Government agencies admit to hiring external lawyers after originally denying it – The Nerve
Last summer, The Nerve took steps to uncover whether the South Carolina Treasurer’s Office and State Auditor’s Office had engaged external legal counsel concerning an investigation into a missing $1.8 billion. Both offices initially denied hiring outside lawyers, but later, it emerged that they had retained prominent law firms for assistance in an inquiry by the U.S. Securities and Exchange Commission (SEC).
The Auditor’s Office paid over $600,000 to Milbank, based in New York, while the Treasurer’s Office shelled out nearly $600,000 to BakerHostetler, headquartered in Washington, D.C. So far, South Carolina taxpayers have spent over $8 million on various investigations linked to the disputed $1.8 billion, with potentially more expenses on the horizon.
In response to the mystery surrounding the substantial amount, Republican Gov. Henry McMaster established a special task force comprised of representatives from multiple state offices, including the governor’s, attorney general’s, treasurer’s, auditor’s, comptroller general’s offices, and the Department of Administration. Despite meeting in secret for months, the task force missed the deadline to provide public answers by July 1. Instead, they enlisted AlixPartners, a global consulting firm, to perform a forensic accounting investigation – a move expected to cost S.C. taxpayers around $3 million.
AlixPartners’ subsequent report revealed that a significant portion of the missing funds did not actually exist, leading to the resignation of State Auditor George Kennedy. Senator Larry Grooms, who led the Senate Finance subcommittee’s investigation, has called for State Treasurer Curtis Loftis’ resignation, accusing him of misconduct. Loftis has dismissed the calls for his ouster, calling for a review of his agency by the state Inspector General’s Office.
Further complexity arose when the Treasurer’s Office disclosed a formal order of investigation from the SEC concerning a $3.5 billion restatement by then-Comptroller General Richard Eckstrom. Despite cooperating with the SEC’s inquiry, the agency refrained from further comments. The SEC’s focus on securities laws violations emphasizes the significance of the investigation, although no criminal allegations have been made against any South Carolina officials.
The Treasurer’s Office clarified that filing disclosures on the EMMA website was a routine duty related to the State Fiscal Accountability Authority. Additionally, documents obtained under open-records laws revealed the retention agreement with BakerHostetler, signifying the firm’s representation of the state office in connection with the SEC’s Division of Securities investigation.
The ongoing scrutinization of South Carolina’s financial affairs underscores the gravity of the situation and the monumental task ahead to uncover the truth behind the vanishing $1.8 billion. As investigations intensify, taxpayers can only hope for transparency and accountability from state agencies to ensure the proper handling of public funds.