Penny Tax Program Began Illegally

January 4, 2016

Investigative Reports

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Penny Tax Program

Program fees criticized; interns paid $54 per hour

The initial process to hire ICA Engineering – one of the firms now embroiled in scandal and criminal investigations into fraud and corruption relating to the management of the Richland County Penny Tax program – as the county’s official Program Management Team wasn’t just deeply flawed, although it was.

It was illegal.

Upset that it lost the bid to ICA despite an independent scoring system that ranked it first above its four other competitors bidding for the $50 million contract, Columbia-based Civil Engineering Consulting Services immediately filed a legal protest in a letter addressed to then-Richland County procurement director Rodolfo Callwood on Jan, 15, 2014.

The 10-page protest alleged that County Council chose Tennessee-based ICA “in its closed door session (that) did not even claim in its proposal that it was a local business as defined by the Ordinance.”

It further alleged that the rules of competition as set forth in the Request for Proposals (RFP) were “changed or erroneously applied by Council members … in violation of law and County ordinance” and that at a Jan. 13 public meeting of the Transportation Penny Advisory Committee, “numerous serious concerns were raised about ICA” reflecting “vital considerations of voters, taxpayers, local workforce, and indeed the multi-disciplinary group of experts who were selected by the County under Ordinance 2-600(3) as the Selection Committee.”

Such an action, the letter alleged, “violates the law and jeopardizes millions of dollars of federal funding. It also violates the public trust.”

“Up to the point that County Council was involved, the selection process was proper and lawful and, on information and belief, it resulted in the ranking of a local, Richland County headquartered company, CECS, as the most qualified vendor for the work.”

“The selection process … was performed properly and lawfully until late in the game, when it went entirely off the tracks.”

The letter expressed concerns that besides circumventing the RFP format and ignoring the scoring process vetted by multi-disciplinary experts, the selection of ICA “may have been done in closed, private executive session, in violation of the FOIA law.”

When County Council subsequently reviewed the protest with attorneys from the McNair Law Firm, it discovered CECS was right – it had broken the law when it voted 6-5 to award the PDT contract to ICA Engineering.

Whoops.

Upon learning this, the county rescinded its offer to ICA on Feb. 4, 2014, and had new language written into code allowing it to vote in a presumably lawful manner, which it did on July 1, 2014, when it chose – pause for effect – ICA Engineering, which in the period between votes had combined its bid with another competitor, MB Kahn, and Brownstone Construction Group LLC.

“The first time around I voted for the top scorer (CECS) from staff and can’t say why or how other members chose not to,” County Council member Seth Rose told The Nerve.

“The second time around there wasn’t a top scorer given to us but a top three given and the teams had changed, in some instances drastically, from the first round.”

Rose said the second time he voted for the joint venture of ICA Kahn and Brownstone because he believed their bid had improved from the first time, while CESC’s had gotten more elaborate.

What caused members of council to vote against the top-rated team, CECS, the first time when it was presented as the clear overall choice is unclear. Rose said members of council were told that they did not have to follow the recommendations presented to them by staff for that vote, which obviously a majority chose not to.

The letter closed with an admonition to County Council that presaged the concerns that were to come almost exactly two years later.

“The processes and commitments made by the County to vendors in the published RFP were not followed, and were specifically violated, in a manner that awards a contract to one of the lowest ranked competitors – an out of state competitor – when the highest ranked competitor is a local Richland County Competitor, and is further, a minority vendor.

“All the above described deviations by the County in its selection process are serious, material and jeopardize federal funding, and are improper and unlawful. Further, the manner in which the solicitation has been evidently managed is in direct violation of law of Richland County and state laws regarding public contracting.”

In his letter to Richland County on Dec. 9, 2015, Department of Revenue director Rick Reames concurred with those previous concerns.

“The manner in which the Project Development Team (the “PDT”) was procured, including, but not limited to, Council’s adoption of exemptions from established procurement procedures, and certain payments by or to the PDT raises questions of potential public corruption and fraud.”

Those matters, the letter states, have been turned over to law enforcement.

A review of the 166-page program management agreement between the county and the PDT reveals payment schedules that do not conform with industry standards, including $3 million for two public relations firms – Campbell Consulting Group and BANCO Bannister Company ($1.5M each) – that has drawn criticism since the county already has a fully staffed public relations team and other questionable expenditures such as fee schedules for PDT personnel that include $54/hr for an intern, $43/hr for a student intern and $72/hr for a clerical position. In fact, among the 75 positions listed in Exhibit E, 52 pay $100 or more per hour, with 27 of those paying $150 or more and eight paying $200 or more per hour.

Messages and calls left with County Council chairman Torrey Rush, former Richland County procurement director Rodolfo Callwood and ICA director of program management David Beaty were not returned Sunday.

The South Carolina Department of Revenue has thus far refused to comply with a Freedom of Information Act Request for its audit of the Richland County Penny Tax Program, citing the ongoing criminal investigation. Spokeswoman Bonnie Swingle wrote in an email to The Nerve that “we are unable to provide additional information pursuant to S.C. Code Ann. 30-4-30(a)(3) as well as S.C. Code Ann. 12-54-240.”

Section 30-4-30(a)(3) says exempt information includes “Records of law enforcement and public safety agencies not otherwise available by state and federal law that were compiled in the process of detecting and investigating crime if the disclosure of the information would harm the agency by:

(A) disclosing identity of informants not otherwise known;

(B) the premature release of information to be used in a prospective law enforcement action;

(C) disclosing investigatory techniques not otherwise known outside the government;

(D) by endangering the life, health, or property of any person; or

(E) disclosing any contents of intercepted wire, oral, or electronic communications not otherwise disclosed during a trial.”
Section 12-54-240 prohibits the divulging of information related to individual tax returns.

As Rush told The Nerve two weeks ago, “What’s been so frustrating about this is that so little specific information has been shared with us by the Department of Revenue,” Rush said. “It’s hard to know what to correct when you don’t know precisely what is wrong.

“We’re waiting to hear back.”

Until DOR releases the audit or a public response, so is everyone else.

Reach Aiken at 803-254-4411 or email him at ron@thenerve.org. Follow him on Twitter @RonAiken and @TheNerveSC.