Internal DOT Files Paint Troubling Picture

October 12, 2015

Investigative Reports

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By RON AIKEN

Road Work

State’s transportation agency crippled by internal conflicts, allegations of corruption

In the four years leading up to the most-destructive single event for South Carolina’s road and bridge system, the agency responsible for it was mired in internal controversies ranging from DOT supervisors engaging in private business relationships with vendors they oversee; state employees forced to work on private property and falsify documents at the behest of politicians; thefts of materials covered-up by management; procurement irregularities resulting in overpayments to the tune of hundreds of thousands of dollars; and allegations of racism. fraud and conflicts of interst.

A review of S.C. Department of Transportation internal audits dating back to 2011 reveals an agency regularly investigating serious charges from all corners of the state involving employees at nearly every level of compensation. The documents obtained by The Nerve through the Freedom of Information Act paint a picture of an agency where issues as simple as inventory control varied wildly from shop to shop and often were impossible for investigators to track or make sense of and where interactions with the public were handled so poorly that the DOT auditor recommended remedial customer service training to prevent further erosion of consumer confidence in the agency.

From the files, taken chronologically:

● In March 2011 the auditor’s office investigated allegations of racism and unfair treatment at its Sumter office where DOT twice improperly demolished a driveway to a community outreach building serving as a church within a two-week period from Jan. 20 to Feb. 4, 2011. DOT finally corrected its error and re-installed the driveway on Feb. 11 but had to return a week later because that installation was not according to permit.

That investigation led to 12 separate findings/recommendations from then-Deputy Chief Internal Auditor Paul Townes, including a wrongly revoked initial permit, two permit revocations without satisfactorily contacting the owner and attitudes that harmed the office’s reputation.

The sensitivity of SCDOT’s reputation for fairness requires higher approval for a removal of a driveway. The foreman that removed the driveway said he had never removed a driveway in his five years without the owner’s request,” Townes wrote in his report to then-Secretary Of Transportation Robert St. Onge. “SCDOT’s Sumter office should develop a more thoughtful team approach to dealing with problems. The revocation of a permit is unusual. The failure of staff to coordinate and review proposed actions was detrimental to SCDOT’s reputation.”

SCDOT should mandate remedial training in quality customer service. This situation was so poorly executed that there is an obvious lack of sensitivity to the public.”

As for the allegations of racism brought by the property owner, Townes addressed them specifically.

Racial prejudice is very difficult to objectively prove and no one that we interviewed at SCDOT specifically admitted to any prejudice,” Townes wrote. “While nothing was overt, there are subtle indications that racial prejudice could have influenced some of the attitudes.”

SCDOT should develop a formal response to allegations of racism from the public.”

● In July 2011 the auditor’s office investigated the theft of three chainsaws from the Orangeburg office. Investigators found areas where security could be improved but came away most concerned about management’s attitude concerning the thefts.

Perhaps the most troubling issue was the lack of candor from three management personnel who we interviewed initially,” Townes wrote. “We asked if they had any problems with missing equipment or other thefts and were told no.

When we interviewed the employees, several mentioned that in a safety meeting someone stated that tools were stolen from the garage. We also heard the saws were returned.”

We asked one manager specifically and he indicated a foreman and an employee had colluded to get a chainsaw off the yard for personal use. Upon additional review, the chainsaws were taken the same weekend.”

Townes said regardless of what exactly happened and which individuals were at fault, “…it would have been helpful and expected that this information would have come from management and not the employees.”

● In September 2011 Townes’ office investigated a complaint that DOT personnel and resources had been used to inspect bridges on private property in Woodside Plantation, a gated community in Aiken.

First reported on in 2013 by The Nerve, despite state law against inspecting private property and being warned not to do so beforehand, DOT Chief Engineer for Operations Clem Watson and then-DOT Deputy Secretary John Walsh ordered the work be performed against the objections of employees on Aug. 23, 2011.

In addition to concerns about impropriety, Townes’ investigation also determined employees were encouraged to submit fraudulent reports.

They were instructed to not use the federal charge code as these bridges were not on the state system. Inspection staff also had to create fake bridge ID numbers because the bridges were off system,” Townes wrote.

Without any reservation, all personnel (under Watson) were certain the activity was wrong, stated that they expressed reluctance to their supervisor, and knew it would resurface later because it was against established policy.”

Townes discovered in his investigation that pressure to inspect the bridges had come from an unnamed Aiken city council member, later identified as Reggie Ebner, who lived in Woodside Plantation and that Ebner had “…utilized SC Representative (now Sen.) Tom Young to assist him in obtaining services from SCDOT on private property.”

Making matters worse, Townes wrote that he could not rule out the possibility that DOT had incurred a potential legal liability.

By issuing an inspection report, SCDOT may have incurred an exposure to a lawsuit as a defendant if something happens in the future even though the bridges are outside of its jurisdiction,” he wrote. “There is also the possibility that SCDOT could be called as an expert witness for the plaintiff without compensation if the property owners association decides to sue the developer of the private gated community.”

Walsh left the agency in 2013 and currently works for Michael Baker Junior Inc, an engineering company that currently has a three-year contract with SCDOT for $3 million for on-call engineering and inspection.

Watson left DOT in 2014 and currently works for HDR I ICA Engineering, a firm with DOT contracts in five offices across the state. According to his LinkedIn profile, Watson specifically serves as the construction engineer manager for the Richland County Transportation Penny Tax Program.

In October 2014 Ebner, still a member of Aiken City Council, tried to have the city reimburse the private Woodside Plantation Homeowner’s Association $105,000 for cleanup costs associated with the 2014 ice storm. That motion was defeated amid controversy and community outrage.

● In July 2012, Townes investigated a potential violation of the state ethics act concerning a DOT appraiser scheduled to appear as a co-presenter at a West Virginia conference with a vendor whose contracts he supervised.

The presentation indicated an existing business relationship between the two men, identified as DOT Chief Appraiser Rick Callaham and Charles Crider, a contract appraiser. Both men had their names listed as copyright owners of a publication entitled “SCDOT APPRAISAL OF EMINENT DOMAIN AQUISITIONS.”

After a call from Townes to the West Virginia certification board hosting the seminar with questions about the compensation agreement and materials, the organizer reported that Callaham had decided not to attend.

At a subsequent interview, Callaham informed Townes the reasons he didn’t attend were because the compensation was $900 and he couldn’t afford the travel cost.

Additionally, (Callaham) stated that he would have asked permission before attending,” Townes wrote. “It should be noted that we received notification that he would not present at the seminar just eleven days prior to the seminar… .”

Callaham told Townes the manual was not prepared during work hours and that he never received compensation for the materials.

(Callaham) also confirmed that he intends to leave SCDOT by the end of the year and intends to begin employment with Keith Batson.”

According to the report, Batson is a fee appraiser employed by DOT who was the fourth-highest paid contract appraiser in 2011. Townes later learned Callaham had provided appraisals for Batson the weekend prior to his interview without mentioning that fact or the relationship to Townes.

This is a conflict of interest because a business relationship has been established,” Townes wrote.

Callaham left DOT in September 2012 according to his LinkedIn profile, and for the past three years has been a certified general appraiser for Sage Valuation Inc., which is owned by Keith Batson.

● Finally, in February of 2013 Townes completed an investigation of significant allegations of fraud, waste and abuse centered around the Florence DOT office.

Specifically, Townes investigated allegations including the theft of signal poles and other equipment “…that were being ‘loaned’ but never returned” by vendors and an alleged fraud involving signal controllers at the Charleston Airport the Florence office could not produce records to support. The latter investigation of the vendor expanded to involve SLED but once that occurred, Townes wrote, “…the paperwork appeared in Florence to justify the borrowing” and the investigation ceased.

While conducting this investigation, Townes discovered a “mistake” that cost DOT $300,000 when a sole-source vendor inverted the prices for 500 controllers on his bid and no one from DOT recognized the error. That led Townes to delve deeper into the purchase that he discovered “involved an additional 250 controllers that were processed as an emergency need,” Townes wrote.

However, less than a year earlier we were shown controllers with expired warranties still on the shelf. Based on what we were told, we have purchased 750 controllers very near the end of the (vendor) contract or after the expected term of the contract before extensions.”

Townes noted that the sole-source contract was unusual to begin with and was due to language changed in a contract written in 2003 that expired in 2009 but had stood because of DOT’s failure to assemble a bid separating software from hardware.

We changed one specification that created a sole source from a competitive supplier on our pedestrian signals,” Townes wrote. “The reasons were a simple change of approximately 10 words that probably cannot be supported as needed to the point of eliminating competition.”

Based on additional comments made by SCDOT staffers, I have a strong suspicion that this activity is anticompetitive and in violation of state law.”

Townes’ recommendations about the Florence investigation – which also included futher allegations of an employee retiring, “clearing out” the shop and starting his own business; a former employee “over the (Florence) signal shop” whose wife had a business that contracts with DOT; and contracted signal software written by a company where a wife of a DOT employee works – were sharp.

While emphasizing the need for basic, standardized borrowing practices, security of stock and other cost-saving measures, Townes focused on problems in procurement procedures.

(The procurement process) has the appearance of being anticompetitive,” Townes wrote. “In regards to employees involved in any procurement, SCDOT must verify and document any conflict of interest issues as well as what has been done to eliminate or remediate any issues.

We need to maintain the highest ethical standing in the eyes of the citizens of South Carolina and avoid harm to SCDOT’s reputation.”

Auditor under fire

These issues with DOT surface as the agency is involved in a public dispute over the direction of the internal auditor’s office. At an August hearing of House Oversight Committee, DOT commission vice-chairman Mike Wooten expressed concerns that Townes was not performing his role of helping streamline efficiencies at an agency with a $1.84B budget and some 4,400 employees.

Speaking to The Nerve, Wooten reiterated his frustrations with both the direction of the internal auditor’s office and the auditor himself.

The true purpose or the internal audit mechanism is not to play cop,” Wooten said. “It is to review and improve on methods and procedures that will make the organization stronger.

Instead of saving somebody stealing gas or tires, they should save the organization millions and millions of dollars because of changes in procedures. The IG has a clear idea of what the function of the IG is supposed to be, and I’ve been relying on his countenance. His advice to us regarding this question has been clear, and he’s retired FBI so he’s coming from the law enforcement side.

Laying in the weeds trying to find somebody coming to work late is not a function you’d think that a certified public accountant would want to do. But our chief internal auditor has done that. It’s a philosophical difference, and it didn’t start with this commission. It’s been there for some time. He works for us and always has. I have trouble understanding why anyone would have a differing opinion of that.”

In 2013 DOT stripped the internal auditor’s authority to conduct independent investigations. As previously reported by The Nerve, then-commission chairman Eddie Adams wrote in an internal memo that the “role of fraud and waste investigations will no longer be an area of focus of the Office of the Chief Internal Auditor.” A fraud hotline number and P.O. Box were shut down.

Speaking at the August meeting of the House Oversight Committee, Townes maintained his belief in the need for an internal auditor’s office that can assure accountability to the taxpayer.

Management is in the role of policing themselves,” Townes said. “I don’t think the commission sees themselves as much as an oversight as they do as an advocate of the department, so if we come through and have critical audits, then it tends, I think, to make the commission uncomfortable, too.”

Read the internal audits in their entirety here.