An investigation by the N.C. Office of the State Auditor finds that a former Town of Manteo commissioner used state funds for his personal benefit in contracts awarded for a dredging project. The report also alleges that the town’s finance officer didn’t ensure project expenditures were “reasonable and necessary.”
The state launched an investigation last year after the auditor’s office received “multiple and varied allegations” through its hotline involving the Doughs Creek Canal dredging project conducted from the fall of 2017 to spring 2018.
The canal runs around the north side of Roanoke Island Festival Park and was dug in the early 80s to maintain access to Roanoke Sound for property owners who were cut off by construction of the Cora Mae Basnight Bridge between downtown Manteo and what was once known as Ice Plant Island.
The sand was barged to a lot near McDonald’s on U.S 64 in Manteo owned by Klimkiewicz Family Manteo I, LLC.
While no buildings are located on the 331,100-square-foot parcel, a 450-foot-long canal from Shallowbag Bay with a bulkhead and boardwalk on one side runs down the middle.
After initially being taken to the Kilmkiewicz site by barge, the spoils were hauled to the town’s wastewater treatment plant.
But the earth that was dug out to create a pit for the spoils disappeared, with at least 70 truckloads hauled away by unmarked vehicles according to surveillance video.
That missing dirt was not mentioned in the state Auditor’s report released earlier this month. In 2018, the town sought to recoup money from the dredging contractor for the lost earth as a civil matter after consulting with the District Attorney’s Office.
The nearly $649,000 project was paid for with appropriations in the state budget from the Shallow Draft Navigation Channel Dredging and Aquatic Weed Fund and money held by the now-dissolved Roanoke Island Commission.
An additional $88,000 came from a grant obtained by Manteo to cover unexpected expenses incurred by the town.
The report alleges a former town commissioner was involved in making the lease agreement, for which he received $12,500, to use the two adjacent parcels of land for a transfer site for the dredging project.
While the report from state Auditor Beth Wood’s office does not directly identify the individuals involved, emails and other documents dating back to when the investigation began in the summer of 2018 identify the former town commissioner as Hannon Fry and the former Mayor as Lee Tugwell.
Fry voted to approve a budget amendment for the lease agreement, and signed as the agent for the limited liability companies on the Town of Manteo vendor applications.
“The Commissioner and a former mayor of the Town of Manteo … described the $12,500 payment as a ‘gift,’” the report reads. “On December 22, 2017, the former Mayor wrote a $12,500 check from his corporation’s bank account to the Commissioner. This payment occurred the day after the former Mayor’s corporation received $25,000 from the Town for the Doughs Creek Canal dredging project.”
The report alleges Fry was able to benefit because he failed to disclose his conflict of interest in the case. State law and a town ordinance prohibits town officials from benefiting from contracts.
Fry was up for re-election last month, but conceded after the results ended in a tie, saying he wanted to avoid the race being decided by a coin flip or drawing.
Tugwell, who was both a former mayor and town commissioner, was not serving in any capacity wit the town during the lease negotiations. He was appointed to the town’s planning board in February 2018, before resigning last month.
Auditor’s also report the town’s finance officer, Shannon Twiddy, did not ensure documentation existed to support the lease agreements for the dredging sites. As a result, the town may have overpaid for the parcels.
Twiddy, who is also assistant town manager, told state investigators in 2018 that town staff were not able to locate a signed lease agreement.
The engineering firm hired by the town for the project said they were informed at the start of the permitting process in 2016 there was a verbal agreement with Tugwell, who was the local representative of the property owners, to use the parcels.
In a response to the auditor’s report by Manteo Town Manager James Ayers sent December 11, he said the town will request repayment of a portion of the funds involved in the lease agreement, and institute conflict of interest and ethics training for appointed and elected town officials.
The town has also launched an internal investigation into the finance officer’s involvement, according to Ayers response.
“In addition, the Town intends to continue its full cooperation with the State Auditor, and the Town has accepted all of the recommendations of the State Auditor and is in the process of implementing those recommended corrective actions,” Ayers said Tuesday evening.
An anonymous letter from someone claiming to be a “whistleblower” sent to several state agencies in 2018, including the State Auditor’s Office, and local media outlets, is believed to have sparked the investigation.
The letter made accusations that local CAMA officials granted the permit in collusion with the town, some current and former town leaders may have personally benefited from the dredging of the canal, and that the sale of the sand was inappropriate.
This story originally appeared on OBXToday.com. Read More local stories here.