WATCHDOG REPORT: State group looking out for seniors should be non-profit

A new state-funded program aimed at shielding seniors from unethical businesses runs the risk of violating the standards it pledges to uphold.

Lt. Gov. Andre Bauer's Office on Aging has paid about $85,000 in state funds to Senior Shield LLC, a company it formed to investigate and certify "senior safe" businesses.

Bauer's chief of staff, former Secretary of State Jim Miles, created Senior Shield and is the organization's registered agent in South Carolina.

State ethics laws prohibit public employees from negotiating with businesses with which they are associated or in which they have an economic interest. But the state ethics commission says the arrangement would run afoul of state ethics laws only if Miles makes financial decisions in his official capacity that directly benefit Senior Shield or if he receives compensation from Senior Shield outside his government salary.

Bauer, who is reportedly considering a run for governor in 2010, is expected to hit the road later this month to launch and promote the new senior program. His spokesperson said he was not available for comment.

Miles said the General Assembly tasked Bauer's office with protecting seniors from scams but provided no money for that purpose. As a result, the Office on Aging needed to establish an outside organization to solicit private financial support for the program. Senior Shield plans to charge private businesses and services a fee of $160 to $195 to receive Seniors Shield's verification services and blessing.

The group relied on state money to get up and running but hopes to attract enough members to pay its own way and reimburse the state for its contribution, Miles said.

The head of a Columbia-based taxpayer watchdog group says state agencies need to be careful about providing seed money to ventures that will compete with small businesses. "I've got a concern with that," said Don Weaver, president of the S.C. Association of Taxpayers. "We are in a severe budget crisis. I think their hearts are in the right place, but I'm leery of creating quasi-government entities that will compete with private enterprise."

The Office on Aging directed about $100,000 in grant money to Senior Shield, said Frank Adams, Bauer's director of communication. Senior Shield also received money from hospitals and from a Maryland-based company called Silver Nation that developed the computer software Senior Shield plans to use to conduct checks on businesses.

Since July 29, the Office on Aging has paid $85,142 to Senior Shield, according to financial records obtained from the Comptroller General's Office through the state Freedom of Information Act.

When first asked about the financial arrangement last week, Adams said the use of state funds was a non-issue because Miles established Senior Shield as a non-profit organization.

In fact, Miles had registered Senior Shield as a for-profit limited liability corporation, The Post and Courier Watchdog found.

After the newspaper inquired about the discrepancy last week, Miles re-registered Senior Shield as a non-profit organization with the Secretary of State's Office.

Miles said Senior Shield was always intended to be a charitable organization but that he mistakenly registered it as a corporation.

Miles said he has applied to the IRS on behalf of Senior Shield for non-profit status. The group's finances will be subject to the federal government's public reporting and accounting rules for charitable organizations, he said.

State Ethics Commission Executive Director Herbert Hayden said Senior Shield appears to be an arm of the Office on Aging and working on an official program for that agency, which would not violate state ethics laws.

Where it becomes troublesome is if Miles or any other public employee is operating on both sides of financial arrangements between the Office on Aging and Senior Shield, Hayden said.

He said the same test would apply whether the group is registered as a charity or a for-profit company.

Miles said the only people who stand to gain from Senior Shield are the seniors it helps. "I get nothing from Senior Shield," he said, adding that all decisions are made in the interest of protecting seniors.