Jury sides with Bailey, ex-public safety director, in North Myrtle Beach fraud case

07/30/2014 5:52 PM

07/31/2014 6:28 AM

An Horry County jury on Wednesday said the former public safety director for North Myrtle Beach did not commit fraud during negotiations with the city about his retirement plans in 2010.

The verdict followed a three-day trial in which city officials claimed William Bailey tricked a city lawyer into spending 14 hours negotiating over how much time Bailey needed to come up with the money needed to purchase service credits from the state’s Police Officers Retirement System. The city claimed Bailey had already arranged his retirement when the negotiations were taking place, thus wasting the city’s time and money.

The city sued Bailey to recover lawyer fees totaling $3,150.

Bailey said his retirement was never finalized until after the negotiations had ended and that he did not mislead city officials.

A jury took a little more than two hours to return its verdict in favor of Bailey. The city has 10 days to decide if it will appeal that decision.

Randy Mullins, Bailey’s lawyer, said the lawsuit was intended to retaliate against Bailey, who is suing the city in a separate action for wrongful termination.

“I think the jury rendered a fair verdict and it is unfortunate that the money paid in taxes by the citizens of North Myrtle Beach was used in such a manner,” Mullins said.

Bailey retired from the city’s public safety department in April 2010 after former City Manager John Smithson gave him a resign-or-be-fired ultimatum. Bailey says he was forced into retirement because Smithson needed a scapegoat for numerous problems the city was facing at the time. Smithson retired in July 2010.

Ken Moss, a lawyer representing Bailey in the wrongful termination case, said the fraud claim was never about the amount of money the city spent but about smearing Bailey’s name.

“I can’t believe they spent taxpayers’ money on a personal vendetta,” Moss said. “It’s wrong.”

It is not clear how much money the city has spent in legal costs related to Bailey’s forced retirement and the fraud claim. The Sun News has filed a request for that information.

The fraud claim stems from a two-day period following Smithson’s ultimatum to Bailey on April 28, 2010. Moss and Stephen Savitz, a lawyer representing the city, spent a combined 14 hours on April 29 and April 30 of that year negotiating over how Bailey’s departure from the city would occur.

Bailey needed to be on the city’s payroll until April 30 of that year to retire with 20 years of service. Bailey also needed to raise about $160,000 to buy an additional five years of service credits, making him eligible for full state retirement benefits.

Bailey testified that he spoke with state retirement officials by phone on April 29 and met with them in Columbia on April 30, eventually writing a check that afternoon to pay for the five years of service credits. At the same time, Moss was telling Savitz that Bailey wasn’t sure how much time he would need to come up with the money for his retirement.

Bailey testified that he did not have enough money to cover the check he wrote to the state retirement system and he wasn’t sure how he could come up with the funds until the following week. Bailey said retirement officials assured him the check would not be cashed until his retirement application was completed, a process that could take weeks.

County Councilman Harold Worley and Ed Horton, vice president of Anderson Brothers Bank, both testified that Bailey sought loans from them on the afternoon of April 30, but neither man could provide any financial help until the following week. Horton’s bank ultimately gave Bailey a $160,000 loan on May 3, 2010, which Bailey used to cover the check he had written to the retirement office.

Christopher Johnson, a lawyer for the city, said Bailey created “a ruse that he needed additional time” to keep Smithson from firing him before his 20th anniversary of service.

“He says he can’t [raise the money] to us, but he’s telling the retirement system he’ll be there tomorrow,” Johnson said, adding that Smithson would have given Bailey until Monday to retire if he had told him that’s what he needed.

“They wouldn’t have spent two days negotiating,” Johnson said. “They would have just given him until Monday. But they kept up this ruse.”

Bailey said he did not trust Smithson and was looking out for his own interests by trying to secure his retirement in the days after Smithson’s ultimatum. Bailey said that although he filled out a retirement application, his retirement was never certain until days after the negotiations with Savitz concluded.

“They [city officials] got mad because Mr. Bailey figured out a way to retire,” Mullins said during closing arguments. “They got out-maneuvered, out-lawyered and Mr. Bailey retired, and they got mad.”

Bailey filed the wrongful termination lawsuit against the city on June 11, 2010, about six weeks before the city countered with the fraud claim.

Bailey has said he was made a scapegoat for Smithson and other city officials who had grown weary of intense media scrutiny in the months following an April 2009 wildfire in the Barefoot Resort subdivision, where dozens of homes were destroyed.

Bailey ultimately was suspended from his job and then demoted to lieutenant after Smithson said the public safety director lied to him about how his gun had been stored on the December 2009 night it was stolen from Bailey’s unlocked truck.

Smithson said Bailey told him the gun had been locked in the glove compartment of his truck. Bailey has said he told Smithson and others that his gun was secured, but he never used the word “locked.”

A public grievance hearing over Bailey’s demotion was held on April 19, 2010, at which time Bailey gave city officials a draft copy of a lawsuit he was planning to file if he was not restored to public safety director. Nine days later, Smithson issued his ultimatum to Bailey.

“Smithson said I embarrassed him at the grievance hearing, and I must resign or be fired the following day,” Bailey said during this week’s trial. Bailey said he started working on “option C,” his retirement, the next day.

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