BAR HARBOR – A missing town file is central in the latest dispute between hotelier Thomas Walsh and the town over the use of a single-family dwelling at his Regency Hotel property on Eden Street.

In the fall of 2002, Walsh publicly alleged that town officials, primarily Town Manager Dana Reed, were undermining his business efforts, singling him out unfairly for code enforcement and driving up his costs.

This week, Walsh’s attorney, Andrew Hamilton of Bangor, intimated in a public meeting that town officials intentionally destroyed or lost a critical 1985 file in their campaign to harass Walsh and hold up his business projects.

Hamilton said the missing file could be decisive in helping Walsh fight the town’s latest action against him, a charge that he is using a single-family home on his Regency Hotel property on Eden Street as a commercial enterprise.

If the town can’t produce the file, Hamilton said, it should consider dismissing the alleged violations against Walsh.

“We’re going to be frustrated on this case” if the missing file is not located, Hamilton told the town appeals board Tuesday. “If the evidence is not in the town office, that should suggest something to all of us.”

Walsh has appealed the Walsh House violation and continues to use the property despite the code enforcement officer’s directive to cease activity on the property.

Reed flatly denied Walsh’s new assertion in an interview Thursday and said no one at the town office intentionally did anything to the missing 1985 file.

According to Reed, a box of building permits from 1985 to 1989 was destroyed when the town office basement flooded during the 1998 ice storm.

Walsh’s original building permit for the Regency property might have been in the box, although no one can be sure.

In all, thousands of pages of records, including payroll, birth and death certificates and planning and assessing drawings and other records were destroyed, Finance Director Stan Harmon said Friday.

“We filled up a Dumpster, probably a couple of times,” Harmon said.

Walsh was told by town officials last month to cease using the Walsh House on Frenchman Bay as anything other than a single-family home as approved in 1994.

Code enforcement officer Angela Chamberlain alleges Walsh is using the residence for business activities, including public functions and hotel rooms on the second floor.

In addition to the first-floor “Great Room” where parties and receptions are held, including the annual meeting of Friends of Acadia on Friday afternoon, the second floor contains several bedrooms the town alleges are illegal.

Hamilton would not say this week whether Walsh is paid for any of the first-floor functions or whether he rents out the upstairs bedrooms.

“We will have to wait for the [appeals] hearing,” Hamilton said Thursday.

The Walsh House is being used today for the same purposes as in the past four years, Hamilton said, asserting that the 1985 building permit “may prove” that the continuing use in fact was approved nearly 20 years ago and possibly grandfathered under the town’s land use rules.

The town, meanwhile, argues that regardless of what the 1985 permit may have allowed, Walsh sought and received approval in late 1994 to build a home for his family on the foundation of a previous residence on the shorefront behind the Regency.

According to Chamberlain’s notice of violation to Walsh, the upstairs bedrooms require a key-card entry, much the same as hotel rooms; there are separate restrooms for women and men, with multiple stalls; there are exit signs and emergency lighting; and there are no personal items such as clothing and photographs.

Chamberlain also noted that the Walsh House is advertised on the Regency’s Web site as an “oceanfront banquet facility.”

The code official was direct in her response to Hamilton’s assertions that she and others had not cooperated in trying to find the missing file.

“There is no basis for such accusation, and I do not appreciate your continued attempts to cast my office and other town officials in an unfair and unfavorable light,” Chamberlain wrote to Hamilton in a June 23 letter.

“It is simply unfair and misleading to suggest that my office or other town officials are doing anything but fully cooperating with your client’s efforts to review documents contained in my office,” she wrote.

Walsh is also suspicious of Chamberlain’s recent actions, according to Hamilton, because neither of the two previous code enforcement officers issued any notice of violations on the property.

“I can tell you ‘why now,'” said Bar Harbor Fire Chief David Rand, who oversees code enforcement. “We got a written complaint from two citizens and we acted on it. It would be no different if I got a complaint on some other property in town. We’d act on it.”

Rand said Chamberlain, as the town’s only code enforcement officer, does not have time to visit dwellings unless there has been a written complaint.

The complainants were two former planning board members, Chairman David Einhorn and Stewart Brecher. They filed their written complaints in early April.

Einhorn did not seek reappointment last month and Brecher was removed from the board by the Town Council.

While the Walsh House is only the latest in a series of public disputes between the town and Walsh over many years, the developer and his representatives has become more outspoken as their frustration with the town has intensified.

“This is a new tactic by the same town officials who have actively worked against my client’s projects for years,” Hamilton said in an interview Thursday.

“The town seems to toss off the fact that these files don’t exist,” he said. “Fair play is not in play in this case.”

Many of the recent violations against Walsh involve him allegedly changing the design of his projects in significant ways after the planning board has approved the plans. He also has been known to seek after-the-fact permits for unapproved work.

Hamilton has demanded the town either locate the missing 1985 building permit for the property, which Walsh says is crucial to proving his case, or discuss with him whether the town should dismiss its action.

If those are the choices, Reed said, the case is likely to be decided in Superior Court.

Walsh owns about $35 million in property in Bar Harbor, according to assessor Steven Weed, making him one of the top commercial property owners in the town.

With the recent acquisition of an adjacent whale watch business on West Street, Walsh now owns all but one or two parcels on the shore side of West Street, and many parcels on the other side of the road, Weed said.

Walsh’s new marina has not yet been assessed for tax purposes.