Winston-Salem lawyer James Kelly, co-chairman of Pepsi Americas’ Sail 2006, would not disclose on Thursday whether his organization made or lost money on the tall ships event that took place in early July in Beaufort and Morehead City, saying in a telephone interview that the financial records of his organization are private.

Pepsi America’s Sail 2006 LLC was set up in June 2005, with the Pepsi name included for a major sponsor — the Minges Bottling Group, a Pepsi franchise based in Greenville. But the New York-based organization that sanctioned the Beaufort tall ships event said it is planning legal action against the North Carolina organizers, alleging that it failed to share revenue according to a contract.

Kelly said the Pepsi Americas’ Sail 2006 was “a wonderful event,” and added that the “contract dispute has nothing to do with the event” itself.

William Wendler, president of Americas’ Sail of Glen Cove, N.Y., said that Pepsi Americas’ Sail LLC has not paid his organization according to the terms of a contract. Wendler said his organization was due 20 percent of the gross ticket-sale revenue on July 6 based on a contract between the groups.

But Kelly disagrees with Wendler. “We entered into an agreement with Americas’ Sail. We have already paid them $50,000. Part of the agreement states that they would provide advice and assistance. They did very little. They gave us some bad advice that I cannot discuss because of likely arbitration,” Kelly said.

An annual report filed in April 2006 lists five member-managers for Pepsi America’s Sail. They include: James Kelly of Winston-Salem, Vern Mettin of Beaufort, Marshall Gurley of Raleigh, Kurt Fickling of Greenville, and David Nateman of Beaufort. Nateman is the director of the N.C. Maritime Museum, a public facility managed by the N.C. Department of Cultural Resources.

Pepsi America’s Sail received revenue from ticket sales and sponsorships. A statement on the organization’s Web site said the “event attracted more than 150,000 visitors to Beaufort and Morehead City, including more than 30,000 who bought tickets to tour the ships.” Proceeds from the event are to go to the development of the 36-acre Olde Beaufort Seaport, a project of the N. C. Maritime Museum.

Even though Kelly would not disclose financial information, some of Pepsi Americas’ Sail financial records may eventually become public.

The Friends of the Museum organization is classified as an IRS 501(c)(3) organization and contributions are usually tax-deductible. It is required to file an annual IRS Form 990, Return of Organization Exempt From Income Tax, and to also make copies of that annual form available to the public on demand.

Jeffrey T. Lawyer, Kelly’s law partner who filed the articles of organization with the N.C. Secretary of State, told CJ that Pepsi America’s Sail was a single-member limited liability company for income tax purposes. All income and expenses will be included in the tax return of the Friends of the Museum.

Government Support

In addition to the private funds raised by the event, public funds were also involved. 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.”

A $300,000 Golden LEAF grant was made to the Friends of the NC Maritime Museum to support the staging and promotion of Pepsi Americas’ Sail. Cultural Resources Secretary Libba Evans is a member of the 15-person Golden LEAF board, which is set up to distribute tobacco settlement funds.

The Gam, a weekly paper based in Beaufort, has published several news stories that raised questions about the financial aspects of the event. According to the paper, the Department of Cultural Resources spent $225,000 to assist the festival with some of the money going to pirate re-enactors.

The News & Observer of Raleigh and other media organizations have extensively reported a $30,000 party for public officials sponsored by the N.C. Ports Authority that was held on a boat borrowed from the N.C. Department of Transportation Ferry Division. That expenditure was in addition to the funds noted above.

The Gam has also published highly critical editorials. “The breathtaking serene and lovely view down Front Street that normally greets everyone was overshadowed by metal cages ‘to corral drinkers,’ plastic and metal barriers, port-a-johns, security guards, tents, golf carts that slalomed around pedestrians, a jumbotron that spewed Pepsi Americas’ Sail propaganda and a general carnival atmosphere. All that was missing was the midway,” read an editorial published after the event.

Public records withheld

For weeks Carolina Journal has been investigating alleged financial irregularities associated with the event. Department of Cultural resources officials have denied repeated requests for records.

The N.C. Department of Transportation has provided CJ several documents that show most of those funds went to a Vienna, Va.-based company, Transportation Management Services. But 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.

Thursday, Cultural Resources General Counsel Staci Meyer sent an e-mail to CJ that read, “I am working diligently to gather and review the documents that are responsive to your request. I have not yet completed gathering information nor have I completed my review. I will provide the documents as soon as I have the process complete. I appreciate your continued patience.”

North Carolina public records law states that any person can examine public records at reasonable times and under reasonable supervision.

Untangling the organizations

Below is a list of organizations involved in the Pepsi Americas’ Sail 2006 event:

• The North Carolina Department of Transportation was to spend up to $1.65 million for transportation enhancements associated with the event.

• The North Carolina Department of Cultural Resources administered at least $1.25 million of the DOT funds and spent at least $225,000 from its budget to support the event and provided substantial promotion for it.

• The Golden Leaf Foundation made a $300,000 grant to support the event.

• Pepsi Americas’ Sail, LLC was set up to sell tickets and sponsorships, manage the event, and deliver net proceeds to the non-profit Friends of the Museum

• The North Carolina Maritime Museum is a state government facility that provided an office for Pepsi Americas’ Sail.

• The Friends of the Museum is a non-profit that was to receive proceeds from the event and in turn spend them on projects to support the Maritime Museum.

Don Carrington is executive editor of Carolina Journal.