South Carolina’s most potent investigative tool, the state grand jury, is examining Richland County’s penny sales tax program, a State Law Enforcement Division spokeswoman has said.
SLED spokeswoman Kathryn Richardson declined to elaborate when asked by The State newspaper about the extent of the previously secret case.
But four sources familiar with the investigation have told the newspaper the probe of the controversial program has been under way. Some sources said the active probe dates back at least five or six months.
More than one current or former public official and at least one private businessperson has been called to testify, some sources said.
The penny transportation program eventually is expected to generate $1 billion within two decades, with the money paying for road construction, improved bus service and other items. So far, raising the tax by 1 cent for every dollar in sales has produced almost $260 million. Roughly $5 million is collected monthly, according to recent figures from the S.C. Department of Revenue, the state’s tax collecting agency.
The grand jury investigation follows a dispute between the county and the Department of Revenue over a critical 2015 audit of the penny program conducted by the state agency. The dispute has been appealed to the state Supreme Court.
Former County Council Chairman Paul Livingston said he was interviewed by SLED Lt. Pete Logan as long ago as late last year. Logan, who works with the grand jury, asked general questions about the penny program and then inquired whether Livingston was willing to testify.
“I told him, ‘Yeah, I would,’ ” Livingston said, adding that someone with the state Attorney General’s office also became involved. “But they said, ‘We don’t need you to come (testify).’ So, I never went.”
Councilwoman Dalhi Myers, who was not on council during the dispute with the Revenue Department, was taken aback when she learned that the investigation is active.
“I’m completely surprised. I guess there are some people who know about this,” Myers said. “I believe that every action that we’re taking (currently) is ... (for) using the penny strictly as the referendum allows.
“I hope it’s not true,” she said of the criminal investigation.
Other members of council the newspaper reached out to did not respond. County Administrator Gerald Seals declined to be interviewed.
How the investigation began
The grand jury investigation grew out of the 2015 audit.
Rick Reames, then director of the Revenue Department, spearheaded his agency’s challenge of how Richland County was administering the penny program.
Reames, now a private civil law attorney in Columbia, would not say whether he had been subpoenaed by the grand jury.
“I need to decline to comment on that,” Reames said, citing the confidentiality of state grand jury investigations.
There are no publicly known indictments, however, stemming from the probe.
It’s been known publicly since December 2015 that SLED was looking into the Revenue Department’s allegations.
A state grand jury investigation intensifies the depth and breadth of a normal SLED investigation because the grand jury, which operates in secret, has the authority to issue subpoenas to compel witnesses and to get documents. Specialized SLED agents are assigned to the grand jury, which has designated prosecutors and its own judge. The grand jury has jurisdiction in public corruption cases and over several other specified criminal offenses.
The Revenue Department raised serious questions about how Richland has spent some of the public money. The agency’s seven-month audit led Reames to inform county leaders that evidence of “potential public corruption and fraud” had been uncovered.
Reames wrote in a letter that among other problems found by auditors were “multiple instances of illegal activity by individuals and/or companies associated with the penny program.”
County leaders, including members of County Council, strongly protested Reames’ allegations at the time. One former legislator, James Felder, said in July 2016 the allegations were “trumped up claims” by Reames, who had filed a protest to overturn the 2012 penny referendum before he was appointed to lead the Revenue Department.
Taxpayers approved the 1-cent increase specifically to improve roads, to upgrade the capital city area’s bus system and to build pedestrian and bicycle pathways. The controversial election was marred by irregularities, including long lines because there were too few voting machines, and lawsuits.
A lot of penny program questions
Among the concerns raised by revenue department auditors were:
▪ How a consortium of private companies hired by the county was spending money.
▪ How the county hired the companies, which collectively are called the “program development team.”
▪ Why County Council decided to exempt some of its own procurement procedures for penny projects.
More precisely, Reames questioned the council’s use of $619,000 to start a program intended to assure that small, minority- and women-owned businesses had a shot at winning contracts.
Further, the audit raised questions about $600,000 used yearly to pay two marketing firms when the county has its own public relations staff. The firms are Campbell Consulting Group and BANCO Bannister Co.
At the $600,000 yearly rate, Reames wrote, the county was on pace to spend $3 million over five years “for the equivalent of fewer than two full-time employees – when an entire (county) public information office already exists.”
Another complaint of the state agency was that then-Columbia City Councilman Brian DeQuincey Newman’s one-man law firm was to be paid nearly $400,000 over five years to do property ownership and title research for right-of-way acquisitions. Newman also had sway over a large part of penny revenue because he was then chairman of the board that oversees The COMET bus system.
Newman stepped down from the county job in 2016 and pleaded guilty to failing to pay taxes on $200,000 in income in 2012 and 2013. He did not seek re-election to City Council.
A dispute also erupted last year over bidding for a then-$24.5 million contract to extend Shop Road, a project that would in part service a large fiberglass manufacturing plant that is under construction at the county’s Pineview Industrial Park.
After Reames’ office withheld about $17 million of penny revenue, the county sued the agency in 2016. A state judge ruled the Revenue Department had overstepped its authority in freezing money. But Judge Thomas Cooper also said the agency could pursue its claims of misspending by the county.
The county and the agency have appealed Cooper’s ruling to the S.C. Supreme Court. The justices have yet to issue a final decision, Rep. James Smith, D-Richland, said. Smith was hired by the tax collection agency to argue its case.