Jury returns guilty verdicts in Stephen LaRoque criminal trial - WRBL

Jury returns guilty verdicts in Stephen LaRoque criminal trial


The jury in the Stephen LaRoque trial has returned verdicts of guilty on 12 counts  in the former state lawmaker's criminal case.

Counts 1-4 are for theft concerning programs that received federal funds; Counts 5-8 are for monetary transaction in criminally derived property; Count 9 is for falsify, conceal, and cover-up by scheme and device; Count 10 is for materially false, fictitious and fraudulent representation; Count 11 is for making and subscribing a false tax return in 2009; Count 12 is for making and subscribing a false tax return in 2010.

Judge Howard asked federal prosecutors if they wanted to request any detention condition. Federal Prosecutor Dennis Duffy said he has no special requests, and said LaRoque can remain under the same conditions as before the trial.

Those conditions include: LaRoque will remain free on an unsecured bond of $50,000; LaRoque must surrender his passport; remain in the Eastern district of North Carolina unless his probation officer approves otherwise; and he must not possess a firearm.

However, Judge Howard decided to strike down a previous condition that prohibited LaRoque from talking about the case with witnesses.

LaRoque's sentencing will happen 90 days or more from today, with a tentative date set for Sept. 10, 2013.

After the jury was dismissed, defense attorney Joe Cheshire asked the judge to tell jurors, "We appreciate their hard work and respect their verdict."

Two jurors were emotional and one was wiping away tears as the clerk read the guilty verdicts  aloud. LaRoque, on the other hand, was calm and showed no emotion.

Cheshire told 9 On Your Side LaRoque was shocked by their decision and may decide to appeal it.

Our Katie Banks was in the courtroom for the verdicts. She'll have more tonight at 5 and 6 on WNCT-TV.

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The jury in the Stephen LaRoque trial ends its second day of deliberation without verdicts.

But jurors told U.S. Senior District Judge Malcolm J. Howard they're confident they'll reach decisions by Friday afternoon. So far, they've deliberated for more than eight hours, but plan to return Friday morning at 9 a.m.

LaRoque was indicted last summer on a dozen felony counts of theft, money laundering and filing false tax returns. Prosecutors say he stole $300,000 in U.S. Dept. of Agriculture money through his non-profit, East Carolina Development Company (ECDC), bought lavish gifts for himself and his family, and tried to cover it up.

LaRoque's defense team argues their client earned every penny he took through a compensation contract that promises him 3 percent of the non-profit's total assets annually. They say any loans he ever took out were "owed" to him.

Before jurors recessed Thursday afternoon, Judge Howard asked the jury chairman if they were making progress in their deliberations. Her answer was yes. Judge Howard also asked if they knew approximately how much more time they would need to reach unanimous verdicts for all 12 counts. The jury chairman told him they expected to reach verdicts by 4 p.m. Friday afternoon.

Before leaving the courthouse, jurors presented Judge Howard with a note asking if they could see the transcripts for three witness testimonies. The list included Lloyd Moody, LaRoque's long-time friend and CPA; Angie Johnson, LaRoque's other CPA; and Lisa Talley, a USDA business programs specialist.

After talking with federal prosecutors and LaRoque's defense attorneys about the request, Judge Howard decided that, logistically, he would not be able to provide those testimonies because the transcripts are still incomplete. He said he plans to tell jurors Friday morning they will have to go off their own recollections.

If convicted on all charges, LaRoque could face a maximum of 90 years in prison and be forced to pay $3 million dollars in fines.

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Closing arguments wrapped today and the jury is now deliberating in the Stephen LaRoque trial.
LaRoque was indicted last summer on a dozen felony counts of theft, money laundering and filing false tax returns.
Prosecutors say he stole $300,000 in U.S. Dept. of Agriculture money through his non-profit, East Carolina Development Company (ECDC). They say he used the taxpayer money to buy lavish gifts for himself and his family, and allege he then tried to cover it up by filing false federal tax returns.
LaRoque's defense team argues their client earned every penny he took through a compensation contract that promises him 3 percent of the non-profit's total assets annually. They say any loans he ever took out were "owed" to him.
On the witness stand Tuesday, LaRoque admitted to making some mistakes by keeping "sloppy" records, but told jurors, "At no time did I plan to cheat, steal or take any money that didn't belong to me."
During closing arguments Wednesday, federal prosecutor Dennis Duffy painted LaRoque as a self-entitled, greedy politician who took advantage of his position as the non-profit's executive director.
"Somewhere during the last decade, Stephen LaRoque lost his way," Duffy told jurors. "Somewhere along the journey, he started to feel a sense of entitlement…ECDC is not Stephen LaRoque. But somewhere along the way, he forgot that."
Duffy said in 2005 LaRoque began using federal funds meant to go to rural small business owners as his "personal piggy bank," in addition to his already hefty salary and reimbursements.
Duffy argued the real victim in this case is not LaRoque, but rather ECDC and all the taxpayers he allegedly stole from through illegal self-dealing.
LaRoque's defense attorney, Joe Cheshire, delivered a closing argument filled with anecdotes about people rising up against big government to do what they believe is right. At one point, he even referenced Rosa Parks refusing to sit in the back of the bus.
Cheshire painted LaRoque as the victim in the case who is "not just not guilty, but innocent." He told jurors LaRoque is "a man, a human – just like you," who the federal government is unfairly targeting for political reasons. He also took several swings at Duffy, saying the prosecutor "attacked witnesses who didn't tell him what he wanted to hear."
Cheshire said LaRoque had a 1999 contract that entitled him to money that he sometimes left in ECDC's bank account and took out in big chunks as needed. It's a claim Duffy has criticized during the trial because LaRoque could never provide any signed documentation of such an agreement. Duffy added if the contract is legitimate, LaRoque should have paid taxes on his unclaimed earnings.
Cheshire ended by telling the jury they must believe LaRoque is guilty beyond a reasonable doubt before they can convict the former state lawmaker.  Otherwise, they must acquit him.
During his rebuttal, Duffy told jurors, "You are the only ones who decide the facts of the case," and advised them to focus on documentation and witness testimonies to determine their verdict.
9 On Your Side's Katie Banks is the only reporter who has been inside the courtroom for every day of LaRoque's 2 ½ week trial. After two hours of deliberation Wednesday morning, the jury told the judge they need more time to determine a verdict.

They will continue deliberating Thursday morning. Stay with us for updates.

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On Tuesday, former state lawmaker Stephen LaRoque took the witness stand Tuesday to defend himself against fraud and theft charges.

It's the first time we've heard straight from LaRoque since this trial began two weeks ago. He testified for five hours.
Prosecutors maintain he stole $300,000 in federal money through his non-profit organization, bought expensive things, then tried to cover it up by filing false tax returns.
On the witness stand, LaRoque said he earned every penny he took from the non-profit through a board-approved compensation contract that promised him 3 percent of the non-profit's total assets annually. He said all loans were "owed" to him.
LaRoque admitted to making some mistakes by keeping "sloppy" records and board minutes, and not double-checking his tax returns after his CPA filed them. However, he maintained his innocence. At one point he told jurors, "At no time did I plan to cheat, steal, or take any money that didn't belong to me."

Joe Cheshire, LaRoque's defense attorney, told 9 On Your Side after the testimony, "Stephen testified and he put himself up there in front of the prosecutor and as far as I can tell, they didn't lay a glove on him. It's hard to shake somebody who's telling the truth. It's really easy to shake somebody who's lying and Stephen wasn't shaking at all today, so I feel pretty good about that."

Federal prosecutor Dennis Duffy has declined to comment on this case numerous times.

Closing arguments will be Wednesday morning, followed by jury deliberation. Stay with 9 On Your Side for updates.

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Federal prosecutors called their last witness in the Stephen LaRoque trial Monday, while his defense team says expect the former state lawmaker to testify Tuesday.

His case all comes down to $300,000.

Prosecutors say LaRoque stole that taxpayer money from his federally-funded economic development non-profit company, East Carolina Development Company (ECDC). They believe he used it to pay for cars, jewelry and an ice skating rink, then tried to cover it up by filing false tax returns. 

LaRoque's defense attorneys argue their client earned the money thanks to reaffirmation of a compensation contract that promises LaRoque 3 percent of his non-profit's total assets annually. They say LaRoque cannot steal what is rightfully his.

Over the past two weeks, federal prosecutor Dennis Duffy has built his case by calling more than three dozen witnesses to the stand. On Monday, he wrapped it up with three final testimonies.

Angela Johnson, one of LaRoque's former certified public accountants, was on the stand again to complete testimony that began last week. Duffy grilled her on U.S. Dept. of Agriculture regulations and non-profit bylaws that forbid directors like LaRoque  from loaning themselves money.

Johnson told jurors she knew about LaRoque's self-dealing, but said she believed it was legal. She said she felt "confident he was borrowing his own money" and thus she did not see the need to list it as "income" on his 990 tax return. 

During cross-examination, defense attorney Joe Cheshire pointed out if LaRoque was doing anything wrong, USDA agents and auditors would've told him.

George Moore, a Greenville civil IRS revenue agent, took the stand next. Moore is currently assigned to audit Bert Diener, LaRoque's former attorney. Last week during his testimony, Diener accused the IRS of unfairly auditing him because of his involvement in LaRoque's case.

Duffy aimed to disprove that claim Monday by questioning Moore about his interests in the LaRoque case. Moore told jurors he was auditing Diener merely because Diener filed an amended tax return – and nothing more. He said he had no idea Diener had any connection with LaRoque.

The last witness to testify Monday was Paul Charnetzki, a Harvard-educated financial forensics expert from Chicago. Charnetzki told jurors he studied tax returns, audits, board minutes, paychecks, budgets and government interviews to learn the details of the case.

Charnetzki said if LaRoque was entitled to deferred compensation, he should have reported the amount of loans as income and paid taxes on it. The judge clarified that Charnetzki's testimony was opinion, and said the jury could choose to accept or deny it during deliberations.

The defense will call witnesses for the first time on Tuesday, including LaRoque.

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Friday's testimony was heavy in numbers and financial records as prosecutors followed Stephen LaRoque's paper trail for more than a decade.

Lloyd Moody and Angela Johnson were the latest to take the witness stand in the former state lawmaker's criminal trial. Both are certified public accountants who have prepared tax documents and audits for LaRoque over the years.

Moody is also a long-time friend who serves on the board of directors for LaRoque's non-profit economic development organizations, East Carolina Development Company (ECDC) and Piedmont Development Company (PDC).

Prosecutors focused Friday's questioning on their accusations that LaRoque stole federal money through his non-profits to pay for a lavish lifestyle. They believe he then tried to cover it up by lying on his tax returns.

They also tried to prove LaRoque and his wife, Susan LaRoque, "significantly understated their tax liability" in their joint tax return.

Moody and Johnson both said they knew about LaRoque's reimbursements and loans to his own company, even though such loans to an executive director like him violate USDA regulations. In fact, records show Moody co-signed many of the checks from ECDC payable to LaRoque's Management Group (LMG).

LaRoque's defense attorneys fired back with claims that LaRoque earned all money he took from his non-profits and say any discrepancies in tax records were unintentional.

They say his board of directors, including Moody, "reaffirmed" a compensation contract that promises LaRoque 3 percent of ECDC and PDC's total assets annually, retroactively effective back to 1998. They say any payouts - in the form of loans or otherwise - were owed to him.

In a motion to dismiss LaRoque's charges, his defense attorneys say they believe LaRoque was the "rightful owner" of the money, that he did not steal it and that "the prosecution's theory is insufficient to state an offense."  

The motion concludes, "Theft is taking funds without authority. Here, Mr. LaRoque had authority. Therefore, there was no theft."  

The prosecution is expected to wrap up on Monday. The defense will then call witnesses, which should include Stephen LaRoque.

The judge expects deliberations to begin as early as Tuesday.

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Stephen LaRoque's lawyer took the stand Thursday and at times it got a bit contentious.

LaRoque's attorney, Bert Diener, pointed out since he became involved in the trial he's become the target of an IRS audit, and he finds the timing suspicious. He says he's scared of federal prosecutors and the situation proves he can't trust anyone.

Diener represented the former lawmaker in several defamation lawsuits brought by and filed against political opponents. Records show during that time, Diener also received hundreds of thousands of dollars in loans from LaRoque's federally-funded economic development non-profit organization, East Carolina Development Company (ECDC).

Prosecutors believe this was a conflict of interest and say parts of their loan agreement violated USDA regulations. They also revealed bank records in court they say show LaRoque paid Diener for his personal lawsuits with your taxpayer money.

LaRoque's defense attorney argued Diener's law firm created jobs as the loan intended and said if USDA regulators had a problem with Diener and LaRoque's lending relationship or LaRoque's pay-outs, they would've spoken up.

During his testimony, Diener also described a heated argument he had with federal prosecutor Dennis Duffy during pre-trial questioning, and said he believes the tension between them is why the IRS recently began auditing his law firm.

Duffy said he is not behind the IRS audit and accused Diener of hiding that information from him, then giving it to the defense.

The judge expects the trial to wrap up early next week.

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Half a million dollars spent on an ice skating rink. That's where prosecutors say some of your taxpayer dollars went after former lawmaker Stephen LaRoque allegedly stole money from the federal government.

Eatmon got emotional as she rehashed Stephen's initial disapproval of buying the ice rink for $525,000 in bad economic times. But Eatmon, who ice-skated competitively during her college years despite health issues, said, "You don't go into a business like this for the money. You do it for the kids."

Eatmon says she believed the former owners planned to shut down the rink and she worried young athletes would lose a valuable resource. So she and her mother went "behind Stephen's back" and bought the ice rink anyway – which is called Bladez on Ice and is still open for business on Red Banks Road in Greenville.

"There was a lot of turbulence in our family when this came to be," she said, explaining Stephen's angry reaction to the purchase as he felt "betrayed."

Prosecutors tried to prove Stephen had a change of heart. They showed jurors bank records and check receipts that detail loans from Stephen's non-profit organization, East Carolina Development Company (ECDC), to his company, LaRoque Management Group (LMG).

Prosecutors say Stephen then made several comparable payments from LMG toward a Zamboni ice resurfacer and remaining debt for Bladez on Ice. Records show all checks were signed by Stephen and/or his wife, Susan.

Eatmon denied knowing anything about her step-father's involvement in her business until his federal Grand Jury indictment last July. She said she believed the money came from her mother's profit funds after selling her carpet business in Kinston.

Stephen's defense attorney, Joe Cheshire, argued his client earned all money from ECDC through board-approved salaries and reimbursements. Cheshire says the payments from LMG to Bladez on Ice were Stephen's – not taxpayer – dollars.

However, the judge responded, "That's for the jury to decide."

Prosecutors say LaRoque similarly stole federal money to pay for a $90,000 home for his other step-daughter, Nicki Scott, to live in with her boyfriend and four children.  

On the witness stand, Scott said she paid Stephen and Susan $800 in rent each month before moving out after a family dispute. She says she knew nothing about her step-father's financial situation with ECDC or where he and Susan got the money to buy the home.

Stephen's estranged brother, George LaRoque, also testified Wednesday. Most of his questions pertained to arguments he and his two other brothers had with Stephen about divvying up their deceased parent's assets.

The judge told jurors he anticipates closing arguments by Monday afternoon.

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The federal trial for a former state representative resumed Tuesday.

Stephen LaRoque is charged with theft, fraud, and money-laundering.

So far, more than 20 witnesses have taken the stand as federal prosecutors continue their questioning. LaRoque's brother, Walter LaRoque, was the first family member we've heard from so far, as he testified for nearly four hours on Tuesday.

Walter served on the board of directors for more than a decade at his brother's federally-funded economic development nonprofit, East Carolina Development Company (ECDC). He said he didn't know about Stephen's hefty paychecks that totaled more than $2 million.

Walter also said he knows it's against the non-profits bylaws and USDA regulations for a director like Stephen to loan money to his own company. However, Walter said he trusted his brother to do the right thing and never questioned otherwise.

In response, LaRoque's defense attorney, Joe Cheshire, pointed out all of the non-profit's board members, including Walter and Stephen's wife, Susan LaRoque, signed off on Stephen's salary. Plus, Cheshire says the USDA regulators and independent auditors never questioned how much Stephen was being paid until findings from an NC Policy Watch investigation hit the Internet.

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Thousands of dollars in jewelry and an ice skating rink –that's where prosecutors say your tax dollars went after former state lawmaker Stephen LaRoque funneled federal money into his wallet.  

9 On Your Side's Katie Banks was in the courtroom for the fifth day. So far, much of the testimony has been heavy with numbers, bank statements and old receipts – all tracking LaRoque's paper trail.

But Friday afternoon, the focus turned to what prosecutors believe he bought with it.

More than $24,000 in replica Faberge eggs – they're those pricey collectibles covered in gold, diamonds and other jewels.

They're also gifts prosecutors say LaRoque bought for his wife using money stolen from the federal government.

Employees from jewelry stores in Virginia and Las Vegas took the witness stand Friday as prosecutors showed the jury receipts LaRoque signed in 2008. The 77-page indictment lists each purchase and links the money used to pay for it back to his economic development non-profit, East Carolina Development Company (ECDC).

Prosecutors say the Kinston lawmaker funneled more than $2 million tax-payer dollars from ECDC into his own pocket in salaries, reimbursements and illegal loans. They say he then tried to cover it up and filed false tax returns.

The landlord of a Greenville ice skating rink also took the witness stand Friday afternoon. Prosecutors say LaRoque's wife and step-daughter bought the rink with the stolen money.

LaRoque's defense attorney did not contest these purchases. Instead, he argued the trial itself is a waste of tax dollars by using federal money to fly in and house witnesses for the week.

The trial is set to start back up Tuesday morning and the judge hopes to have a verdict by the end of next week.

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A county official takes the witness stand in the Stephen LaRoque trial and admits to breaking rules to get a federal loan.

Lenoir County Economic Development Director Mark Pope testified for nearly two hours Thursday in federal court, where prosecutors are trying to prove former Rep. LaRoque stole taxpayer money to fund a lavish lifestyle.

Pope used to serve on the board of directors for LaRoque's non-profit organization, East Carolina Development Company (ECDC). But he told jurors he quit after he began to disagree with how the nonprofit operated – primarily how LaRoque stacked his board with family members and stopped seeking the board's approval before authorizing loans.

Pope also admitted to bending U.S. Dept. of Agriculture rules to take out a $160,000 loan from ECDC to build an apartment complex shortly after leaving the board. He admitted he and his partner, Doug Freeman, never paid back the loan after the economy tanked and their side-business filed for bankruptcy.  

The debt is a detail LaRoque emphasized back in August 2011 when NC Policy Watch's investigation into LaRoque's business dealings started raising public concern and he held a publicized press conference to defend himself.

On Thursday, LaRoque's defense attorney, Joe Cheshire, argued the former lawmaker might have been aware of Pope's loan, but did not realize it qualified as a conflict of interest.  

At one point, Cheshire asked Pope if he would ever consider paying back his debt now that he has a steady income as an economic development director.

Pope said "No," because "circumstances have changed" and his "family comes first." Pope referenced an "out" through a technicality that the wrong business name appears in the contract.

Pope says he knew what he was doing was wrong, but says he thought he could generate enough revenue through the apartment complex to pay back the loan quickly – something that never happened.

The fifth day of the trial starts tomorrow morning at 9 o'clock.

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"If assets increase, profitability increases, so do I make more money? Absolutely. But this is America and I don't think profit is a crime."

It's a statement former state Rep. Stephen LaRoque delivered before a crowd of people two years ago when he was first questioned about his hefty salary at a non-profit organization he managed, East Carolina Development Company (ECDC).

Fast forward and the former lawmaker's defense attorney, Joe Cheshire, is arguing LaRoque's innocence in the midst of 12 felony charges.

Five people took the witness stand on Wednesday in LaRoque's federal trial at the courthouse in Greenville. The jury heard testimony from a U.S. Dept. of Agriculture employee who supervised the Intermediary Relending Program; a former ECDC board member; a former ECDC employee; Kinston Mayor B.J. Murphy, who apparently briefly worked for LaRoque Management Group before quitting because of a difference of opinion with the former lawmaker; and a builder who received loans from ECDC to finance the construction of complexes.

Prosecutors are trying to prove LaRoque stole hundreds of thousands of dollars in federal money that was meant to help small businesses in rural areas.

A 77-page indictment lists the 12 counts, which allege LaRoque stole taxpayer money, tried to cover it up and then filed false tax returns.

For the past two days, federal prosecutor Dennis Duffy has declined to comment on the charges. But Cheshire told 9 On Your Side he feels confident the evidence presented during witness testimonies will reveal LaRoque was owed the money and did nothing wrong.

On the third day of the trial, Elliot Abrams of LaRoque's defense team emphasized what he called "conflicting regulatory language" in USDA loan guidelines. Abrams argued if there are confusing rules, it's difficult for someone like LaRoque to determine which rules to follow.

Abrams also pointed out that if LaRoque was doing something wrong, USDA regulators overseeing his non-profit would have spoke up.

The trial continues Thursday with more witness testimonies.

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It's a case of potential government corruption. And day two of a former lawmaker's criminal trial was all about connecting the dots that allegedly led to theft and fraud. 

Cameras were not allowed in the courtroom.

Six witnesses testified in response to a dozen felony charges against Stephen LaRoque on Tuesday. Each one gave the jury details into LaRoque's complicated financial transactions that span more than a decade. 

Prosecutors said he used government-funded non-profits to funnel money to himself. And they believe he scammed taxpayers into paying him more than $2 million in salaries and $300,000 in interest-free loans.

All witnesses had done business with LaRoque in the past, either through the Neuse River Development Authority in the early '90s or through his non-profit at the center of the trial, the East Carolina Development Company (ECDC).   

At one point, the federal prosecutor focused on questions about LaRoque's significant salary increases while serving as the executive director of ECDC and LaRoque's decision to help get his wife and brother on the board. 

In response, the defense said LaRoque received his salary increases fair and square as set out by a contract promising him 3 percent of ECDC's total assets.  They argued independent auditors and the U.S. Dept. of Agriculture (who provided money for ECDC's loans) authorized LaRoque's actions and those of his board, so it was safe to assume they were playing by the rules.

The six witnesses were just the first on a list that tops 80 potential witnesses. The trial is expected to last two weeks.

--- Original Story ---

Jury selection and opening arguments wrapped up today for a former state representative accused of a dozen felonies, including fraud and theft.

Stephen LaRoque used to be a powerful Republican playmaker in the state House. That is, until a grand jury indicted him on charges for allegedly stealing hundreds of thousands of dollars from taxpayers.

LaRoque left the courthouse for a lunch break Monday with his wife and a woman who appeared to be his step-daughter.

He didn't make any statements and avoided all reporter questions about his charges.

Inside, Assistant U.S. Attorney Dennis Duffy made his case against the former lawmaker. He said the evidence in the case can be summed up by three words: theft, concealment, and ECDC, which is short for East Carolina Development Company, the non-profit LaRoque headed and allegedly stole from.

Duffy claimed, over the past decade, LaRoque mismanaged and stole hundreds of thousands of federal dollars from the two non-profit economic development organizations he was in charge of for personal gain.

Duffy said LaRoque used that money to pay for new cars, jewelry, a hefty personal paycheck and even an ice skating rink for his wife. Plus, Duffy said LaRoque loaned money to his friends and family or used it for campaign expenses, then tried to cover it up.  

During opening arguments, LaRoque's defense attorney, Joe Cheshire, denied these claims and said the government is simply trying to turn technicality and accounting issues into theft.

Cheshire emphasized the USDA authorized all actions taken by LaRoque and his board of directors at the time.

The trial will continue Tuesday morning at 9 a.m. and is expected to last two weeks.

If convicted on all charges, LaRoque could face nearly 100 years in prison and be forced to pay $3 million dollars in fines.

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