Experts see S.C. public disclosure laws as lax
S.C. Rep. Jim Merrill did not report the income he took from special-interest groups on the public disclosures he filed with the state.
He didn't have to.
That's because the state's income reporting laws allow officials to shroud business deals and connections they don't want the public to discover.
S.C. law says officials must report only the source and amount of income “of substantial monetary value received from a governmental entity” on their statements of economic interest.
In addition to government income, officials are supposed to report gifts and business interests, but few actually do. Even a member of the S.C. House Ethics Committee staff in an interview last week acknowledged that fact.
Officials also have to report money they take from lobbyist principals, or groups that lobby at the Statehouse — but only if those entities pay them directly. The principals have found ways around that. The S.C. Association of Realtors, for example, paid Merrill through its political action committee.
National watchdogs gave the weak laws failing grades in a national report released this year that judged legislative accountability.
Bob Stern, a national expert in government ethics, said the soft requirements are unusual. Most states require legislators to list all their income sources, Stern said.
“In South Carolina, you're not getting a full disclosure of what's going on,” said Stern, former administrator at the Council on Governmental Ethics Laws. “The public needs to know how money influences decisions.”
Caitlin Ginley, a writer and spokeswoman at the Center for Public Integrity, a nonprofit investigative news group based in Washington, said other states mandate full disclosure of all income sources.
“Even stocks and investments, a whole range,” Ginley said. “In states where the laws aren't strong, things fall through the cracks. There are relationships that are not revealed to the public.”
Cathy Hazelwood, general counsel for the State Ethics Commission, described South Carolina's lax requirements during an interview with the Center for Public Integrity and its collaborators last year.
The forms require “absolutely nothing compared to other states,” Hazelwood said in an interview that became part of the national state accountability report. A lawmaker's statement is “not a true asset disclosure” because any income beyond state pay is reported on a voluntary basis, she said in the State Integrity Investigation report.
The Ethics Commission “does not have the staff to enforce or investigate” omissions or violations in income and gift disclosures submitted by lawmakers and “will not set up stings,” Hazelwood said in the report.
S.C. Gov. Nikki Haley has faced scrutiny this year for alleged omissions and misstatements in the economic interest statements she filed while serving as a House member representing Lexington County.
Republican activist John Rainey filed a complaint with the House Ethics Committee in March, alleging that Haley made “false and misleading public disclosures that failed to give accurate, full, and complete information to the public as required by law.”
It continues: The “plaintiff and the citizens of South Carolina had no opportunity to discover Haley's conduct because she habitually failed to make a full and complete disclosure in her annual Statements of Economic Interest. These omissions include failing to disclose income” from engineering firm Wilbur Smith and Associates and misstating her employer as Lexington Medical Center Foundation when it was the hospital itself, according to the complaint.
The hospital sought state approval for a new cardiac center at the time. It eventually received that approval. The engineering firm wanted state contracts, and it too had success.
Haley's attorneys deny any wrongdoing.
Although the governor now faces scrutiny for her business deals, she once railed against legislative secrecy. She addressed the topic in her book, “Can't Is Not an Option,” which was released in April.
“Members weren't required to disclose whom they worked for in their day jobs,” Haley wrote. “I thought that was wrong. It breeds conflicts of interest. The people deserved to know who paid us.”
She continued: “Once they see who is paying their legislators, I said, people will start to understand why policy moves the way it does in Columbia.”
Last week, a Haley spokesman said the excerpt “is entirely consistent with where the governor has always been on the issue of income disclosure.”
“Then-State Rep. Haley disclosed everything she was supposed to when it comes to sources of her income,” Rob Godfrey said in a statement.
Godfrey said the governor believes “state law should be made stronger and that every legislator should be required to disclose all of their income sources, which they are not presently required to do.”
Like Haley, Merrill also faces criticism of his business relationships with special interests such as the Realtors.
“These are the types of relationships those laws expose,” Ginley said, referring to other states' stricter income reporting requirements.
The rules also would shine a light on the low-key consulting groups legislators set up to handle work obtained through their political connections. Merrill's Geechie Communications fits that category.
“They don't advertise themselves, have no list of staff, no websites — it's hard to find out they even exist in the first place,” Ginley said. Maintaining consulting firms are “an opaque way of funneling money from a special interest to a candidate,” she said.
J. Michael Bitzer, a political science professor at Catawba College in Salisbury, N.C., called it a “sneaking around the back-door approach.”
Nationally, Idaho, Michigan and Vermont have no income reporting requirements, Ginley said. South Carolina's rules are lax, but the minimal requirements put its disclosures a step above those three, she said.
Reach Renee Dudley at 937-5550 or on Twitter at @renee_dudley.