State Law Allows Public Officials to Hide Private Income Sources

March 8, 2013

Investigative Reports

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Income DisclosureSouth Carolina stands alone when it comes to income disclosure by public officials.

“S.C. is the only state to require just one source of income to be disclosed: government income,” states the report from the South Carolina Commission on Ethics Reform, an  11-member panel appointed by Gov. Nikki Haley that made 23 recommendations in January to reform state ethics laws.

During a Senate Judiciary subcommittee hearing Thursday on several ethics bills, Henry McMaster and Travis Medlock, two former S.C. attorneys general who chaired the ethics-reform panel, emphasized the importance of public officials disclosing all sources of income – both government and private.

Medlock told the subcommittee he was a member of the S.C. House in 1969 when he tried to get disclosure of private sources of income into an ethics bill.

“What I learned from that experience is if you don’t make your colleagues mad, you probably haven’t done much for the people of the state of South Carolina,” he said. “So I would urge you to look around in the House chamber and the Senate chamber and apologize to your friends first, and then go forward and raise a little hell.”

The main ethics bill (S. 338) by Sen. Wes Hayes, R-York and a former Senate Ethics Committee chairman, would require the disclosure of private sources of income.

McMaster said other key policy areas for ethics reform include: abolishing political-action committees affiliated with constitutional officers of the executive branch or members of the General Assembly; having a serious enforcement mechanism for ethics violations; and eliminating the ability of state lawmakers to exempt themselves from the S.C. Freedom of Information Act.

Several of the Ethics Reform Commission’s proposals are included in an eight-point reform agenda announced last year by the South Carolina Policy Council, the parent organization of The Nerve. The Policy Council recommends that public officials in South Carolina disclose all public and private sources of income.

“As an attorney, I have to disclose. None of this is new to me,” said Sen. Luke Rankin, R-Horry and the subcommittee chairman, during Thursday’s hearing.

For public officials, however, that disclosure covers only government sources of income. Current law requires public officials and immediate family members, such as a spouse or children living in one’s home, to disclose their government income, Cathy Hazelwood, the State Ethics Commission’s chief lawyer, said in an email to The Nerve Thursday.

S. 338 would require the disclosure of “the source of any other income received by the filer or a member of the filer’s family residing in the filer’s household.”

Rankin questioned McMaster regarding income-disclosure rules for officials in the executive branch. Haley was the subject of a House Ethics Committee investigation last year involving her private sources of income when she was a House member, though she was cleared of any ethics violations.

McMaster said the State Ethics Commission already has the power to investigate officials in the executive branch. He said lawmakers should clarify the law where it is needed and put a strong investigation and enforcement mechanism in place.

Lynn Teague, advocacy director of the League of Women Voters of South Carolina, told the subcommittee that the public deserves to know all sources of officials’ income.

S. 338, known as the “2013 Ethics Reform Act,” has 11 co-sponsors from both sides of the aisle. Aside from authorizing public officials to disclose their private sources of income, the bill also would:

  • Require political committees to file expense reports. This would address the state’s definition of “committees”; two federal courts have ruled the old definition was too broad. As a result of those decisions, groups have been able to raise and spend unlimited amounts of money from undisclosed sources; and
  • Ban leadership political-action committees.

Because the Senate does not allow leaderships PACs, S. 338 would focus on House PACs including the Palmetto Leadership Council, which is tied to House Speaker Bobby Harrell, R-Charleston.

“We have not found anyone that thinks that (leadership PACs) is a good idea,” McMaster said. “You can’t put lipstick on that pig.”

“There’s no oink-oink in the Senate,” Rankin responded.

Meanwhile, Herb Hayden, director of the State Ethics Commission, has recommended an amendment to S. 338, which would give the commission power to assess penalties on a graded scale. Current law empowers the commission to assess one penalty for every violation.

In related matters Thursday, Sen. Larry Martin, R-Pickens and the Senate Judiciary Committee chairman, addressed the general idea of ethics reform.

“It’s just one of those issues we’ve got to address,” said Martin, who is a co-sponsor of Hayes’ three bills, including S. 346 and S. 347. “We’ve got an obligation today to address what has been brought to us.”

S. 346 is a proposed constitutional amendment to allow the State Ethics Commission to discipline members of the General Assembly; S. 347 is the enabling legislation. However, the House and Senate Ethics committees would not be eliminated under the proposals; rather, they would retain the power to recommend the expulsion of a member, as well as impose discipline for minor matters.

Hayes said the proposed formation of a multi-agency “Public Integrity Unit” (PIU) in the S.C. Attorney General’s Office should be in S. 338, as well as eliminating the legislative exemption for open-records requests to lawmakers. Both of these recommendations were key points that McMaster underscored with the subcommittee.

A bill (H. 3163) aimed at strengthening the Freedom of Information Act, which is sponsored by Rep. Bill Taylor, R-Aiken, has been amended to include elimination of the legislative exemption.

During Thursday’s hearing, John Crangle, director of Common Cause of South Carolina, said the most common ethics problem “relates to campaign finance.”

Rankin said subcommittee members will dig into the details of Hayes’ bills and the recommendations of the Ethics Reform Commission at the next meeting, which has not been scheduled.

Olson can be reached at (803) 254-4411 or curt@thenerve.org. Follow him on Twitter @thenerve_curt and @olson_curt. Follow The Nerve on Facebook and on Twitter @thenervesc.