Tuesday, June 28, 2022

Year One: Seven controversial moments from the $60 million H2GO case’s first year in court

It's the one-year anniversary of the most controversial legal case lingering over Brunswick County. To mark the events that started it all, we've compiled several of the case's most controversial happenings.

The complex multi-party case involving a contested transfer of nearly $60 million in assets from H2GO Brunswick Regional Water and Sewer to Belville last year is still in litigation. (Port City Daily photo/Johanna Ferebee)
The complex multi-party case involving a contested transfer of nearly $60 million in assets from H2GO Brunswick Regional Water and Sewer to Belville last year is still in litigation. (Port City Daily photo/Johanna Ferebee)

Author’s note: Wednesday marks the one-year anniversary of Brunswick Regional Water and Sewer H2GO voting itself out of political existence, selling all of its $60 million assets to the Town of Belville for $10.

BRUNSWICK COUNTY — A decades-long feud between two town’s in the state’s fastest growing county has recently culminated in a $60 million case.

Belville and Leland’s battle over Brunswick Regional Water and Sewer H2GO’s assets has racked up nearly $1 million in legal fees — and it’s led to some controversial moments.

RELATED: Leland and Belville’s 30-year rivalry is the key to understanding the complex H2GO case

Though the case has been eventful throughout, here are seven moments that had a lasting impact:

Lame duck move: Transferring H2GO

The contested transfer was approved 3-2 by an outgoing majority on Nov. 28, 2017. Two of the commissioner’s terms were set to end, with the board’s power set to shift with the upcoming arrival of an anti-reverse osmosis candidate.

Chairman William Browning, not seeking re-election, Commissioner Carl Antos, who lost his re-election bid, and incumbent Ron Jenkins, who was re-elected, voted in favor of the move that spurred a lawsuit that’s approaching nearly $1 million in legal fees.

In court, Leland and H2GO’s lawyers, on behalf of the new majority, argued the outgoing majority subverted the will of an election, by intentionally voting on an item that would not have passed under new leadership.

This “lame duck” argument was negated by Belville’s attorney at the time, Jim Philips. He told the court at a Dec. 13 hearing last year that the North Carolina Supreme Court makes it clear that until an official’s full term is over, that official has full authority to act.

At the hearing, Judge Thomas Lock sided with Belville, keeping H2GO’s assets under Belville’s control.

Heck of a deal: $60 million for $10

H2GO’s attorney, Brian Edes, has argued on multiple occasions that the transfer or sale of assets is illegitimate on the basis that it does not actually warrant a reasonable transfer.

H2GO’s $60 million assets were transferred to Belville at a cost of $10; Edes has written in court filings that “the sale price is so minimal it cannot legitimately be considered proceeds.”

Mike McGill, whose contract as a communication consultant for H2GO transferred over to Belville along with the $60 million assets,  said transfers of assets are typically arranged at a low dollar amount.

“The $10 argument is a false one and Mr. Edes knows it,” McGill said. “He knows that conveyances of infrastructure are often made for as little as $1 because the entity taking ownership becomes responsible for the infrastructure’s debt service and maintenance costs.”

Hurry-up defense: Bill Beer’s swearing in

After H2GO’s outgoing board voted 3-2 to transfer its assets to Belville, the utility’s minority scrambled to stop the unexpected move.

In order to undo the move, the board needed Bill Beer. Beer had campaigned on an anti-RO platform, and was the only anti-RO candidate to be elected on Nov. 7. Though he finished third behind two pro-RO candidates, his election was all that was needed to swing the board’s power.

Typically, new board members take office during the first regularly scheduled meeting in December. On Dec. 4, three days after the contested transfer, H2GO called for an emergency meeting and passed a resolution seeking to undo the transfer. According to court documents recently filed by Belville, Beer was sworn in at 12:01 at Leland Town Hall, notarized by a Leland staff member.

Belville alleges Beer’s swearing-in is in violation of two state statutes, with one carrying a penalty for a criminal, Class 1 Misdemeanor offense.

Split decision: Two boards, confusing votes

Beer’s sudden swearing in later caused issues on the board. Weeks later, on Dec. 19, six board members were actively sworn in, leading to confusion over whose vote actually counted.

H2GO’s attorney, Stephen Coble, opened that meeting, stating a lack of certainty about a legal voting board. A valid board would comprise of five voting members; at that meeting, six members, both former or current Commissioners, cast votes on an item.

Plan ahead: Meeting held open

In order to finalize the agreement transferring H2Go to Belville, both parties had to sign. With both parties consisting of publicly elected officials held under parliamentary procedure, typically, an agreement of this nature would take months to go through.

However, the transfer documents were introduced not before, but during the Nov. 28 meeting. After they were approved, Belville, approximately 14 hours later, met and signed the documents at 8 a.m.

To pull this off, Belville left its Nov. 20 meeting open, and reopened it on Nov. 29, allowing the town to accept the documents before many involved knew what had happened. In court filings, Belville does not deny this chain of events.

(Editor’s note: Holding open a meeting is uncommon but not illegal. Leland has alleged that Belville not only anticipated and planned for H2GO’s vote to transfer, but also unduly – and possibly illegally – influenced that vote. More on that here.)

Gag order: Silencing H2GO’s staff, director

After Beer’s midnight swearing-in, H2GO’s anti-RO majority passed a gag order that prohibited all staff members from communicating with the press.

Court filings accuse H2GO staff members of hurridly completing the transfer before Leland’s temporary restraining issue was served on Dec. 3 at 8 p.m. Belville denies this claim, and instead, states in a response to Leland’s filings that H2GO staff members reasonably worked to complete the transfer, a lawful document.

Regardless, in an apparent effort to silence staff members who helped complete the transfer, H2GO’s anti-RO majority passed two communications policies to limit outside conversations. The silencing orders created a “hostile workplace” for staff members, pro-RO Commissioner Rodney McCoy said at a February meeting.

Both orders effectively rendered the utility’s public information officer’s role obsolete. Tyler Wittkofsy was required to redirect inquiries –even inquiries that did not directly involve litigation — to H2GO’s new attorney, Brian Edes, who charges an hourly rate approximately eight times higher than Wittkofsky salary. For some residents, this financial side effect of the gag-order was a controversy in and of itself.

Despite effectively gagging its own spokesperson, H2GO kept Wittkofsy on the payroll,

In February, when discussing the orders, Edes warned the board that they would have “First Amendment implications” in limiting free speech.

Double duty: Leland hires Edes

In a strange twist of events, Leland hired Edes as its town attorney in September. Edes was hired on to serve H2GO in Dec. 2017 shortly after the transfer.

Since then, Edes has provided legal services to H2GO in the lawsuit against Belville, with Leland as a co-plaintiff.

When Port City Daily asked Edes in October whether he was concerned about the potential for a conflict of interest in serving both political bodies separately, he did not directly answer, but said any agreement entered into by H2GO would be compliant with the Preliminary Injunction Order.


Send tips and comments to Johanna Ferebee at johanna@localvoicemedia.com

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