Gov. Mike Easley and his wife, Mary, accepted a $137,000 discount on a coastal waterfront lot they bought in 2005, months after Easley's administration granted environmental permits to the developer of the Carteret County subdivision.
Easley did not report the 25 percent price break from R.A. North Development, on his state ethics disclosure forms; and his closing attorney, the mayor of Beaufort, did not report the discounted price on the deed registered with the county. It was recorded at the original sales price of $549,880.
The closing documents, obtained by The News & Observer, contradict what Easley's representatives have said for years. In 2006, while Easley was still in office, his spokeswoman Cari Boyce said the Easleys didn't get a special deal. "The governor paid the listed asking price for the lot," she said at the time. "The price was set and non-negotiable."
This spring, McQueen Campbell, a key Easley ally who represented the Easleys in the real estate deal, told The N&O that Easley paid the listed price.
For months, The N&O had sought the closing documents from Easley, a Democrat who left office in January. He declined to release them.
Easley could not be reached for comment. His lawyer, Wade Byrd of Fayetteville, did not respond to questions about the deal. Byrd said in a letter that the closing documents were confidential and threatened legal action against the newspaper.
Ace Smith, a San Francisco political consultant and spokesman for the Easleys, said the transaction was not unusual and it would be "ridiculous" to suggest the discount from the developer was a gift. "He was assured he received the same offer as everyone else," Smith said.
The deal's closing attorney, Richard Stanley, said he was aware that employees of the developer had received discounts. A review of 10 lots close to the Easleys' showed three discounts of $5,000 or less to non-employees.
Randy Allen, a political ally of Easley, was president of R.A. North, which developed the project and received the permit for the Cannonsgate wastewater treatment plant in June 2005. That permit was needed for the development to go forward.
Efforts to reach Allen were unsuccessful.
The land deal has become a key part of the wide-ranging federal investigation into the Easleys' activities. Federal authorities have subpoenaed documents involving Easley's flights on private jets, his family's use of vehicles owned by supporters, his involvement in getting his wife a job at N.C. State University, and the couple's purchase of the lot on Bogue Sound across from Emerald Isle.
The N&O also reported last month that Easley had accepted at least $50,000 in free dues from an exclusive golf club in Chatham County that he did not report on ethics disclosure forms.
Federal authorities would not comment on the investigation.
Getting crucial permits
Four men who were involved directly or indirectly in Cannonsgate are Easley allies and campaign donors: Campbell; Lanny Wilson of Wilmington, who helped finance the development; and the Charlotte brothers Randy Allen and Gary Allen. Gary Allen heads the marketing company for Cannonsgate.
Easley appointed Randy Allen to the state Wildlife Resources Commission and Wilson to the state Board of Transportation; he twice appointed Campbell to the N.C. State University Board of Trustees, of which he was elected chairman in 2007.
Campbell, a Raleigh real estate broker and private pilot who frequently flew Easley around the state, boasted that he had used his connections in state government to get the crucial permits for Cannonsgate. In early 2006, he wrote a potential client and claimed that his contacts let him and Gary Allen cut the time to get crucial permits nearly in half.
In 2005, Campbell also helped Mary Easley get a job at N.C. State. After months of saying he had nothing to do with her getting the job, he admitted this spring that he was involved and abruptly resigned from the Board of Trustees.
About the same time Mary Easley was hired, the Cannonsgate development was coming together. The coastal real estate market was booming, and Campbell represented Raleigh real estate broker Steve Stroud in selling the 285-acre waterfront parcel in Carteret County, about 140 miles southeast of Raleigh.
The buyers were the Allen brothers. Cannonsgate would have waterfront lots and a 75-slip marina. But before any deal could go through, the Allens needed permits to build a wastewater-treatment plant and other infrastructure in a sensitive coastal area.
Randy Allen applied for the treatment-plant permit in April 2005. It was granted by the Easley administration's Department of Environment and Natural Resources two months later.
Several state environmental officials have said they didn't recall attempts to influence the Cannonsgate permits, and state files don't show memos or documents indicating political pressure. But an N&O analysis showed that Randy Allen got the Cannonsgate wastewater permit faster than most. Of 15 coastal developments of similar size, only four got their permits quicker.
A 25 percent discount
The permit was granted June 8, 2005. Twelve days later, the Easleys wrote a $5,000 check for earnest money for lot 514, a choice parcel on the waterfront.
The governor's former spokeswoman said in 2006 that the lot was intended as an investment for the Easleys. They own homes in Raleigh and Southport.
The original contract on the Cannonsgate lot, signed on Nov. 30, 2005, showed a price of $549,880.
Reviews of that price, including analyses by the Carolina Journal and The Charlotte Observer, indicated that it was a good deal compared with nearby sales. Two weeks before the Easleys closed, for example, two deeper but narrower waterfront lots nearby sold for $699,000 each. And in 2007, the Easley lot was valued for taxes at $1.2 million, although it would be worth far less in today's market.
But the publicly listed price of $549,880 was not what the Easleys paid, according to the closing documents.
They signed a deal dated Dec. 15 that included a "seller discount" of 25 percent, which was worth $137,470, the settlement statement shows. That brought the Easleys' cost down to $412,410.
The Easleys got a loan from BB&T for $494,000, an amount based on the original contract and more than the actual purchase price. They had paid $54,988, including the earnest money. Because of the discount, they took $135,000 away from the closing.
Pete Edmundson, a regional executive for BB&T, said he could not discuss confidential client matters. As a general policy, a prudent lender would look at all closing documents, he said. "If there was a discount, that's between the buyer and seller only," Edmundson said. "The bank would have no dog in that fight."
Why tax stamps matter
In North Carolina, the sales price of land or a home is reflected by the tax stamps on the deed. In the Easleys' case, the stamps showed a sales price of $550,000. Appraisers, lenders, developers and real estate agents rely on the tax stamp to evaluate the purchase price.
And for that reason, the state agency that regulates lawyers bars them from overstating the purchase price of property.
"If excess tax stamps are affixed to a deed, the higher value reflected by the tax stamps may deceive third parties," the State Bar ruled in 2001.
Richard Stanley, mayor of Beaufort and the closing attorney, said that the closing was done by mail and that he never met with the Easleys.
"We were instructed to put a discount in there," Stanley said. "We don't do things on our own."
Stanley declined to say who ordered him to include the $137,470 discount at closing. But he said it was his regular practice to make sure that the seller, buyer and lender approved all details of the transaction.
Stanley said he used the $549,880 purchase price listed on the contract when paying the tax, and did not factor in the 25 percent discount. Stanley said he believed he abided by the State Bar's ethics rules.
"It's not within my power to change the contract price," Stanley said.
Both Easleys are lawyers. Mike Easley is the former state attorney general, and Mary Easley is a former law professor.
Carteret County Tax Administrator Carl Tilghman said his office relies on property buyers to accurately report sales prices on deeds. It's crucial information for the county to set tax values.
"Certainly it affects our operations, so we would not want to have false information about the sales price," Tilghman said.
The information is so important that when someone buys real estate, the county sends a follow-up letter asking the buyer to voluntarily confirm the sales price. Most, including the Easleys, fail to respond, he said.
At the time of the transaction, Easley was required to list possible conflicts of interest as well as any gifts valued at more than $200 on state ethics disclosure forms. He did not list any gifts. Sanctions could have included his removal from office.
William S. Bost III, a Raleigh real estate attorney and an expert on ethics in the mortgage industry, said real estate clients sometimes push to have the tax stamps reflect a price higher than the sales price. It's a practice he avoids, he said.
Sometimes a developer will do it, for example, to give a sense that lots in a project are selling at higher prices than they really are. Or a buyer might do it in an effort to lay groundwork for a higher resale price.
One thing that's certain about such deals, he said, is that the buyer and seller are trying to hide the true sales price.
News researcher Denise Jones contributed to this report.
firstname.lastname@example.org or 919-829-4526