Are S.C. officials shirking their oversight of tax dollars awarded to private groups?

May 1, 2019

Investigative Reports

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By RICK BRUNDRETT

In 2006, lawmakers approved spending $700,000 in the fiscal 2007 state budget to help the private Erskine College in Abbeville County establish the “John Drummond Center for Statesmanship” – to be named after the late longtime senator who retired from the Legislature in 2008.

A budget proviso authorizing the funding required the liberal arts college to give a written report to the budget-writing House Ways and Means and Senate Finance committees and the then-state Budget and Control Board on how it spent the state funds.

That apparently never happened, however.

Last month, the nonprofit college in Due West, founded in 1839 and affiliated with the Associate Reformed Presbyterian Church, admitted in court papers that a “physical facility for the Drummond Center was never constructed,” and that “no accounting of the $700,000.00 of state funds was made to the State.”

A lawsuit against the college asks the 8th Circuit Court to order the college to return the $700,000 to the state if the school “redirected the funds it received,” or if it “cannot provide an accounting demonstrating those funds were used” for the proposed center.

The case raises larger questions about the Legislature’s and executive branch’s oversight of tax dollars that are given to private organizations. The Nerve last month, for example, found that annual reports submitted by four regional economic development organizations to the legislative budget-writing committees and the state Department of Commerce didn’t specifically link in most cases the efforts by those groups, which collectively received $2.8 million in state funds last fiscal year, to identified companies that located or expanded in their areas.

In a separate story, The Nerve revealed that two of those groups listed contributions from state or local public entities as part of their required private matches last fiscal year. In addition, four tourism organizations with similar reporting requirements to the state, and which collectively were awarded $7.3 million in state tourism grants last fiscal year, said they make their required private matches through a special fee charged to hotel guests, though a Nerve check of several hotels found that the fees were not voluntary or transparent as claimed by those groups.

The Nerve this week sent a copy of the Erskine lawsuit with questions to longtime Senate Finance Committee chairman Hugh Leatherman, R-Florence; House Ways and Means Committee chairman Murrell Smith, R-Sumter; and Delbert Singleton, secretary of the five-member State Fiscal Accountability Authority, which was the successor to the Budget and Control Board.

The Nerve asked all three officials whether they were aware of Erskine’s admission in court papers that it had provided no accounting to the state of how it spent the $700,000 appropriation in fiscal 2007, and if their respective offices had any contact with the college about the matter. They also were asked how they verify that state funds given to private organizations are properly spent, and whether they could legally demand repayment if reporting requirements were not met.

As has been his longstanding practice with The Nerve, Leatherman did not respond. In email responses, Singleton said he would not be able to answer the questions by publication of this story, while a Ways and Means staffer said Smith was “not available by email or phone this week.”

Bob Merritt, a Greenwood attorney and former chief of staff for Sen. Drummond when he was the Senate Finance chairman in the 1990s, and who is one of three plaintiffs in the suit, declined comment this week, referring The Nerve to the public legal filings.

Andrew Mathias, an attorney with the Nexsen Pruet law firm’s Greenville office and who is representing the college, said in an email to The Nerve that he is in a trial this week in New York.

Budget records show that during the 2006 legislative session, the Senate Finance Committee, chaired then by Leatherman and which also included Drummond, a Democrat from Greenwood County who died in 2016, first approved the budget proviso authorizing the $700,000 to Erskine. It was part of a ranked list of special projects funded with state surplus funds – a common legislative practice, as The Nerve most recently pointed out last week.

The suit alleges, among other things, that instead of spending the money toward building the Drummond center, the college redirected the money to cover pledges by the private “Grady Patterson” Appreciation Committee” and “two unidentified entities” to establish the “Grady L. Patterson Chair/Professor of Politics” at the school. Patterson, an Abbeville County native who died in 2009, was a longtime Democratic state treasurer.

The suit contends that the college starting in 2000 or 2001 “solicited funds” for the center, noting that a college employee was “tasked to actively lobby the South Carolina General Assembly and potential donors for funding for the Center.”

The plaintiffs, which include Carol Cheek and Charles Schulze, identified as trustees of The Drummond Trust, in court papers asked that the court require the college to “provide a comprehensive and exact accounting of these state funds as was required by proviso in the original appropriation,” and provide “guidance for situations when Erskine College or any other private, religious institution seeks funding from the State of South Carolina.”

In their amended complaint filed last Sept. 26, the plaintiffs said the college “currently is seeking other funding from the State of South Carolina, in the amount of $64.6 million to fund thirteen charter schools, of which amount Erskine College would be entitled to retain $1.3 million as an administrative fee.”

Erskine College, in a written response filed on April 5, denied it was seeking the additional state funding cited in the amended complaint and other allegations, including the plaintiffs’ “attempt to link the State appropriation of $700,000.00 for the Drummond Center to the pledge for the Grady Patterson Chair of Politics.” The college wants the court to dismiss the suit.

No final court decision has been made, though in a related matter brought by plaintiff Merritt, 8th Circuit Judge Donald Hocker ruled in November 2017 that Erskine was considered a public body under the state open-records law to determine how the school spent the $700,000 state appropriation.

Brundrett is the news editor of The Nerve (www.thenerve.org). Contact him at 803-254-4411 or rick@thenerve.org. Follow him on Twitter @RickBrundrett. Follow The Nerve on Facebook and Twitter @thenervesc.

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