S.C. DOT’s Chief Watchdog Neutered

July 15, 2013

Investigative Reports

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DOT WorkerThe S.C. Department of Transportation’s internal watchdog has been stripped of his authority to conduct independent investigations of waste and fraud at the massive agency, The Nerve found in a review of internal documents obtained last week.

In a Jan. 7 memo to Department of Transportation employees, Eddie Adams, then-chairman of the DOT Commission, announced that the “role of fraud and waste investigations will no longer be an area of focus of the Office of the Chief Internal Auditor.” Adams said the agency’s fraud hotline phone number and post office box would be discontinued, and instructed employees to report waste or fraud to the recently created state Office of Inspector General.

No reason was given for the change in policy. In the same memo, Adams announced that Paul Townes, a certified public accountant who had been DOT’s deputy chief internal auditor, had been promoted to the chief auditor’s position.

The policy change came before the Legislature this year passed a bill, signed last month by Gov. Nikki Haley, that will direct a projected total of more than $141 million in state funding – $50 million of which reportedly will be leveraged by the S.C. Transportation Infrastructure Bank to borrow up to $500 million – this fiscal year for road and bridge improvements throughout South Carolina.

The Nerve last week also obtained internal reports in which Townes was critical of DOT management’s handling of private-bridge inspections in 2011 at an upscale Aiken residential community, and a proposal last year to replace a highway bridge in Berkeley County.

Under state law, DOT’s chief internal auditor reports to the eight-member DOT Commission, which determines policy for the agency and is appointed mainly by lawmakers. The transportation secretary, who is appointed by the governor and oversees the day-to-day operations of the agency, has no authority over the Office of the Chief Internal Auditor, according to the law.

The state Office of Inspector General (OIG), created by Haley in 2011 through an executive order and made a permanent state agency last year by the Legislature, is “an independent state agency” charged with “investigating and detecting fraud, waste, abuse, mismanagement, misconduct, violations of state or federal law, and wrongdoing in the Executive Branch,” according to its website.

But the OIG has limited firepower with only two investigators to cover more than 100 state agencies, boards and commissions, which collectively employ approximately 58,000 workers, Inspector General Patrick Maley said in an interview Friday with The Nerve.

The Department of Transportation, which has a total $1.58 billion budget for the fiscal year that started July 1, is the state’s fourth-largest agency with more than 4,400 employees, according to state Budget and Control Board records.

“I am very judicious in the cases I will originate and am responsible for,” Maley said, noting that his agency’s budget ($1.36 million, according to Office of State Budge records) for this fiscal year will allow him to hire three more investigators.

Asked how many complaints about the Transportation Department that his agency has received through its hotline, Maley estimated it was only about one a month over the past six months. He declined to say if his office has conducted any investigations of DOT; there have been no public statements of any such investigations by his office.

“I’m a hotline available to anybody who wants to call in about an executive agency on waste, fraud or abuse,” Maley said.

Internal documents obtained by The Nerve last week show that Maley declined a request by Townes in January to investigate allegations that Transportation Department staff and equipment were used last year to refurbish the private driveway of a DOT employee.

“Many calls, emails, and letters to the OIG through the hotline mechanisms are unrelated to matters of investigative interest to the OIG, but are provided to the logical state agency,” Maley wrote in a Jan. 8 letter to Wendy Nicholas, DOT’s chief of staff. “This matter (refurbishing private driveway) is being forwarded to the SC Department of Transportation for whatever action it deems appropriate.”

Under a Jan. 7 revised-policy directive from Transportation Secretary Robert St. Onge – a copy of which was obtained by The Nerve last week – any DOT employee who “suspects fraudulent or unethical activity is expected to notify the Office of the State Inspector General immediately and should not attempt to personally conduct investigations or interview/interrogations related to any suspected fraudulent or unethical conduct.”

The directive also says that the state inspector general will “coordinate all investigations of fraudulent or unethical conduct with SCDOT’s Legal Office,” which is under the control of St. Onge.

DOT Management Criticized

Two internal reports prepared by Townes – then the deputy chief internal auditor – and obtained by The Nerve reveal the former independence of his office to criticize decisions by the Transportation Department’s management.

In an Oct. 12, 2011, report to St. Onge, Townes took issue with a decision that year by John Walsh, the then-deputy secretary of transportation for engineering, to order the inspections of three private bridges in Woodside Plantation, an upscale, gated residential community in Aiken. Townes said when he interviewed staff in the office of DOT’s chief engineer, those employees were “certain the activity was wrong, stated that they expressed reluctance to their supervisor, and knew it would later resurface because it was against established policy.”

According to the report, DOT inspection staff had to “create fake bridge ID numbers because the bridges were off system.”

The report pointed out that the initial request for the inspections came from an Aiken city councilman and a Woodside Plantation resident, who wasn’t named in the report but who was identified in court papers and by other media as Reggie Ebner. The local politician enlisted the assistance of then-state Rep. Tom Young, R-Aiken, “in obtaining services from SCDOT on private property,” the report said, noting that Young, now a state senator, had informed Clem Watson, DOT’s chief engineer for operations, that although the bridges were on private property, the roads were used by public school buses.

Townes in his report said Watson and Walsh believed that the inspections were proper because the bridges were used by school buses. But their actions exposed the agency to future potential legal liability, Townes contended.

“Deviations from federal and state regulations must be avoided,” Townes concluded. “Any deviations from standard department operations should be clearly justified to the employees performing the function to avoid SCDOT creating an ethical conflict for these employees.”

DOT’s management apparently wasn’t pleased with Townes’ report.

“He’s not a lawyer; nor does he appear to be particularly well versed in the arts of reason and logic,” Beacham Brooker, an assistant chief counsel at the Transportation Department, wrote in a May 20 response brief to an appeal of a related lawsuit filed by the South Carolina Public Interest Foundation, a Greenville-based, not-for-profit government watchdog organization.

In his other internal report, dated April 12, 2012, and sent to the DOT Commission, Townes criticized a decision by DOT’s management to recommend that the S.C. Highway 41 bridge over the Wando River in Berkeley County be replaced with another moveable bridge. He noted that the agency’s deputy secretary of engineering – Walsh – pushed the moveable-bridge proposal to gain approval of the town of Mount Pleasant, despite a study by an outside engineering firm showing that the proposed bridge would cost an estimated additional $22 million over the operating life of the bridge, and that the deputy secretary was “cautioned by his staff that the additional costs would be significant.”

Townes in his report recommended, among other things, that DOT:

  • Should have “an open door policy that works,” noting that the bridge issue is “one of several on which staff has ‘closed ranks’ even when a major issue arises. … It is hard to ignore the fear of retaliation that surfaces during these investigations”; and
  • Needs “more transparency in its dealings,” pointing out that state tax dollars are “being spent resolving issues without the general public being aware of the costs of complying with various concessions.”

‘Judgment Call’

The Nerve on Friday sent a list of written questions to St. Onge about Townes’ reports and the policy change to transfer waste and fraud investigations out of Townes’ office. In a written response, Linda McDonald, the Transportation Department’s chief lawyer, said the DOT Commission “decided to transfer the investigation of fraud, waste and abuse to the State Office of Inspector General.”

“The Commission was interested in focusing the OICA (Office of the Chief Internal Auditor) on audits of SCDOT processes, rather than investigations of allegations of fraud, waste and abuse, and the State Office of Inspector General had been recently assigned that responsibility by the Governor and State Legislature,” McDonald wrote.

Regarding Townes’ earlier internal reports, McDonald offered the following responses:

  • As for the 2011 private-bridge inspections in Aiken, although the “particular bridge was not state or locally maintained, SCDOT officials made a judgment call that the public benefit served by a limited SCDOT inspection outweighed the private benefit to be gained by the owners of the subdivision who were responsible for the bridge.” McDonald also said a “local government official requested that SCDOT inspect the bridge,” and that the official, whom McDonald did not identify, was “concerned that school buses were using the bridge and it might not be structurally sufficient for that purpose.”
  • The Wando River bridge-replacement project is a “normal project with difficult project development issues.” The DOT Commission halted the project after receiving “an anonymous complaint about the processes involved in developing the project,” McDonald said, adding that a “full reconsideration of the matter has been conducted.”

In both matters, “no fraud, waste or abuse was found,” McDonald wrote.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org. Follow him on Twitter @thenerve_rick. Follow The Nerve on Facebook and Twitter @thenervesc.