COLUMBIA — State Rep. Jim Merrill was indicted by a grand jury Wednesday on 30 counts of ethics violations alleging the Charleston lawmaker or his company pocketed more than $1 million by soliciting or accepting cash from groups with Statehouse legislation at stake.
Sources believe Merrill’s indictment could well be just the beginning of actions resulting from a Statehouse corruption probe that's been evolving for nearly three years. More indictments remain a distinct possibility, sources said.
Repeated attempts to reach Merrill, a Republican who lives on Daniel Island, were not successful. The indictments accuse the 49-year-old of skirting state laws almost from the time he took office in 2001.
The Post and Courier first raised questions about Merrill's dealings in a 2012 story that touched on some of the very issues outlined in the indictments. Merrill also figured prominently in "Capitol Gains," a series the newspaper produced last year with the Center for Public Integrity exploring South Carolina’s loophole-ridden campaign finance system that allows state lawmakers to use their campaign war chests like personal ATM machines.
Merrill's attorneys issued a statement late Wednesday saying the lawmaker denied the charges. They called the allegations in the indictments "flawed" and noted that he has worked in advertising, direct mail and public relations for more than two decades.
"Contrary to the flawed allegations made today, the work performed by Jim Merrill’s private company was completely legal and legitimate," read the statement from attorneys Matthew Hubbell and Leon Stavrinakis, who is also a Democratic state representative from Charleston.
The charges were filed by special prosecutor and 1st Circuit Solicitor David Pascoe after a grand jury met in Richland County, home of the state capital. His work, shrouded in secrecy, has been the subject of rampant speculation for months.
A bond hearing date has not been set. Pascoe stressed that the investigation is ongoing and that he would have no further immediate comment.
House Speaker Jay Lucas, R-Hartsville, said Wednesday he has suspended Merrill from office, effective immediately, after receiving confirmation of the criminal filing.
"This suspension is in pursuant to state law and will remain in place until the matter is resolved or the seat is declared vacant,” Lucas said.
The indictment documents accuse Merrill, former House majority leader, of engaging in a pattern of wrong-doing going as far back as 2002 and to as recently as just a few months ago. Specifically, the violations include two counts of misconduct in office and 28 counts for violating the state's Ethics, Government Accountability and Campaign Reform Act of 1991 that was adopted following the FBI's Statehouse sting known as Operation Lost Trust.
According to the indictment papers, Merrill allegedly accepted or solicited money from parties with a stake in Statehouse legislation and failed to report it on Statehouse disclosure records while obtaining a personal profit and benefit.
One of the accusations is that Merrill, through his business Geechie Communications, received approximately $35,000 from Infilaw Management Solutions LLC, which was trying to purchase the Charleston School of Law.
At the time, Merrill was a member of the House Ways and Means Committee. After receiving the money, he became chairman of the Higher Education subcommittee "and used this position to influence government decisions involving this purchase," the indictment states.
The law school's owners at the time were actively in search of a buyer. Merrill previously has said he engaged in public relations work in support of Infilaw. Many students, alumni, faculty and members of the state's legal community opposed the sale to InfiLaw because they thought the company's other three operating law schools carried lower standards than the Charleston School of Law.
In another of the accusations, Merrill is charged with accepting $391,174.95 from the S.C. Association of Realtors, or its affiliates, in exchange for using his position as a public official to influence legislation benefiting the association.
The Post and Courier in 2012 first raised questions about Merrill's dealings with the association, detailing how he had taken in tens of thousands of dollars from Realtors and then sponsored legislation that benefited them financially.
At issue was his work on "Point-of-Sale" reform legislation. Point-of-sale refers to the practice of reassessing a property's taxable value when ownership changes. Realtors strongly oppose point-of-sale reassessments because they can result in sharp tax increases that could discourage property sales.
Merrill's reform legislation — a lobbying priority for the Realtors, according to disclosures filed with the state — ultimately resulted in a property tax discount for commercial properties, including apartments and second homes. Opponents of the reform argued that it would result in less revenue for local governments and schools that rely on property taxes.
In a column published in response to the article, Merrill took aim at the newspaper’s reporting on the point-of-sale legislation, arguing that the mail advertising his firm did for the Association of Realtors “had absolutely nothing to do with legislation. As I told the reporter, this is an advertising client I have done work with for years.”
He went on to question why the reporter, Renee Dudley, was interested in point-of-sale.
“She apparently thought the mail piece I had processed promoted that legislation. Again, she was wrong. The mail I processed was a simple piece about how realtors and the candidates they support help improve the 'quality of life' for families. It had nothing to do with any pending legislation,” he said at the time.
The indictment, however, accuse Merrill of participating in a December 2008 conference call in which he allegedly solicited funding from the association to assist with point-of-sale tax reform in the 2009 legislative session that began two weeks later. That year, he sponsored a bill on the issue, which directly benefited the association or its affiliates. The same year, he pocketed about $212,000 from those groups, the indictment states.
Another area of the indictments says Merrill had a retainer with and accepted a total of $172,485 from Student Transportation of America, a school bus provider. Their financial arrangement was highlighted when Merrill sponsored legislation to privatize school buses in the state "directly benefiting" STA, according to the indictment.
The caucus system
The indictments also shine a light on the state’s caucuses, a system that government watchdogs have long said could be used as political slush funds.
In simple terms, caucuses are meetings where lawmakers gather to talk about legislative tactics and strategies. But few things are simple about South Carolina politics, including legislative caucuses.
The largest caucuses, such as the House Republican Caucus, have staff and slick websites. They spend large sums on conferences at resorts. Much of their inner workings are behind closed doors and not subject to state open records laws.
And millions of dollars go through them. Candidates poured at least $680,000 from their own campaign accounts into legislative caucuses, a Post and Courier analysis revealed last year.
State candidates and lawmakers spent an additional $121,000 on caucus retreats, meetings and meals since 2009. Many retreats took place at such resorts as Charleston Place and The Sanctuary at Kiawah Island and meals at such restaurants as Ruth’s Chris Steak House.
Meantime, corporations and other special interests chip in even more cash — contributions that are all but secret. The Nerve, the investigative arm of the S.C. Policy Council, reported that the House and Senate Republican and Democratic caucuses spent nearly $9.5 million from 2008 through 2014.
Merrill and his company, Geechie Communications, were intimately tied to the House Republican Caucus, the indictment says.
In one count, Geechie Communications is alleged to have charged the House Republican Caucus and former House Speaker Bobby Harrell’s political action committee, Palmetto Leadership Council, $275,521 for “candidate mailings and advertisements.” The indictment says the money came from the caucus’ operating account instead of its campaign account, “in an effort to conceal the contributors.”
In his 2012 column, Merrill chided The Post and Courier for questioning work he had done for the Palmetto Leadership Council.
“I spoke with the reporter and explained that I had been hired to process direct mail,” he stated. “ I told her my billings for mail projects are 90 percent postage and printing, and that my agency's modest mark up was only 10 to 15 percent.”
Wednesday’s indictment, however, accuse Merrill of actually charging more than fair market value for work he did for the PAC and the House Republican Caucus, marking up his costs for printing and graphics services by more than 50 percent.
Pascoe first revealed his interest in the caucuses late last year when he sent S.C. Attorney General Alan Wilson a letter asking for a legal opinion. Pascoe said he wanted to know whether it was legal for a House majority leader to “cause or influence” a legislative caucus to hire “a business in which the Majority Leader has an economic interest?”
Wilson’s office responded with a rambling 46-page opinion that cited obscure precedents dating back to the late 1800s. The opinion concluded that it was legal for lawmakers to steer caucus money to businesses they ran or were operated by family members. Pascoe continued his investigation anyway.
Not long after that, Wilson fired Pascoe as special prosecutor, calling Pascoe a liar and that he was “tainted.” Pascoe fought back, all the way to the S.C. Supreme Court. The court eventually sided with Pascoe, opening the door to Wednesday’s grand jury finding.
Wilson's office declined to comment for this story.
Ten of the indictments include accusations that Merrill failed to report work on required Statehouse disclosure records paid by companies or trade associations that lobby the Legislature.
One of them was the S.C. Association of Convenience Stores, which hired Geechie Communications in 2009 to conduct a poll on proposals to raise the state cigarette tax, said Leigh Faircloth, the trade group's executive director.
Merrill's company was recommended by tobacco company officials, said Faircloth, who added that Geechie was one of a handful of firms in the state with experience in handling requested polling work.
Faircloth said she did not expect any problems from the association spending $37,000 with a firm owned by a state lawmaker.
"It didn't even cross my mind," she said. "If we had concerns, we would not have done it."
Faircloth said she expected to meet with her association board to discuss how to handle future work with firms tied to legislators.
"I don't think we did anything wrong," she said.
Merrill also was cited for not reporting $56,000 in work done in 2008-2010 paid by Made in SC, an affiliate of the S.C. Manufacturers Alliance.
Geechie performed some writing and publishing work, said Lewis Gossett, president of the Manufacturers Alliance. Gossett said he did not think Merrill would need to report the work done for Made in SC because the affiliate did not lobby lawmakers.
Another count says Merrill, through Geechee, accepted approximately $24,000 from the S.C. Trial Lawyers Association, now called the S.C. Association for Justice, and failed to report or file a statement of economic interest for 2008.
Another allegation is that Merrill accepted $43,000 from the Thomas & Hutton Engineering firm between 2008 and 2010.
One of the allegations involves the Charleston Area Convention and Visitors Bureau. According to the indictment, Geechie received $283,700 from the bureau from 2012-16, about half of which was first sent through his brother’s business when Merrill chaired a budget panel overseeing state tourism funding. The indictment describes the money as being "laundered."
Merrill's attorneys, in their statement, said the charges are off-base.
"Solicitor Pascoe has charged Rep. Merrill for conduct that is not illegal under South Carolina law. In fact, the charges include conduct that has been declared legal in written opinions by the South Carolina Attorney General, the bi-partisan House Ethics Committee, and the State Ethics Commission," they wrote.
"Representative Merrill acted in good faith and looks forward to defending himself in court," the note said.
Andy Shain and Tony Bartelme contributed to this report.