State Auditor Beth Wood’s office found that Ocean Isle Beach Mayor Debbie Smith benefitted from using confidential town information in her real estate company’s purchase of a former police station site in 2018 and has referred the matter to the local district attorney.

In the report released Wednesday,  Jan. 26, the office said it received allegations about the sale of the property, which Smith’s company, Sloan Realty, purchased from the city in October 2018 for $460,670. But questions arose about another interested party who said he was never offered the chance to buy the land.

The report says that the resident inquired about the property in February 2018, which sparked the city to hire an appraiser, who valued the property at $460,000 the following month. In May 2018, the board entered a closed session and told the town administrator to offer to sell the property to that resident for the appraised amount. The following month, the board entered a closed session again, and the town administrator told the board the resident didn’t respond to that offer.

But the resident later told examiners the city never contacted him with the offer.

The report said that Smith told auditors she helped prepare the offer to purchase and contract, which included the price, due diligence period and closing date.

Auditors said in the report that Smith “failed to observe state law which prohibits officials from being involved in making or administering a contract on behalf of a public agency in which they will derive a direct benefit.”

Examiners further note that Smith’s offer to purchase prompted the town’s board of commissioners to vote to proceed with the upset bid process, which would require other potential buyers to bid more than $23,000 more than Smith’s offer. The report points out that because of this process, the public never had the chance to buy the property for the same price as Smith.

“The Mayor has a simultaneous obligation to act in the best interest of the Town and her real estate company,” the report says. “She cannot temporarily set aside her obligations as Mayor in order to enter into a business transaction that may result in a direct benefit to her.”

Auditors also received conflicting statements from Smith and the town’s legal counsel, Mike Isenberg, concerning the sale. Smith said she didn’t discuss the purchase with the attorney before the offer was submitted. Isenberg said Smith discussed the issue with him, according to the report.

Smith told the Wilmington Star-News that the offer was made and talked about in public.

“It was advertised, it was posted on front door of Town Hall and the town chose to do an upset bid process to obtain the highest purchase price for the town in the sale,” she said.

Wood’s office said it has referred to the matter to 15th Prosecutorial District Attorney Jon David to determine if there is sufficient evidence to pursue criminal charges against Smith. Using one’s elected position for personal gain is now a felony in North Carolina, after a new law went into effect this year. But since the alleged offense by Smith occurred before the new law taking effect, she could only potentially be charged with a misdemeanor.

David’s office issued a press release on the issue, which said ”because we just received this information, I am without the benefit of knowing the depth and scope of the investigation or important facts which underlie the decision to make this referral. Accordingly, we will scrupulously review the information to date to determine the appropriate path forward.”