Fred Hobbs is going on the offensive to defend himself and his employees against allegations that his firm falsified information on a 2010 grant application in Yadkin County.

In early August, the state Department of Commerce confirmed that it had turned over information to the State Bureau of Investigation regarding the $100,000 grant for low-income home repairs and asked for an investigation.

"The SBI has not officially opened up an investigation," Jennifer Canada, a spokesperson for the state Department of Justice, told The Pilot this week. "At this point, they are reviewing the audit results that were provided about these grants."

Hobbs explained his aggressive approach to his defense in a recent interview.

"Our fear is, and our belief is, that at the end of the day, if you (the SBI) find we've done nothing wrong you're not going to make a public pronouncement," Hobbs said.

The allegations include (1) forgeries and false information in a grant application in connection with signatures on income needs surveys that were supposedly inconsistent with those of the homeowner-applicants, and (2) questions over a report submitted concerning a meeting held by a selection committee to pick homeowners - a meeting that allegedly never occurred.

Charlotte-based law firm Parker Poe Adams & Bernstein was hired by Yadkin County to investigate alleged anomalies contained in the 2010 Community Development Block Grant (CDBG) Economic Recovery Grant application, and the firm has issued a report detailing the allegations.

In August, Yadkin County Manager Aaron Church addressed the issues in a press release. "Yadkin County was distressed to discover that fraudulent or misleading documents may have been submitted on its behalf," he said in the release.

In his recent response, Hobbs said he and his firm felt "very, very concerned" about the allegations of fraud and falsification of documents - "so we required Michael [Michael Walser, who had handled the grant application for the firm] to take a polygraph test. We believe Mr. Walser, but he and I both wanted some scientific - to the extent you can call that (polygraph test) scientific - corroboration that was something more than just his word against their word."

The polygraph was administered to Walser on Aug. 16 by Lacy Pittman of Pittman and Associates Polygraph, according to a document Hobbs provided to The Pilot. Pittman's report said Walser indicated that he had not falsified any documents contained within the grant application in question.

In his report, Pittman indicated that he produced eight income and needs surveys, which were alleged to be falsified or forged, for Walser to review.

Walser indicated that he had completed the information in the body of the eight forms and signed his name but had not signed the names of the applicants, according to the report.

Walser further indicated that these forms had been completed in 2009, and the only thing he did was to change the date on the top left corner of the survey to reflect a 2010 date, according to the report.

Walser was asked during the polygraph examination if he had falsified these documents, forged any signatures on any of the documents, or planned with anyone to falsify them. According to Pittman's report, Walser answered no to all three questions.

"Based upon chart evaluations of all tests, it is examiner Pittman's expert opinion that consistent and significant responses commonly associated with deception indicated were not observed at the relevant questions," the report said. "Therefore, it is the opinion of examiner Pittman this examination supports the truthfulness of Walser when he responded to the above questions with a final determination of 'no deception indicated.'"

'Confusion' on Applications

Addressing the issue of the selection committee, Hobbs said there was confusion among three grant applications that the firm had submitted on behalf of Yadkin County.

He said the firm submitted applications for CDBG Scattered Site Housing and CDBG Recovery Stimulus grants in 2009. In 2010, a CDBG Economic Recovery application was submitted

"The fact is, that for the program they are questioning, the 2010 program, there was no selection committee required by the state regulations," Hobbs said. "It was merely required that you tell the state how you selected the houses."

Scattered Site required a selection committee. The 2009 Recovery program was not funded, Hobbs said.

In 2010, the state contacted the counties that had not been funded in the Recovery program and informed them of the opportunity to apply for the 2010 CDBG Economic Recovery program. Eight primary homes and four alternates were part of the application, Hobbs said.

"Much has been made of the fact that we took the 2009 application and dumped it into the 2010 application," Hobbs said. "That is exactly what we did, and that is exactly what the state thought we were going to do. That is exactly why they only asked unfunded applicants to reapply."

Homeowner Had Died

Concerns were brought up over the fact that Ralph Hague, a homeowner whose house was one of the eight selected for the program, had died in December 2009.

Hobbs said his firm's primary contact for Hague's home was his daughter, Sharon Gwyn.

"The best we can confirm, we went back to her in 2010 to confirm she was still interested," he said. "She was."

Hobbs said the home was still eligible for the grant.

"There was no evidence she ever told us of Mr. Hague's death," he said. "Maybe she did, we don't know. We don't recall it."

Another home on the primary list of eight for the program reportedly burned in July 2010. Hobbs said his firm didn't have evidence that it had ever contacted that homeowner again in 2010.

He said that if the program had been funded, and Hobbs Upchurch & Associates was selected by the county to administer the program, someone would have gone to the house, discovered it had burned and another home on the alternate list would have been selected to replace it.

'No Criminal Wrongdoing'

In addition to responding in writing to the report by Parker Poe Adams and Bernstein, Hobbs said he and his legal counsel met with with Dale Carroll, deputy secretary of the state Department of Commerce, to tell their side of the story.

He said aside from that meeting, he has had no contact with the state Department of Commerce, the SBI or Yadkin County officials to discuss the grant application in question.

Church said in his prior release that Yadkin County hadn't contacted Hobbs Upchurch & Associations with its findings, "so as not to impede a potential investigation or other law-enforcement entities."

Hobbs said, "I steadfastly stand behind the fact that there is no criminal or noncriminal wrongdoing. That fact is why we've heard nothing."

When asked about possible lost business over the allegations, Hobbs declined to offer specifics.

"I can tell you, that in the absence of our innocence being proclaimed, it isn't good for business."

Hobbs' attorney, John May, added, "The report and the time that has gone into refuting those allegations, the cost that Hobbs Upchurch has incurred for doing that, is significantly not inconsequential. Whether there has been any lost business doesn't reflect the time and the cost to the company to refute what they believe to be completely false allegations."

In August, the state Commerce Department turned over information it had to the State Bureau of Investigation, saying there was "some concern" about it, and asked the SBI to investigate.

The episode began when a competing firm, Benchmark CMR, of Kannapolis, reportedly contacted Yadkin County with concerns. Church then contacted the state Department of Commerce.

(Before joining Hobbs Upchurch, Walser had formerly worked for Benchmark.)

When reached by phone Thursday morning, Gary Wilson, president of Benchmark CMR, declined to comment.

Two employees from the state Department of Com-merce, Vanessa Blanchard and Jim Liles, met on June 7 with Church and Christopher Ong, Yadkin County planning director, at the request of the county to discuss its concerns.

Yadkin County then hired Charlotte-based Parker Poe "to gather, review and analyze the facts and information surrounding allegations of forged signatures of middle- to low-income grant applicants on documents submitted to the N.C. Department of Commerce," according to a release from Yadkin County officials.

Hobbs Upchurch and Associates obtained a copy of the Parker Poe report and addressed the issues raised in it one by one.

Hobbs said his firm has taken no legal action on the matter.

"Our main concern right now is to clear our name," he said, "and then we will look at the next step."

Contact Tom Embrey at tembrey@thepilot.com.