In S.C., ‘Winners’ Can Use Campaign Cash for Legal Defense

November 4, 2015

Investigative Reports

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Harrell owes $113K, but only because he lost

Disgraced former House Speaker Bobby Harrell walked into the House Ethics Committee Hearing Monday morning smiling, and he left the same way.

How long that is the case remains to be seen.

With a unanimous vote from members he formerly presided over, Harrell attorney Mark Peper asked for and received an extension until December to address the committee’s charge that Harrell wrongfully paid $113,475 in attorney’s fees from his campaign account while unsuccessfully defending himself from six ethics charges he was convicted of in October 2014.

Arguing that he needed more time to gather the relevant facts, Peper – owner of the law firm that employs Harrell’s son Trey – told the committee he had only just taken the case last Thursday had not had enough time adequately to prepare.

Harrell stood but did not speak at the hearing. Before it began he worked the room, shaking hands and exchanging cell phone pictures and pleasantries with his former colleagues. After it was over, he deferred questions to Peper while standing silently in the hallway of the building he once commanded.

Harrell’s fight to avoid paying $113,000 out of pocket appears bleak at best, because in South Carolina you only pay your fees if you lose, and the fact Harrell lost is not in dispute.

IT PAYS TO WIN

When people give money to support a candidate’s campaign, they’re typically not imagining their candidate using it to defend themselves against serious ethical charges. And yet, under the prevailing opinion in the South Carolina House of Representatives, they can do just that unless – and only unless – ­the politician is found guilty.

According to House Ethics Advisory Opinion 2013-2, which was issued following multiple lawsuits stemming from the 2012 campaign about who could and could not appear on ballots, “legal expenses flowing directly from someone’s campaign may be an appropriate use of campaign funds.”

However, the next sentence in the opinion warns clearly that “this holding does not reach lawsuits resulting from a candidate’s personal misconduct.”

In 2012 Gov. Nikki Haley was allowed to use $50,000 from her campaign funds to pay for her defense (the firm of Womble Carlyle Sandridge & Rice) against four charges before the House Ethics Committee, because she was cleared of those charges by the committee – no personal misconduct was found.

In his losing effort to defend himself all the way to the state Supreme Court, Harrell paid attorney Bart Daniel – whose website boasts that as a former U.S. attorney he led “the largest and most successfullegislative public corruption case in the history of the US … Operation ‘Lost Trust’” (emphasis his) – two payments totaling $70,475 in April and July of 2014. Harrell also in April paid $43,000 to Charleston criminal defense attorney Gedney Howe.

Bingham said once Ethics Committee members became aware through Harrell’s campaign finance disclosure forms that he had used campaign funds to pay his fees, ethics attorney John Nichols asked Daniel in June for an explanation to reconcile how Harrell was not in violation of the advisory opinion.

“Basically (Daniel) offered no explanation or response other than ‘I think he could (do it.’),” Bingham said.

Later, around August, Bingham said, the committee reached out to Daniel again for clarification on his position given the advisory opinion.

“He said, ‘I’ve already given you my response’,” Bingham said.

That response led the Committee to draft a letter to Harrell dated Sept. 1 in which the former lawmaker was given until Oct. 1 to repay the funds to his campaign account. Harrell missed that deadline. On Monday, committee members thought they were finally going to hear arguments to that effect until Peper’s plea to postpone.

“I don’t know what they’ll say (in December),” Bingham said. “We’ll listen at it and make an informed decision.”

AS ABOVE, SO BELOW?

Using campaign funds to pay for legal fees has the federal stamp of approval. The U.S. House of Representatives’ Ethics Committee has ruled that “it is generally permissible under House Rules for a Member to use campaign funds to defend legal actions arising out of his or her campaign, election, or the performance of official duties. The basis of this determination is that the protection of a Member’s presumption of innocence in such actions is a valid political purpose.”

However, the committee cautions that before using funds in such a way a member should consult with the committee and the Federal Election Commission to determine if the specific legal services are permissible as taken on a case-by-case basis.

In the Senate, the practice requires prior written approval of the Senate Select Committee on Ethics.

But what about other states?

Rules vary wildly, running the gamut from ‘anything goes’ to ‘no can do.’

In Alabama, lawmakers just this year codified their right to use campaign funds with no stipulations, allowing office holder to use campaign donations for “Legal fees and costs associated with any civil action, criminal prosecution, or investigation related to conduct reasonably related to performing the duties of the office held.”

Those efforts were spearheaded by another embattled Speaker of the House, Mike Hubbard, who in October of 2014 was indicted on 23 felony corruption charges and who has spent more than $300,000 of campaign funds for his legal defense and faces a possible $2.5 million in fines. His trial was set to begin last month but also was postponed, until March. Hubbard has refused to resign his seat and maintains his innocence, going so far as to have his attorneys file a constitutional challenge to the ethics law he is charged under.

In North Carolina, candidates may establish a separate legal expense fund apart from their campaign fund “for the purpose of funding an existing or potential legal action taken by or against the elected officer in that elected officer’s capacity.”

Those establishing such a fund must register the donations, which are subject to disclosure and restrictions, with the only proviso on the fund being that “a candidate may not create more than one legal expense fund for the same legal action or for legal actions arising out of the same set of transactions.”

In Tennessee, an opinion from the Attorney General forbids the practice outright. It states “that a candidate may not use surplus campaign funds to cover his or her legal expenses, regardless of whether the action is related to the performance of his or her job duties. The opinion concluded that these expenses are not ‘ordinary and necessary expenses incurred in connection with the office of the officeholder.’”

HURRY UP AND WAIT

For Harrell, there does not appear to be any legal wiggle room, meaning all he did Monday was drive to Columbia and kick the can down the road.

“You cannot use campaign funds for legal expenses if it’s a result of personal misconduct,” Bingham said. “We’ve made (Harrell’s attorneys) aware of that advisory opinion, (and) they were aware of that advisory opinion (before today).”

With no evidence to sustain an objection that the funds weren’t improperly spent, Bingham said, the committee moved forward with the directive issued Sept. 1. Bingham said the improper use was not an additional violation, but it was not an allowed expense, meaning he had to return the campaign funds  to the state and pay the fees out of his own pocket.

Bingham said the committee will meet next in December, at which time – presumably – the committee will hear Harrell’s explanation for using the funds. If the committee does not accept Harrell’s explanation at that time, he will again be asked to repay the money via administrative order or a directive.

Because of the terms of his sentence, Harrell would turn the original $113,475 in campaign funds over to the state’s general fund and be responsible for paying Daniel, Gedney – and, presumably, Peper – himself.

Reach Aiken at 254-4411. Email him at ron@thenerve.org. Follow him on Twitter @RonAiken and @TheNerveSC. Staff researcher Shane McNamee contributed to this report.