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Two towing companies contracted by the state of North Carolina have been called out in an audit for lacking appropriate paperwork and leaving 234 state-seized cars unaccounted for. The contractors are part of a program designed to support the state’s school system with proceeds from vehicle auctions.

According to the state auditors, one of the contractors wasn’t thrilled about the inquiries. From WRAL:

Martin Edwards & Associates, the Cumberland County-based contractor for the state’s eastern half, was responsible for all but 13 of those vehicles and “actively hindered” the inquiry, the audit states. At one point, someone from the company threw a subpoena at an auditor trying to serve it, it states.

It’s unclear what happened to the unaccounted for vehicles. State Auditor Beth Wood’s office relied on paperwork – and the contractors’ lack of it – to make its report and forwarded the case to the state Division of Motor Vehicles’ License and Theft Bureau for more investigation and possible criminal charges. The contractors were supposed to split proceeds from auctioned seized vehicles with local school systems, and auditors concluded that “there is a risk that contractors inappropriately benefited from the contract.”

“There’s absolutely the potential for criminal activity here,” Wood said. “There’s absolutely a probability that money that should have gone to schools didn’t go to schools.”

Of the two contractors, Martin Edwards & Associates couldn’t account for 221 cars and Eastway Wrecker Service, the second contractor, couldn’t account for the other 13.

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A specific example of the suspicious discrepancies was the case of a 2007 Mercedes SLK 350 that “went missing” on the inventory paperwork from Martin Edwards, which showed the car in October of 2015, but not the following month and with no record of what happened to the car.

The government agency responsible for overseeing the two contractors was the Department of Public Instruction, which never really actually monitored the operations according to the audit.

The contractors made complaints about not being informed of the severity of the findings in the audit, and felt they should have been given a chance to answer for the gaps in records before the final report was published. They weren’t shown the audit prior due to it being an issue between government agencies, as the Department of Public Instruction was the target of the audit.

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The decision to bring in contractors for the program was saved two years ago under additionally suspect circumstances involving sate representative David Lewis. More from WRAL:

This is the same towing contract saved two years ago by some legislative wrangling from House Rules Chairman David Lewis. Lewis, R-Harnett, dropped language into a budget technical corrections bill, reversing permission the General Assembly was about to give the state Department of Administration to run this program without the contractors.

The move followed a $5,000 campaign contribution to Lewis from Martin Edwards President Rickie Day. According to The News & Observer, It was Day’s first ever contribution to Lewis, and it was logged the day before Lewis had the bill in question referred to his committee. The fallout led one of Lewis’ Republican colleagues to file an ethics complaint against him.

Lewis said at the time the donation didn’t motivate him, that he didn’t believe government could run the program as well as private companies and that the Department of Administration didn’t have a business plan for the changeover.

Sure, Dave.

The contract was rebid last year, but only Martin Edwards and Eastway Wrecker Service submitted a bid, with WRAL citing the specific requirements of the state contract. The oversight of the program was moved to the Department of Administration early last year. Following the audit, the department claims it has implemented changes including “doing a daily reconciliation of DMV and contractor data, as well as sending someone to monitor all auctions.”

The DMV estimated the value of the missing 234 vehicles to be approximately $634,000. Overall, the contract has brought in $746,000 for the NC school system and a combined $1.1 million for the two contractors.