The Friends of the N.C. Maritime Museum released a report this week admitting that it lost more than $1.8 million on the Pepsi Americas’ Sail 2006 event staged in July in Beaufort and Morehead City.

The report also says N.C. Department of Cultural Resources Secretary Libba Evans agreed to ”make the debts go away” if a 36-acre parcel of land in Beaufort owned by the Friends was deeded to the state.

The Friends is a nonprofit organization that supports the work of the three North Carolina Maritime Museums. The main museum is situated in Beaufort. The Friends is also the parent organization of Pepsi Americas’ Sail 2006.

The three-page document, “A report to our members and to the community from the leadership of the Friends of the N. C. Maritime Museum,“ was dated Dec. 10 and listed Friends board member Dave DuBuisson as a contact for further information.

“Any way you look at it, it’s been one heck of a year for the Friends of the NC Maritime Museum,” the report says. “What follows is an overdue effort by the Friends leadership to bring our membership and the larger community up to date on the events of 2006. The report is overdue because during several months of negotiations with the Department of Cultural Resources, we agreed — very reluctantly — to avoid public comment concerning either Pepsi Americas’ Sail or pending arrangements covering the Gallants Channel property. We are no longer so constrained.”

Gov. Mike Easley and top state officials approved the acquisition of the Gallant’s Channel parcel at the monthly Council of State 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 state real estate transactions.

After the transfer, stories by Carolina Journal indicated the land deal was linked to operating losses from the Pepsi Americas’ Sail event, and that the deed transferring the property had been recorded before the council meeting.

The Friends report confirms the link. When asked why the deed to the 36-acre property was signed and recorded before the Council of State meeting Oct. 3, DuBuisson told CJ that it was done at the direction of Cultural Resources Chief Deputy Secretary Staci Meyer, who is also a lawyer.

CJ asked Cultural Resources spokeswoman Maryanne Friend why Meyer ordered the transfer before Council of State approval. She was unable to get an answer by press time.

According to the report, the Pepsi Americas’ Sail event had income of $2,534,363 and expenses totaling $4,358,816, for a net loss of $1,824,453. Half of the loss was covered by a loan secured on the Gallant’s Channel property and about $900,000 remains a debt to be paid by the Friends.

The Friends borrowed just under $5 million to improve the property and provide cash flow to put on Pepsi Americas’ Sail. Contractor’s bills totaling $432,000 have still not been paid.

The report says the Gallants Channel property acquired by the Friends 10 years ago would eventually be deeded to the state, but only when Department of Cultural Resources was ready to commit to expanding the museum at the site. At that time Pepsi Americas’ Sail looked like an opportunity to jump start development.

“In retrospect, it’s clear that the Friends lost control of the costs when responsibility for event management, advertising and public relations and transportation was turned over to others. The job clearly required the help of professionals, but the pros were not careful with our money.” The report did not say who the “pros” were, but research by CJ indicates that the Department of Cultural Resources made most of the major spending decisions.

The report also cites other event problems. It claims that Americas’ Sail, the owner of the franchise, did not produce enough tall ships. In addition a race was moved offshore where no one could see it.

“We must find a way to hold the Department of Cultural Resources to its side of the bargain for the Gallants Channel land. The property is security for construction loans totaling $4.4 million plus the tall ships line of credit for a total of $5.3 million,” according to the report. The report says that in a meeting with Friends officers in late summer, Evans proposed that the Friends’ land be deeded to the state in return for which she would “make the debts go away.”

The General Assembly appropriated $1.65 million from last year’s budget to “enhance transportation infrastructure for the Friends of the N. C. Maritime Museum/Tall Ships Event in Beaufort.” Most of those funds went to a Vienna, Va.-based company, Transportation Management Services. It was the Department of Cultural Resources that selected TMS and agreed to administer the $1.25 million contract. For that amount, TMS brought in buses from North Carolina and other states and managed parking lots.

A $300,000 Golden LEAF grant was made to the Friends of the N.C. Maritime Museum to support the staging and promotion of Pepsi Americas’ Sail. Evans is a member of the 15-person Golden LEAF board, which is set up to distribute tobacco settlement funds. The Department of Cultural Resources spent another $225,000 assisting the festival.

Several media reported earlier this year about a separate $30,000 party for public officials, sponsored by the N.C. Ports Authority, that was conducted on a boat borrowed from the N.C. Department of Transportation Ferry Division.

The N.C. State Auditor’s spokesman Chris Mears told CJ that state auditors are investigating the finances of the Friends, the Pepsi America’s Sail event and the related land transaction.

Don Carrington is executive editor of Carolina Journal.