Tom McDevitt, head of Smoky Mountain Center for Mental Health, has come under fire from his board of directors for allegedly taking advantage of his position at the helm of the state’s largest mental health care agency to further the interests of himself and his family.

Smoky Mountain Center is one of 23 entities that manages mental health care on behalf of the state. Its recent merger with two other agencies created a 15-county area that is the state’s largest geographically.

An investigation by The Smoky Mountain News reveals several red flags surrounding McDevitt’s activities, including:

• Profits his wife may have made off real estate transactions involving the agency’s nonprofit Evergreen Foundation.

• Subsidizing his salary with funds from the nonprofit.

• Falsely inflating his Smoky Mountain Center salary.

• Employing his daughter.

• Receiving contract benefits not offered to other employees.

In July, the 30-member Smoky Mountain Center board representing 15 counties awarded McDevitt a five-year contract with a $164,892 salary.

But for the first time in the agency’s recent history, the vote wasn’t unanimous — eight board members voted against the contract. During the discussion, board members questioned McDevitt about actions they felt amounted to an abuse of his position for personal gain.

Previously, McDevitt had tried to quell board scrutiny by inserting an amendment into the agency’s bylaws that would remove a board member without explanation if they criticized the Smoky Mountain Center.

Skirting the line

A major issue dogging McDevitt is whether his wife received commission on sales of property owned by the Evergreen Foundation, a nonprofit arm of the Smoky Mountain Center that McDevitt heads.

Maggie McDevitt, a Realtor with Main Street Realty in Waynesville, has served as the Realtor for transactions of Evergreen Foundation property, but McDevitt refuses to say at what level she was compensated for her work.

Some board members raised the issue during the debate over McDevitt’s recent contract.

“When Smoky sells or buys property, what real estate firm or agent handles that?” asked Haywood County Commissioner Mary Ann Enloe, who sits on the mental health board.

McDevitt was initially evasive. He responded that the organization doesn’t own any property. Technically, McDevitt was right. Smoky Mountain Center doesn’t own property, its nonprofit arm does.

Enloe then asked point blank whether McDevitt’s wife was in any way involved in property transactions for the organization.

“She’s been involved in assisting the Foundation and purchasing properties,” he responded.

In a telephone interview, McDevitt confirmed that his wife was involved in some property transactions with the Foundation, but declined to elaborate which ones. He said that there were “many more she hasn’t been involved in,” that have been performed by numerous other agents.

When asked to give the names of those other agents, McDevitt refused. He only said the Foundation has used dozens of agencies over the years to do business before refusing to discuss the matter further. When pressed, he also declined to say whether his wife had accepted the standard commission Realtors make on raw land sales.

“I’m not going to talk to you more about anything to do with the Foundation,” he said.

When McDevitt was asked to explain the selection process used by the Evergreen Foundation to select a Realtor, he said the board of directors makes every decision on the purchase or sale of property.

However, the chairman of Evergreen’s board of directors said otherwise. Foundation board chairman John Bauknight said he had no knowledge of how a Realtor was chosen.

“I’m afraid I can’t respond to that because I’m not involved in that part of it,” he said. Bauknight deferred the question to board attorney Jay Coward.

Coward couldn’t answer the question either, though, citing his limited role as the closing attorney on Evergreen property transactions.

State law governing mental health agencies prohibits an official, whether a board member or paid staff, from entering a contract he or she would benefit from personally, according to David Lawrence, a professor at the UNC School of Government.

Lawrence equates it to a town council member who owns a company — the town can’t contract with that company. Nor can it contract with the spouse of an appointed official or board member.

Had McDevitt’s wife served as a Realtor for the Smoky Mountain Center and received commission, it would have been a violation of state law.

But since the transactions were conducted by the Evergreen Foundation — albeit on behalf of the Smoky Mountain Center — the issue falls into a gray area.

There’s little case precedent to determine whether the Foundation would fall under state statute, Lawrence said. Lawrence said the courts could deem that Evergreen is beholden by the state law, particularly if the nonprofit is fully controlled by a related public entity like the Smoky Mountain Center. The fact that the Foundation is headed by the agency director could also play into a court’s decision, said Lawrence, though “we really can’t be sure.”

Under separate guidelines laid out by the state Ethics Commission for state personnel, contracting with the spouse of an official is forbidden.

“Ethics law would say you can’t take official action that would benefit a family member financially,” said state Ethics Commission Director Perry Newsom.

Yet mental health agencies don’t have to abide by these guidelines either — at least, not yet. Newsom said that these agencies and others that are hard to categorize have been considered for having to abide by state ethical guidelines.

“We are going to eventually look into whether these LMEs and similar entities that are in this strange hybrid status should fall there,” he said. Currently, “some things that may need to be are not.”

Bonus salary for McDevitt

McDevitt has also tapped into the funds of the Smoky Mountain Center’s nonprofit Evergreen Foundation to subsidize his salary.

McDevitt, who serves as the nonprofit’s director, bills the organization for eight hours of work each week. In exchange, he received $42,000 in salary and benefits from the Foundation in 2007.

It is unclear exactly what McDevitt does for the Foundation, allegedly amounting to an additional eight hours a week on top of his regular work week for the Smoky Mountain Center.

McDevitt was initially vague about what responsibilities he was compensated for in his role as director of the Foundation, stating his work as “attending to the day-to-day operations, albeit they’re not all that demanding; and mainly making sure it meets all the requirements of being a not-for-profit organization.”

When pressed, McDevitt said he felt he’d already explained his role, but then added, “we do leases, we collect the rents, we account for the money, organize the audit, review applications for scholarships and make grants.”

The “we” McDevitt referred to are the seven other members of the Evergreen Foundation board. The board meets four times a year and isn’t compensated, according to Chairman John Bauknight.

Inflated salary

From July of 2005 to January of 2008, McDevitt’s Evergreen salary and benefits were run through the books of Smoky Mountain Center.

The practice caused McDevitt’s state salary from Smoky Mountain Center to appear higher than it actually was, amounting to a total of $216,408. This set-up offered McDevitt some advantages. For example, his annual cost-of-living increase was calculated as a percentage of his salary. The higher his salary appeared on the books, the more his cost-of-living increase was. In addition, retirement benefits, which are also based on a percentage of salary, accrued at a higher level.

McDevitt said that the boards of both organizations agreed to the practice to make it more cost effective and offset payroll taxes.

“It was strictly done to avoid having two sets of payroll done in two different companies,” he said.

McDevitt said the practice was discontinued in January of this year primarily due to mental health reform.

“As things became more separate, the Foundation board just decided to go ahead and incur the increased costs and separate that activity,” he said.

Foundations are rare

The salary earned by McDevitt appears to set him apart from others in the mental health field. Of the state mental health agencies contacted for this story, only one had a Foundation — Pathways, the mental health agency serving Gaston County. Like the Evergreen Foundation, the director of the Pathways Foundation also serves as the director of the Pathways mental health agency. Unlike McDevitt, however, the director isn’t paid for his role.

Foundations were first established when mental health agencies couldn’t own property and had to establish a nonprofit arm to hold assets. The law changed, however, and most mental health agencies dissolved their Foundations, bringing assets under the agency’s wing. The Smoky Mountain Center’s Evergreen Foundation is one of the few that has remained in existence.

The Evergreen Foundation owns group homes and other properties in various western counties that are rented out to mental health providers.

Daugher’s employment questioned

McDevitt has also come under fire for the involvement of another family member, this time at the Smoky Mountain Center for Mental Health — his daughter, Melissa.

The director has waved off questions surrounding his daughter’s employment. At a special called board meeting to approve McDevitt’s contract, board members asked McDevitt to explain his daughter’s involvement with the Smoky Mountain Center. McDevitt told the board she’s a temporary employee.

However, personnel records from the Smoky Mountain Center show otherwise. Melissa McDevitt has been a permanent employee for two years. She was hired as a temporary employee in September of 2006 to assist with a medical records retention and disposal project, but moved to permanent status after one year.

In a recent interview, McDevitt was asked to explain the discrepancy between what he told the board and his daughter’s actual status as a permanent employee. He said that his daughter is in fact in a permanent position, but working on a temporary project. McDevitt said she was moved to permanent status because state personnel statutes don’t allow “temporary” employment to last more than 12 months.

Initially, Melissa McDevitt worked as an office assistant on the project with one supervisor, one coordinator and one other office assistant. Today, Melissa McDevitt remains as the only original employee of the project.

The Smoky Mountain Center nepotism policy, crafted by the agency, only prohibits the Center from employing spouses of employees — not children. The only provision is that an employee must not be directly supervised by a relative.

In contrast, state ethics guidelines prohibit employment of family members by state personnel, stating that employees “can’t hire or cause the employment or promotion of an extended family member.”

McDevitt paid well

In the 2007 calendar year, Tom McDevitt was not only one of the highest paid mental health agency director in the state — receiving a $174,000 salary, more than $22,000 in benefits and nearly $10,000 in fringe benefits as well as $42,000 from the Evergreen Foundation — he also had another financial advantage: the ability to accrue an unlimited amount of annual leave.

A typical employee can only save up a maximum of 240 hours of annual leave over the course of his or her career. When annual leave exceeds the max, it’s converted to sick leave. Annual leave is far more advantageous than sick leave, however. While employees can cash out their annual leave for pay, they either use or lose their sick leave.

But McDevitt managed to get around the limitations on accrued annual leave. Since 2004, McDevitt’s contract has carried a clause that states “Mr. McDevitt will not be subject to maximum carryover allowance for annual leave,” making him the only Smoky Mountain Center employee who did not have to abide by the agency’s carryover rule.

That means McDevitt would be due a much larger cash payout upon retirement than fellow agency employees who could only accrue a certain amount of annual leave each year.

McDevitt’s new contract does not allow him to collect unlimited leave. That’s because state law changed to say that directors of mental health agencies can’t be afforded any benefit not offered to other employees of the agency.

McDevitt’s cap on leave accrual won’t kick in until Jan. 1, 2009. Under his new contract, he’ll be allowed to keep all the leave he’s accumulated up to that point —for a maximum total of 1,475 hours. That amounts to 184 days he can cash in at retirement — a sharp contrast to the 45 days all other employees are allowed.

McDevitt said he initially requested this exemption for himself so that instead of higher compensation being paid up front, it would be deferred in the form of an annual leave payout.

Yet according to Smoky’s Chief Financial officer Lisa Slusher, “annual leave is not deferred compensation.” In that case, McDevitt’s upfront salary may not have changed at all.

The law change is the reason the board had to vote on a new, altered contract for McDevitt. He said he brought the law change to the board chair’s attention.