Small company pursuing COVID-killing light therapy has atypical benefactor — NC lawmakers

State legislative leaders two years ago tucked $6 million into the state budget for a newly formed company developing a novel COVID treatment — a device that would shine a virus-killing blue light in the back of patients’ throats.

Then in September, legislators more than tripled their bet on the small company that operates out of a nondescript office park in Morrisville, providing another $20 million in the state budget as EmitBio tests its blue diode-emitting light in a full-scale trial.

It’s rare for lawmakers to give taxpayer money directly to any company, lawmakers and state officials acknowledge. But this company has political connections others lack.

Neal Hunter, a founder of EmitBio and its parent company KNOW Bio, paid House Speaker Tim Moore tens of thousands of dollars for legal work in 2017 — until KNOW Bio’s then-CEO discovered the payments and discontinued them as unnecessary.

When The News & Observer pointed out Moore’s previous paid work with KNOW Bio to a top House budget writer on April 15, the legislator put a hold on what remained unspent the next day until he and other budget chairmen received more information.

“We’ll find out if there’s accountability things that we need to put in, we’ll do that. If we don’t need to spend the money we may decide that. But that will be up to the chairs collectively and we’ll go from there,” Rep. Jason Saine told The N&O.

The hold lasted eight days, legislative records show.

On April 24, Moore’s chief of staff, Neal Inman, emailed a letter to State Budget Director Kristin Walker saying there were no issues with the appropriation after EmitBio submitted “detailed information” about its use. The letter listed the names of Saine and nine other budget chairmen as co-authors. Inman also sent the emailed letter to The N&O.

Lawmakers, company providing few details

The News & Observer requested but did not receive any of the information EmitBio provided to the House budget chairmen referenced in the letter. Nor did legislators release requested records related to the appropriations.

N.C. House Speaker Tim Moore listens during a press conference Wednesday, March 29, 2023, where Speaker Moore and the House Republican budget chairs talked about their state budget proposal.
N.C. House Speaker Tim Moore listens during a press conference Wednesday, March 29, 2023, where Speaker Moore and the House Republican budget chairs talked about their state budget proposal.

Last year — with late-entry language in the same budget that gave EmitBio more millions — the Republican-led state legislature exempted lawmakers from public records requests.

Saine had told The N&O he would provide records showing how he and other lawmakers were invited to a tour of EmitBio before they committed the $6 million.

One of the House’s three chief budget writers, Saine has not responded to requests for a follow-up interview. Other House budget writers did not grant interviews.

Former state Supreme Court Justice Robert Orr, acting as a lawyer for a conservative legal institute, unsuccessfully sued the state in 2005 over tax dollars going to a computer manufacturer in the form of economic incentives.

He questioned why lawmakers would pick EmitBio for funding out of the many companies in the Triangle developing products and services that could have a public benefit.

“If the General Assembly can just give them money to help them in financing their research, you are really pushing the public purpose way beyond what I thought the proper constitutional interpretation was,” said Orr, who served as an associate justice on the state’s top court from 1995 to 2004.

Advanced testing underway

EmitBio and KNOW Bio rent space in a 65,000-square-foot office building in the Keystone Technology Park in Morrisville. There’s no sign at the entrance for either business. A woman who answered the doorbell recently said no one was available to meet with a reporter, who multiple times requested an interview by phone and email.

The companies’ LinkedIn pages show each employ roughly 15 people. An organizational chart EmitBio filed with the state Office of Management and Budget as part of the state appropriation shows 25 employees, some of them are also KNOW Bio employees.

KNOW Bio was incorporated at the end of 2015 with Hunter as the managing member. Its website says it specializes in medical treatments using nitric oxide and precision light, and lists three other spinoff companies – Vast Therapeutics, Revian and Diabetic Health. Revian uses red and orange LED light to promote hair growth.

For many years, blue light has been used in medicine for the treatment of acne, psoriasis and other skin ailments. John McNeil, EmitBio’s former chief medical officer, said early-stage research showed it highly effective against the virus that causes COVID-19 in the upper respiratory tract.

The company recently finished an advanced trial that McNeil designed involving roughly 350 people, he said. Test subjects had to be treated within 72 hours of developing symptoms, he said.

McNeil, an expert on infectious diseases on the UNC Health Care System’s board of directors, left EmitBio in September for personal reasons, he said. He expects the trial to conclude by summer.

If its results are strong, they could lead to a device people could use at home to knock out mild COVID and other respiratory diseases such as the flu before they fully develop, avoiding significant time away from work or school, he said.

“If you get a strong treatment without side effects, then you are really talking about something special,” McNeil said. “And no potential to develop resistance like with antibiotics.”

He said he found it “bizarre” that company officials would not talk to a reporter about research that he thinks is promising. He didn’t know the company had received money from state lawmakers, he said.

McNeil, a former Fayetteville State University trustee, acknowledged that it’s rare for state lawmakers to hand out money to private companies, and that he understands why some people may raise questions about it.

“This is just so atypical that it raises red flags,” he said.

Rare path to initial funding

House and Senate leaders awarded $6 million to EmitBio in a dramatically shortened budget process in which neither chamber produced budget proposals, which is rare.

Instead, leaders rolled out a $27.9 billion budget bill, giving rank-and-file members two days to read it. The 192-page budget had to be passed in an up or down vote with no amendments.

Saine, a Lincoln County Republican, said he did not recall Moore pushing the spending.

“I didn’t feel any pressure from the Speaker’s Office or from the speaker to fund it,” said Saine. “As presented to us it sounded like a legit purpose for the dollars allocated from the feds for research on COVID and other diseases.”

EmitBio is not named in the 2022 budget bill. The money is referenced deep within a 443-page companion spending report. It earmarks pandemic recovery funds to the company for “continued development of a light-based treatment option for COVID-19 patients with severe respiratory involvement.”

Lawmakers in last year’s budget offered that same description when giving the company another $20 million. That appropriation first appeared in the House’s budget proposal, records show.

EmitBio spending in the 2023 state budget.
EmitBio spending in the 2023 state budget.

The company is targeting potential treatment for early onset of mild-to-moderate COVID, McNeil said. The titles of published research articles posted on the company’s website emphasize the same clinical target.

The first award of $6 million came from billions in federal COVID relief dollars provided to states during the pandemic. It requires EmitBio to submit expense reports to a state office that tracks the COVID funds, which the company has done.

The more recent $20 million is a “directed” state grant from the lawmakers, and also requires EmitBio to submit expense reports to the state Office of Budget and Management, OSBM requirements show.

Saine said he and two other House budget writers took a tour of EmitBio before they and House and Senate budget writers provided the initial $6 million. He was not as involved in the $20 million appropriation and could not explain why other budget writers viewed it was needed, he said.

Legislative leaders on the Senate side, meanwhile, showed little knowledge of the company, which they did not fund in their 2023 budget proposal.

“I don’t know what they do, so, as far as an opinion on it in the budget, I have no specific recollection of that appropriation,” said Senate leader Phil Berger, a Rockingham County Republican.

The N&O revealed Moore’s legal service payments from KNOW Bio in 2018. That reporting and allegations in an anonymous letter sent to Wake County District Attorney Lorrin Freeman about another client of Moore’s prompted her to ask the State Bureau of Investigation to review the speaker’s fees.

The inquiry concluded that the “fees were for legal services paid to Mr. Moore in his capacity as an attorney,” Freeman said.

Saine said Moore told him in April, as he looked into the KNOW Bio connection to EmitBio, that he had not done any work for the company since.

A decade of financial connections

EmitBio spent $77,500 lobbying state officials in 2022 and then spent another $120,000 in 2023, reports filed with the N.C. Secretary of State show.

Two politically connected EmitBio registered lobbyists declined to answer questions about the state funding when an N&O reporter approached them in April outside a campaign fundraiser for state House and Senate Republicans.

One was David Powers, who the House appointed to UNC Board of Governors for the maximum three four-year terms, and who sits on N.C. State University’s trustee board. The other is Will Mitchell. His father, Alex, also a House-appointed BOG member is a business partner of EmitBio founder Hunter’s in 751 South, a 166-acre development of residences and shops near Jordan Lake in South Durham.

Neal Hunter
Neal Hunter

Moore and Hunter have helped each other financially over the past decade.

In 2013, while House Rules chairman, Moore filed successful legislation that forced the City of Durham to extend water and sewer services to the property where 751 South was planned, despite local opposition to the development.

That year, Hunter and his wife, Janet, began making campaign contributions to Moore.

Two years later, in 2015, Moore appointed Hunter to a special committee that selected the firm that invests $60 million from a pot of unclaimed money the state holds known as the escheat fund. The committee selected Hatteras Venture Partners. One of its general partners was Robert Ingram.

Ingram had previously personally invested in another Hunter company, Novan, and replaced Hunter as board chairman in early 2016. KNOW Bio is a spinoff from Novan, a pharmaceutical company that specialized in dermatology.

Hunter’s companies sought funding in the years before and after Hatteras Venture Partners was selected to run the escheat fund, said Clay Thorp, one of Hatteras’ founding partners. But Hatteras hasn’t invested in those companies, he said.

Records from the state treasurer’s department, which oversees the fund, show Moore appointed Hunter on Jan. 28, 2016. Two weeks later, the department became aware of Hunter’s financial ties to Ingram, with then Chief Investment Officer Kevin SigRist suggesting a “conflict review.”

Hunter discussed his ties at a subsequent meeting, according to an email on Sept. 30, 2016 written by Mary Laurie Cece, an assistant general counsel to the department. Hunter said his “interest” in Novan at that time was “less than a 10%,” Cece wrote.

“But essentially Mr. Ingram might have the ability to affect (Hunter’s) net worth,” Cece wrote.

The department could not produce records of the committee’s actions, which took place when Janet Cowell, a Raleigh Democrat, was state treasurer, spokesman Frank Lester said.

Moore’s ethics statements began showing in 2017 that he or immediate family members had investments worth at least $10,000 in Novan. He continued to report the investments until 2022, a year before Novan declared bankruptcy.

In 2015, Hunter hired Moore for unspecified legal work, Moore said in a 2018 interview with The N&O. This was after The N&O learned that Hunter paid Moore for performing legal work for KNOW Bio in 2017.

The $10,000-a-month payments lasted four months, Moore said then. KNOW Bio’s then-CEO Anne Whitaker questioned the need for Moore’s legal work and terminated it, she told The N&O. The company already had other legal counsel for internal and external matters, she said in the interview.

The Hunters’ contributions to Moore’s campaigns kept flowing. Last November, shortly after Moore became a candidate for the 14th Congressional District, they gave his campaign a combined $13,200. That’s the maximum allowed under federal law.

This story is one of a series of News & Observer reports called Power & Secrecy. It explores the rise of both in the N.C. General Assembly.