Following tornado, Morgan County paid $1.65 million for property previously valued at $315,000

WEST LIBERTY — Morgan County is struggling with debts resulting from the March 2012 tornado that wrecked this community.

One of those debts stems from the purchase of a 30-acre lot just outside West Liberty, which holds a small office building, a garage and rusting heaps of scrap metal.

Before the tornado hit, the vacant property was assessed for tax purposes at $315,000. Three weeks after the tornado, Morgan County paid $1.65 million, more than five times the assessed value, to Rifle Coal Co. to buy it.

The one-time headquarters of the coal company served three months as office space for then-Judge-Executive Tim Conley and several other county leaders whose usual workplace, the Morgan County Office Building, was severely damaged and needed repair. Today it houses the county's water district staff and road crew.

Morgan County could ill afford it.

This year, the county consolidated its tornado-related debts — including the property's purchase — into a $5 million, 20-year bond. Paying off the bond will require monthly payments of $28,808.

Facing a projected $600,000 budget shortfall next year, county officials are weighing whether to raise taxes and fees in a place where 29 percent of residents live in poverty.

The old Rifle Coal property now is viewed with some resentment. Locals note that Conley — who is serving seven years in federal prison for an unrelated bribery scheme — authorized the purchase without getting an appraisal or competitive bids for other locations. Nor did he try to negotiate a cheaper, short-term lease for the property.

Conley was personally acquainted with the property's sellers. Before he was elected judge-executive in 2003, Conley worked for the locally prominent Frederick family that owns Rifle Coal, as did Conley's father before him. The Fredericks also own Frederick & May Construction Co., which builds schools and other public projects. Cumulatively, the Fredericks have given more than $200,000 in campaign donations to Conley and other politicians since 1998.

The signatures on the March 27, 2012, deed of sale belong to Tim Conley for the Morgan County Fiscal Court and family patriarch Barrett Frederick for Rifle Coal. Local attorney Chris Frederick, another member of the family, prepared the paperwork and signed as notary.

"People here say we paid too much," said Judge-Executive Stanley Franklin, who defeated Conley in last year's election.

"It certainly would appear from the assessment that it was an overpayment. But I wasn't here at the time, so I can't tell you for sure what went on," Franklin said. "I will say, there was urgency to the situation after the tornado. We needed some sort of facilities, and you know, they had one for sale."

Mike Lindon, pastor of Grace Baptist Church in West Liberty, led the Morgan County Long-Term Recovery Committee after the tornado. One way or another, something was wrong with the deal, Lindon said.

"If that building really was worth that kind of money, then our county officials were terribly negligent all those years when they were saying it was worth so much less than that, and we were getting shorted as a community on our taxes," Lindon said. "If it wasn't worth that kind of money, then that's obviously a problem, too."

Conley did not respond to a request for comment mailed to the medium-security prison in West Virginia where he's currently an inmate. Conley's defense attorney, Frederick Anderson of Lexington, did not return a call seeking comment.

In an interview, Barrett Frederick said it was a fair deal. Rifle Coal was going out of business, so he was trying to sell the company's vacant headquarters even before the tornado hit, he said. After the storm, he offered it to Conley for $1.65 million. Conley agreed.

Asked about the previous property assessment of $315,000, Barrett said he could not judge the accuracy of that number. He also said the circumstances Conley faced should be considered.

"I'm sure there was some urgency to the matter," said Frederick, a lawyer by training who sits on the board of directors at Paintsville-based Citizens National Bank. "We had office space. They had none."

The property's garage came with some tools and mechanical equipment, including hoists, that should be considered part of its value, Barrett said. Rifle Coal bought the land from a local couple for $35,000 in 1993, then erected the garage and office building for its own use.

Morgan County's attorney under Conley was another member of the Frederick family, Joleen Frederick Phipps. Last week, Phipps said she recused herself from the land sale to avoid a conflict of interest "because that property was owned by my family."

Phipps said she never saw any documents about it until after the fact, when an FBI agent who was investigating Conley showed her the deed and asked her about it.

"I'll be honest with you, though, I don't think there was any foul play there," Phipps said. "I can tell you, it was fully vetted and investigated, and if there was something to get on it, they would have."

The FBI field office in Louisville and the U.S. attorney's office in Lexington, which successfully built a bribery case against Conley last year involving kickbacks on building projects, last week declined to comment on other possible investigations in Morgan County.

The Kentucky Department for Local Government helped Morgan County consolidate its tornado-related debts into a $5 million bond this year. Russell Salsman, the agency's chief of staff, said it was his understanding that county officials hoped to get reimbursed for the Rifle Coal property by the Federal Emergency Management Agency, "but that didn't work out." FEMA and other government entities did pay millions in Morgan County to repair public structures, including $7 million for the Morgan County Office Building.

"As for whether or not buying that property was a good decision," Salsman said, "that was a local thing, and they'll have to decide that for themselves."

This story was originally published May 23, 2015 at 8:26 PM with the headline "Following tornado, Morgan County paid $1.65 million for property previously valued at $315,000."