Thousands of ratepayer dollars paid out by the Corporation of Hamilton to host a convention on the Island later this year could be seized by a US bankruptcy court.

The municipality has already handed over $50,000 to the Atlanta-based Conference of Black Mayors (CBM) — an offshoot of the National Conference of Black Mayors (NCBM).

But court documents show that the NCBM has now been declared bankrupt and is being administered by a bankruptcy trust. The group owes money to more than 100 creditors and is understood to be in debt to the tune of $1 million.

The Corporation entered into negotiations with the NCBM last year after Deputy Mayor Donal Smith was introduced to NCBM chief executive officer Vanessa Williams.

But Ms Williams was fired by the NCBM after the scale of the group’s debt under her management was exposed. Ms Williams also failed to cooperate with an internal audit of the organisation, which later revealed that she had spent $600,000 of NCBM funds on personal expenses.

Georgia State records show that, prior to her dismissal, Ms Williams set up a new group, the CBM, naming herself as president and chief operating officer. She then continued negotiations with the Corporation of Hamilton to host a conference in Bermuda in October. She has visited the Island twice, once as the guest of Hamilton Mayor Graeme Outerbridge, and also received $50,000 from the Corporation to cover organisational expenses. The Corporation has agreed to pay the CBM a further $50,000, although sources claim the event could cost the municipality up to $350,000. Home Affairs Minister Michael Fahy has given the conference his backing and approved the payments.

Papers from the US Bankruptcy Court Northern District of Georgia show that the NCBM filed a voluntary petition for relief on April 30. Control of the NCBM has been handed over to bankruptcy trustee Edwin Palmer.

The papers also list 115 NCBM creditors, including a number of convention centres, who have been called to a meeting scheduled for next Thursday, May 29.

Instructions to creditors state: “There does not appear to be any property available to the trustee to pay creditors. You therefore should not file a proof of claim at this time. If it later appears that assets are available to pay creditors, you will be sent another notice telling you that you may file a proof of claim, and telling you the deadline for filing your proof of claim. ”

It is uncertain if the CBM, as a splinter group of the NCBM, is now obligated to pay off the parent company’s debts.

Ms Williams has insisted that the two organisations are not separate, claiming that the NCBM has simply changed its name to the CBM. The official name-changing ceremony is expected to take place during the “40th anniversary” convention in Bermuda.

That claim was supported this week by City Hall, which claimed to have conducted thorough background checks and due diligence on the CBM “to find out more information about who we’re dealing with and what exactly is going on”.

Explaining the relationship between the two organisations, Mayor Outerbridge told a press conference on Wednesday: “We went through things very carefully with the Minister and provided the information directly from the CBM to the Minister and had discussions for clarification — why the name confusion, things like that — because the NCBM basically a while ago had decided it was ... becoming an international organisation, not just a national organisation. From the point of view of being a split organisation it’s actually an organisation of both bodies.”

At the same press conference, Deputy Mayor Donal Smith said: “In 2011 the NCBM passed a resolution that they will relinquish the name ‘National’ and pick up ‘Conference of Black Mayors’. There’s no confusion over the NCBM and CBM, none at all. The NCBM is now in the hands of the president of the CBM.”

However, lawyers for the NCBM have always maintained that Ms Williams was acting independently when she set up the CBM which is a separate entity from the parent group.

Yesterday Corporation of Hamilton councillor Larry Scott, who has repeatedly raised concerns about the credibility of the CBM, expressed alarm at the development.

“If the NCBM and CBM are one in the same entity and they plan to dissolve the NCBM at the Bermuda conference, then the NCBM trustee in bankruptcy may well reach out to seize the funds we have made available to the CBM to satisfy the considerable debts owed by the NCBM,” Mr Scott said.

“The Trustee in Bankruptcy could do that in any event because we paid $2,500 to join the NCBM — or CBM. We are an affiliate.

“Of course the other point is this, if the trustee in bankruptcy has control over the assets of the NCBM, then the CBM has no assets at its disposal. Is it any wonder then that they need our backing? In fact, is it any wonder they want to hold a conference here? How would the NCBM or CBM or its affiliates be able to hold a conference in the US — they are under Chapter 7 bankruptcy. No city in the US would want to host them, but we suckers in Bermuda will of course. We can’t be that kind of prostitute.

“How far are we prepared to go to rescue this group and for what purpose, what do we get in return?”

Mr Scott also criticised Mr Outerbridge for failing to contact Ms Williams’ former employer, the NCBM, when investigating her credibility. Mr Outerbridge has confirmed he never liaised with the NCBM “because they didn’t contact us”.

“It is quite startling that the Mayor would not contact [NCBM law firm] Ballard Spahr for their position, even after I made available to him their communications,” Mr Scott said.

“In fact the Mayor asked me recently why I had contacted them at all. I was completely nonplussed, by his question.

“I have never opposed the idea of this event in principle, I have only ever asked that we check our facts before we enter into the relationship. And as of this moment in time I am not so satisfied.”

The Royal Gazette e-mailed the bankruptcy documents to Mayor Graeme Outerbridge and Minister Fahy yesterday, along with a number of questions. No response to those questions was received by this newspaper by press time last night.