Scrap Ethics Bill, Government Watchdog Says

June 13, 2014

Investigative Reports

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SC StatehouseA touted “ethics-reform” bill awaiting action next week by the S.C. Senate likely would do little to curb House Speaker Bobby Harrell’s influence over fellow lawmakers, or stop certain campaign-spending abuses by public officials, a review by The Nerve found.

It also would allow some political groups directly supporting candidates to hide their campaign contributions and expenses from the public, says the leader of a state government watchdog organization.

“It’s got too many defects,” John Crangle, the attorney-director of Common Cause of South Carolina, told The Nerve when contacted Thursday.

Crangle, who was a main player in developing the current ethics law that took effect in the early 1990s following a major bribery scandal involving state legislators and others, said lawmakers should scrap the current version of H. 3945 and start over next year.

Supporters of the legislation say it would require lawmakers and other public officials for the first time to publicly reveal their private sources of income so that the public can better monitor them for potential conflicts of interest. The South Carolina Policy Council – The Nerve’s parent organization – has been pushing since April of last year for lawmakers and other officials to voluntarily disclose their private income sources.

But Crangle said there are “holes” in the income-disclosure section of the bill, pointing out, for example, that it would allow public officials to hide income from private sources in bank brokerage accounts, which would be exempt from disclosure.

The House on the last day of regular session last week approved a compromise version of the bill – crafted by a six-member conference committee made up entirely of lawyer-legislators. But after Sen. Lee Bright, R-Spartanburg, raised concerns, the Senate decided to carry over the bill until Tuesday of next week when lawmakers will return to take up any conference committee reports and vetoes by Gov. Nikki Haley.

Crangle said the problem is that the bill was completed in the final days of regular session without giving the public any time to digest it. The conference committee version still was not available as of Thursday under the bill’s heading on the General Assembly’s website.

“When you try to write bills that way at the end of session,” Crangle said, “you get a mess.”

Ashley Landess, the South Carolina Policy Council president, also is critical of the bill, issuing the following prepared statement this morning:

“Our initial review of the bill revealed some very serious problems, which is almost always true with big omnibus bills and why we wanted more time to analyze it.

“The language defining PACs appears to allow some entities to avoid all reporting if they tweak their incorporation papers and keep direct election expenses just under fifty percent. That’s the opposite of what lawmakers claimed they wanted to accomplish. If this were to pass, it looks like legislators could lobby government entities and still maintain a leadership PAC through an agent.

“One of the worst changes is the one that allows politicians to spend their campaign funds on anything from trips to party conventions to speaking engagements – and even to take their families along. Instead of tightening the definition so campaign funds had to be spent on campaigns, legislators chose to “fix” the rampant abuse of campaign spending by making it most of it legal.

“Also, the income-source disclosure language – one of our top reform priorities – seems to have some potential loopholes. We had hoped at least that portion of the bill would be airtight, but after a careful read, we aren’t sure it is.”

Harrell-Affiliated PAC

The Nerve’s review of the legislation found that a political action committee affiliated with Harrell, which has doled out more than $500,000 in recent years mainly to GOP House members and the House Republican Caucus, likely would continue to be off-limits to the state’s ethics-watchdog agency.

Critics have contended that Harrell, the House speaker since 2005, has used the Palmetto Leadership Council (PLC) to exert influence over House members, though the Charleston Republican has said he has no control over the organization.

The Nerve last month reported that the PLC did not file its campaign disclosure report, which lists contributions and expenditures, for the first quarter of this year, due by April 10. Cathy Hazelwood, the State Ethics Commission’s deputy director and chief lawyer, told The Nerve then her agency didn’t plan to take any action against the PLC, which routinely had been filing quarterly reports, because of two federal court rulings that found the state’s definition of “committee” unconstitutional.

Hazelwood also said then that until state legislators redefine “committee” to comply with the federal court rulings, political caucuses, including the House Republican Caucus Committee, would be considered “non-candidate” committees and would not have to report their contributions or expenses. Individual candidates who receive contributions from those groups, however, must still report those donations, she said.

Asked this week by The Nerve if the conference committee version of H. 3945 would require the PLC to resume filing quarterly reports, Hazelwood replied: “At the outset, the PLC would have had to file because their stated purpose was to elect Republicans, and most of its money was used for that. It morphed into something else.”

As for legislative caucuses, their “only purpose is to elect more members, so they’ll have to file,” if the bill as written becomes law, Hazelwood said.

Before the PLC website was discontinued in January 2013, Harrell was featured on the site’s home page with his picture and a written message that read in part, “The Palmetto Leadership Council is dedicated to a positive, bipartisan effort to find workable solutions to the major problems we face.”

Under the conference committee version of H.3945, party, legislative caucus and “non-candidate” committees would have to file campaign disclosure reports with the State Ethics Commission if their “major purpose” is the “support of or opposition to the nomination or election of a candidate to an elective office.”

But the “major purpose” test would be met only if that purpose is specifically stated in a committee’s organizational documents or public statements made by the committee, or if more than 50 percent of the committee’s “disbursements” in a calendar year in or out of the state are “made to support or to oppose the nomination or election of one or more candidates to an elective office.”

So if, for example, 49.9 percent of an organization’s expenditures in a calendar year were donations to candidates and the group didn’t specifically use the “major purpose” language in its literature, it wouldn’t be considered a “committee” under H. 3945 and wouldn’t have to file quarterly disclosure reports with the State Ethics Commission.

Case in point: From 2009 through 2013, the PLC made at least 202 contributions totaling $214,500 – mostly individual $1,000 donations to incumbent Republican House members – plus donated another collective $332,750 to GOP organizations, typically the state House Republican Caucus Committee, which made at least 82 donations in mainly $5,000 amounts to GOP House candidates,  The Nervereported last month. The total donations during the period represented about 42 percent of the approximately $1.3 million in revenues received by the PLC.

Crangle said the wording of H. 3945 would legally exempt the PLC and other political groups that spent under the 50-percent cap on candidates from filing campaign disclosure reports with the State Ethics Commission.

“They need to get a tighter definition than the one they’ve got right now,” he said. “It’s too easy right now to get around disclosure.”

Hazelwood said the “50% language is from N.C. and several court decisions.”

In addition to that provision, although supporters of the bill say it would do away with legislative PACs, such committees could be allowed if “any other agent” of the lawmaker has the “authority to approve, alter, or veto the committee’s solicitations, contributions, donations, disbursements, or contracts to make disbursements.”

Campaign Spending Loopholes

As for campaign-spending restrictions on individual lawmakers, H. 3945 would allow the “payment or reimbursement of reasonable and necessary expenses associated with the campaign or the office.”

The bill defines “official responsibilities of the officeholder” to include such things as “political party events, official appearances or meetings for which reimbursement is not offered by the governmental entity, and educational forums or conventions to which an officeholder is invited in their official capacity.”

But the definition of “official responsibilities” is “not limited to” those activities under the bill, which would allow lawmakers to define that as they see fit, critics contend.

In its February 2013 complaint filed against Harrell, the South Carolina Policy Council asked S.C. Attorney General Alan Wilson to investigate, among other things, whether Harrell misspent campaign funds in reimbursing himself for the use of his private plane for legislative and political events.

Wilson referred the complaint to the State Law Enforcement Division, which, after a 10-month investigation, turned its report over to Wilson, who referred it to the state grand jury in January for further investigation.

Although Richland County Circuit Judge Casey Manning impaneled the grand jury, according to court documents filed by Wilson’s office, the longtime judge on May 12 ordered that the investigation be canceled, contending that the House Ethics Committee should get first crack at it. The S.C. Supreme Court later ruled that the grand jury investigation could continue pending Wilson’s appeal of Manning’s ruling.

A hearing before the top court is set for June 24.

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