State auditor says mayor used elected office for personal gain in real estate deal

OCEAN ISLE BEACH, NC (WECT) – The state’s auditor is asking the Brunswick County prosecutor to review possible criminal charges surrounding a real estate transaction in Ocean Isle Beach.

The auditor says Mayor Debbie Smith’s purchase of the city’s former police department violated state law, allowing her to use her elected position to take direct advantage of the city. The auditor also claims that Smith used inside information that is not readily available to the public for personal gain.

The mayor and city attorney flatly disagree with the state auditor’s findings.

On Thursday, State Auditor Beth Wood released a nearly 200-page investigative report into the dodgy real estate transaction. In 2018, the city completed plans for a new city hall and police department. In February of that year, a resident expressed interest in purchasing the old police department on West 3rd Street. The city council was interested in selling and paid to have the land appraised.

The former police department’s valuation came back to $460,000. The state auditor’s office and City of Ocean Isle Beach officials wonder if the city ever responded to the resident who expressed interest in purchasing the property, but he hasn’t ended up. buy it.

In June 2018, the city council met behind closed doors where the city administrator informed council that the interested resident had not responded after trying to contact him about the amount of the offer. The minutes of the meeting say that the board then decided “not to put this property up for sale on the open market until late fall”.

In August 2018, Smith submitted an offer to purchase the property for $460,670. Smith and his brother co-own a nearby real estate business and were hoping to expand their office into this space. Smith drafted the offer herself to submit to the city, and Council was briefed on her offer in open session at their next meeting in September. They voted to publicize upset deals, allowing any interested party to buy the police department property themselves for $483,753.

When no thwarted offers were received, council voted to accept the mayor’s offer in open session on October 9, 2018. The mayor abstained in the vote to avoid the appearance of a conflict of interests. interests.

While Smith and City Attorney Mike Isenberg believe the transaction was completely legal and honest, the auditor stands by her findings.

“The mayor is basically involved in a real estate transaction…and they’re not supposed by law to deal with things that will benefit them as elected officials. In addition, the mayor used inside information, there was an assessment, it was public information, but who would even know, number one, that the city even had an assessment done because the conversations had taken place in camera. And then second, this pricing of what the city would accept was never really made public,” Wood explained. “You really had the mayor dealing with information that no one else knew, and for someone else to buy the same property, he would have spent over $20,000 buying that same property.”

Wood disputes that she wrote the contract herself. She says that while Smith didn’t vote to approve the sale, she was sitting at the table, potentially exerting influence over others who were voting.

Prior to this year, using your elected office for personal gain, as defined by state law, was a misdemeanor in North Carolina. In January 2022, the offense became a felony. Wood said she currently has 31 complaints in her queue for investigations right now, and 26 of them involved elected officials, often in small towns, abusing their position for personal gain.

“I hope to see that number go down because what has now become effective (…) is that for any elected official who abuses or abuses his position for personal gain, it will result in a class H crime. This n It’s not for me to indict or indict, but the law exists now and has consequences for elected officials,” Wood added.

Since the alleged breach in the Ocean Isle Beach case occurred before January, when the new law took effect, the maximum potential consequence would be a misdemeanor conviction and the sales contract would become void.

The auditor’s investigation began after Wood’s office received five complaints from members of the public about the questionable real estate transaction. Smith argues that the timing of the complaints was politically motivated.

“It took two years between the city accepting an offer, before the police department was ready to move into its new location. It’s a little strange that this question hasn’t come up at any time during these two years. Then it was raised just before a municipal election. I feel we have complied with the law, I disagree with the Auditor’s position and the reasons are covered in the [written response to the Auditor’s findings]”Smith said.

While Smith submitted the offer to buy the police department in 2018, the deal didn’t close for two years. City officials say that’s because there were delays in completing the new police department and officers weren’t ready to move from their Third Street location until 2020.

“The offer was made in public, it was discussed in public, it was announced in the newspaper, it was posted at the town hall on the door and was offered for a higher bid. The city chose this upset auction method to get the highest price for the city in the sale. No upset offers were received,” Smith added.

Smith served as mayor of Ocean Isle Beach for 20 years, but faced a challenge in last fall’s election. She insisted she had never used her self-service office and added that she had provided no-cost real estate services to the city for $15 million in other land purchases since joining. active.

As part of its official response to the state auditor’s findings, the city included an email from the man who originally expressed interest in buying the former police department. He wrote in that email that he made the request for a client who later changed his mind about his intention to buy the property. He said that since it wasn’t a viable deal anymore, it wasn’t high on his radar, and he just doesn’t recall if the city ever contacted him with the estimated price.

“The City maintains that the sale of the former Police Service property complied with all applicable laws and procedures. As noted in the state auditor’s report, city staff and the board of commissioners cooperated fully with the state auditor’s office during their investigation. The commissioners, the mayor, and the city administrator all voluntarily submitted to interviews, and the city provided all documents and information requested by the state auditor. Given the ongoing nature of this matter, it would be inappropriate to comment further at this time,” Isenberg added when asked for an interview Thursday.

District Attorney Jon David released a statement Thursday afternoon saying his office will “carefully review the information to date to determine the appropriate course of action.”

Here is David’s statement in full:

“Earlier today, the District Attorney’s Office received a report from the State Auditor’s Office regarding the acquisition of the Ocean Isle Beach City Police Department building and land by a real estate company. owned by its mayor Debbie Smith. The findings of the auditor’s investigation have been forwarded to my office to determine if there is sufficient evidence to lay criminal charges. Because we have just received this information, I do not have the benefit of knowing the depth and scope of the investigation or the material facts underlying the decision to make this referral. Accordingly, we will carefully review the information to date to determine the appropriate path forward. »

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