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Audit: Mayor used confidential information in purchase of town property

State Auditor Beth Wood

The state Auditor’s Office says that the mayor of a coastal town used confidential information to buy town property at a price not available to the public.

Ocean Isle Mayor Debbie Smith purchased land and a former police department building at the appraised value of $460,000 for a real estate company that she co-owns. The town board improperly discussed details of the sale in closed session, the audit says, and the mayor was able to use information that was not public in making her purchase offer. Further, the town board discussed sale of the property in closed session, according to the audit report, a topic that cannot be discussed behind closed doors.

In their formal response, the Ocean Isle Beach town attorney and assistant town attorney said in a letter that Smith did not have any information that was not available to the public and that the appraised value and the offer from Smith’s real estate company were properly disclosed.

“The town respectfully disagrees that Mayor Smith unlawfully or unethically acquired town property using nonpublic information,” the town lawyers’ letter said.

Smith did not respond to a request for comment Thursday morning.

The audit lays out this timeline:

  • February 2018 – An Ocean Isle Beach resident expressed an interest in buying the property to the town administrator. The town had the property appraised.
  • May 8, 2018 – At a Board of Commissioners meeting, the board went into closed session and told the town administrator to offer to sell the property to the resident for the $460,000 appraised value.
  • June 12, 2018 – The board went into closed session where the town administrator told board members that the interested resident did not respond after she attempted to contact him about the offer amount. The resident later told investigators that he never received a response from the town. (In an email included with the town’s response, the resident wrote that he told the investigator that he didn’t remember the town administrator contacting him about selling the old police building, not that it didn’t happen. If he had been contacted, it probably won’t have registered because by that time he didn’t care.) The board minutes state the board then decided, “not to put this property on the open market for sale until later this Fall.”
  • August 2018 – Smith’s company offered to buy the property for $460,670. The offer contained a settlement date of December 30, 2019.
  • September 11, 2018 – During an open session of the board meeting, the board was told of the offer. The board approved the publication of the notice of the $460,670 offer and advertised for upset bids of at least $483,753.50. Smith’s real estate company then wrote a $25,000 check payable to the town as a deposit.
  • October 9, 2018 – The board voted in open session to accept the $460,670 offer from Smith’s real estate company after receiving no upset bids.

The audit says Smith did not follow state law prohibiting public officers or employees from benefitting from public contracts.

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