Ex-DOT commissioner Hardee was dealmaker for program that collected state money, funded political campaigns

July 19, 2019

Investigative Reports

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By RICK BRUNDRETT

Ex-state transportation commissioner John Hardee negotiated $1.57 million in payments since 2014 from government agencies and nonprofits for public service announcements through a billboard-industry trade group, though much of the revenues were not used to produce billboards, records reviewed by The Nerve show.

Instead, at least $450,000 from 2014 through 2018 was collectively spent on political contributions and lobbying, plus another total $142,500 was paid over the five-year period to Hardee as consulting fees, according to federal income-tax returns and state lobbying reports filed by the Outdoor Advertising Association of South Carolina (OAASC).

It’s unclear whether any state or federal campaign-finance laws were broken, or whether the government agencies and nonprofits that negotiated payments with Hardee for the public service announcements (PSAs) – the OAASC’s main revenue source – knew how the organization was spending the money.

South Carolina government agencies and 501(c)(3) nonprofits can’t spend money to influence election outcomes, either directly or indirectly.

In an interview Wednesday with The Nerve, Doug McFarland, the OAASC president, said the FBI had “a lot of conversations” with him last year about the organization’s PSA program and Hardee, who directed the program and whose longtime, paid consulting job with the group was first reported by The Nerve in February 2018.

“There’s no stones that have not been turned over,” McFarland said, adding the S.C. Department of Revenue last year indicated that “we’re just clean as a whistle” after reviewing the organization’s financial records.

Hardee is an executive with Lamar Advertising Company, a national billboard and outdoor advertising company that is a member of the OAASC. In January, he agreed to plead guilty to a federal charge of attempted evidence tampering in 2017, though no other details were publicly released then.

On Monday, federal prosecutors filed court documents revealing that an unnamed witness alleged that he paid money to Hardee, then a member of the state Department of Transportation Commission, in exchange for contract awards. No specifics about the contracts were provided.

In the sentencing memo, prosecutors, who are agreeing to a probationary sentence for Hardee, said they couldn’t prove the witness’ allegations, though Hardee was recorded as instructing the witness to destroy related emails and correspondence “before the FBI could find them.”

Prosecutors declined to discuss details about Hardee’s case when questioned by The Nerve last month after a sentencing hearing in Columbia was postponed. No new sentencing date has been set.

Hardee, of Columbia, did not respond to phone and written requests Wednesday from The Nerve seeking comment on his federal case and his consulting role with the OAASC. McFarland, president of MAC Advertising Inc., of Charleston, said the OAASC earlier this year suspended Hardee, who had been a consultant since 2003, from the organization in the wake of the federal charge.

One week after The Nerve’s February 2018 story was published, Gov. Henry McMaster announced a replacement for Hardee on the DOT Commission. Hardee, the son-in-law of powerful state Sen. Hugh Leatherman, R-Florence, was on the commission from 1998 to 2007 before regaining his seat in 2014. Leatherman, the longtime Senate Finance Committee chairman, sat on a former state screening committee that nominated Hardee to his seat.

Hardee came under scrutiny in 2015 when The Nerve revealed his ties to South Carolina Logos Inc., a Lamar subsidiary that has a 12-year contract with DOT for highway business-logo signs statewide – a multimillion-dollar operation.

Asked initially Wednesday by The Nerve if the S.C Attorney’s General Office, headed by Alan Wilson, was investigating Hardee for any potential state criminal violations in connection with his pending federal case or his OAASC consultant’s role, agency spokesman Robert Kittle didn’t provide a direct answer, replying that those matters were “investigated and handled by the federal authorities.”

“We discussed this case two years ago with the federal authorities for a possible dual-track investigation, but the feds asked to handle the case on their own, so we agreed, knowing they had the ability to handle it,” Kittle said in a follow-up email Thursday, referring to the pending federal case.

He declined further comment on any OAASC matters.

There are at least two state laws that prohibit public officials from accepting bribes to influence official actions or decisions, including one dealing specifically with DOT commissioners. Under Section 8-13-705 of the State Ethics Act, a public official cannot “directly or indirectly, knowingly ask, demand, exact, solicit, seek, accept, assign, receive, or agree to receive anything of value for himself or for another person in return for being,” among other things, “influenced in the discharge of his official duties.”

The offense is a felony that carries a maximum penalty of 10 years in prison and a $10,000 fine upon conviction.

Under the other law (Section 57-1-40), a DOT commissioner or employee can’t accept money, a contract, employment or “other thing of value” with the intent to influence his “decision or action on any question, matter, cause, or proceeding which at the time may be pending or which by law may be brought before him in his official capacity.”

In addition, another state law (Section 8-13-730) bans someone from serving in a governmental agency that “regulates any business with which that person is associated.” Outdoor advertising is regulated primarily by the state DOT, according to the OAASC’s website.

More generally, state law (Section 8-13-700) prohibits public officials from using their positions to obtain an “economic interest” for themselves and bans the use of public funds to influence election outcomes (8-13-1346).

Numbers don’t add up

The Nerve’s latest review of the OAASC’s federal income-tax returns found that from 2014 through 2018, the organization received a total of $1.57 million in PSA payments and had total revenues of about $1.67 million. Other listed revenue sources over the five-year period included membership fees ($50,520), investment income ($24,058), and an undefined “other” category ($20,000).

State comptroller general records show that $411,701 was paid collectively to the OAASC over the period by eight state agencies: Department of Social Services, Department of Natural Resources, Museum Commission, Insurance Commission, former Budget and Control Board, Adjutant General’s Office, Confederate Relic Room and Museum, and the Wil Lou Gray Opportunity School.

The identities of other government agencies or nonprofits that made PSA payments were not included in federal or state records reviewed by The Nerve.

Federal income-tax records and state lobbying reports filed with the State Ethics Commission show differences between the OAASC’s political contributions and lobbying expenses over the five-year period. The federal records show that the OAASC spent $367,080 and $191,950 on identified lobbying expenses and campaign contributions, respectively, while state lobbying records list a total of $233,081 for lobbying and $223,338 in political contributions.

McFarland said he couldn’t explain the discrepancies. He also couldn’t give specifics about a category in the federal tax records labeled “Public Service Commissions,” which totaled $147,536 over the period.

State lobbying records show that the OAASC spent over the period a total of $3,000 in campaign contributions to Leatherman. The organization’s political contributions ranged from $200 and $250 individual donations to Republican and Democratic House and Senate members to $10,000 each to the state Senate and House Republican caucuses.

McFarland said Leatherman never has had any direct dealings with the OAASC, adding, “We’re all very conscious of that situation.” He said the OAASC’s governing board decides which candidates or political groups will receive campaign contributions.

The Nerve this week asked the top three state spenders with the OAASC over the five-year period – DSS, Wil Lou Gray and Museum Commission – whether their respective agencies were aware at the time that the OAASC used part of PSA revenues for political contributions and lobbying, and whether they had any written or verbal communication with Hardee regarding their PSA billboards.

On its website, the OAASC says that to be eligible to participate in the PSA program, an organization must “spend no money for advertising except production and installation costs.”

Only the Museum Commission responded by publication of this story. Commission spokesman Jared Glover in an email Thursday said the agency wasn’t aware of the campaign and lobbying spending by the OAASC, noting it “booked billboards through John Hardee with the understanding that as a non-profit, there was no charge for the space and we were only paying the printing costs.”

OAASC invoices from 2011 to 2015 to the Confederate Relic Room, copies of which were provided last year to The Nerve, indicated only production and installation costs for billboards.

McFarland last year told The Nerve that Hardee coordinated “everything” involving the PSA program, noting Hardee typically negotiated a fee that covered production costs, and that the participating billboard companies provided billboard space for free to the approved public and private agencies.

The OAASC has no paid staff of its own, according to McFarland and federal tax records.

McFarland on Wednesday acknowledged the OAASC used some PSA revenues for political contributions, given that group’s membership fees and other revenue sources collectively don’t cover those costs. Total annual membership fees from 2014 through 2018 ranged from $9,000 to $12,520, while annual PSA revenues over the period ranged from $247,116 to $404,866, tax records show.

Internal Revenue Service regulations ban nonprofit 501(c)(3) groups from directly contributing to political campaigns or indirectly through 501(c)(4) organizations such as the OAASC, though under South Carolina law, 501(c)(4) groups can spend limited amounts on state political campaigns. Under federal regulations, 501(c)(3) groups can spend limited amounts on direct lobbying, while there are no such limitations for 501(c)(4) organizations.

In South Carolina, state law bans the use or authorization of “public funds, property or time to influence the outcome of an election.” Government agencies generally are allowed to lobby, though a 2003 executive order issued by then-Gov. Mark Sanford banned Cabinet agencies from hiring outside contractors to lobby the Legislature.

“All I know is we were doing everything we’re supposed to do,” McFarland said.

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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