EDENTON — Former Chowan County Manager Cliff Copeland acknowledged hiring a consultant without proper authorization, advised current county officials not to cooperate with a state audit, believed his replacement had “panicked” over the county’s inability to meet payroll, and even said he was thinking about filing for county commissioner and applying for his old job, transcripts of phone and face-to-face conversations with county employees show.

Peter Rascoe, who replaced Copeland as county manager in June 2008, said he authorized county staffers to begin documenting Copeland’s visits and phone calls to county offices after it became apparent that litigation might result from Chowan’s near financial meltdown two summers ago.

Chowan officials have repeatedly blamed Copeland for the financial woes that left the county unable to pay its operating expenses and at risk of a state takeover in 2008.

After Copeland abruptly retired, county officials discovered Chowan had spent nearly the entire amount — $29 million — in its hospital trust fund account. A state review of Chowan’s budget for 2008-09 also found that the county had overestimated revenues by $3.8 million. The revelation forced county commissioners to adopt an amended budget that included a property tax increase.

Last year, Chowan officials received subpoenas to turn over documents to federal authorities related to the county’s near financial collapse. The U.S. Attorney’s Office for the Eastern District of North Carolina has declined to comment on whether a federal probe is under way.

Rascoe, who recently resigned to take the town manager’s job in Southern Shores, said he and other county employees did all they could to discourage Copeland from calling or visiting the county office building after the financial woes came to light. But Copeland apparently wasn’t shy about communicating with his former subordinates.

In transcripts of conversations provided to the Chowan Herald, Rascoe detailed an April 29, 2009 conversation he had with Copeland in the parking lot at John A. Holmes High School following a Rotary Club breakfast. During the conversation, Copeland acknowledged hiring Capstrat, a Raleigh-based consultant firm, without authorization to lobby for the county and town of Edenton, Rascoe’s notes from the encounter suggest.

“(Copeland) did comment about Capstrat saying ‘That was my fault. Things got hectic’ and he said ‘I assumed the town was contributing to it and they were not,’” Rascoe wrote.

However, on Sept. 4, 2009, at 3:15 p.m., Copeland allegedly told County Clerk Susanne Stallings that “he always thought the town was paying their share” for Capstrat’s expenses.

Copeland paid Capstrat nearly $260,000 in county funds to assist with several projects that needed federal grant funding.

Asked last week about those comments to Rascoe and Stallings, Copeland said he accepted responsibility for hiring Capstrat.

“I was responsible,” Copeland said. “I was the county manager at the time and that’s how the system works.”

Copeland said he did not know that county staffers were documenting his conversations with them.

The transcripts also show that Copeland told staffers that Rascoe “panicked” after discovering the county could not meet payroll shortly after his retirement.

The records also show Copeland repeatedly offering to help county officials respond to the budget woes.

Rascoe said that early in the crisis, he and Lisa Jones, the county finance officer, took Copeland up on his offer.

“Lisa and I went over to his house for him to come clean (about) the budget,” Rascoe said during a recent interview. “We laid (the budget problems) out on his dining room table.”

According to Rascoe, Copeland had no answers for them. He sat quietly, scratching his head while staring at the documents, Rascoe said.

“He kept saying Sandy Point was going to come through,” Rascoe said. “He said we were going to get a big sale and everything would be fine.”

Sandy Point, a planned 900-acre mixed-use development along the Albemarle Sound, was supposed to be a property and sales tax bonanza for Chowan County once it was fully built out. Because of the downturn in the real estate market, however, the development has yet to materialize.

Two months after Chowan officials discovered the budget shortfall, District Attorney Frank Parrish asked the State Auditor’s Office to investigate.

Transcripts show that Copeland repeatedly told county staffers not to worry about the review by the State Auditor’s Office.

“‘Don’t say a word. Raleigh says this (auditor investigation) is a joke and (that) he (Copeland) will be cleared of everything.’ (He) kept saying he knew (this) for sure and (not to) say anything,” Stallings wrote following a conversation with Copeland at 10:45 a.m. on April 23.

A report released by the State Auditor’s Office later found no criminal wrongdoing but criticized Copeland for acting on a number of matters — Capstrat’s hiring was one of them — without authorization from the Chowan Board of Commissioners. The report also criticized the commission board for not keeping a closer eye on Copeland’s management of the county’s coffers.

Later, however, questions arose about the report’s completeness and about whether the State Auditor even had the authority to investigate Chowan’s finances. The Auditor’s Office later retracted comments in the document specifically related to Capstrat.

According to the transcripts, Copeland at times would call county staffers and disguise his voice, telling them he was with the State Auditor’s Office or that he was a reporter.

The transcripts also show Copeland apparently telling Chowan staffers that he was being asked to run for county commissioner in District 3. “He said he was thinking about doing it to help us out,” a transcript of the conversation reads.

During the recent interview, Copeland denied making the remark, but allowed that he may have joked about being a political candidate.

“Why would I run? I couldn’t win,” Copeland said.

After Rascoe announced in May that he was resigning as county manager, Copeland apparently called and said he was going to apply for the county manager’s job, the transcripts show.

Board of Commissioners Chairman Eddy Goodwin said he agreed with the idea of keeping a log of county officials’ conversations with Copeland.

“When you get a man who is no longer an employee still coming in the county office building and being disruptive, something had to be done,” Goodwin said. “Employees have a right to conduct their day-to-day operations without being disturbed.”

Wade Smith, Copeland’s attorney, said it would be inappropriate to comment on the transcripts when contacted recently.