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'False and defamatory': Contractors push back over missing vehicles audit

Posted October 24, 2017 3:20 p.m. EDT
Updated April 10, 2018 3:55 p.m. EDT

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— State contractors stung last month by an audit into allegedly missing seized vehicles pushed back hard against that report Tuesday, accusing the Office of the State Auditor of either shoddy work or ulterior motives.

Not only are all 234 vehicles accounted for, attorneys representing the businesses said, state auditors had records on 181 of them in hand for months before issuing their "erroneous report." Investigators, attorney Sandy Sands said, failed to follow up, and State Auditor Beth Wood put out "false and defamatory" statements suggesting the cars could have been stolen.

"If the State Auditor's Office had simply taken us up on our offer to assist and provide more records, this all could have been avoided," Sands said in a news release Tuesday morning. "Our clients are good, hard-working people whose reputations have been severely damaged and who have received threats as a result of this flawed audit and the statements made by the state auditor."

Martin Edwards & Associates and Eastway Wrecker Service, the two contractors involved, also disputed the auditor's report when it was released in September, though in less detail.

Wood's office stood by its report in a statement late Tuesday afternoon, and Wood refuted Sands' complaints about the audit point by point in a Wednesday phone call with WRAL. She said that, while Eastway cooperated, Martin Edwards failed to provide documentation despite repeated requests.

Any claim that all vehicles are accounted for is "premature," Wood said. The case was referred to the Department of Motor Vehicles License and Theft Bureau for more investigation, and that inquiry is ongoing. A DMV spokesman declined to answer questions about that inquiry, saying in an email that a team of investigators are "continuing to track and identify the vehicles in question" and that it is "a meticulous process."

"Any statements made concerning the current location of these vehicles have not been independently verified," Wood said in her statement. "There is also no assurance that these vehicles have been processed in accordance with the contract."

Martin Edwards and Eastway have state contracts to take charge of, and eventually auction, vehicles seized from impaired drivers and those who run from police. The proceeds get split between the contractors and local schools. Last month's audit report said Martin Edwards couldn't document what happened to 221 vehicles and that Eastway couldn't account for 13.

The audit relied on paperwork, or a lack thereof, as opposed to physically tracking vehicles down. Wood acknowledged limitations of the inquiry when it was released, but she also told WRAL News that there was "absolutely the potential for criminal activity."

Sands accused auditors of harassing his clients, making unreasonable demands for troves of documents and either "intentionally or recklessly" failing to run a full investigation. He demanded a public apology and said legal options or "on the table" if one is not forthcoming.

Sands is not only an attorney for the two companies involved, he's also a former state senator. He's a lobbyist as well and worked on these companies' behalf to keep their state contracts in place several years ago when the state considered bringing the vehicle seizure program in house.

Wood said that, as auditors tried to serve Martin Edwards with a subpoena in this case, company President Rickie Day complained of the way he'd been spoken to previously and threatened that he had "the political power to do something about it." Sands' letter accuses an unnamed member or members of the audit staff of using profanity during a phone call with Martin Edwards and of talking down to them by referring to "people like that."

Sands' letter ticks off what he characterizes as several problems with the state's inquiry, and Wood responded to these points Wednesday.

  • Auditors looked at five years worth of seized vehicles when regulations require contractors keep records for only three.

The audit report states that its scope ran from 2011 to 2016, but the seized vehicles reviewed were seized between July 1, 2013, and June 30, 2016. "I declare ...," Wood said, "either they can't read and comprehend the audit report or they are trying to mislead people."

  • A Mercedes the audit keyed in on was actually on a contractor's lot in January, and documentation produced at the time showed this. "No one from the auditor's office attempted to verify that it was or was not there," the letter states. The car sold in March at an auction attended by a state observer, the letter states.

Wood said Martin Edwards "absolutely did not" produce those records. The company did produce "hundreds of records that had nothing to do with ... the vehicles that we were looking at," she said.

  • The auditor's office "failed to request a single interview of any individual" at Martin Edwards, raising "concerns that the audit may have been motivated by ulterior motives related to this public/private program." Neither company was allowed to see the audit report before it came out.

Wood said that, while the report wasn't sent to the companies before its release, "to say that we did not let them respond is not an accurate statement." Wood described repeated requests sent Martin Edwards for documentation, including lists of vehicles for which information had not been provided.

  • Eastway was able to produce records for its 13 missing vehicles "almost immediately" after the audit came out. Martin Edwards said it provided records for 181 of its 221 missing vehicles before the report came out and that the rest were either outside the three-year retention period, could not be provided because auditors gave inaccurate vehicle identification numbers or didn't exist because the vehicle was never actually seized.

Wood re-iterated that Martin Edwards showed "a pattern of uncooperative behavior," not only with her office but with the Department of Administration, which oversees the seizure program. She said one batch of Martin Edwards documents took two months for the company to produce and "still did not contain everything we needed."

When documents take that long to produce, Wood said, auditors began to wonder whether they might be fabricated. Sands said Martin Edwards provided colored copies of records and offered to back them up with originals that auditors could view at his law firm.

Sands also said Martin Edwards cooperated with auditors but wanted subpoenas and other inquiries to go through his law firm instead of being served in person. The audit report accused Martin Edwards of actively hindering the review and said that someone at the company "tried to refuse the subpoena and threw it back to the serving auditor."

Sands said no one threw a subpoena, and he provided an affidavit from the assistant auditor who served subpoenas in the case that makes no mention of one being thrown. Wood said the affidavit doesn't mention it because the affidavit was only meant to show the subpoena had been served, something that was needed because auditors had to leave with subpoena documents unsigned.

She read from an email written that night by one of the investigators and describing an encounter with Day, who was behind a clear partition from the auditors. Auditors pushed a thick packet of subpoena documents through a slot in the window and Day, "aggressively threw it back through the service window at the auditors," Wood said.

The auditors left with the unsigned paperwork sitting on the floor, Wood said.