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By RICK BRUNDRETT
The $1 billion subsidy to Scout Motors is about $300 million to $500 million more than what states normally would have to offer in grants for comparable projects, The Nerve found in a review of a newly released State Ethics Commission order.
After learning in late January 2023 that the Scout electric-vehicle assembly plant now under construction near Columbia was one of four finalists for the project, S.C. Department of Commerce Secretary Harry Lightsey informed Gov. Henry McMaster and state House Speaker Murrell Smith that “similar projects typically required a commitment of between $600-$800 million in grant funding,” according to the commission’s Sept. 8 written order.
Lightsey’s notification came less than two months before the Legislature passed and McMaster signed into law a $1.29 billion state appropriation for the Scout project – including $1.09 billion in state surplus funds transferred to Commerce for, among other things, land acquisition, infrastructure improvements, a rail spur bridge and a training center.
The nearly $1.1 billion in surplus funds is approximately $300 million to $500 million more than what Lightsey, according to the commission’s order, told McMaster and Smith usually is required in grant commitments for similar projects, The Nerve’s review found.
And it’s seven times more than the $150 million that the state of Mississippi, which lost out to South Carolina, offered in late 2022 to Scout in grant funding through special legislation, as The Nerve revealed in February this year.
As The Nerve has pointed out, the $1.29 billion appropriation, which included a $200 million loan offer to Scout, works to be about $240 for every man, woman and child in South Carolina.
The Ethics Commission’s order was issued in response to a joint ethics complaint filed in April this year against Scout by the South Carolina Policy Council – the parent organization of The Nerve – and the South Carolina Public Interest Foundation.
But in its order, the eight-member commission – four of whose members are appointed by the governor, with the House and Senate each having two appointments – dismissed the complaint, ruling there was “no evidence” of ethics law violations by Scout in connection with the $1.29 billion appropriation. The Policy Council received the order in the mail last week.
The ethics complaint, filed on April 25 this year, asked the commission to investigate whether Virginia-based Scout Motors Inc., a company created in 2022 by German-based Volkswagen, violated state ethics law by failing to register as a lobbyist principal before the Legislature and McMaster approved the state appropriation, known as Act 3 of 2023.
Scout Motors first registered as a lobbyist principal on April 20, 2023 – a month after the appropriation became effective.
Under state law, a lobbyist principal is defined in part as someone who “directly employs, appoints, or retains” a lobbyist to “influence by direct communication,” among other things, the “action or vote” of the governor or lawmakers “concerning any legislation.” The law requires that lobbyist principals register with the Ethics Commission within 15 days of “employing, appointing, or retaining a lobbyist.”
The ethics complaint against Scout contended that a main purpose of the state ethics law in question (Section 2-17-25(A) of the S.C. Code of Laws) is to “provide the public with advance notice of the identities of companies or organizations that plan to persuade state lawmakers and/or the governor to adopt their legislative agendas.”
In an April 26 letter this year to the Policy Council and Public Interest Foundation, Meghan Walker Dayson, the commission’s executive director and an attorney, said the complaint “contained facts sufficient to warrant an investigation.”
The complaint cited findings in Nerve stories last year and this year about private meetings or events involving Scout Motors officials or their representatives and McMaster, his staff or lawmakers before the appropriation was approved; and the earlier incentives proposal by the state of Mississippi.
The findings “raise legitimate questions about whether Scout Motors or its representatives engaged in direct communication with lawmakers and/or the governor regarding Act 3 of 2023 before the law was passed,” according to the complaint.
The South Carolina Policy Council, an independent, nonpartisan research organization based in Columbia, was founded in 1986 and is “dedicated to promoting and protecting the principles of limited government and individual liberties, free markets, and traditional South Carolina values,” according to its website.
The South Carolina Public Interest Foundation, based in Simpsonville and founded in 2005, is an “independent, nonpartisan private operating foundation dedicated to ensuring that South Carolina governments, agencies and officials act in strict compliance with the state Constitution and statutes,” according to its website.
‘No evidence’
The Ethics Commission, however, ultimately decided to dismiss the complaint – though a vote breakdown wasn’t provided in its Sept. 8 written order – noting that its investigation “revealed no evidence to suggest Scout ever promoted or opposed through direct communication” the “introduction or enactment of legislation” or “any covered gubernatorial action” before the company registered as a lobbyist principal in April 2023.
“To the contrary, all the evidence suggests the State’s public officials and public employees were engaged in an aggressive campaign to entice Scout to set up shop in South Carolina,” the order said.
The commission dismissed the complaint at its July 18 meeting – less than three months after the complaint was filed – Courtney Laster, the commission’s general counsel, said in a Sept. 19 cover letter with the order. No explanation was given in the letter why it took the commission two months to notify the Policy Council and Public Interest Foundation of its decision.
Asked about the status of the commission’s investigation, Dayson, the commission’s executive director, in a written reply to The Nerve on Aug. 26 – just over a month after the commission had already decided to dismiss the complaint – said only, “The Commission has no comment at this time.”
The six-page order provided no details about how many witnesses were interviewed or the identities of those questioned by commission investigators, and gave few specifics about written communications between Scout and state officials.
As for three private meetings or events cited in the complaint – including a swank dinner at the Williams-Brice football stadium in Columbia in February 2023 – involving Scout or Volkswagen officials or their representatives, Commerce officials, McMaster or members of his staff, or state lawmakers, the order repeated several times without giving specifics that according to “attendees interviewed by the Commission during its investigation, Scout did not lobby” during the meeting or event in question.
The order also didn’t address whether an incentives wish list, known as a “request for proposal” (RFP), submitted by Scout for the South Carolina project and which, among other things, sought a cash grant, constituted “direct communication” under state lobbying laws. The Nerve last October revealed that Scout’s RFP was submitted through a global real-estate services firm to town of Blythewood and Richland County officials in December 2022.
In its February story this year, The Nerve revealed that the state of Mississippi had offered a $150 million state grant through special legislation to Scout, which had sought a cash grant for an electric-vehicle assembly plant and a battery facility as part of its RFP to that state, and set an Oct. 1, 2022, deadline to receive a response to its 53-page incentives wish list.
As with the private meetings or events with S.C. officials, the RFP issue was cited in the ethics complaint.
When an investigation is conducted into an ethics complaint, Ethics Commission staff can interview witnesses, subpoena evidence and take depositions to determine the facts of the alleged violation, according to the agency’s website.
But under state law, records obtained by commission staff in its investigation can’t be publicly released by the commission when a complaint is dismissed unless the respondent – in this case, Scout Motors – agreed in writing to waive confidentiality and authorize the release of records.
“The matter shall now be stricken from public record … unless the respondent waives the confidentiality of the existence of the complaint in writing to the Commission and authorizes the release of information about its disposition, ” Laster said in her cover letter with the dismissal order.
Quick deal, big taxpayer tab
As The Nerve previously reported and as was cited in the ethics complaint, the Legislature on March 15, 2023, gave final approval – just one week after it was passed by the Senate Finance Committee – to an amended joint resolution appropriating the $1.29 billion to Commerce for “Project Connect,” the code name for the planned Scout Motors assembly plant on an approximately 1,600-acre site at the town of Blythewood in Richland County.
To put the $1.29 billion into context, the amount is easily larger than the entire current budgets of most state agencies.
On March 20, 2023, McMaster signed the appropriation into law, effective that day. The law directed the state treasurer to transfer $1.2 billion to Commerce within five days of the law’s effective date, with the remainder of the appropriation to be dispersed within five days of the close of the state books or by Nov. 1, 2023, which ever occurred first.
The Nerve in June 2023 revealed details of the 192-page state incentives agreement with Scout, which announced on March 3, 2023, plans to create a minimum of 4,000 jobs and invest a minimum of $2 billion. Records show the deal would allow the company itself to create at least 400 jobs and invest at least $400 million over an eight-year period, allowing the differences to be made up by company “affiliates” and “counted suppliers.”
Up to 400 jobs could be “badge” workers, defined in the agreement as “cafeteria, security, and janitorial maintenance personnel,” according to records.
In January this year, The Nerve sent written questions to Scout Motors president and CEO Scott Keogh asking, among other things, whether Scout officials or other company representatives discussed the state appropriation with McMaster or his staff or lawmakers or their staffs before the legislation was passed. No response was given.
McMaster, a Republican; House Speaker Smith, R-Sumter; and Senate Finance Committee Chairman Harvey Peeler, R-Cherokee, all of whom, according to records, were listed as attendees or guests at one or more private meetings or events with Scout officials or representatives, also didn’t respond at the time to written questions sent directly to them by The Nerve.
McMaster spokesman Brandon Charochak in a January email response to The Nerve said that “state officials discussed and negotiated an incentive package with Scout officials before the legislation was introduced and prior to Scout deciding on South Carolina in March 2023,” adding, “It would have been impossible or unnecessary to draft a bill otherwise.”
The Ethics Commission in its Sept. 8 written order, which was signed by commission chairman Scott Frick, who is an attorney, stated in the last paragraph that the Policy Council and Public Interest Foundation “alleged that Scout likely engaged in lobbying in the days and months leading up to the passage” of the $1.29 billion appropriation.
But the written complaint didn’t specifically make that allegation. Instead, the organizations jointly requested that the commission investigate whether Scout violated state ethics law in connection with the appropriation.
Brundrett is the news editor of The Nerve (www.thenerve.org). Contact him at 803-394-8273 or [email protected]. Follow The Nerve on Facebook, Instagram and X (formerlyTwitter) @thenervesc.
Nerve stories are free to reprint and repost with permission by and credit to The Nerve.