by Thomas Healy
It was typical Helms, using the language of fiscal conservatism to justify his opposition to federal efforts to help minorities. But his argument did not go unchallenged. When Helms sat down, Senator Edward Brooke rose to speak. The only Black member of the Senate—and the first since Reconstruction—Brooke was part of the vanishing liberal wing of the Republican Party. He had coauthored the Fair Housing Act of 1968, opposed the nomination of Judges Haynsworth and Carswell to the Supreme Court, and been the first Republican to call for Nixon’s resignation. Just three days earlier, he had taken on the Democratic Mississippi senator John Stennis, helping to defeat Stennis’s attempt to weaken a key provision of the Voting Rights Act. Now, he faced off against another conservative southerner, albeit one from his own party. Responding to Helms’s tirade, Brooke explained that he did not object to the GAO probe and would accept whatever conclusion the auditors reached. But until the investigation was complete, he argued, federal agencies should not withhold funding based on unsubstantiated articles in the press. “We do not hold up grants to any other agency, any other department of this government, any other town, or any other city merely on the basis of allegations made by a newspaper reporter,” Brooke asserted. “When are we going to stop trying people and convicting them without evidence? This is a nation of laws, not of men. We have said it time and time again.”
It was a valiant, if unsuccessful, defense, and when it was over Brooke wrote to share the exchange with McKissick. “As you know, Jesse Helms and I fought the Battle of Soul City on the Senate floor last Saturday,” he wrote. “I thought you might be interested in reading the debate, so I’m enclosing a copy of the Congressional Record. You have my every confidence in your important work.”
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WHILE THE BATTLE of Soul City was being waged on the Senate floor, the GAO auditors diligently went about their work. State investigators had already completed their probe, finding nothing improper about Soul City’s use of state funds. But the GAO’s mandate was broader. Under a deal with Helms, it had agreed to evaluate the history and status of Soul City, as well as all federal, state, and local financing for the project. The investigation was costly and time-consuming; there were sometimes as many as twenty auditors at Soul City. They arrived promptly at nine each morning, pored over documents, interviewed staff members, and left precisely at five each afternoon. Everything about the operation was punctilious and precise. The auditors wouldn’t so much as accept a cup of coffee for fear of being seen as friendly or compromised.
At first, the presence of so many strangers unnerved the staff. But they soon became accustomed to their guests and went about their work as usual. The problem was, there wasn’t much work to do. As long as the audit was ongoing, there would be no more federal grants. And without the prospect of additional grants, it was impossible to recruit industry.
In fact, the investigation couldn’t have come at a worse time. Soul Tech I was nearing completion, and McKissick was desperately looking for tenants. But with federal auditors on site, no company wanted to get near the project. In December, McKissick had met with Robert Thompson, a vice president of R. J. Reynolds Industries in Winston-Salem, about the possibility of building a food processing plant in Soul City. The meeting went well, and McKissick was optimistic about his chances of securing a commitment. But in April, Thompson wrote to say that Reynolds would not be expanding its operations in the near future. Thompson did not mention the N&O series, but McKissick, suspecting it was on his mind, sent him a copy of HUD’s letter to the editor. “I hope the enclosed material will clear up some questions in your mind as it regards Soul City,” he wrote.
An industrial recruiter McKissick had hired, Harry Payne, had a similar experience. Calling on contacts in Boston, Buffalo, and Chicago, he kept hearing the same thing: until the GAO audit was finished, no one wanted to touch Soul City. When he explained the situation to the governor’s adviser for minority business, the latter was indignant. “I did not believe that a sincere prospect would be daunted by political allegations,” the adviser wrote. Payne responded that he was surprised, too, but would follow up with his contacts at the end of summer. “During that time period, I would hope that our situation at Soul City would have been altered or cleared up to the point that I need not speak defensively.”
As it turned out, the audit lasted much longer than that. The inspectors did not leave Soul City until September 1 and did not issue their report until the third week of December. For McKissick, it was almost worth the wait. After nine months and a cost of nearly five hundred thousand dollars, the GAO audit largely exonerated Soul City. Although the auditors confirmed the N&O’s allegations of “interlocking directorships,” they noted that there was nothing wrong or illegal about this arrangement and that HUD officials had been fully aware of it. The same was true of the paper’s claims of nepotism. Some of the grants awarded to Soul City did bar the hiring of family members to work within the same department, the audit pointed out. But McKissick had not violated that rule. And the family members he did hire “had the education and experience to qualify them for their jobs.”
As to the claim that McKissick had made insufficient progress in building his town, the GAO flatly rejected this charge, stating that “the physical development of Soul City was essentially on target.” In reaching this conclusion, the report pointed out what the N&O should have made clear itself. “Although the idea for a new community was conceived in 1969 and the final application was made to HUD in 1971, it was not until early in 1974 that the loan guarantee was finally executed,” the report stated. “Therefore the project, for all practical purposes, has been in existence for only about 18 months. Because the project was in its initial stages, most of the accomplishments were not visible in terms of shops and houses but were evidenced by more basic amenities, such as roads, utilities, and social services, required for the new community.”
The audit did acknowledge that HealthCo had opened its doors eleven months behind schedule and had initially suffered from poor management and a lack of clear objectives. But over the past year, the report found, most of those problems had been resolved, and HealthCo was now treating an average of thirty patients a day at a cost of just forty-four dollars per patient.
The audit also faulted HUD and other agencies for deviating from established procedures in awarding several grants and contracts to Soul City. For instance, HUD had approved money for the regional water system in 1973, after Secretary Lynn announced the termination of the agency’s public-facilities grants program. But as HUD officials explained, they felt a “moral obligation” to fund the water system in light of the offer of commitment made to Soul City a year earlier.
Finally, the audit raised “serious questions” about bookkeeping practices at Soul City. After sampling 349 expenditures, auditors found that about one-fourth—totaling $44,000—did not meet established procedures and were thus “unallowable.” In the overwhelming majority of cases, the expenditures were “unallowable” because they lacked “adequate documentation,” meaning travel vouchers or other forms hadn’t been properly filled out. In some cases, however, money had been spent on items not covered by the applicable grant or contract. For instance, the Warren Regional Planning Corporation had paid $349 in penalties to the Internal Revenue Service and the state department of revenue even though its agreements with HUD barred it from using grant money to pay such costs. The auditors noted that a review of recent accounts at Soul City showed improvement, but “confirmed a need for a more businesslike approach to purchasing and recordkeeping.” As a result, they recommended that agencies working with Soul City review all transactions made and recover any unallowable expenses. They also recommended that agencies put in place adequate safeguards “to prevent such unallowable expenditures in the future.”
The audit did not minimize these concerns. Yet the overall impression it conveyed was strikingly different from that of the News & Observer. Where Stith and the editorial page saw corruption, fraud, and
criminality, the GAO saw Soul City for what it was: an underfunded operation with an overstretched staff struggling to do its best and a federal bureaucracy still working out the kinks of the new towns program. There was no swindle or scam, the GAO made clear, just occasional shortcuts and sloppiness.
McKissick claimed victory. At a news conference on December 18, he noted that none of the principal charges leveled by the News & Observer had been substantiated by the audit. Asked about the finding of unallowable expenses, he blamed the problem on poor bookkeeping practices, which had since been addressed. “When Senator Helms and Representative Fountain first called for this audit by GAO, more than seven months ago, we publicly welcomed the audit and said then that we had nothing to hide and nothing to fear,” he declared. “The GAO has validated that statement, and we find their report to be a very timely and welcome Christmas present.”
If it was a victory, though, it was only a partial one. The finding of unallowable expenses gave critics something to seize upon. Indeed, the N&O portrayed the audit as a vindication of its reporting. In an article headlined “GAO Hits Handling of Soul City Funds,” Stith led with the “serious questions” the audit raised about Soul City’s expenditures. Not until the sixth paragraph did he acknowledge that the GAO had found no violations of federal law. And not until five paragraphs later did he concede that the GAO gave Soul City “what amounted to a clean bill of health.” Other aspects of the report—such as the GAO’s finding that Soul City was “essentially on target”—were buried deep in the article.
The editorial page was equally grudging. It emphasized the unallowable expenses without noting all the ways in which the audit had exonerated the project. It also blamed McKissick for damaging the reputation of the new towns program without acknowledging the role it had played in hyping the allegations and demanding an investigation. In fact, reading the editorial by itself, one might have thought its authors were as troubled by the attacks on Soul City as anyone. “Foes of federal efforts to assist minorities are always in the market for evidence of an effort gone astray,” the editorial observed. “One such foe is Sen. Jesse Helms, who along with Rep. L. H. Fountain, D-N.C., requested the GAO audit following a series of Soul City articles in the News & Observer. If its fiscal record were perfect, Soul City wouldn’t have an ally in Helms. Those who botched the effort have only helped to make their enemies more effective.”
If the N&O would not acknowledge the truth of the GAO audit, the Carolina Times, in Durham, was happy to help. It ran an article across its front page with the banner headline, “GAO Audit Clears Soul City Project.” On the editorial page, it asked a pointed question: “Is Helms Man Enough to Apologize?”
The answer, of course, was no. Although clearly disappointed with the audit, Helms maintained that its results were damning, going so far as to publicly ask the Department of Justice to review the case for possible criminal charges. “I am not an attorney, and I do not know what, if anything, that review will disclose,” he declared the day after the report was released. “But whatever the result, an obvious fact will remain—Soul City is suspected by many citizens of my state to be the greatest single waste of public money that anyone in North Carolina can remember.”
The Justice Department wasn’t interested. After reviewing the GAO report, it concluded that the audit “had failed to reveal any violations of law” and that “the matter deserved no further prosecutive consideration.”
PART IV
• 17 •
Good Place to Live
With the investigation behind them, McKissick and his staff attempted to regain the momentum they had lost over the past year. It was not easy. The News & Observer’s allegations had undermined morale and tarnished the project’s reputation. Many companies were no longer willing to meet with McKissick, while others gave him a cool reception. In addition, two federal agencies decided to terminate funding for the project. First, the Community Services Administration, which provided grants to the Soul City Foundation, announced that it lacked the money to continue supporting the foundation. Then, the Department of Health, Education, and Welfare denied a request for seven hundred thousand dollars to fund HealthCo, citing the GAO’s finding of “unallowable expenses,” as well as the poor prospects for the town’s future. “Evidence of growth of Soul City demonstrates no population potential in less than five to ten years that would justify a health facility,” the agency stated.
But while CSA and HEW distanced themselves from Soul City, HUD reaffirmed its commitment. On the same day the GAO report was made public, the New Communities Administration announced a $445,000 grant to build sewer lines, storm drains, and roads. It was $3 million less than McKissick had asked for, but it showed that HUD had not given up on the project altogether. Governor Holshouser also reaffirmed his support. Dismayed by the suspension of funding to HealthCo, the governor appealed directly to HEW secretary David Mathews, arguing that medical care in Warren and Vance counties was “already at minimum levels” and that closing the clinic “would make it a critical situation.” His plea was answered. On February 3, Mathews reversed his agency’s decision, announcing that it would continue to fund HealthCo while evaluating the program’s future.
McKissick also received good news from an old industrial prospect. In January, he met twice with executives from Morse Electro, who had gotten cold feet three years earlier because of delays in finalizing the loan guarantee. Morse was still interested in building a plant in Soul City, the executives said, and they tentatively committed to begin construction later in the year. In exchange, McKissick agreed to help the company secure government contracts and establish a minority division that would be eligible for a federal set-aside program. He also offered to display Morse products at the Soul City visitor center and to present Philip Morse with an award at the annual Founders’ Day Banquet that summer.
And so gradually, step by small step, the development of Soul City began to move forward again. Soul Tech I had recently been completed, and McKissick finally landed his first tenants. The Warren Manufacturing Company, a newly created subsidiary of Hunter Outdoor Products, agreed to lease the bulk of the industrial space to make sleeping bags, field packs, tents, and other outdoor equipment, while American National Housing Company, a builder of low-cost modular homes, rented the remainder of the space. The Soul City Company also moved in to Soul Tech I, occupying ten thousand square feet of office space. It was the first real office the staff had occupied since arriving in Warren County, and the move from cramped trailers and dusty barns to a modern suite with glass walls and new furniture helped to reenergize a beleaguered workforce.
Elsewhere in Soul City, work crews were busy paving roads, installing sewer lines, and digging storm drains. The regional water system was nearly complete, while construction was underway on the Magnolia Ernest Recreation Complex, the First Baptist Church of Soul City, a lake, a shopping center, and a permanent facility for HealthCo, which was operating at full capacity. At the entrance to the city, workers were erecting a steel and concrete monolith standing twenty feet high with the words “Soul City” engraved on both sides.
The most important development was housing. After the N&O series, HUD realized that its ban on the construction of housing had hurt McKissick’s ability to demonstrate progress to industry and the public. So in 1976, HUD lifted the ban, and the staff began planning the city’s first subdivision. They named it Green Duke Village, after the plantation owner who had built the manor house two hundred years earlier. But if the village’s name served as a deliberate reminder of the legacy of white oppression, its street names were a tribute to the many Black figures who had fought for freedom. In addition to Turner Circle and Scott Circle, there was Walker Circle (named after David Walker, author of the famous antislavery tract “Walker’s Appeal”); Allen Circle (for Bishop Richard Allen, founder of the African Methodist Episcopal Church); and White Circle (in honor of George White, North Carolina’s first Black congressman). Other streets were named a
fter sympathetic whites, including John Brown, Thomas Paine, and Oliver Otis Howard, a Union Army general and commissioner of the Freedmen’s Bureau who helped establish Howard University.
With construction set to begin on Green Duke, McKissick suggested another groundbreaking celebration. But Floyd Jr., who was now working full-time in the planning office, talked him out of it. “It will be interpreted as more federal dollars being spent on new roads that will lead to nowhere,” he wrote to his father. “Our current emphasis should be on building and creating a viable community here at Soul City. I say wait till we produce the jobs and the homes, then bring the press and they can report what actually exists here, not what’s planned or under construction.”
While the staff worked out the details of housing, McKissick began thinking about a home for his own family. Since 1971, when they left New York, he and Evelyn had lived in a trailer like everyone else at Soul City. It was not what Evelyn had envisioned. Although she had never questioned McKissick’s decision to build Soul City, the move from a Harlem brownstone into a trailer in the middle of nowhere had not been easy for her. McKissick had promised to build a house within two years, a time frame that had been repeatedly pushed back, first because of delays with HUD and then because of the GAO audit. But now that the investigation was over and development was moving forward once more, McKissick was ready to deliver on his promise. He and Evelyn had already identified the site—a 3.7-acre tract across the road from Green Duke Village that he purchased from the Soul City Company for ten thousand dollars. In the future, the house would form part of a single-family neighborhood, just down the street from an elementary school. For now, it would stand alone at the end of a long driveway lined with dogwoods.