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NC Law: City Of Charlotte Can't Award Contracts To Construction Firm Co-Owned By City Council Member

convention center.PNG
City of Charlotte
RJ Leeper Construction is part of a $115 million contract to renovate the Charlotte Convention Center.

R.J. Leeper Construction is a major player in the city’s construction business. And that includes contracts doled out by the city of Charlotte.

Leeper is one of three construction companies in charge of a $115 million expansion of the Charlotte Convention Center, as well as a $600 million renovation of Charlotte Douglas Airport’s main terminal. The firm was also picked to build a Joint Operations Communications center.

This week, a new investment fund – Bright House Capital – announced it was buying the firm. As part of the deal, James Mitchell – the longest-serving Charlotte City Council member – would be a co-owner and president.

Mitchell chairs the city’s workforce and business development committee, which often takes the lead on multimillion-dollar projects and construction contracts.

Mitchell says there won’t be a conflict.

“I will not be involved with any city of Charlotte-led projects,” he said in an interview Tuesday.

James Mitchell

He says he will recuse himself from any vote involving his firm, and that another executive will handle city of Charlotte business.

"In the past, I have always asked the city attorney for advice to make sure if there’s a perceived perception that I recuse myself and I’m going to continue to operate on that,” Mitchell said.

But Charlotte City Attorney Patrick Baker says that may not be enough. He says he doubts the city can do business with the company, so long as Mitchell is both an owner and member of City Council.

“I have not been involved in a situation where a sitting official was the owner of a company that was doing business with the city,” Baker said.

The reason is North Carolina statute 14-234, which says that an elected official can’t derive a personal benefit from a contract they administer.

That statute says that an elected official would receive a direct benefit from a contract if they or their spouse derives any income or commission directly from the contract – or if they have a 10% ownership in the business that’s been awarded the contract.

Mitchell says his stake in the company is 25%.

Frayda Bluestein with the UNC School of Government says that an elected official who meets that criteria can’t simply be recused from taking a vote to make it OK. She says the law specifically says that it doesn’t matter if the official “actually participates in the action.”

“And if that’s the case (that Mitchell owns more than 10%), then not voting doesn’t work,” she said. “(The city) just can’t do it.”

The Bright House Fund is headed by former Bank of America CEO Hugh McColl and two executives. One is Malcomb Coley, Charlotte managing partner of Ernst & Young. He said the new company might have to sacrifice some city business.

“If it gets to a point where we think a project might violate or have a strong perception then we would consider to walk away from a city project,” he said.

Coley says the conversation about conflicts is important, but he doesn’t want it to distract from the overall mission of the fund, which is to expand minority-owned businesses.

“I think equally important is the narrative of what we’re accomplishing in this community,” he said.

Mitchell has had to negotiate potential conflicts before.

His current job is business development for JE Dunn Construction, and Mitchell recused himself on a 2019 vote to award a $2.5 million contract with JE Dunn to renovate a city building in Belmont for an environmental business incubator.

Last summer, council members criticized Republican council member Tariq Bokhari over a plan in which the city would use federal coronavirus relief money to support a job-training program administered by his nonprofit, Carolina FinTech Hub.

Baker says there was no conflict of interest because Bokhari would not have directly benefited. Nonetheless, Mitchell was critical of the contract, particularly because it would not have gone a final council vote.

“To me, we ought to keep it simple, it is clearly a conflict of interest for any councilmember not to go through a public procurement process and be awarded a contract,” he said during a July council meeting. “We’ve never done it in the past and being old as dirt and being around here for 18 years, we have never been in this situation.”

And now Baker — who has been in local government as a city attorney and manager for 15 years — says he’s never seen a situation like this either.

This story was done in partnership with The Charlotte Ledger.

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