State treasurer asks auditor to investigate town’s finance during former mgr.’s tenure; is money missing?
Graham’s new city manager is scheduled to start work on Monday, November 15, while she and the town she previously led are mired in substantial legal and financial controversy.
North Carolina Treasurer Dale Folwell announced Monday that he has asked state Auditor Beth Wood to conduct an investigative audit into the town of Rural Hall’s finances. Folwell cited the October 21 resignations of town manager Megan M. Garner – who Graham’s city council voted unanimously to hire October 22 – and three of the five members of Rural Hall’s town council (see related story, this edition).
“At issue are allegations that $1.5 million has disappeared from the town’s bank account,” Folwell said Monday.
Meanwhile, the interim town attorney for Rural Hall, Randolph (“Randy”) James, has filed a motion in Forsyth County superior court, signaling his intention to file a lawsuit against Garner over the alleged improper severance agreement she received following her resignation on October 21.
James confirmed this week for The Alamance News that he was appointed as the town’s interim attorney after D. Barrett Burge resigned on October 21. The interim attorney told the newspaper Tuesday that he intends to file a formal complaint on the town’s behalf “on or before the 15th” of November, coinciding with the date that Garner is scheduled to begin work as Graham city manager.
The motion that James has filed in Forsyth County superior court alleges that a “putative settlement agreement,” calls for Garner to receive a “six-figure sum” that was allegedly agreed upon before Rural Hall finance director Wade Gilley, Jr. could conduct a “pre-audit” review to certify that the town had sufficient funds to pay, as required under the state’s local government budget and fiscal control statutes. The failure to comply with the “pre-audit” requirement appears to nullify the settlement with Garner, based on the same portion of state law.
At a minimum, the payment to Garner would’ve required the council to vote in a public meeting to amend the town’s budget for the current 2021-22 fiscal year, based on the motion that Rural Hall’s interim attorney filed last week in Forsyth County superior court.
The interim town attorney also contends Garner shouldn’t have received severance because she resigned, James confirmed Tuesday in an interview with The Alamance News.
State law generally allows for public employees to receive severance if they’re laid off or furloughed. Garner’s employment contract, however, with the town of Rural Hall stipulated that “the town is not obligated to pay any severance” if she resigned to accept a new position or to retire, or if she was fired for misconduct, based on a copy of the contract obtained by The Alamance News.
James declined to specify the amount of the settlement agreement with Garner, which he said was labeled “confidential,” though he acknowledged that state law requires public bodies to disclose such settlements. Instead, he’s asking a Forsyth County judge to issue a ruling on whether the amount of the severance agreement should be disclosed, the interim attorney told the newspaper.
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 his motion, James further contends that Garner breached her fiduciary duty to the town of Rural Hall by resigning to take the position with the city of Graham.
Garner’s employment as Rural Hall town manager ran from July 10, 2017 through October 21, 2021, and she resigned without giving the 90 days’ notice required under her employment contract, the interim attorney confirmed for the newspaper Tuesday. “We’ve alleged there was notice to the three other council members who resigned,” he explained.
“One of the allegations is that it was a done deal prior to the closed session [on October 21].”
Garner apparently “had applied sometime in late May or early June” for the Graham city manager’s job, James said, while acknowledging the incongruity of her “seeking a new position while simultaneously claiming she was being harassed.”
The interim town attorney for Rural Hall is also challenging the “settlement agreement” over what he believes is an abuse of the state’s Open Meetings Law, which provides nine exceptions, including to prevent disclosure of personnel information, for which public bodies may enter into closed session. James has said that he believes the three now-former council members who resigned had previously held meetings that violated the Open Meetings Law prior to October 21.
Now-former councilmen allegedly held illegal meetings to finalize settlement
“The putative settlement further is the result of an orchestrated manipulation of applicable laws related to closed sessions by prior elected officials,” the preliminary court filing alleges.
Rural Hall’s town council members held two emergency meetings – on August 26 and September 1, 2021 – for the purpose of entering into closed session, based on meeting minutes subsequently published by the council. Rural Hall town council members had also held a special meeting on August 10 and went into a closed session for 34 minutes, until reconvening in open session and adjourning the meeting.
Neither the emergency meeting minutes nor those for the town council’s subsequent, regularly-scheduled meetings indicate that the council made any announcement or took any action after returning from the closed sessions. The council’s regular meeting was cancelled due to a lack of a quorum needed to conduct business on September 13.
Discussion of an impending resignation by Garner “would occur in closed session because it involves personnel,” the interim town attorney said Tuesday in the interview with The Alamance News.
The three council members who resigned on October 21 – John McDermon, Ricky Plunkett, and Jesse Stigall – also voted to approve the “settlement agreement” with Garner. The sole remaining council member, Susan Gordon, voted against the severance package, which James said in earlier interview with The Winston-Salem Journal had been voted on in open session.
“I can’t say much more about [it] because of the statutes,” the interim attorney said. “It appears the deal with Ms. Garner had been cast before the meeting. The agreement was reached, documents were prepared – it was kind of in reverse of what was supposed to happen. The statutes were written to protect the taxpaying citizens…It appears the severance was an overreach by someone.”
State treasurer requests investigative audit
“Folwell,” who James said is from the area, “actually called me last Friday to let me know he was issuing a press release.” The state treasurer has asked for an investigative audit. “As you know, every municipality is required to have annual audits,” the attorney said Tuesday.
James pointed out to the newspaper that the town’s in-house finance director, Wade Gilley, has decades of municipal finance experience and had previously managed the finances for the cities of Greensboro and Winston-Salem. But, the attorney said, municipal audits are typically conducted using a sampling of financial documents; and Folwell is “wanting a deep dive to “assure [taxpayers] and quell the rumor mill that there may be money missing,” James explained, adding that any allegations of financial wrongdoing are not the basis for the lawsuit he intends to file on the town’s behalf.
However, James emphasized in the interview, “That’s not part of my lawsuit. The current town council is not making that allegation.”
Two now-former councilmen had sought reelection
Plunkett and Stigall had filed for reelection to Rural Hall’s town council earlier this year and could serve another term – if they won Tuesday and choose to do so, Forsyth County elections director Tim Tsujii reportedly told The Winston-Salem Journal this week. McDermon had been reelected to a four-year term in 2019.
However, unofficial results from the Rural Hall town council race revealed that, of the four candidates listed on the ballot for Tuesday’s general election, Plunkett and Stigall came in third and fourth, respectively. Out of a total of 469 ballots cast in the race, Plunkett received 31 votes (6.61 percent); and Stigall received 30 votes (6.40 percent).
By comparison, Eddie Horn and Terry M. Bennett – who had been appointed late last month to serve out the remainder of Plunkett’s and Stigall’s terms – were the top vote-getters in the Rural Hall town council race, based on unofficial results from the state Board of Elections.
Horn received 205 votes (43.71 percent); and Bennett received 199 votes (42.43 percent), according to the state elections board.
The terms for Rural Hall mayor Tim Flinchum and Gordon, the sole remaining council member, are scheduled to expire in 2023, according to Forsyth County’s board of elections.
“Citizens and property taxpayers deserve to know that governance, competency and transparency exist with the administration of the finances of Rural Hall,” said Folwell, a Forsyth County native and Winston-Salem resident. “At the end of the day, everyone will benefit if the accusations of financial malfeasance are thoroughly investigated so the town can get on with serving the people.”
James, the interim town attorney for Rural Hall, is seeking more than $25,000 in damages and an award for attorney’s fees against Garner, under an alleged claim of breach of fiduciary duty, according to the initial court filing.
Wood had not publicly responded to the state treasurer’s request by press time.
See separate story in this edition on what Garner’s supporters on the Rural Hall town council said in their resignation letters: https://alamancenews.com/rural-hall-town-council-defenders-of-garner-claim-smear-campaign-was-designed-to-drive-her-out/
SEE EARLIER COVERAGE:
Graham hires Megan Garner as new city manager: https://alamancenews.com/graham-council-votes-unanimously-to-hire-new-city-manager-megan-garner-will-be-the-citys-first-woman-in-the-top-spot/
Graham’s plan to hire city manager may be affected by resignations in town of her current position: https://alamancenews.com/plan-for-friday-announcement-of-new-graham-city-manager-may-be-thrown-into-question/