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Judge rules SC officials illegally withheld information about business deals

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Giti Tire (web only) (copy)

Gov. Henry McMaster visited Giti Tire's new factory in Richburg in October 2017. Financial incentives the company received from the state led to lawsuit after a lawmaker was denied access to the details. File/Provided

Officials in South Carolina have been improperly withholding information about millions of dollars in state grants and tax incentives that are handed out to corporations every year, according to a new court order. 

Circuit Judge Robert Hood issued a ruling late last week that found the S.C. Department of Commerce was violating the S.C. Freedom of Information Act by keeping details about those economic development deals from the public. 

The court decision stems from a lawsuit that was filed by state Sen. Dick Harpootlian, D-Columbia, last year. 

Harpootlian, who is running for a second term, has become an outspoken critic of the Department of Commerce, and has questioned whether the grants and tax packages the economic development agency doles out to companies is worth the cost the state is paying. 

The lawsuit, which was filed in Richland County, was focused on economic development deals that South Carolina officials approved for two companies: Viva Recycling, a Moncks Corner business that failed, and Giti Tires, which operates a large plant in Richburg.

But the case is likely to have far broader implications for the way Commerce operates and the amount of information it is required to disclose to the public and the media. 

Harpootlian and Hitt (copy) (copy)

A South Carolina judge ruled last week that the S.C. Department of Commerce has been illegally withholding information about millions of dollars in state grants and tax incentives that are given out to business every year. The lawsuit was filed by state Sen. Dick Harpootlian, D-Columbia, who has become an outspoken critic of the state agency. File

Harpootlian sued the department after agency officials refused to provide him with information he requested under the state's open-records law. 

The lawmaker and attorney asked for the contracts that Viva and Giti signed with the state, communications between Commerce officials and the companies, and the cost-benefit studies the state performed for each deal. 

Some of the information that was requested was blacked out. Other records were withheld altogether, Harpootlian's attorney Chris Kenney alleged. 

That ensured Harpootlian — and anyone else who requested that information — couldn't see what types of investments the companies promised to make or how much they planned to pay their employees on average, which helps to decide how much money a company is eligible to collect through state tax incentives. 

The agency even went so far as to redact the names of the people who signed the contracts with the state. 

Commerce officials argued in court the information Harpootlian was seeking was proprietary. And they told the judge they were following procedures that have long been in place at the state agency. 

Hood rejected those arguments, and said the agency couldn't withhold public information just because they did in the past.

“The court finds that the exemptions asserted by defendant here are consistent with what appears to be the longtime and documented practice of the department," Hood wrote. "Whether these practices comport with the FOIA is another question.”

Alex Clark, a spokeswoman for the Department of Commerce, said the agency "respectfully disagrees" with the ruling, and she said state leaders were still weighing their legal options now that they lost the lawsuit. 

Clark did not respond to a question about whether the agency planned to reform its policies or change what information it releases to the public in the future. 

The lawsuit showed that commerce officials routinely enter into non disclosure agreements with companies they are trying to lure to South Carolina, and they make promises to those businesses that they will withhold as much information from the public as they can under state law. 

The agency also notifies companies when it receives a FOIA asking for information about a particular economic development deal, and it discusses how to respond to those requests with the companies' attorneys, according to evidence presented in court. 

The agency has also charged The Post and Courier and other media outlets $45 per hour to search for records on various economic development deals. 

Harpootlian said it's absurd that it took a lawsuit and court order for him to wrestle information out of a state agency that uses millions of dollars in taxpayer money to lure in giant corporations like Boeing Co., Volvo and Bridgestone. 

South Carolinians, he said, are entitled to information so they can decide whether the department is doing a good job and if the incentives are paying off for the state.

Harpootlian called on Gov. Henry McMaster, a Republican, to require the agency to be more transparent and to force state Commerce Secretary Bobby Hitt to follow the state's open records laws. 

“This isn’t a Bobby Hitt call. This is a Henry McMaster call. I’m calling on him to tell commerce to cut it out,” Harpootlian said. “The buck stops with Henry McMaster on this. He could change the policies tomorrow.”

Brian Symmes, McMaster's spokesman, said the governor "believes in the rule of law and that full and open transparency is critical to maintaining the public’s confidence in government." 

But the governor's office also suggested some aspects of the deals should remain hidden because many of the businesses South Carolina recruits also shop for grants and tax incentive deals in other states. 

"It's important to remember that the competition between states for jobs and investment is fierce," Symmes said. "State law provides very limited exemptions from the public disclosure of a private businesses’ proprietary information. Those exemptions shouldn’t be abused, but South Carolina also shouldn’t disarm itself in this competition for jobs and investment." 

This isn't the first time that Hitt and the Department of Commerce have come under pressure for its handling of public information. 

The state's Legislative Audit Council also released a report this year that faulted the agency for a lack of transparency, failing to scrutinize companies that receive taxpayer money and for allowing businesses to keep millions of dollars even when they don’t create the number of jobs they promised. 

That report found that the S.C. Department of Revenue was not auditing the billions of dollars in tax incentives that companies collect, even though state officials were required to review the deals once every three years. 

Following that report, Harpootlian and Sen. Wes Climer, R-Rock Hill, called on Hitt to resign as commerce secretary, a post he has held for nine years. He didn't. 

“There’s no other state agency that gets a pass like this on how they spend money,” Harpootlian said Monday. "It's billions and billions of dollars being spent without any transparency." 

Harpootlian is facing Republican challenger Benjamin Dunn in his election in Richland and Lexington counties this year.

If he finds himself in the Statehouse again next year, Harpootlian said he plans to force Commerce to be more transparent. Otherwise, he said, he will hold up any new funding going to the agency. 

"I will filibuster every dime going to them until they open up the books,” he said. 

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Reach Andrew Brown at 843-708-1830 or follow him on Twitter @andy_ed_brown.

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