Sunday, March 26, 2023

Top leaders at Ocean Isle Beach brokered shady deal, report alleges

Mayor used privileged info when buying land from town, state auditor forwards findings to district attorney to consider criminal charges

The report from the state auditor’s office details a real estate scandal on the beach town with a population of approximately 640 year-round residents. (Port City Daily/Courtesy Ocean Isle Beach)

BRUNSWICK COUNTY — In a stinging investigative report released this week, the Office of the State Auditor has accused the Town of Ocean Isle Beach of concocting a legally questionable deal back in 2018. 

Three years ago, town leaders showed interest in selling the land used for their police department, as plans for new facilities were in the works and the old building would no longer be needed. 

Months later, there was a contract in place between the town and Sloane Realty, which Mayor Debbie Smith has a 50% stake in. Having been privy to closed-door meetings where town leaders discussed desired terms of the sale, the mayor is being accused of using confidential information to form her purchase offer. Her offer exactly matched the value prescribed by a town-commissioned appraisal, the results of which had not been publicly unveiled.

The report from N.C. State Auditor Beth Wood further claims that Ocean Isle Beach attorneys attempted to mislead investigators in their responses; the findings have been forwarded to District Attorney Jon David, “to determine if there is sufficient evidence to pursue criminal charges related to the direct benefit derived by the Mayor.”

The investigation revealed Smith benefited by making and administering a contract for property she acquired from the town; that in developing the offer, the mayor used confidential information; that the town’s board of commissioners impermissibly talked about selling the property out of the public eye; and that the town administrator made amendments to the eventual contract without proper authority. 

In an interview, Smith confirmed her company purchased the police department property, which is adjacent to Sloane Realty’s headquarters. 

“I disagree with the auditor’s position on this,” Smith said. “The offer was made in public, it was discussed in public, it was advertised in the newspaper. It was posted in town hall, on the door. It was offered out for an upset bid; the town chose that method to obtain the highest purchase price for the town in the sale. No upset bids were received.”

Smith also questioned the motives of those who filed complaints to the Office of the State Auditor and emphasized the dealings detailed in the report are years in the past — and that no one objected to the arrangement until a few months before last year’s municipal elections. 

“It is kind of peculiar to me that this issue didn’t come up during those two years,” Smith said. “It came up just several months before a municipal election.”

Smith has been mayor since 2004 — her parents were two of Ocean Isle Beach’s  original frontiersmen, having arrived to the uninhabited island in 1955 to sell island lots for commission on behalf of developer Odell Williamson. She won re-election over challenger Leigh Simmons by a margin of 332 to 191 in 2021. 

“She should not have been involved in putting together the contract because she is the mayor of the town she’s going to do business with,” Wood, the state auditor, told Port City Daily. “She received a direct benefit and that is not in compliance with the law.”

Town attorneys for Ocean Isle Beach responded to the report by pushing back against much of its substance. According to the legal team, the so-called confidential information — the appraised value of the lot — was public record that could be inspected by anyone upon request, even if it wasn’t widely advertised. 

“The town wants to say, ‘Well, the appraisal is public information,’” Wood said. “If you know about the appraisal, and know that you can go ask for it, yes, I would consider that public: the point being that she was given information that was not readily made public.”

Ocean Isle’s attorneys acknowledged, however, that its board of commissioners inappropriately deployed closed session meetings — where the public is not allowed to watch — to discuss selling the property. 

They also claim the auditor’s office misrepresented comments from a town resident — the person who largely ignited these events by inquiring about buying the police department land three years ago, before an offer from the mayor was ever on the table. 

According to the report, the resident said he never received a follow-up call from the town administrator about the sale of the property, but town materials suggest the resident actually could not recall whether or not the call happened. (The town relies on this passage of information to the resident — whose interest in the lot was fleeting — as proof the value of the lot was not secret information.)

The saga apparently began in February 2018. The resident expressed interest in purchasing the police department land, and town leaders responded by commissioning an appraisal of the property, according to the report. 

The appraiser delivered his report one month later and valued the parcel at $460,670. That summer the town’s board of commissioners met twice in closed session — in violation of statute — where the sale of the property to the resident was discussed. There are limited reasons why public bodies can meet in private: Acquisition of land is among them, but the sale of land is not.

In June, Daisy Ivey, the town administrator, told the board she never heard back from the interested resident, after attempting to contact him with news of the appraisal.

By August, Sloane Realty — half-owned by the mayor and half-owned by her brother — had submitted an offer of their own for $460,670, the appraisal amount. The offer contained a settlement date of Dec. 30, 2019. 

The report emphasizes that Smith had insider knowledge of the desired sale price of the property and the intended timeframe for selling it. 

Construction delays prevented the town from moving into its new facilities on schedule, so Ocean Isle Beach was forced to retain the police building past the intended settlement date. The town administrator created three contract amendments, each further pushing back the closing date of the deal between the mayor and the town. (Those amendments should have been executed by the board, according to the report).

Town staff moved into the new building in October 2020, and the deal was finally executed on Oct. 30, 2020. 

Town administrator Ivey told Port City Daily in a statement the town “maintains that the sale of the former Police Department property complied with all applicable laws and procedures.” 

“As noted in the State Auditor’s Report, the Town Staff and Board of Commissioners have fully cooperated with the State Auditor’s Office during the course of their investigation,” according to the statement. “The Commissioners, the Mayor, and the Town Administrator all voluntarily submitted to interviews and the Town provided all documents and information requested by the State Auditor.”

The district attorney’s office released a statement Thursday afternoon, confirming it had received the report and the office “will scrupulously review the information to date to determine the appropriate path forward.”

Wood said many more investigations of this sort are gearing up. If anyone in the Ocean Isle Beach incident were to be found guilty of a crime, it would carry a maximum penalty of a misdemeanor, she said. But a new state law that went into effect Jan. 1 has increased penalties in these sorts of investigations. Starting this year, for fresh investigations, government officials accused of receiving impermissible benefits can be charged with felonies.

“Right now I have 31 investigative cases in the queue for my staff to go and investigate. Twenty-six of those are local governments, and many of those are small towns,” Wood said. “This is coming to light more and more.”

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