- More than $2.3 million spent on life insurance premiums were not reported as taxable income.
- The county has issued contradictory claims about the policies and seen the departure of Mandy Stone.
- Stone took blame for the news release that disputed commissioners’ own claims.
- Whole-life policies are a rare benefit in North Carolina county governments.
ASHEVILLE — Six-figure premiums paid over 15 months by Buncombe taxpayers for valuable life insurance went unreported as compensation, meaning a total of $2.3 million was left off tax forms for 10 county employees despite federal law requirements.
A tentative settlement of more than $2 million with the insurance company would recover almost all of what was spent on the premiums. But the settlement, if approved, stops short of erasing questions about the policies, one of the costlier perks handed out during an alleged spending binge by former county manager Wanda Greene, who is under federal criminal investigation.
The whole-life insurance policies – which build cash value while allowing holders to withdraw money or borrow against them – totaled nearly $7 million in face value.
Questions left unanswered include whether the county and the employees face tax penalties, and whether employees receiving the policies should have known their true costs, even though the county says those employees did not.
Already, an initial statement by commissioners claiming only Greene and her son financially benefited from the policies runs counter to one employee’s actions.
Budget Director Diane Price borrowed against one of her two policies, officials confirmed more than a month after failing to directly answer the question when it was first posed by the Citizen Times. Price could not be reached for comment.
Whole-life policies, a rarity for local government employees, are the subject of the latest federal indictment against Greene. She faces a series of federal charges including money laundering, embezzlement and fraud after falling under investigation a year ago.
From retail purchases on the county’s dime to liberal use of economic development funds, and along with the insurance policies, Greene either directed employees or spent herself nearly $6 million on questionable financial transactions, according to a Citizen Times review of dozens of documents obtained through public records requests.
The expenses cover nearly the last decade of her career as county manager.
Greene has twice been indicted, once alongside her son and former county staffer Michael Greene. While Wanda Greene has pleaded not guilty to all charges, a filing by Michael Greene’s attorney Friday indicates he will enter a plea agreement and plead guilty to a conspiracy charge.
As Buncombe continues to seek more than $950,000 in damages through a civil lawsuit against the Greenes – and dives into a national search for a new permanent manager after the yet-to-be-fully-explained abrupt retirement of Mandy Stone – the board chairman wants more answers.
“I would like to have a fuller explanation for what people knew about these policies as the process unfolded,” Brownie Newman said. “I do think Wanda misled the staff about the nature of these policies when it was presented to them, but over time, at least some did get more information about it.”
‘Seeking some advice’ on premiums, taxes
Nearly three weeks after the issue was raised by the Citizen Times, Interim County Manager George Wood confirmed the premiums were not reported as compensation.
“We’re seeking some advice now on how to proceed with that,” said Wood, who began the job in the wake of the indictment and Stone’s departure. “Because they should have been included. We’re aware of that.”
County records show the premiums were paid over a 15-month period, with totals ranging from $101,000-$458,000 per individual. That means additional compensation equal to or exceeding employees’ annual base salaries went unreported and instead was granted as a tax-free benefit, free from Medicare withholding and other potential contributions.
For example, the premiums paid for Price’s two policies would have added $347,000 to her income. That’s more than double her current $160,266 annual base salary.
Wanda Greene also had two policies, which should have added more than $458,000 to her compensation. She made a $247,000 annual base salary, though records show she made more than double that in her last six months of work thanks to a retention incentive, regular retirement benefit and other payouts.
Officials believe at least some taxes have been paid, said Scott Jones, an Asheville attorney hired by the county as outside counsel amid the Greene investigation.
“We believe all whole-life policyholders did receive 1099s for appreciation values and paid taxes accordingly,” he said in response to a records request.
Wood said the insurance company sent the tax forms to policy recipients, which would have required them to pay taxes on earned interest. The county still has not determined how much in back taxes is owed and will reach out to professionals and the IRS, he said.
A tax computation worksheet from the IRS shows that depending on the amount of the paid premiums and the employee’s filing status, a range of about $30,000 to more than $93,000 could be owed.
Few details from the IRS
Employer-paid premiums for life insurance policies owned by the employee “are absolutely taxable income to the employee,” said Joe Belth, professor emeritus of insurance in the Kelley School of Business at Indiana University.
“Which strikes me as rather interesting in this case,” he said, “because not only would it be taxable income but the information would be included in the W-2 that the employer provides to the employee.”
Any fringe benefit provided by the employer is taxable and must be included in the recipient’s pay “unless the law specifically excludes it,” according to an IRS publication. Excluded benefits include health savings accounts, adoption assistance and others.
Group-term life insurance coverage — the only legitimate life insurance benefit offered by the county, officials said last month — also is not reported as taxable income. It’s required to be reported to an employee’s wages if the cost of insurance is beyond $50,000 worth of coverage.
The IRS would not provide details Monday on what penalties employers and employees face when taxable income is not reported, instead referring the Citizen Times to an online employer update page. It’s unclear whether the policy recipients would be required to pay back taxes.
A spokeswoman for the U.S. attorney’s office, which has said its investigation into Buncombe government is ongoing, declined to say whether prosecutors were looking into the unreported premiums.
Earlier statements by U.S. Attorney Andrew Murray, however, indicate the IRS is involved in the investigation. The agency’s criminal division has been thanked for their assistance during both indictment announcements.
What did they know?
County officials have been emphatic that only Greene and her son appear to have been fully aware of the details surrounding the policies, including the cost.
She’s accused by prosecutors of duping commissioners in 2015 by knowingly overstating how much it would cost the county to settle wrongful conviction lawsuits.
While commissioners set aside $8 million to pay five innocent men who were convicted and imprisoned for the 2001 fatal shooting of Walter Bowman, the settlements actually ended up costing $4 million. Greene knew that at the time she presented the budget amendment with commissioners, prosecutors argue.
From attorney to finance director to assistant manager, each employee who received a policy held either a high-ranking or director-level position within county government. They claim they were told by Greene that commissioners had approved the policies but to keep the benefit confidential because it was only given to select staff.
A news release issued by county staff the day after the indictment was announced — and sent out without the knowledge of commissioners — claimed some employees were told the cost of their policies was under $15,000.
Commissioners also claimed the 12 wire transfers were processed without proper supporting documentation, and that budget and finance staff were instructed by Greene to wire the funds.
“This is a system weakness that has been addressed and corrected,” their June 5 statement said.
But documents obtained by the Citizen Times through a public records request show the insurance payments were authorized and signed off by staff under at least some normal county procedures.
Wire transfers were accompanied with authorization letters and purchase orders, showing approval by Greene and signatures from finance employees, including that of then-Finance Director Tim Flora. The first wire transfer totaled $1.5 million and was clearly labeled as a payment to Guardian Life Insurance.
The county has offered no details on what process the policyholders underwent, only noting that Greene “misled them as a vehicle for her own financial gain and that of her son.” It has not said whether any received documentation showing policy details, such as face values or premium amounts, or whether they ever met with insurance representatives.
The release by staff claimed no one outside of the finance and budget departments knew the total cost. Flora and Price both received insurance policies, with Price receiving two.
Email records show neither Flora nor Price were involved in writing staff’s release.
Flora resigned last month, leaving his commissioners-appointed position and saying he was aware he’s a legacy from prior administration.
Prosecutors say he raised concerns with Greene, who requested shortly before her retirement an increase to premium payments. When Flora asked for additional documentation showing commissioner approval, Greene tore up her handwritten request and “told him to forget about any more payments,” the indictment said.
Price borrowed less than $20,000 from one of her policies, county officials said. The loan has since been repaid. It’s unclear whether Price received documentation during the loan process indicating either the policy’s face value or the total premiums paid.
Wood said he has heard Newman’s request for more information about what employees ultimately knew about the policies and is looking into the matter.
“He wasn’t involved in any of this,” Newman said. ”So in some ways, for the first time, we’ve got a senior staff person who can really give us a completely objective overview of the whole insurance issue.”
The Citizen Times on June 8 asked county officials whether any recipients borrowed against any whole-life policy. The question came after both commissioners and county staff said no one other than Wanda and Michael Greene financially benefited.
County attorney Michael Frue first instructed commissioners not to respond “in any manner” to the newspaper’s inquiry, according to emails among officials that day.
Newman ultimately responded, saying the county ”has determined there are no outstanding loans against any policies that have been assigned to Buncombe County.” Officials did not confirm Price’s loan until last week. They have not released the exact amount.
Wood said last week officials didn’t initially disclose Price’s loan because they at first considered it similar to an employee borrowing against their 401(k), which typically wouldn’t be classified as public information.
County officials were aware of Price’s loan at the time they claimed no other staff financially benefited, Newman said, but it wasn’t considered at the time commissioners issued their statement because they were focused on Greene’s financial benefit.
They’re unaware of any other employees borrowing against their policy.
“If we could go back in time and reword that statement, I would say it differently,” Newman said.
Claims by staff have been disputed by commissioners themselves, including an assertion that an unnamed staffer spoke about the policies with then-Chairman David Gantt, who supported them.
Greene is accused by prosecutors of cashing out her two policies for nearly $400,000 shortly after retiring. Michael Greene has declined to reassign his policies, the county has said.
That allegation was made less than 24 hours after commissioners and the federal indictment said elected officials were unaware the policies existed. Gantt strongly denied the claim and took issue with the county using anonymous employees.
Newman later identified the unnamed employee as Stone and said commissioners stood by their original claim. Stone abruptly retired the same day.
Stone ‘totally responsible’ for news release
Emails obtained Tuesday by the Citizen Times through a public records request show several employees — Stone, Frue, Human Resources Director Lisa Eby and Public Information Officer Kassi Day — were involved in writing the release.
Frue initially recommended removing a line saying no employee other than the Greenes financially benefited, citing Price’s loan. Still, the final version said “no other county employee received any financial benefit.”
Stone later said she was “totally responsible” for the release.
“I think we all assumed the (indictment) release Tuesday night made this a topic you were free to respond on,” Stone said in a June 7 email. “No matter what any of us thought the final responsibility lies with me so please hear me say you did your job with professionalism and commitment to transparency as always.”
Emails show Stone stopped communicating with her county address by noon June 7, the day before she would notify Newman of her retirement.
A text message obtained by the Citizen Times through a public records request shows a note Eby sent to Stone that afternoon: “Such a deep sense of sadness and grief. I hope you are OK.”
The screenshot provided by the county shows Stone responded, but it is cut off.
When the Citizen Times asked the county if it has any indication that Stone is under federal investigation, Jones responded: “Any such inquiry should be directed to federal investigators.” The county declined to release correspondence between the U.S. Attorney’s Office and Buncombe officials, citing the ongoing investigation.
The U.S. Attorney’s Office has declined to comment on whether Stone is under investigation.
Stone was county manager for less than a year, and largely was applauded by commissioners despite being a recipient of controversial expenditures tied to Greene, including a life insurance policy.
Thomas Amburgey, Greene’s attorney, said in a court filing Wednesday that they’ve been informed additional indictments “involving unrelated issues and naming additional defendants” may be in the future.
An uncommon benefit
A Citizen Times analysis found whole-life policies are not a common benefit offered by North Carolina counties, and when they are, the premiums are paid by the employee.
Public records requests found that of the state’s 10 largest counties, excluding Buncombe, only Cumberland and Durham offer whole-life policies. Neither pays for the premiums.
“The county of Durham does not pay anything towards the premium as this is an individual, voluntary benefit that employees can sign up for during open enrollment or when they first sign up for benefits as a new hire,” said Deidre Harper Gonzales, Durham’s interim human resources manager. ”We currently have 261 employees who are taking advantage of this voluntary benefit.”
Less than 100 of Cumberland’s employees have opted to pay for a whole-life policy, Human Resources Director Julean Self said.
Two other counties, Forsyth and Gaston, said their term life insurance can be converted to whole-life policies upon the end of their employment, but the premiums aren’t covered by the county.
The rest — Guilford, Wake, New Hanover, Mecklenburg and Catawba — said they don’t offer whole-life policies.
While it appears to be less common among counties, Belth said it’s not unusual to see whole-life policies offered by private employers. They can be offered to key employees and are reported as compensation, he said.
“That is very commonplace for employers to pay for it and it has nothing to do with group insurance,” Belth said. “These executives are singled out by the employer to receive some life insurance as a fringe benefit as part of their employment agreement.”
Almost the entirety of the $2.3 million spent on premiums will be recovered by the county under the tentative settlement reached with Guardian Life Insurance. If agreed upon, Buncombe would release the company, its broker, Charlotte-based Consolidated Planning Inc., and employees from any liability, including Bo Cauble.
Cauble was identified as the agent with whom Greene worked on the policies.
The settlement is about $230,000 less than the total amount spent on the life insurance. But the gap is smaller than what was spent on Greene’s premiums for her two policies, and the county still is pursuing its civil suit against her.
All other employees permanently reassigned their policies back to the county by December 2017, records show. Buncombe has not changed the beneficiary of the policies, nor is the county the beneficiary, Jones said Monday.
Guardian Life Insurance did not return a request by the Citizen Times for comment.
Nearly $460,000 in county funds was spent on premiums for Greene’s two whole-life policies, according to a federal indictment. More than $101,000 was spent on premiums for one of Michael Greene’s policies.
Buncombe also is seeking damages related to a retention incentive Greene granted herself and the use of county credit cards. The credit cards are tied to the first federal indictment and Greene and her son; the duo is accused of improperly charging more than $200,000 for gift cards, routine items like groceries and toiletries and other personal purchases.
Newman said the county’s top priority is recouping taxpayer funds.
“The fact that all the employees other than Michael and Wanda have returned the policies, that’s accomplished,” he said prior to the county’s announced settlement with Guardian. “And we’ve filed a civil lawsuit to recoup all the money that we can.
“I think we’re optimistic that we are going to get a lot of this money back.”
Who got the policies
Ten employees received at least one whole life insurance policy, the premiums paid by Buncombe County. Another employee received an annuity after he wasn’t approved for a whole-life policy, according to a federal indictment against Wanda Greene.
Jon Creighton, ex-assistant county manager: $522,000 face-value policy. $215,000 in premiums.
Pat Freeman, identification director: $580,000 face value. $150,000 in premiums.
Tim Flora, ex-finance director: $671,000 face value. $201,000 in premiums.
Michael Frue, county attorney: $557,000 face value. $150,000 in premiums.
Greg Isreal, former general services director: $538,000 face value. $150,000 in premiums.
Mandy Stone, ex-county manager: $617,000 face value. $160,000 in premiums.
Matt Stone, permits and inspections director: $587,000 face value. $202,000 in premiums.
Michael Greene, former business intelligence manager: $419,000 face value. $101,000 in premiums. The county said Michael Greene has an additional county-funded policy that was not covered by settlement money meant for wrongful-conviction lawsuits.
Diane Price, budget director: Two policies, one with a $745,000 face value and another worth $338,000. A total of $347,000 were paid in premiums.
Wanda Greene, ex-county manager: Two policies, each with a $700,000 face value. A total of $458,000 were paid in premiums.
Jerry VeHaun, emergency services director: $150,000 annuity.