Florida city could be wiped off map for being deemed "most corrupt town in America"

Florida mayor Barry Layne Moore resigned Tuesday night while in jail on charges of selling oxycodone.

But that may be the least of the problems in the small city of Hampton, Fla. State officials are threatening to actually wipe it off the map.

Hampton's problems, CBS News' Manuel Bojorquez reported, can be traced to a stretch of U.S. Highway 301, where for years police officers ran a lucrative speed trap. But there are now questions about where a lot of that money went, and Hampton has fewer than 30 days to prove it can be trusted or lose its status as a city.

The first step towards saving Hampton happened Tuesday night when frustrated residents packed City Hall and saw every member of their city council resign.

Some hope the move will convince state lawmakers to spare their beloved Hampton, a humble town an hour south of Jacksonville.

Jim Mitzel, a former mayor, says despite its reputation, Hampton must be preserved.

"There's good people here," Mitzel said. "We have good people. It don't look like we got good people here because we're considered the most corrupt town in America. But we're not."

State officials say that for years, Hampton -- population 477 -- was overzealous in handing out traffic tickets to fill its coffers. It started in the '90s, when the city annexed a sliver of land along U.S. Highway 301 to increase its revenue by catching speeders.

The speed trap is only about 1,200 feet, and the limit dropped from 65 to 55. In just one year, the city made about a quarter of a million dollars off the short stretch of road -- so short that in just a matter of seconds, drivers are already through it.

Hampton's 17 police officers were often seen on lawn chairs camped on the side of the highway. There were even reports of officers issuing tickets while heavily armed.

Sheriff Gordon Smith, of Bradford County, which includes the City of Hampton, became suspicious of the operation. He said signs were moving around or altered. He said, "We had some of the signs that were actually painted over, and the speed limit was painted on the sign, a foot or two off the ground."

State auditors were called in. They found the town had racked up a $132,350 tab at a local convenience store, $10,152 in questionable credit card purchases, and $8,258 in over-payments to the former city clerk whose son ran the water authority and husband was a city councilman.

Republican Florida State Sen. Rob Bradley, says that was just the beginning.

"They had records destroyed," he said. "They said it was due to an automobile crash in a swamp. You can't make this stuff up. It was like something out a Southern Gothic novel."

The state now wants the town to clean up its finances or face dissolution. A criminal investigation is also underway.

"Somebody is going to have to pay for something," Mitzel said. "Because that money went somewhere, and it didn't go to support this town. There's consequences."

State and county investigators are now combing through evidence they seized from last week at Hampton City Hall. Hampton's former city clerk and its police chief did not respond to our interview requests.