When Gov. Mike Easley recently urged top state officials to approve the acquisition of a 36-acre parcel of land in Beaufort, he failed to mention that deeds transferring the property to the state had already been recorded. He also failed to mention growing financial problems of the nonprofit organization donating the land.

The Council of State approved the acquisition at a meeting Oct. 3. The council is composed of the governor and the other nine independently elected state officials, such as the state treasurer, lieutenant governor, and agriculture commissioner. By law, the council is required to approve or disapprove state real estate transactions.

The property was acquired by gift from the Friends of the Museum, a nonprofit organization that supports the work of the three North Carolina Maritime Museums. The main museum is situated in Beaufort. The Friends of the Museum is also the parent organization of Pepsi Americas’ Sail 2006, the organization that sponsored the tall-ships festival conducted in Morehead City and Beaufort in early July. Neither the Friends nor Pepsi organizations have reported how much money the event made or lost.

The state acquired the land subject to deeds of trust in the principal amounts of $995,000 and $3.9 million. The loans were taken out July 12, 2005, and Oct. 17, 2005. While the loans were supposedly to be used to build bulkheads, docks, and other improvements to the property, a Carolina Journal review of public records showed that some of the borrowed money was for staging the tall-ships event.

An audio recording of the Council of State meeting showed that State Property Office Director Joe Henderson made the presentation to the council and that Easley was a strong supporter of the transaction. Henderson explained that taxpayers already had paid $3.2 million for the land in 1997, even though it was being held in the name of the Friends of the Museum.

“This is a very complicated transaction,” Labor Commissioner Cherie Berry said.

“Well, not really,” Easley responded. “We got out of this for pretty close to nothing.”

Lt. Gov. Beverly Perdue said she had a conflict of interest and would not vote. Easley called for a vote, and all members of the council who were present, including State Auditor Les Merritt, voted for the project. State Treasurer Richard Moore and Attorney General Roy Cooper were absent.

But Henderson and Easley failed to disclose several important items of the transaction.

They did not mention that the council had approved the transaction in 1998, that 5.6 acres of the property had already been deeded to the state in 1998, and that a deed for the other 31 acres was recorded Oct. 2, 2006, the day before the council met.

Neither Henderson nor Easley mentioned the liens, even though copies on the property were in the State Property Office file. T. D. Eure Construction Co. of Morehead City filed a lien Oct. 2 for $190,273 worth of work on the property. Thomas Simpson Construction Co. of Atlantic Beach also filed a lien for $74,031 Sept. 25.

Henderson and Easley said that the property was worth $36 million and that the N.C. Department of Transportation would pay $4 million for about four acres of land for a new bridge that the state could use to pay off the mortgages. They provided no documentation on those estimates.

They also failed to mention the growing financial problems of the nonprofit group donating the land.

Attempts by CJ to ask Henderson about the transaction were unsuccessful. Department of Administration spokeswoman Jill Lucas said, “Joe is not available to discuss this matter.”

After being informed by CJ about Easley’s and Henderson’s omissions, Berry said that she had been misled. She said she will ask for a full explanation of the transaction and for the council to take another vote on the matter.

As a former Wake County manager, State Sen. Richard Stevens, R¬Wake, was involved in numerous government land transactions. Stevens currently sits on the Joint Legislative Commission on Governmental Operations. State law requires land transactions valued at more than $25,000 to be reviewed first by the commission, but Stevens said he did not remember this particular transaction being submitted for review, nor does he understand how the state can accept land with mortgages and no legislatively approved funding source to make payments.

“This land transaction appears to be highly irregular and needs to be thoroughly investigated. I have asked the General Assembly staff to look into it,” Stevens said.

Pepsi Americas’ Sail received revenue from ticket sales and sponsorships. A statement on the organization’s Web site said the July event attracted more than 150,000 visitors to Beaufort and Morehead City, including more than 30,000 who bought tickets to tour the ships.

In addition to private funds collected for the event, public funds were also involved. The General Assembly appropriated $1.65 million. The Golden LEAF Foundation made a $300,000 grant. The Department of Cultural Resources spent $225,000. The Department of Crime Control and Public Safety paid for law enforcement by Highway Patrol officers and other personnel. Proceeds from the event were to go to the development of the Olde Beaufort Seaport, a project of the N.C. Maritime Museum, to be situated on the same 36-acre parcel.

Pepsi Americas’ Sail 2006 Co-chairman James Kelly has repeatedly refused to say whether the event made or lost money. Pepsi Americas’ Sail is a subsidiary of Friends of the Museum. According to publicly available financial information, as of Dec. 31, 2005, the Pepsi Americas’ Sail event had earned $350,597 but incurred costs of $436,710.

Officials of Americas’ Sail, the New York-based organization that sanctioned the Beaufort tall-ships event, said Americas’ Sail had not been paid about $120,000 by the North Carolina organizers, alleging that the organizers failed to share revenue according to a contract.

At a press conference Oct. 25 in Morehead City, Americas’ Sail President William Wendler alleged that several other organizations or vendors had not been paid and recommended that the state auditor commence an immediate investigation to determine where the money went.

Don Carrington is executive editor of Carolina Journal.

Click here to listen to audio of discussion about the Beaufort land deal during the Oct. 3 Council of State meeting.

See related story from The Jacksonville Daily News.