The Attorney General’s Office and Maine State Prison Warden Patricia Barnhart have begun discussing how to “unwind” the state’s sale of three houses in Thomaston to Barnhart.
Attorney General William Schneider determined last week that the sale violated a conflict-of-interest law. In a letter to Barnhart and the commissioner of the state department that oversaw the sale, he wrote, “We suggest that the parties and their counsel meet as soon as possible to discuss the process for unwinding this matter.”
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Maine attorneys who specialize in real estate say the matter is highly unusual, and could end up in court if the parties don’t cooperate.
“It’s going to be messy,” said Drew Anderson, an attorney with Murray, Plumb & Murray in Portland.
To help balance the two-year state budget that began July 1, 2009, the Legislature instructed the Bureau of General Services to sell $1.5 million worth of surplus property.
In September, CBRE Boulos won the job of helping the state sell its real estate. The company had a marketing plan for the property in Thomaston, but the state never marketed it to the public.
In January, Thomaston’s assessor, David Martucci, visited the site, examined comparable sales and set the property’s taxable value at $458,000.
On June 9, Barnhart and her partner, Sheehan Gallagher, bought the 5.2-acre property for $175,000.
In the letter he sent to Barnhart on Friday, Schneider said the sale is “void” because it violated a law that prohibits state officials from having a financial interest in any contracts made on behalf of the state.
But that determination alone doesn’t negate the sale.
Barnhart borrowed money to buy the property, so her mortgage company now holds the deed. The mortgage will first have to paid off so the ownership can be conveyed to Barnhart, said William Laubenstein, an assistant attorney general who is working on the case.
“This title needs to be put back in (Barnhart and Gallagher’s) hands so they can convey the property back to the state,” he said.
Barnhart has declined to speak publicly about the issue. Her attorney, James Elliot of Camden, did not return phone calls on Tuesday.
Laubenstein said Barnhart has cooperated in discussions about returning the property to the state.
She has lived in one of the three houses since the state hired her from Michigan in 2009 to run the state prison in nearby Warren.
One issue is whether Barnhart will be compensated for the expenses she incurred in buying the property, such as legal fees and consulting fees. Besides an attorney, she hired Landmark Corp. Surveyors & Engineers of Rockland to create a subdivision plan.
Although state officials who authorized the sale may feel a moral obligation to ensure that Barnhart doesn’t end up losing money, she has no legal right to compensation, said Dennis Keeler, a real estate attorney for Pierce Atwood of Portland.
When a person makes an agreement with the state, it’s up to that person to determine whether the deal is legal, he said. “If you don’t, you take it at your peril.”
Regardless of the legal issue, state officials may want to compensate Barnhart to be fair to her, although that could anger taxpayers, Keeler said.
“It’s hard to know where this shakes out,” he said. “It looks like there is enough blame to go around.”
Money for Barnhart could come from CBRE Boulos. Laubenstein said the firm will be involved in the negotiations related to the money that Barnhart and the state spent on the sale.
The company received a 6 percent commission on sales of state properties, and it may have received a fee for developing a marketing plan, Laubenstein said.
He said the state’s contract with the firm contains language about the conflict-of-interest law that says no state official shall be “pecuniarily interested” in any contracts on behalf of the state.
Laubenstein said the sale – and the expenses – would not have happened if officials of CBRE Boulos had been aware of the conflict-of-issue provision.
Officials from the brokerage company could not be reached for comment.
MaineToday Media State House Writer Tom Bell can be contacted at 791-6269 or at: tbell@mainetoday.com
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