials, the nonprofit has almost $20 million in assets. According to a recent audit, at least $14.5 million in state and county funds have flowed into the foundation over the years.

The Evergreen Foundation has its own board and is led by Executive Director Tom McDevitt. McDevitt was pressured to resign as director of Smoky Mountain in September 2008 amid revelations about his large salary, his family members profiting from work for Smoky Mountain, and because he was earning a salary of $42,000 from Evergreen Foundation while, according to records, performing only eight hours per week work for it.

In March 2009, Evergreen board members told The Smoky Mountain News that on Jan. 1, 2009, McDevitt was awarded a two-and-a-half-year contract of $308,724 to operate the Evergreen Foundation. That amount was for general administration, accounting, budgeting, and investment coordination, as well as overhead. McDevitt’s own salary would comprise most of the budget, but what portion is not clear.

Now, members of the Smoky Mountain Center board and its executive director want answers about what the Foundation is doing with its assets, and they also want the Foundation board members to be appointed by the board of the Smoky Mountain Center. SMC Executive Director Brian Ingraham said: “We are talking about state funds that now exist within an organization that has no affiliation within Smoky Mountain Center and chooses to do so whatever they want with it.”

The SMC board has asked the state attorney general’s office to look into the situation, and county boards in all seven counties in the SMC original coverage area are expected to pass resolutions asking that the Evergreen Foundation come back under the control of the Smoky Mountain Center board. Let’s hope this can happen without a nasty legal battle. It is past time to rein in what has become a renegade foundation.

The Evergreen Foundation was formed by the Smoky Mountain Center for Mental Health in 1977. At that time, state mental health agencies could not own property, so non-profit property holding arms were created. The first tract of land the Foundation owned was a 715-acre parcel in Jackson County on which the offices of the Smoky Mountain Center were once located.

Most state mental health agencies have since dissolved their nonprofit arms, since the law changed and they can now own property directly. But the Smoky Mountain Center kept its nonprofit arm. Today, the Evergreen Foundation owns 23 properties scattered across the seven western counties, which it rents out to mental health providers at a low cost.

With money coming in from leases and investments, the Foundation is also able to support scholarships and training initiatives that further mental health care in Western North Carolina.

“There’s never going to be enough state, federal, and local funding to address the needs in the community,” said Tom McDevitt, director of the Evergreen Foundation. “That’s what the Foundation’s ultimate goal is — to supplement proceeds to provide services for disabilities.”

McDevitt hopes to eventually attain $100 million in assets for the Foundation. Currently, it has $20 million.

McDevitt points to tangible examples of how the Foundation has benefited the community, such as establishing the Balsam Center. Initially, the Center was set up to house a program for abused youth, but the program lost state funding less than a year after it was established.

However, much of Foundation’s funds are plowed back into its asset pool with the aim of accumulating $100 million. Board member Barbara Vicknair said she has not personally seen many grants doled out for scholarships and training during her year on the board, and questions whether the Foundation could be doing more to further mental health care in WNC.

“A lot of people fall through the cracks, and I’d like to see somebody reach out to those people,” Vicknair said.

Though the majority of nonprofit arms have been brought back under the wing of their parent mental health agencies, there’s no intention to do that with the Evergreen Foundation. The reason: keep the Foundation’s $20 million in assets secure.

If the Foundation was merged back with the Smoky Mountain Center, and the state decided to merge or dissolve the mental health agency, the assets could be lost.

“If the Foundation is a part of Smoky, and Smoky goes under, where would all those funds go?” asked John Bauknight, chair of the Evergreen Foundation board. “It’s probably going to end up in Raleigh, and they’ll disperse it through the counties.”

Evergreen has kept a low profile over the years, and as a result, is little-understood.

“These people work behind the scenes,” said McDevitt. “They’re not looking for any acknowledgement or any publicity. You’ll never find any kind of article about Evergreen, because there never would have been an article. Evergreen is a small foundation with a very specific mission.”

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