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Lawsuit calls on mental health nonprofit to share the wealth

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.

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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.

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