SC agency questions Richland County’s handling of penny sales tax

The S.C. Department of Revenue says it has turned up evidence of public corruption, fraud and millions in wasteful or potentially illegal spending in Richland County’s handling of revenue raised by the county’s added penny sales tax, according to a letter made public Monday.

The Revenue Department letter is the first step in criminal and civil investigations into how Richland County has spent millions in public money from May 2013 through October of this year.

No criminal charges have been brought. But a letter from a top Revenue Department official makes it clear that is a possibility.

“Public corruption and fraud are beyond the scope of the (Revenue) department’s mission and, therefore, the department has referred these matters to law enforcement,” Revenue director Rick Reames III wrote in a Dec. 3 letter to Richland County administrator Tony McDonald.

SLED Chief Mark Keel said Monday his agency has received information from the Revenue Department about its findings. “We are going to do a preliminary inquiry,” he said.

Reames also wrote McDonald that the Revenue Department “has discovered multiple instances of illegal activity by individuals and/or companies associated with the Penny Program.”

Reames declined late Monday to elaborate on his letter, saying in an email the investigation is “ongoing.”

In a Dec. 9 letter responding to Reames’ letter, county administrator McDonald said, “We are both shocked and alarmed that DOR has found potential evidence of public corruption and fraud along with other illegal activities.”

County officials will cooperate fully with the investigations, McDonald said in his letter, which he released late Monday. McDonald also indicated the Revenue Department may have concluded mistakenly that some spending was improper.

County Council chairman Torrey Rush said late Monday he will hold a press conference Tuesday to discuss the Revenue Department’s assertions.

The State newspaper obtained Reames’ letter Monday through a Freedom of Information request to the Revenue Department. County officials previously had discussed the letter in a secret meeting, after which McDonald wrote Reames.

The Revenue Department said a seven-month audit and review of the county’s handling of penny sales tax revenues raised questions of “potential public corruption and fraud” related to a “project development team” — a group of businesses chosen by county officials to plan and implement the projects paid for by the penny sales tax.

As an example of possible waste, Reames told McDonald that the audit had discovered that two firms are getting $600,000 a year for five years – or $3 million in all – for public information services about the penny sales tax. “An entire public information office already exists within Richland County government ...(to) provide public relations services,” Reames’ letter says.

In May, Revenue Department officials said they were looking for possible conflicts of interest in how Richland County has been spending money raised by its penny-on-the-dollar sales tax for transportation projects.

The new tax was first collected in 2013. Over 22 years, it is expected to produce $1 billion for transportation projects.

The tax passed — 52-48 — in November 2012 after a bitterly fought referendum that climaxed in an election marred by broken election machines, hours-long lines to vote, ballots that went missing and other irregularities.

In May, County Council chairman Rush said he welcomed the Revenue Department audit. "We don’t have anything to keep from the public," Rush said through a spokeswoman. "We want to be as transparent as we can.”

The penny increase raised Richland County’s sales tax to 8 cents from 7 cents on the dollar. Revenues from the additional penny were to be spent: 63 percent to build, pave and resurface roads, 29 percent for public transit, and 8 percent for sidewalks, bike lanes, green ways and intersection safety.

However, the Revenue Department said some of the money — more than $600,000 — appears to have been spent improperly on a county small business program.

In their response, county officials said Revenue officials were mistaken in that finding. “To date, the (small business) program has been used for penny tax projects” only, the county said.

This story was originally published December 14, 2015 at 4:01 PM with the headline "SC agency questions Richland County’s handling of penny sales tax."