Audit of Ocean Isle shows mayor benefitted from property deal; charges filed

Property in question bought by mayor’s real estate firm for appraised value of $460,670

Ocean Isle Beach

RALEIGH — A report from N.C. State Auditor Beth Wood’s office says the Mayor of Ocean Isle may have financially benefitted from a real estate transaction. 

The matter is being referred to the District Attorney for the 15th Prosecutorial District to determine if there is sufficient evidence to pursue criminal charges related to the direct benefit derived by the mayor, according to the audit’s findings.  

State statute prohibits public officers from making or administering a contract on behalf of a public agency in which they might receive a direct benefit from the contract. According to the same statute, “Violation of this section is a Class 1 misdemeanor.” 

The audit of Ocean Isle says Mayor Debbie Smith “derived a direct benefit by being inappropriately involved in making and administering a contract in which she acquired Town property.”  

According to the audit, a real estate company in which Smith holds a 50% ownership interest “purchased the Ocean Isle Beach police department building and land19 (Property) on November 5, 2020, for $460,670.” 

“The Mayor’s inappropriate involvement in making and administering the Offer to Purchase and Contract for the Property resulted in the loss of opportunity for the public to purchase the Property for the same price,” the audit says. 

The property in question is a police department building which a citizen of the town had wanted to purchase in February of 2018. The appraisal value at the time was $460,000. Three months later, in May of 2018, the town’s board apparently directed Ocean Isle’s town administrator to send an offer to the resident for the previously appraised price. 

Sometime in June of the same year, the town administrator reported they have not received a response from the citizen, and the board decided to delay putting the building up for sale until later that year. The audit, however, states that, “The interested resident later told investigators that he never received a response from the Town.” 

Smith’s real estate company entered the picture in August of 2018, sending a purchase offer of $460,670 to the town administrator. Smith owns 50% of the real estate firm, and her brother owns the other half.  

During a Sept. 2018 board meeting, the board was informed of Smith’s $460,670 offer and approved the advertising “for upset bids of at least $483,753.50.” No upset bids came in and the board accepted the offer from Smith’s real estate company on Oct. 9, 2018. 

Among the related findings of the audit is that Smith used “confidential information” not available to the public to create the terms of the Offer to Purchase and Contract to acquire the property from the town. 

The town’s Board of Commissioners also allegedly inappropriately discussed details of the property in closed session, and the audit also says that the board “failed to disclose those discussions to the public.”  

Additionally, the town administrator executed three contract amendments on behalf of the town “without the proper authority.” 

The town’s attorney, Mike Isenberg, submitted a response denying most of the claims. 

As to claim one, the attorney admits that Smith has a 10% stake in Sloane Realty, which purchased the property in question, but denies that the purchase was “unlawful” and “further denies the mayor acted unlawfully or unethically” in the matter. 

On the claim that Smith acquired the property using non-public information, the town’s attorney disagreed, citing the town’s interest in the sale was made public during a February 2018 meeting and the ordering of an appraisal was voted on and approved. The appraisal was made public after it was received, according to the town’s response. 

Ocean Isle’s response acknowledged that the board of commissioners did discuss the sale of the properties and discussion of those topics is prohibited in a closed session. However, the town’s response then denies that the property discussion was the “purpose” of either of the closed sessions where the topic was brought up and that no votes were taken.

About A.P. Dillon 656 Articles
A.P. Dillon is a North State Journal reporter located near Raleigh, North Carolina. Find her on Twitter: @APDillon_