A state-supported program to subsidize businesses that are expanding or moving into South Carolina has so little oversight in funneling large grants to businesses that it’s easy for cheaters to skim money, a S.C. Department of Commerce staff attorney testified Thursday.
Cynthia Turnipseed, who helps oversee grant distribution at the Commerce Department, testified her department has a lack of staff to scrutinize grant disbursements, making it easy for cheaters to do things such as make up phoney invoices for work that was never done.
Turnipseed testified on the fourth day of an ongoing federal public corruption trial at the U.S. District Courthouse in Columbia.
One of the charges against lead defendant Jonathan Pinson, former chairman of the S.C. State University board of trustees, is that he and others created a phoney invoice to skim $61,500 from a $1 million grant that Marion County used to subsidize a Georgia diaper plant’s move to Marion County in 2009. Scamming the S.C Commerce Department is just one of five major illegal schemes prosecutors charge Pinson was involved in.
“We just don’t have the manpower to send somebody to Marion County to see if the work was done,” Turnipseed told the federal jury under the questioning of assistant U.S. Attorney DeWayne Pearson. “We mostly review paperwork.”
Pearson then asked, “Does the county have a responsibility to review the invoice too?”
“We hope they do,” Turnipseed said, explaining the $1 million came from the federal Rural Infrastructure Fund.
Later Thursday, Marion County administrator Tim Harper testified the county, too, does not check to see if invoices involve genuine work.
Another witness, Tony Williams, a Pinson associate who has pleaded guilty to being part of the scheme to skim money from the $1 million grant, testified late Thursday.
Williams, who has yet to be sentenced, testified that he, Pinson and Lexington County businessman Lance Wright hung out with each other, talking about how to make money from moving the diaper plant to Marion County.
“It was a very insane time, to be honest with you, there was a lot of alcohol,” Williams testified, adding that none of them had any experience with getting government relocation grants.
The idea originated with Eric Robinson, another Pinson business associate, who was living in Georgia and had met Collin Brown, the diaper plant’s owner, who was in financial straits, according to testimony. Robinson, who is a co-defendant in the current trial with Pinson, put Brown in touch with Pinson.
After visiting several locations in South Carolina before choosing Marion County to relocate the plant, the men approached Marion County officials with their plan. In Marion County, suffering in 2009 from high unemployment, officials welcomed the proposal.
County officials filed an application with the Department of Commerce. The application pledged that the relocating company would provide 262 jobs by September 2014.
As work was done in upfitting an existing industrial site, the diaper plant submitted invoices to Marion County officials, who forwarded the requests for payment to the S.C. Department of Commerce. With little review, witnesses said, that department requested state checks be cut to Marion County. Then, Marion County paid the invoices.
One invoice, paid to the Noel Group, was for $62,100, according to Thursday’s witnesses. Other evidence showed that the only person with check-writing authority at the Noel Group, headquartered in Greenville, was Pinson.
Williams, who now lives in Florida, testified that he got $10,000 from that money, even though he had done no work. Two Pinson associates also got money from that invoice – Wright received $10,000, and Phil Mims got $5,000; each has pleaded guilty. Diaper plant owner Brown got $10,000; Brown has an agreement with prosecutors that they won’t use his admissions in court to prosecute him.
“It was discussed between me and Phil and Jonathan to do it so it didn’t look suspicious,” Williams testified about how they drew up the invoice for $62,100.
“Why were you concerned about it being suspicious?” asked prosecutor Pearson.
“Because it was fraudulent,” Williams answered as the jury looked on.
Pearson: “You knew the invoice was fraudulent?”
Williams: “Yes, sir.”
Pearson: “And you took the money anyway?”
Williams: “I did.”
Turnipseed testified that under Rural Infrastructure grant rules, public officials aren’t supposed to receive any money from grants. At the time prosecutors say Pinson got the proceeds from the invoice channeled to his Noel Group, Pinson was on the S.C. State University Board of Trustees.
Although the Pinson-backed application for $1 million pledged 262 jobs by this year, the plant currently employs 20 to 30 people, Brown testified.
In other testimony, a top official at the Columbia Housing Authority in charge of making payments to Pinson’s Village at River’s Edge housing development in Columbia testified Thursday in federal court he thought Pinson was “inept.”
Pinson had never built a housing development, Jethro Currie Jr. told the jury under questioning by assistant U.S. Attorney Jane Taylor.
In 2011, the Housing Authority gave Pinson’s Village at River’s Edge more than $1 million to pay its contractor, SK Construction, for ongoing work to build 60 housing units at the development, in north Columbia near the Broad River, Currie testified.
Village at River’s Edge was the developer, and SK was its general contractor, Currie testified.
But early in 2011, after getting a few six-figure payments from the Housing Authority, Pinson soon had difficulty passing on the HUD money to SK Construction for ongoing work it had done, Currie said.
Pinson’s inability to make payments to SK, despite large cash transfers to Village at River’s Edge that should have gone to SK, caused SK to tell the Housing Authority it was going to halt construction at the development, Currie testified.
Pinson’s inability to transfer money he got from the Housing Authority eventually became so pronounced that the Housing Authority began making payments directly to SK, Currie testified.
Pinson faces numerous charges of public corruption, including bribery, conspiracy and using his position for federal gain. Six others have pleaded guilty in connection with various schemes federal prosecutors are trying Pinson for. All are expected to testify against Pinson, who is fighting the charges.
The Columbia Housing Authority poured $10 million of federal taxpayer money into Pinson’s Village at River’s Edge project from 2011 to 2012 before the project went bankrupt. SK did complete all 60 units it was supposed to, and they are now being lived in, Currie testified. Those units are subsidized housing for lower-income people, he testified.
Under Pinson’s agreement with the Housing Authority, he was supposed to build 38 private housing units on the Village at River’s Edge site. He did not build them.
The project was started around 2006 by Pinson and Columbia Mayor Steve Benjamin. But Pinson bought out Benjamin’s share of the project in 2009, when Benjamin announced he was running for Columbia mayor.
Benjamin’s name has been mentioned repeatedly since the trial began Monday. The mayor has not been charged with any crime.
Prosecutors apparently are using Turnipseed and Currie to set up more prosecution witnesses who will give further details about the Marion County project and the Village at River’s Edge development.
Williams is expected to continue testifying when court resumes Friday. Williams admitted in his testimony that FBI agents had caught him in lies. He is hoping by his testimony to get off with a light sentence. Other witnesses are expected to talk about the Village at River’s Edge and the diaper plant.