By RON AIKEN
Talk about ‘dark money’
While lawmakers have touted the evils of so-called “dark money” this legislative session, another avenue of very real dark money – revenue streams, often in the millions, that legislators do not have to publicly report – is alive and well in the form of government subcontracts.
If an elected official, public member of a state board or commission or a state employee of a certain income level has a contract with state or local government, that person has to disclose that source of income on their Statements of Economic Interest (SEI) form. (The SEI is a tool designed to show the public exactly where politicians derive their income to determine whether they have conflicts of interest or not.)
If he or she has a subcontract with a public body such as the Department of Transportation, as does Florence Concrete (previously run and now partially owned by Sen. Hugh Leatherman, R-Florence), then no such disclosure is necessary, even though the result is the same – public money flowing to the business of a public officials at levels the public cannot determine.
And sometimes those levels can be enormous.
Florence Concrete makes millions of dollars on its biggest projects, but it operates almost exclusively as a subcontractor, and DOT does not keep track of payments to subcontractors, only prime contractors.
That means it’s nearly impossible to tell just how much public money is flowing to a business benefiting the state’s most powerful legislator.
With Florence Concrete, some of that money actually is traceable, thanks not to any transparency efforts on the part of the Senate but only because his business operates as a disadvantaged business enterprise (DBE), a certification that The Nerve has previously reported on.
The Department of Transportation is required to maintain records on DBE subcontracts because by law, 10 percent of federal funds made available for any federal-aid highway, mass transit or technology and research must be expended using DBEs.
In South Carolina in FY 2014-15, that figure was substantial – $61.2 million in new and ongoing contracts was awarded to DBE firms, including $377,000 to Florence Concrete this fiscal year and $3.9 million since 2013.
But that’s not all.
Thanks to a Freedom of Information Act request, The Nerve has learned Florence Concrete has made a total of $7.1 million since 2012 from procurement contracts directly with DOT, an agency that Leatherman exerts a control over that’s nearly unprecedented in state history, considering:
- as chairman of the Senate Finance Committee he has considerable control over DOT’s entire budget;
- he is a member of the Joint Transportation Review Committee, which screens and approves for selection seven of the eight DOT Commissioners who directly govern the agency (one of whom is his son-in-law, John Hardee);
- as a member of the Transportation Committee, he oversees all aspects of DOT operations, including audits;
- as a chairman of the Joint Bond Review Committee, he controls the approval or denial of any state bonding requests, including those from the DOT, and the State Transportation Infrastructure Bank, on which he also sits;
- as a member also of the State Transportation Infrastructure Bank, he votes on the approval of South Carolina’s largest capital transportation projects, including those his company may profit from; and
- he is the chairman of the Agency Head Salary Commission.
That means, in DOT’s case, Leatherman oversees the money that writes director Christy Hall’s checks (Senate Finance), appoints her bosses (JTRC), controls whether the projects she wants get funded, oversees all aspects of the agency’s operations (transportation committee) and even decides how much she makes (agency salary head commission).
And exactly how much of the earnings from the $11 million worth of work his company has performed since 2012 (not to mention the approximately $30 million in DOT funds Florence Concrete earned from 1993-2012, as previously reported) does Leatherman report on his Statement of Economic Interest?
None.
Talk about dark money.
In fact, it wasn’t until 2013, at the time that The Nerve first began looking into his SEIs, that Leatherman first began listing his “minority” stockholder status in the company of which he served as president from the time he joined the Senate in 1981 until 1993, meaning a whole decade went by without his even mentioning that he still held a financial interest in the company.
So why is that not a problem?
Because the S.C. Ethics Commission has no jurisdiction over him; it only exercises authority over statewide candidates and local government officials. Nor does the commission even review the filings of individual legislators; only the House and Senate Ethics Committees do that, and when you also sit on that committee that would investigate you, as Leatherman does, well, that, as they say, is that.
And the $40+ million in state money The Nerve has uncovered does not include earnings that are less easy to discover, such as sub-contractual work legislators have with other such entities as local municipalities, counties, school boards, hospital boards, universities and utilities that all rely on local and state funding and often are governed by legislative appointments.
In Leatherman’s case, he sits on the boards at the S.C. Research Authority, Clemson’s College of Engineering and Science, the Hollings Cancer Center and has been a past board member at Francis Marion University (where his daughter was just appointed to a seat on the board last week), the North Eastern Strategic Alliance (NESA) and attends most meetings of the MUSC Board of Visitors, where his wife, a realtor, is a board member.
Given all this, it’s easy to understand why politicians would rather discuss the debatable perils of out-of-state campaign money than the very real peril of their own dark sources of income.
Reach Aiken at (803) 254-4411 or email him at ron@thenerve.org. Follow him on Twitter @RonAiken and @TheNerveSC.