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The Myrtle Beach Area Chamber of Commerce is being sued by a former motel owner, who claims the group is spending public money improperly. Chloe Johnson/Staff

MYRTLE BEACH — The Myrtle Beach Area Chamber of Commerce, long the most powerful tourism promotion group on the Grand Strand, is facing new scrutiny over how it spends public funds — and it's difficult to connect many of its expenditures to a specific recipient.

The private, nonprofit group is mostly funded with public money, with 85 percent of its revenue in 2017 coming from various government grants, according to its tax return. The chamber's biggest source of that funding, by far, is the Tourism Development Fee, a 1 percent sales tax meant for out-of-market tourism promotion. The Myrtle Beach chamber receives 80 percent of the revenue from that tax — more than $160 million total from the time it was implemented in 2009 to the end of 2017. 

Now, a lawsuit filed April 5 claims the chamber has played favorites with the vendors it uses for marketing services, calling those firms "crony companies" and claiming that there's an unfair playing field for businesses to get work funded with millions of dollars in tax revenue.

A Post and Courier analysis of the chamber's TDF spending reports over the past five years, from 2013 to 2017, showed that many of its expenditures could not be tied to a specific vendor. Specifically, many line items for internet or digital advertising services did not name the company that received the money, listing simply "search marketing," "mobile marketing," "display advertising," "social media marketing," "email marketing" and "video advertising."

In those five years, expenditures described with those terms totaled $40.4 million, or 38 percent of the chamber's total TDF spending over the same period.

Julie Ellis, a spokeswoman for the chamber, told WBTW-TV earlier this month that most generic line items in internet or digital advertising were paid to Visibility and Conversions LLC, but not all of them.

Ellis and an attorney for the chamber did not respond to an email requesting more detail on these expenditures.

Chamber officials have insisted that they are good stewards of public funds and that they handle tax money in accordance with state law. But they face limited financial oversight from the government that passed — and recently reapproved — the TDF. 

Mike Shelton, the chief financial officer for the city of Myrtle Beach, said he "spot checks" the chamber's spending reports by looking through the line items but does not compare the chamber's ledger of TDF expenditures with checks or invoices, as a financial auditor might. The chamber does undergo an independent audit annually, and publishes the resulting report on its website. 

The TDF spending reports can be vague. In the past five years, almost $213,000 in expenditures were simply described as "other." 

" 'Other' stands for a variety of items that don’t total enough to break out. This could include specialized promotions," Ellis said in an email.

She added that the chamber will likely stop using "other" as a category in the future, and intends to add more detail to its reports. 

Top recipients

Many of the chamber's top vendors end up spending much of the money they receive on ad placements with TV networks or other platforms. New York City-based ad buyer Corinthian Media Inc. was sent almost $19 million over the past five years. 

Other top vendors from 2013 to 2017 included Myrtle Beach-based ad firm The Brandon Agency (almost $3.5 million); Myrtle Beach-based internet firm Fuel Interactive (roughly $882,000); and Fahlgren Mortine, a public relations and marketing firm with headquarters in Columbus, Ohio (nearly $2.2 million). 

Contractual arrangements with Corinthian and Fahlgren Mortine were made through a request for proposal, Henrietta Golding, an attorney for the chamber, wrote in an April 16 letter to The Post and Courier. She did not say whether the RFP involved an open bidding process, and when asked for clarification on multiple subjects, Golding said she could no longer communicate with the media because of the pending lawsuit.

In a press conference on April 10, Matt Klugman, the chairman of the chamber's marketing board, said The Brandon Agency and Fuel Interactive were originally selected through a competitive bidding process to manage marketing for the local golf cooperative in Myrtle Beach.

But Brandon Agency and Fuel are mentioned in the lawsuit as two of several companies that were selected for a connection to the chamber. Scott Brandon, the CEO of both companies, said he has not been on the chamber's board of directors since the 1990s and was never a direct employee of the chamber.

Brandon said his namesake agency's work has included Myrtle Beach-branded billboards along major highways for the chamber and ad placements for the golf cooperative, which is a separate group. He said most of the $3.5 million shown in the past five years of TDF reports was likely tied to those ad placements. 

Visibility and Conversions, the group linked to much of the chamber's online spending, is only explicitly listed as the chamber's vendor for roughly $2.9 million in TDF expenditures in the past five years. The group is also mentioned in the lawsuit.

In the chamber's press conference, it was described as the "primary agency of record" handling the chamber's digital advertising campaign.

"In this modern era of marketing, digital advertising is the largest investment used to promote our number one industry," Klugman said. "While it’s true that Visibility and Conversions receives very large amounts of marketing dollars for their efforts, nearly all of these funds are paid to companies such as Google, Yahoo, TripAdvisor, Facebook and many others. The team at Visibility and Conversions is paid to manage these important investments."

Together, the expenditures specifically attributed to Corinthian, Fahlgren Mortine, Fuel, Brandon Agency, and Visibility and Conversions account for 27 percent of the chamber's TDF spending from 2013 to 2017. 

The spending reports also reflect broad strategies the chamber has chosen to market the area. Almost $2.5 million in the past five years were expenditures categorized under sports tourism, an important segment of business for the Grand Strand. Roughly $159,000 was spent in relation to the Myrtle Beach area's attempts at forging a connection with visitors from China, with much of that money going to interpretation firm Syntrans Chinese Communication Consulting, Inc. 

Tourism marketers argue that revealing every detail of spending can be harmful because it would let competitors know exactly who's being targeted and how.

Advocates for transparency counter that tax dollars shouldn't be obscured from the public. One lawsuit arguing the Hilton Head-Bluffton Chamber of Commerce should answer a Freedom of Information Act request has already made it to the S.C. Supreme Court, which has not yet ruled on the issue.

In the case of the Myrtle Beach chamber, "They might use this designated money for something not directly relevant for out-of-area tourism recruitment because it’s so vague," said Xuhong Su, a professor of political science at the University of South Carolina. "You can’t track it down to every specific item."

Procurement

The lawsuit filed in Horry County court claims the chamber has chosen some outside vendors specifically because of their connections to the group.

Plaintiff Karon Mitchell, a Myrtle Beach resident and former motel owner, argued that eight "crony companies" were selected because their founders were former employees of the chamber and that the firms are "receiving taxpayer funds for unsubstantiated goods and services at a mark-up." She argues that the Myrtle Beach chamber should be forced to follow procurement law as it selects its vendors.  

Chamber officials have called the lawsuit a "baseless, vindictive attack." While the chamber has not yet filed a full answer to the suit in court, it did enter a motion on April 13 to strike the word "crony," claiming that use of the term is "impertinent, improper and scandalous."

Su also said it would be difficult to know for sure if the chamber is favoring certain vendors over others without more information for a statistical analysis of its various expenditures. But even in the public sector, she said, not every expense is put out to the public for bid. 

"Even federal government has a few conditions under which non-competitive bidding is completely acceptable," Su said.

Duane Parrish, director of the S.C. Department of Parks, Recreation and Tourism, said that private destination marketing groups are not held to state procurement law. In the private sector, he said, businesses often bid out work and select a contractor based on price, but the process is not necessarily held to the same standards for publicly advertising work. A private group may also choose to use a contractor they've had a previous relationship with without soliciting more bids.

Golding, the chamber's attorney, wrote that in Myrtle Beach, "Generally, if a proposed service is likely to be offered by two or more local businesses and the service is fairly consistent amongst those businesses, the chamber will use an RFP (request for proposal)."

She also wrote that when it looks for contractors, the chamber always notifies its own vendor list. Sometimes the search is broader, and includes "prior history," "competitive analysis" and "a national vendor list from trade industry contacts," she wrote.

Golding did not provide the chamber's vendor list or purchasing policy when both were requested by The Post and Courier.

Reach Chloe Johnson at 843-735-9985. Follow her on Twitter @_ChloeAJ.