‘Ulterior motives’ behind NC audit of cars seized in DWI arrests, attorney contends

Contractors responsible for towing, storing and auctioning off cars seized from impaired drivers and people accused of fleeing police sent a letter to the state auditor on Tuesday disputing her findings in a September audit.

Beth Wood, the state auditor, released the findings of a probe into the work of Martin Edwards and Associates and Eastway Wrecker Service, saying the companies could not account for 234 vehicles, valued at nearly $634,000.

Sandy Sands, a former state senator and the attorney and lobbyist representing the contractors, gave the auditor what he said was an accounting for each of the cars in question, and called Wood’s earlier report “false and defamatory.”

“Given the harassment by your office and the false statements published by you, our clients hereby demand you rescind your report, retract your false statements, and make a public apology,” Sands’ letter states.

Wood stands by the audit, her spokesman Brad Young said Tuesday.

“After reviewing statements made today by the contractor’s attorney, there were several items that demanded a response by this Office,” Wood said in a statement. “First and foremost, the attorney’s claim that all vehicles are accounted for is premature.”

DMV investigation ongoing

The state Division of Motor Vehicles’ License and Theft Bureau, which has the power to bring criminal charges if warranted, has been investigating the contractors since the release of the audit.

“The DMV License and Theft Bureau investigation is ongoing and has not been closed,” Wood said. “Any statements made concerning the current location of these vehicles have not been independently verified. There is also no assurance that these vehicles have been processed in accordance with the contract. This audit provided evidence of a contractor that either would not or could not provide the documentation supporting the proper disposition of 221 vehicles; documentation that is required by statute and their own contract with the State of North Carolina. The eastern vendor has exhibited a pattern of uncooperative behavior with state agencies.”

Martin Edwards, of Linden, was responsible for the east region. Eastway was responsible for the west region.

At issue between Wood and Sands is whether the companies were required to give auditors access to their original documents.

Woods contends they are. Sands said the contract only requires the companies to keep receipts for three years, and auditors should not have free access to all company documents.

“We are unaware of anything that requires our client to produce original receipts, especially in light of providing legible, color copies of the receipts,” Sands’ office wrote in a response to a Wood inquiry in January. “We believe that our client has satisfied its obligations under the subpoena. However, in the spirit of cooperation, if there is a select number of receipts which you would like to view the original receipt, please identify those receipts and we will make them available for inspection at our office.”

Sands said Tuesday they had not received further response from Wood about that.

Can state contractors shield records?

The audit was launched after the oversight of the program was shifted in March 2016 from the state Department of Public Instruction to the state Department of Administration. The audit was requested, Wood said in an interview, by the new overseers.

Under a state program, vehicles operated by drivers who were arrested for repeat driving-while-impaired offenses or speeding to elude arrest were to be seized, maintained, stored and sold by two contractors.

The contractors receive portions of revenue from the towing and storing of vehicles, as well as a fee when vehicles are sold. Public schools also get a share of the revenue.

According to numbers provided by the Department of Public Instruction, from October 2013 through September 2014, the two contractors retained nearly $1.1 million combined through their contracts, while school districts across the state received a combined $746,000 and state government’s general fund received about $19,000.

The objective of the audit, according to the report, was to determine whether the private contractors were operating the program according to the contract terms and state regulations. The auditors reviewed five years of records between July 1, 2011, and June 30, 2016.

“The audit was flawed from the start because the scope of your audit was inconsistent with the objective of the audit,” Sands said in the letter to Wood.

Sands further alleged that the volume of records the towing companies are required to keep “is burdensome, so much so that it slowed their computer systems,” Sands said. “Since our clients were advised by their technology personnel to purge unnecessary records, our clients periodically purge any records outside the applicable document retention period.”

Because of that, Sands said, some of the documents sought by the auditor were not subject to that retention period and not provided to auditors.

Political connections to towing company

The audit came several years after Rep. David Lewis, a Republican from Dunn, went to great lengths to protect the state’s contract with Martin Edwards.

There was disagreement at the time about whether private contractors or a state agency were a better fit to operate the seized vehicle program and which would generate more money for public schools.

Martin Edwards, whose president is Rickie Day, had held the contract for years, when Lewis tucked language into a technical corrections bill that became law in the final minutes of a 2015 session. The change ensured that contracts for those services would continue to be bid out to the private sector after they were due to expire last year.

Day donated $5,000 to Lewis’ campaign before the Harnett County Republican took the legislative steps, according to reports filed with the N.C. State Board of Elections.

Lewis, who was chairman of the powerful House Rules committee, told the N.C. Insider in November 2015 that his actions had nothing to do with Day’s contribution. He said he believed private contractors could do the work more effectively than the State Surplus Property Agency, which is part of the Department of Administration.

“I am very suspect whenever anybody tells me that the government can perform services of this nature more efficiently than the private sector,” Lewis said in the interview.

In his letter, Sands questioned whether Wood, a Democrat, was targeting Martin Edwards.

“Despite stating in the ‘methodology’ section of the report that your auditors ‘interviewed personnel,’ your Office failed to request a single interview of any individual” of Martin Edwards, Sands said. “On four separate occasions, our firm told representatives of your office that our clients would cooperate with your auditors. However your auditors chose not to interview them and instead published an inaccurate misleading report. Such actions raise concerns that the audit may have been motivated by ulterior motives related to this public/private program.”

This story was originally published October 24, 2017 at 6:56 PM with the headline "‘Ulterior motives’ behind NC audit of cars seized in DWI arrests, attorney contends."