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Landis pushes forward as embezzlement investigation continues

By Liz Moomey

liz.moomey@salisburypost.com

SALISBURY — Feb. 7, 2019 was the day the State Bureau of Investigation announced the start of an embezzlement probe into two Landis town employees. Then-Town Manager Reed Linn and Finance Officer Ginger Gibson resigned immediately and were identified as subjects of the investigation along with an unnamed third person.

More than a year later, the investigation is still ongoing, according to a SBI spokesperson. And the town is pushing forward with financial improvements.

Change came quickly to Landis. A municipal election in the fall brought a new mayor: Meredith Smith. Board members Ashley Stewart, later named the mayor pro tem,  and Katie Sells joined Stewart. Darrell Overcash was appointed to the board after the death of Alderman Bobby Brown.

But there were other changes, too. After the resignation of Linn and Gibson, Police Chief Kenny Isenhour stepped in as interim town manager and Deputy Police Chief Roger Hosey as the interim finance officer. Hosey briefly served as town manager before the new board, by a 3-2 vote, terminated Hosey from all positions. Isenhour retired at the end of 2019. Diane Seaford was hired as the town’s finance officer before Hosey’s firing. 

Smith said aldermen had to do what was best for the town.

“We won by a landslide, and landslide spoke very clearly about what they needed and wanted from this town,” Smith said. “It was the first time ever that somebody actually followed through with what the citizens asked.”

Hosey sued the town and is seeking monetary damages for a breached contract. He says the town owes him $450,000. 

The town has yet to respond to the filing. Smith declined to comment on it.

After the firing of Hosey, the board immediately appointed Leonard Barefoot to be an interim manager. Barefoot came to town hall with a bounty of experience, including previously serving as manager in Sanford and in an interim role in 11 other municipalities.

Barefoot said his focus has been to provide the town stability. Seaford said she’s been working to bring the town to a better financial state — something for which the town has frequently attracted the state’s attention. It has for years received letters from the Local Government Commission, under the State Treasurer’s office, advising it to improve its fund balance and make other financial improvements.

A letter from the commission in March 2007 stated the town had serious financial problems and was not prepared for “unforeseen emergencies or opportunities” in its general fund. The letters continued, including one sent in March 2019 to former Mayor Mike Mahaley that said the cash position of the town’s general fund, water fund, sewer fund and light fund were all inadequate to support town’s operations in June 2018.

“These are alarmingly low amounts of unrestricted cash resources for the town,” the letter stated.

But at the start of the current fiscal year the fund balance was at 8.77%, current Finance Officer Diane Seaford said. That’s a notable improvement from one year earlier, according to the town’s financial documents. With conservative estimates, the fund balance at the end of the fiscal year, on June 30, will be 22.5%, or $870,000.

The Local Government Commission requires a 8% minimum fund balance, which is partially a savings account when the economy slows down.

Seaford said the town has worked with the commission to ensure Landis is in compliance and is in good standing. And State Treasurer Dale Folwell said he’s not aware of any negative items lately.

“I haven’t seen anything recently that would indicate that they’re not on the right track,” Folwell said in an interview with the Post last week.

Based on the size of the town’s budget, Barefoot said his goal is to have the fund balance above 50%.

Seaford said she has focused on paying off loans and minimizing debt payments. She announced at the last board of aldermen meeting the town has paid off fire trucks and electric meters, which represented $400,000 of debt.

Barefoot said the financial improvements are a good start.

“I can tell you now we’ve come a long way,” Barefoot said. “We’ve got a ways to go, but we keep chipping away at it.”

Barefoot and Seaford will present a proposed budget for the 2020-2021 fiscal year during a board of aldermen meeting at 5:30 p.m. Monday. 

“We’re fairly confident that the board members will be pleased with it and, if we’re fortunate, Monday night we’ll be on track for an approved budget,” Seaford said.

Smith said Monday’s budget workshop will showcase a budget that is straightforward, to the point and easy for all citizens to understand.

“There will be nothing back door about it,” Smith said. “No intent that people don’t know about. We’ll be doing things correctly for the Town of Landis in the first time in about 12 years.”

But with advancements of the town’s financial state and no current concerns from the Local Government Commission, a “black cloud” still hangs over Landis in the form of the embezzling investigation.

“It’s time for that storm to move on out,” Seaford said. “It’s moved out from town hall, and we put good, qualified, competent people in the right places, and we put measures in place that have oversight.”

Last year, Isenhour said he expected the investigation to end in the late summer of 2019. And while a ruling hasn’t come, documents released by the town provided insight into allegations Linn and Gibson face.

The town released W-2 forms for both former employees in March 2019. Those showed Linn made $286,541.10 in 2018, although his approved salary was $69,077. Gibson made $216,168.66 in 2018, but was only approved to make $58,937.

Town Attorney Rick Locklear last year also filed a civil suit alleging Linn and Gibson for misappropriating town funds. The lawsuit said former manager Hosey reviewed the payroll system and discovered “monies assigned in excess of $25,000 for the unauthorized payment of salary and contributions to the (retirement) plan on behalf of or to the benefit of Linn.” The lawsuit also alleges Gibson received unauthorized benefits in excess of $25,000.

There has been no notable movements in the suit.

Since then, former board members have been interviewed by the State Bureau of Investigation. The town paid for a forensic auditor to review the town’s finances as a part of the investigation. Linn’s hard drive was seized by investigators.

Smith said the citizens are still waiting for the SBI’s findings.

“We don’t know and we can’t know,” Smith said. “I do think once we find out our town will be able to heal, prosper and move forward.”

Whenever the state wraps up its investigation or makes an announcement, Barefoot said it will not change what he needs to do as an interim manager, and it won’t change the town’s goals.

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