Warren Bolton

July 20, 2014

Bolton: Did SC State University use rebates from vendor contracts as a slush fund?

While S.C. State deserves criticism over how it has handled money from rebates from vendor contracts, I wonder what we’d learn if the inspector general stuck his head under the hoods of other state colleges.

WHEN FORMER S.C. State University general counsel Ed Givens testified in court that he attempted to get the school’s main foundation to pay half of his attorney’s fee, I thought it was laughable.

Surely he didn’t think that was a justifiable expense.

He did. Mr. Givens testified during Jonathan Pinson’s recent public corruption trial that after learning he was a target of an FBI investigation for bribery and extortion, he hired a top-notch defense lawyer for $75,000 and then wrote an invoice for “outside legal work” to get the S.C. State University Foundation to pay $37,500 of that. Mr. Givens testified he thought it was “appropriate” because the matter involved himself and Mr. Pinson, the former chairman of the S.C. State board.

I remember thinking at the time that it was odd that if Mr. Givens really thought that was a legitimate expense, he didn’t ask the university’s board for funding through the regular budget rather than going to a school foundation. Not that I thought the board would have granted such an absurd request.

Beyond pondering that for a day or two following Mr. Givens’ testimony, I didn’t think any more of it — until week before last. That’s when the state inspector general revealed that S.C. State had been diverting money from rebates attached to vendor contracts into its two foundations — $2.3 million over the past three years. The inspector general’s report noted that there was no legislative or public oversight of funds held by the foundations.

While the S.C. State University Foundation — the school’s main foundation and the one Mr. Givens sought to tap — generates money through fundraising, it also received money from rebates from vendor contracts.

For all the good the foundation might do, such as funding student scholarships, the inspector general’s report said it also has paid for travel, consultants, flowers, entertainment, meetings and country club memberships. Interestingly, the report said the foundation didn’t have authority over the accounts containing the rebate money. Instead, those accounts were assigned to the president and other administrators; the foundation was simply a conduit that allowed those school officials who had control of the rebate money to determine its use.

For some reason, Mr. Givens thought he could use some of that money to help pay his legal fee. I guess it’s possible that he was just desperate and looking for money from anywhere he could get it. But, let’s be real: Mr. Givens has served in various capacities at S.C. State, including chief of staff. He knows his way around, and he believed that this was a place he could get cash.

Fortunately, someone at the university wisely objected, and Mr. Givens, who pleaded guilty in May to having knowledge of crimes at S.C. State, had to pay all of his own legal costs.

But did Mr. Givens’ testimony reveal something about how money held by the school’s foundations is viewed? Is it a place people can go for discretionary purposes?

Is it a slush fund? Think about it: flowers, trips, country club memberships.

And what about the school’s other foundation — the S.C. State University Advancement Foundation — which the inspector general’s report said was created in 2005 to handle money generated by contracts? That entity provides salary supplements to administrators, including a $50,000 bonus that S.C. State President Thomas Elzey was given recently after receiving a positive evaluation from the school’s board.

The bonus is mind-boggling: First of all, considering S.C. State’s struggles, no one can be judged as performing well enough to deserve a bonus. Even if someone did rate a bump, the college can’t afford it: It’s experiencing a $13.6 million deficit, has received and spent a $6 million state loan and has made significant cuts with more on the way. But I guess if you’re socking rebate money away into foundations, you can afford it, despite the fact you’re short on money to pay the light bill.

Trustee Tony Grant had the wisdom to oppose the bonus. The lone board member to cast a vote against the evaluation, he said there is no money in the school's budget for a $50,000 bonus.

The inspector general told S.C. State that that money diverted to the foundations should be returned to the university’s coffers. Days after the inspector general’s report was released, the university said that the S.C. State University Foundation was providing an additional $1 million to fund some scholarships. That’s a much-needed injection of funds; the school’s enrollment has been on a downward spiral, and officials are trying to boost it.

While S.C. State deserves criticism over how it has handled money from rebates, it’s not alone. The inspector general says it’s a “common practice.” We just don’t know how other schools are using the money and whether they’re steering any to foundations, although USC says none of its money from contracts goes to foundations.

I wonder what we’d learn if the inspector general stuck his head under the hoods of other state colleges.

Reach Mr. Bolton at (803) 771-8631 or wbolton@thestate.com.

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