PILOT MOUNTAIN — The town of Pilot Mountain reached a settlement with its former manager Blair Knox on Friday following two mediation sessions between Knox and representatives of the town, facilitated by retired Judge Peter McHugh.

Knox was terminated on June 27, 2011, by the Pilot Mountain Board of Commissioners. Knox was hired as Pilot Mountain’s town manager March 28, 2005.

Knox was fired after a lengthy closed session at the June 2011 town meeting.

Commissioner Andrew French made the motion that Knox be terminated citing his contract dated June 29, 2009, under Section 2, subsection A: “he shall serve at the pleasure of the board until such time as the agreement is terminated.”

French also cited subsection B, which states that nothing in the agreement shall prevent, limit or otherwise interfere with the right of the town board to terminate the services of the employee at any time, with or without cause.

Commissioner Linda Needham seconded French’s motion. The motion passed unanimously.

French declined to comment following that meeting about the board’s termination of Knox’s services. Needham said he was terminated based on the terms of the contract as previously stated. Mayor Earl Sheppard also declined to comment.

Knox also declined to comment after the board’s decision.

According to the contract, Knox’s annual salary was $72,095. The contract states that in the event the employee is terminated by the board, he will be compensated a minimum lump sum cash payment equal to six months aggregate salary, benefits and deferred compensation. The contract also states that after the initial three years, the town manager will be compensated for an additional month severance for each additional year of service for a maximum of 12 months.

Under terms of the settlement, the town agreed to pay Knox for six weeks of accrued vacation pay, as well as a lump sum amount of $12,000 to “resolve any and all claims, contractual and civil.”

A few months after Knox was terminated, the board hired former Walnut Cove Town Manager Homer Dearmin. After working a 60-day notice in Walnut Cove, he started work with the town of Oct. 10, 2011.

On his fourth day as manager, Dearmin fired the town’s finance director, Don Keeley. Keeley won his unemployment claim with the town on March 21 and is now collecting unemployment benefits. His weekly benefit amount is $522, with a maximum benefit of $13,572.

The town is appealing the decision.

Keeley was fired shortly after the North Carolina Department of the State Treasurer issued a letter to the town highlighting the town’s financial problems.

After receiving the letter, French delved into the town’s budget and found out where the problems began.

French said $102,000 allegedly was spent by Knox and Keeley, without consent of the board. French also discovered that $241,000 of grant money from the Golden LEAF Foundation for the Pilot Center was paid to the town in September in the 2010-11 fiscal year but was reflected as revenue in the 2009-10 budget.

Dearmin said, as part of the settlement with Knox, both parties agreed to a release of all claims, and a mutual non-disparagement agreement. The town also agreed not to contest Knox’s claim for unemployment benefits. Each party is responsible for its own attorney fees.

“I am glad that both sides were able to agree to a fair settlement,” said Dearmin. “This allows both sides to move forward, and we are grateful to the legal counsel involved, as well as to Judge McHugh for facilitating the mediation. We wish Mr. Knox the best in his future endeavors.”

Knox could not be reached for comment on Thursday afternoon.

Reach Mondee Tilley at mtiley@heartlandpublications.com or at 719-1930.