“Six-figure settlement agreement” made to Megan Garner by council members moments before they resigned is illegal, according to lawsuit filed Monday in Forsyth County, NC
The town of Rural Hall is suing its former town manager, Megan M. Garner – who arrived Monday to begin her tenure as Graham’s city manager – to void the payment of a “six-figure settlement agreement” that three then-town councilmen approved October 21, the same day that Garner resigned as town manager and the three councilmen resigned their seats.
Graham’s city council voted unanimously the next day, October 21, to hire Garner as the new city manager. She succeeds former city manager Frankie Maness, who resigned earlier this year to become the county manager in his native Montgomery County.
Late Monday afternoon, the lawsuit was filed against Garner in Forsyth County civil superior court by Rural Hall’s interim town attorney, Randolph (“Randy”) James (no relation to the initial interim town manager Frank James).
The suit that James has filed against Garner contends that the settlement agreement – which he has repeatedly described as a six-figure sum – should be voided on the basis that it violates the state Constitution and several state laws, as well as the terms of Garner’s employment contract with the town of Rural Hall. Garner was hired as Rural Hall’s second town manager in July 2017, following the retirement of its first town manager, Frank James.
James has said that the settlement agreement had been improperly labeled “confidential” and acknowledged that the state’s Public Records Law requires disclosure of settlements made on or behalf of public bodies.
North Carolina’s Public Records Law specifically mandates disclosure of “settlement documents in any suit, administrative proceeding, or arbitration instituted…in connection with or arising out of such agency’s official actions, duties or responsibilities, except in an action for medical malpractice against a hospital facility.”
In its suit, the town is asking a Forsyth County superior court judge to rule on whether the settlement agreement with Garner should be made public, in keeping with the state’s Public Records Law, according to the lawsuit he filed for the town of Rural Hall on Monday afternoon.
Garner’s settlement agreement also failed to fulfill a statutory requirement to conduct a “pre-audit” review to certify that the town had sufficient funds to pay the “six figure lump settlement,” according to the suit. A majority of the council also failed to vote to amend the budget ordinance for the current fiscal year, based on the suit.
The settlement agreement violated several provisions within Garner’s 2017 employment agreement with the town of Rural Hall, the suit asserts. Her contract provided for her to receive severance – equal to six months of her annual salary, plus compensation for up to a maximum of 240 hours’ in annual leave – but only in the event she were fired, based on a copy of her July 2017 employment contract, which is included in the court file.
Garner’s annual salary as Rural Hall town manager was $111,514.62 for the 2021-22 fiscal year, the complaint states.
However, her contract with the town of Rural Hall contained a caveat: the town would not be obligated to pay Garner any severance in the event she resigned to take another position; retired; or was fired for misconduct. The “Settlement Agreement” with Garner makes no reference to any circumstance that would obligate the town to pay severance, according to the suit her former employer has filed.
By comparison, Garner will be paid an annual salary of $120,000, plus benefits and a $5,000 allowance for moving expenses, under her employment contract with the city of Graham.
The suit also alleges that the three now-former Rural Hall town councilmen acted beyond the scope of their authority in approving the “Settlement Agreement” with Garner on October 21, the same day they subsequently resigned from the town council.“Regardless of their justification, motivation or explanation the three former council members, Ricky S. Plunkett, John McDermon and Jesse Stigall, [took] actions [that] were … beyond their powers given to them,” the complaint states.
The other Rural Hall town council member, Susan Gordon, voted against the settlement agreement Garner. Neither Gordon nor Rural Hall mayor Tim Flinchum have spoken publicly about the controversy.
Starting sometime around late August, the three now-former councilmen apparently negotiated the agreement with Garner during a series of closed sessions, but the final vote was taken in open session on October 21, based on news reports published by The Winston-Salem Journal and a subsequent review of Rural Hall town council meeting minutes by The Alamance News.
Pre-existing transaction cap blocked bank transfers from town accounts to Garner
Among the most egregious allegations the lawsuit outlines is that the three former councilmen “betrayed the citizens of Rural Hall in their effort to transfer a six figure payment to Garner, an amount to which she was otherwise not entitled.”
“On 21 October 2021 the three now resigned Rural Hall council members and Garner attempted [a] transfer from Rural Hall’s accounts to Garner’s accounts,” the interim attorney alleges in the lawsuit he has filed for the town. “Due to the magnitude of the transfer, a six-figure sum, Rural Hall’s previously imposed transaction limits for Rural Hall payroll accounts prevented the transfer from taking place. Additional payments called for the ‘Settlement Agreement’ have similarly been suspended.”
During the town council meeting on October 21, the three now-former councilmen “in closed session voted for a previously executed document entitled ‘Settlement Agreement,’” which Garner had signed the day before, on October 20, according to the suit.
James also contends in his suit for the town of Rural Hall that Garner breached her fiduciary duty to the town by “overreaching and obtaining something of value she would not otherwise be entitled to receive.
The town’s lawsuit also accuses the three former Rural Hall councilmen of violating the oaths they took to “faithfully discharge” their duties when they were sworn into office.
Garner allegedly failed to give the 90 days’ notice of her intent to resign, as required under her employment contract with the town of Rural Hall, according to the lawsuit that was filed in Forsyth County court Monday afternoon.
“Garner did not submit a formal resignation, nor did she provide the 90 days’ notice of her resignation except [to] on or more of the now resigned council members and/or former Rural Hall town attorney Barry Burge,” the complaint states. “The ‘Settlement Agreement’ is silent as to whether 90 days’ notice had been provided to one or more now resigned Rural Hall council members. The entire council then situated did not receive 90 days’ notice of Garner’s resignation.”
Burge had served 45 years as the attorney for the town of Rural Hall prior to his resignation on October 21, the town’s interim attorney confirmed in an earlier interview with The Alamance News.
Only the three now-former town councilmen who resigned abruptly at their meeting on October 21 were aware Garner had applied for the city manager’s position in Graham earlier this year. The three former Rural Hall town councilmen also provided written and verbal references to Billy Clayton, a Graham police department investigator who conducted a background check on Garner for the city of Graham, according the lawsuit that her former employer has filed.
‘Deep dive’ into Rural Hall’s finances pending
Meanwhile, North Carolina Treasurer Dale Folwell has asked the state auditor, Beth Wood, to conduct an investigative audit into the town of Rural Hall’s finances due to widespread rumors that $1.5 million had disappeared from the town’s accounts.
A spokesman for the state auditor’s office has said that Wood doesn’t publicly comment on requests for investigative audits. Instead, the state auditor’s office customarily releases a report on any findings from an investigative audit once it’s completed.
That rumor about missing town funds remains unsubstantiated, James said last week in an interview with The Alamance News. Rural Hall’s town council – which includes two new councilmen who were first appointed and subsequently who were elected in the November 3 general election – heard a report from the town’s outside auditor, Eddie Carrick, a Certified Public Accountant based in Lexington.
During Rural Hall’s town council meeting on November 8, Carrick confirmed that there was “no missing money,” James told the newspaper last week, adding that the town’s finance director and auditor have said the town will do a “deep dive” into Rural Hall’s finances, given the concerns that Folwell has raised.
No deficiencies, material weaknesses, or misrepresentations were reported in the auditor’s notes to the financial statements for the fiscal year that ended on June 30, 2021, based on a copy of the 51-page annual audit report The Alamance News obtained through a public records request to the town of Rural Hall.
To read a copy of the lawsuit filed Monday, Nov. 15, 2021, in Forsyth County (NC) Superior Court, Town of Rural Hall vs. Megan M. Garner, click HERE: