A 2009 state economic-development grant to rural Marion County for $1 million, from which an alleged swindler is accused of skimming $61,500, was awarded as a gamble to help an impoverished county during the height of the Great Recession, SC Commerce Secretary Bobby Hitt told The State on Friday.
However, the system that Commerce uses to follow up on grants – depending on counties to oversee the work performed rather than state staff – still exists.
“I have to trust somebody,” Hitt said. “I can trust another government.”
The alleged theft came to light Wednesday in the trial of Jonathan Pinson, former chairman of the S.C. State University board of trustees and former business partner of Columbia Mayor Steve Benjamin. Pinson is accused of five major illegal schemes, including scamming the S.C. Department of Commerce.
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Pinson and others are accused of creating a phony invoice to skim $61,500 from a $1 million grant that Marion County used to subsidize a Georgia diaper plant’s move to the county in 2009.
Hitt on Friday denied testimony by the department’s own attorney that Commerce doesn’t have the means to do serious due diligence that the work the taxpayers are funding gets completed properly.
“We just don’t have the manpower to send somebody to Marion County to see if the work was done,” attorney Cynthia Turnipseed said under oath on Wednesday.
Gov. Nikki Haley’s office referred questions about the grant to Commerce. Hitt noted that the grant was made in 2009 under the administration of former Gov. Mark Sanford.
Since then, Hitt added, Commerce has tightened the reins on the grants by holding title to buildings being renovated by companies until all work is completed. That was not the case with the diaper firm. Counties are also directed to more closely scrutinize invoices to ensure that contractors and subcontractors are valid and work is completed.
“It’s not a (state) staffing issue,” he said.
Critics claim, however, that the Pinson case is the symptom of a bigger problem.
“This is what we have been worried about for years,” said Ashley Landess, executive director of the S.C. Policy Council, a libertarian think tank and watchdog group. “We know they have no follow-up process. There is no reporting process. Now we are seeing the problem.
“It has to be the state’s responsibility to follow up when it’s the state’s money,” she added. “If they are going to give away South Carolinians’ tax dollars to high-risk companies, then it’s up to them to put the proper procedures in place to ensure, at least, the process isn’t corrupt.”
In addition to the alleged skimming, the Softee Supreme Diaper Co. in Mullins has created only 20 to 30 of the 262 jobs it said it would create by this September, according to testimony.
Commerce spokeswoman Allison Skipper said the state would seek the return of some amount of the grant money, called a “claw-back,” for every promised job that did not materialize. However, she didn’t know how much that would be per job.
Also, Skipper added that the state or county can’t seize the building because the title was not retained until the provisions of the grant were met.
Also in 2009, Commerce’s Coordinating Council for Economic Development approved nine grants for projects in seven of the state’s most economically distressed counties at the time, Skipper said.
Landess said the problem stems from the closed-door negotiations, which lead to economic development grants. By law, all of those negotiations can be held in secret.
“The secrecy is the problem,” Landess said. “The process needs to be open to the public from start to finish.”