South Carolina's Department of Commerce was notified last year that one of the state's tire manufacturers allegedly owed millions of dollars in unpaid debts while the company moved to finalize a deal for additional state tax benefits.
Newly released emails show state Commerce Secretary Bobby Hitt and other agency officials received a warning in August 2018 that Giti Tire allegedly failed to pay roughly $2 million to a contractor at its facility in Chester County.
At that point, state officials were already busy reviewing perceived startup problems at Giti's factory and discussing the company's financial health with its executives.
"Well crap, this is getting ugly," States Clawson, a commerce employee, wrote after learning the contractor hadn't been paid in more than a year.
"I think me, you and Bobby need to talk about how to handle this," Clawson told another commerce employee, referring the Secretary Hitt.
It's unclear what discussions occurred between the Department of Commerce and Giti in the following months. But in December 2018, the company finalized a sought-after contract that made the business eligible for up to $30 million in future tax incentives.
Alex Clark, spokesperson for the Department of Commerce, said the company already qualified for those tax credits in 2014. The Commerce Department, she said, was legally obligated to give Giti the incentives in 2018 because it hit its promise of creating 400 jobs.
Giti also assured the state that the alleged debts to its contractors were part of a legitimate business dispute, and it in no way indicated potential financial problems for the company, Clark said.
"These types of disputes are not uncommon in large, complex manufacturing operations, nor are they indicative of financial perils," Clark said Thursday.
But the decision to finalize the incentives for Giti while the company was being pursued for allegedly failing to pay its bills is drawing fire from state Sen. Dick Harpootlian, D-Columbia.
The first-term senator was already an outspoken critic of the state's economic development incentives. He challenged efforts earlier this year that made the Carolina Panthers eligible for similar tax breaks. And he pushed for a legislative audit of the Department of Commerce's contracts.
"If the Department of Commerce gives millions of dollars to an entity like Giti Tire, and then they begin to fail, is it the state's role to step in and help bail them out?" Harpootlian asked Thursday.
Many companies that started in South Carolina without the benefit of state economic incentives don't get that same treatment, he said.
The emails about Giti's alleged debt in 2018 came out as part of a lawsuit Harpootlian filed in Richland County court this week.
It comes on the heels of two other complaints filed by Giti's contractors in federal court, which alleged the company didn't pay for some of its equipment and its contract employees.
The contractors in those cases alleged Giti began missing payments as early as December 2017. And they claimed the international tire manufacturer still owed more than $500,000 to two companies. One of those lawsuits also alleged that a Giti executive admitted the company was having a cash-flow problem in 2018.
David Shelton, a spokesman for Giti, said that is not the case. Giti filed its own claims against one of the contractors, alleging its workers broke equipment at the factory near Richburg.
"The company currently employs over 700 associates and continues to hire, and has increased production in the past 18 months to over 8,000 tires per day," Shelton said. "Giti is committed to the community, Chester County and the state of South Carolina, and will continue to progress."
Harpootlian wants to know what information Giti provided the state to show the company was financially sound.
The tax incentives Giti began collecting earlier this year are known as Job Development Credits. They allow select companies to keep part of the state withholding taxes its employees pay each month. In return, the companies promise to hire a set number of people and invest a specific amount of money.
The program is one of the Department of Commerce's primary economic development tools. More than 480 contracts for Job Development Credits were signed in the past decade, including deals with corporate giants such as BMW, Boeing, Volvo and Michelin.
Using those credits, companies statewide netted a combined $81.9 million in 2018 that would have otherwise been collected by state tax officials.
But Job Development Credits weren't the first incentive package the state extended to Giti. The Department of Commerce also provided more than $39 million through grants to help prepare the site of Giti's first factory in the United States.
As part of that deal, Giti promised to invest $560 million and employ 1,700 people by 2024.
That type of public assistance isn't guaranteed for every company, Harpootlian noted. Handing out the tax incentives is done at the state's discretion.
Harpootlian blamed the Department of Commerce for operating under "a culture of secrecy." He said the state's process of approving companies for tax incentives and economic development grants gives taxpayers no ability to question the decisions.
That's why Harpootlian filed his lawsuit over the information the Department of Commerce redacted and withheld about Giti. He wants to force the agency to start disclosing the details of the contracts it signs with each corporation.
"The past two or three gubernatorial administrations said 'Government shouldn't pick winners and losers,'" he said. "And here they're picking a loser and trying to make it a winner."