HAMPTON — Two City Council members say Hampton's city manager has backed off her prior assertion that a "gift" from a private entity provided funding for an undercover police company created to go after cigarette bootleggers.
In a Sept. 27 email to the Daily Press, City Manager Mary Bunting wrote that no taxpayer funds were used for the Hampton Police Division's undercover firm, Blue Water Tobacco, save for the salaries of the handful of officers involved.
"Instead, donated funds from a private entity were given to us to fund the operation," she wrote.
Bunting went on to cite a city ordinance that gives her, as city manager, the authority to "approve and accept" gifts that "are donated in furtherance of immediate public safety administrative or operational needs."
Money "derived from the use of that gift," Bunting added, "is akin to evidence or fruits of criminal activity," and that she didn't need to inform the City Council about the money's existence or expenditures until later.
She said at the time that the ordinance — which was amended for the purpose of accepting that gift — amounted to the City Council's "prior authorization" to spend it.
Under the ordinance, gifts valued at $5,000 or more are to be reported to the council "as soon as practicable." Bunting said that she and City Attorney Cynthia Hudson jointly determined that it wasn't yet practical to tell the seven-member council about the money.
In bringing up the gift ordinance, Bunting was responding to statements that a state government accounting expert made to the Daily Press.
Virginia Auditor of Public Accounts Walter Kucharski said in an interview that city councils must approve all city spending and that Hampton's council should have been told about the more than $700,000 in Blue Water Tobacco's account at Langley Federal Credit Union.
Two City Council members — Donnie Tuck and Will Moffett — cite problems with Bunting's explanation that a gift from a private firm provided money to Blue Water Tobacco.
The council members are not calling into question Bunting's statement that no Hampton tax dollars were used for the operation, save for the police officer salaries.
But Tuck and Moffett point out that an amendment to the gift ordinance that allows the city manager to accept public safety gifts wasn't passed until April 13, 2011 — more than nine months into the cigarette operation.
By that time, several hundred thousand dollars from the account had already been spent. For example, nearly $400,000 in cars and SUVs were purchased in January 2011, three months before the ordinance was passed.
Second, those council members say, there was never any such gift.
Though the city was expected to get a gift of up to $50,000 from a "security arm" of Philip Morris USA, Tuck and Moffett said that Bunting told council members during a closed session on Oct. 3 that the expected gift never came.
"There was expectation of a gift, but because of an administrative error on Hampton's part, it didn't happen," Tuck said. "There was an agreement in place, but they forgot to fill out some technical paperwork."
"The gift never happened," Moffett said. "I will confirm that as being a fact. What Donnie heard is what I heard."
More than $3 million flowed through Blue Water Tobacco over 19 months, as it advertised tax-free cigarettes online and sold them out of a nondescript industrial warehouse off of Aberdeen Road.
But the investigation — designed to crack down on people evading cigarette taxes and committing other crimes — yielded no arrests before it was shut down in January 2012 following officer misconduct allegations pertaining to spending. The case is now a matter of a police internal affairs investigation.