Ethics probe of S.C. Gov. Haley shines light on dark side of state's politics

The probe into whether Gov. Nikki Haley broke state ethics laws could give South Carolinians a look at the dark underbelly of S.C. politics, where some lawmakers use their elected positions to benefit their employers and themselves.

It also is reviving debate about how to rein in that self-serving culture.

Often, the legislators’ money-making activities are legal, even portrayed as standard behavior at the Capitol. Haley’s attorneys have made the “common practice” argument, saying in a filing with the House Ethics Committee that the Lexington Republican “has not done anything that is not already the norm of members of the General Assembly.”

But even if public politics for personal profit is legal, it is not what many South Carolinians want happening at the State House. And it does not serve the public good, activists say.

As a result, the probe is raising new questions:

Should legislators be required to disclose who employs them?

Should legislators be required to disclose what job they perform for their employers, ensuring that no conflict of interest exists with their legislative roles?

And should they be allowed to take campaign contributions from special interest groups that have legislation pending before lawmakers to whom they’re donating?

Those questions arise against the backdrop of Haley’s now-well-known record of working for companies with business before the state — a Lexington hospital and a Columbia engineering firm. But the House Ethics Committee also is looking into Haley’s less-well-known ties to payday lenders, including the period when she chaired a House subcommittee charged with regulating the controversial companies.

Some observers, including some lawmakers, say the allegations raised are serious enough that changing state law is the only way to restore the public’s trust in state government. Others say more drastic changes are needed, including creating a full-time Legislature and prohibiting lawmakers from having outside employment.

“The problem is very widespread. It’s a systematic flaw that has existed for years,” said John Crangle, director of the government watchdog group Common Cause South Carolina. “This (Haley investigation) is an opportunity to expose the problem and make some real progress on reforming the system. I hope we don’t blow it.”

Payday connection

The allegations that Haley illegally lobbied for Lexington Medical Center, which was seeking legislative approval to open a heart-surgery center, are well known.

Haley’s work for Lexington Medical, where she was paid $110,000 a year as a foundation fundraiser, and her consulting work for a Columbia engineering firm that did work for the state, for which she was paid $42,500, are among the subjects of the Ethics Committee probe into whether the then-state representative illegally lobbied, exploiting her office to benefit her employers and her own bank account.

Haley has denied the claims, calling the complaint against her politically motivated and a waste of time.

However, Lexington Medical and the Wilbur Smith engineering firm are not the only businesses to receive subpoenas from the Ethics Committee. Thursday, that committee also requested records from two payday lenders, Advance American and Check into Cash. Both donated to Lexington Medical’s foundation, where Haley worked as its fundraiser.

The question: Was there a connection between Haley the regulating legislator and Haley the fundraiser, as in you contribute to my foundation, and I’ll protect your business?

In 2008, Haley chaired the House’s Labor, Commerce and Industry subcommittee as it weighed whether to follow the Senate’s lead and clamp down on payday lenders. Critics charged that the lenders made hundreds of million preying on cash-strapped consumers.

The state Senate already had passed tough restrictions, stopping just short of banning the industry altogether.

All eyes were on Haley’s subcommittee. It met repeatedly to discuss the Senate bill but ultimately did not act, running out the clock on the legislative session and letting the proposed restrictions die.

While chairwoman, Haley received at least $4,000 in campaign donations from payday lenders.

Then-state Sen. John Hawkins, R-Spartanburg, who led the Senate effort to restrict payday lenders, accused Haley of trapping the bill in committee and looking out for payday lenders.

Hawkins — who unsuccessfully ran for the state Senate in last week’s primary, losing to the Haley-endorsed incumbent Lee Bright, R-Spartanburg — stands by that claim today.

“She was the chief obstructionist in the entire General Assembly of any reform to payday lending,” Hawkins said. “We couldn’t get anything through the House of Representatives because Nikki Haley killed it. She never made any secret of her belief that there was nothing wrong with payday lending. She was its No. 1 apologist.”

Payday lenders have long supported Haley:

In 2007, she received $1,750 from payday lenders. In 2008, they gave at least another $4,000 and, in 2010, the contributed $10,500 to Haley while she was running for governor.

As governor, Haley has received $14,000 in contributions from the companies, including a $3,500 donation from Check Into Cash of South Carolina on Feb. 14.

During her time as a fundraiser for the Lexington Medical Center Foundation, Haley also raised $10,000 from a pair of payday lenders for a foundation event, lenders that she previously had overseen as a subcommittee chairwoman. Neither payday lender ever had donated to the foundation before Haley became a fundraiser for it, according to a Lexington Medical Center spokeswoman.

Haley dismisses Hawkins’ criticisms and suggestions her financial ties to payday lenders were improper.

“We’re far more concerned with what Spartanburg’s actual senator — Lee Bright — has to say about issues facing our state than what a job-killing trial lawyer, who has made a political career of fighting against conservatives, has to say,” Rob Godfrey, Haley’s spokesman, said Friday.

Also, nothing in state law prohibits lawmakers from accepting campaign donations from companies that have pending legislation before them, Haley’s office says. “ ... (T)he governor followed the law, and to drag up something like this from five years ago is silly,” Godfrey said.

Crangle of Common Cause agreed that “Haley accepting the campaign contributions does not violate the law.”

He added, “Should there be a law that prohibits it? Yes.”

Haley is not alone

Haley is not the only lawmaker with questionable connections to businesses.

State Rep. Jim Merrill, R-Berkeley, was paid nearly $160,000 in consulting fees by the S.C. Association of Realtors between 2008 and 2011, according to recent reports by The (Charleston) Post and Courier. At the same time, Merrill sponsored legislation that financially benefited real estate agents, the paper said.

Staff for the House Ethics Committee say Merrill’s consulting activity is legal under state law.

State law bars legislators from advocating legislation for a specific company if they have a business relationship with that company. But they can advocate legislation that benefits an entire industry.

But the public has no way of knowing about the ties between legislators and companies or even entire industries.

Part of the problem is with the state-required statement of economic interest that candidates are required to file to run for office. That controversial statement — the focus of misfilings that resulted in hundreds of candidates being disqualified from last week’s primary — requires prospective candidates to declare any business that they do with the state. But it does not require them to say who they work for and what they do in their jobs.

As a result, the number of lawmakers who work for groups that have legislation pending before the Legislature is not known.

In fact, in many cases it is unclear who a lawmaker’s employer is.

No law requires lawmakers to report their jobs with private companies, according to the state Ethics Commission. And nothing in state law bars groups that employ lobbyists from also employing legislators.

That creates an opening for lawmakers to consult, fundraise or do other jobs that some view as conflicts of interest.

“As long as you have a part-time, amateur Legislature, you’ve got a lot of people who have to have other employment so they can make a living,” Crangle said. “That makes them easy targets for special interests that want to trap them with employment opportunities and sweetheart consulting deals.”

For example, the public was unaware Haley had worked as consultant for the Wilbur Smith Associates engineering firm until Haley allowed reporters to see her tax returns as part of her 2010 gubernatorial bid. Asked why she had not disclosed the relationship, Haley, who campaigned on a platform of requiring lawmakers to disclose their income, cited the law in maintaining she was not required to release the information even though Wilbur Smith had a history of receiving state contracts.

Calls for reform

Haley’s attorney, Butch Bowers also has noted that state law places no restrictions on who lawmakers can work for.

In a comment that some viewed as a threat to expose self-dealing by other lawmakers, Bowers told the House Ethics Committee that other legislators also work for groups that employ lobbyists to advance their interests at the State House.

“Did you know that sitting among you in the chamber, there are House members who are employed by or paid by lobbyist principals (companies and groups that employ lobbyists)?” Bowers told Ethics Committee members. “Sure there are. There’s nothing wrong with that.”

Some lawmakers say they did not know fellow lawmakers were getting paid by companies that have a State House agenda.

“I’m unaware of that happening,” said state Rep. Joan Brady, R-Richland, who requested that Bowers provide the committee with a list of names. (Bowers said he would, but so far he has not.)

House Minority Leader Harry Ott, D-Calhoun, said he, too, is unaware of lawmakers who consult or do other work for groups that have business before the Legislature.

But if it’s happening, it needs to stop, he said.

“I don’t think (lawmakers) should be paid to influence legislation, whether they’re lobbying, consulting or doing whatever,” Ott said. “The voters don’t send us up there to consult and get paid by people with business with the state. They send us up there to represent them.”

Ott said he will introduce legislation in January to ban lawmakers from consulting or working for groups that have business pending before the General Assembly.

But Common Cause’s Crangle says that proposal doesn’t go far enough.

Instead, he says South Carolina should follow the lead of California, Wisconsin, Illinois and other states that have full-time legislators, paid by taxpayers and barred from outside employment.

Crangle would like to see that coupled with campaigns paid for by taxpayers, replacing the current system of campaign contributions from organizations and industries that want to influence legislation.

“Anything short of that and there’s going to be that temptation to get into bed with special interest,” he said.

Haley, too, says she wants state ethics law reformed.

Specifically, she is calling for stronger income disclosure laws for legislators as well as prohibiting the House and Senate Ethics committees from serving as judge and jury for fellow legislators accused of ethics violations. Instead, she wants the State Ethics Commission — which critics say is largely toothless — to police legislators, as it does other officials.

“As a legislator, as a statewide candidate and as governor, Nikki Haley has sought stronger income disclosure laws for legislators to get the conflicts of interest out of the system, and she will continue to do so because it’s the right thing to do,” spokesman Godfrey said. “But, more than that, what’s wrong with the ethics process in the General Assembly is that House and Senate members continue to police themselves.”