Loftis will appeal Ethics Commission decision saying he violated state law by hiring friend
by Seanna Adcox | October 28, 2016 5:17 am
Last Updated: October 27, 2016 at 7:18 pm
State Treasurer Curtis Loftis violated ethics law when he helped in hiring a long-time friend to represent his office in a lawsuit against the Bank of New York, the State Ethics Commission says.
In an order released Thursday, commissioners publicly reprimanded Loftis and told him to pay $500 to help offset the cost of the case. If he doesn’t pay within 90 days, the amount becomes a $2,000 fine, the law’s maximum punishment.
Loftis says he will appeal the decision and fee.
His critics have long questioned a 2013 settlement of $9 million to the state’s two contracted attorneys. Of that, $2 million went to Michael Montgomery, who Loftis helped bring aboard soon after taking office in 2011.
Beyond being Loftis’ longtime personal attorney and fraternity brother, Montgomery was, when the state hired him, a board member of a charity Loftis founded.
The commission found that, because of the charity connection, Loftis violated state law that bars public officials from using their position to economically benefit an associate. The order notes Loftis testified that his failure to disclose the relationship was “inadvertent and unintentional.”
But that doesn’t matter under the law, commissioners wrote, adding that any public official “should err on the side of disclosure.”
Loftis argued Montgomery was not an associate because they worked together at a nonprofit, not a business, according to the order. Commissioners disagreed.
“I fear that letting it stand would impose burdens on the selfless service of thousands of people across the state that devote their time to nonprofit boards and organizations,” he said in a statement.
Montgomery did not return a request from the AP for comment.
The complaint was filed in June 2014 by Sam Griswold, a state retiree who has publicly disagreed with Loftis for years. Griswold said he’s pleased with the finding.
“I don’t think the amount of the fine is of tremendous consequence,” he said.
Loftis said the complaint was filed by the “cronies” of the South Carolina Retirement System Investment Commission, which invests the state’s pension portfolio. Loftis, a member of the board, has publicly feuded with his fellow commissioners since taking office.
“This decision will not keep me from my duties to the people,” Loftis said in his statement. “I work for them and not the handful of rich and powerful elites that run our state.”
The allegations involve a lawsuit started by Loftis’ predecessor. It accused the Bank of New York Mellon Corp. of losing $200 million of state retirees’ pension money through bad investments that violated its contract for conservative, short-term securities lending. By the time the case was settled — with the bank continuing to deny the allegations — the actual loss was estimated at roughly $120 million, due to partial recovery from those investments.
Loftis re-filed the lawsuit in January 2011. An agreement approved by Attorney General Alan Wilson gave Montgomery 22.5 percent of any attorneys’ fees awarded.
The settlement, signed in spring 2013, provided no cash to the state. It credited $25 million to South Carolina’s accounts and awarded the Bank of New York a new, 10-year contract.
In defending the $9 million payout, Loftis said in September 2013 he personally pounded the negotiating table to maximize the attorneys’ fees.
“I was trying to get as much money as I could,” Loftis said then, calling it economic development for two South Carolina law firms. “Not one penny of legal fees came out of retirement money.”