Voters may have something new to decide on this year’s ballot — not who their treasurer should be, but whether they should keep voting for one at all.
An explosive new interim report on Tuesday from an S.C. Senate Finance subcommittee concluded State Treasurer Curtis Loftis and his office are responsible for a $1.8 billion accounting scandal that has embarrassed state leaders. Senators said the snafu appeared to involve no criminal wrongdoing, but cast doubt on South Carolina’s ability to track its finances
Sources say the legislature, which is already considering a vote to put the future of the state comptroller general’s office on the ballot as a result of a separate $3.5 billion scandal, likely will now also ask voters to consider removing the elected treasurer’s office and make it a position appointed by the governor. Loftis has already said he does not plan to seek a fifth term.
“Treasurer Loftis has failed to maintain the integrity of the state’s banking and investment records … (and) has known about (these) unresolved differences for at least seven years,” state Sen. Larry Grooms, R-Berkeley, said Tuesday on the Senate floor.
Weeks of finger-pointing
The Senate subcommittee’s 116-page interim report comes after weeks of finger-pointing by state financial officials over an account that appears to contain $1.8 billion in unexplained and unreconciled funds. Put plainly, state accountants cannot say where the money came from or who it belongs to.
“The subcommittee concludes the state treasurer is responsible for the 1.8 billion discrepancy,” said Grooms, who chaired the subcommittee investigation.
He said while the committee discovered no evidence of criminal wrongdoing, “the possibility cannot be summarily dismissed due to the size of the errors, the length of time they were concealed, and the inaccurate condition of the treasury records.”
Meanwhile, the report’s allegations against the treasurer did not stop with the $1.8 billion error. Grooms’ Senate presentation detailed other money management problems that the subcommittee discovered.
“Research revealed that the (state) general fund was actually negative by $474 million at the close of the (2023) fiscal year,” Grooms said. “A determination was made to offset the negative balance by (using) state investments…despite positive cash balances held in banks and record receipts of revenues into the general fund.”
Doubling-down
Perhaps most surprising was an allegation that Loftis, in response to subcommittee requests for more transparency, threatened to publish highly sensitive state financial records on the internet.
According to Grooms, that threat led to an emergency meeting with the state’s attorney general and members of the staff of Gov. Henry McMaster “to find a way to stop the treasurer from publishing detailed information that would have crippled our state.”
At one point, state Attorney General Alan Wilson was even working on an emergency injunction order to present to the state Supreme Court, Grooms said. But then, a direct intervention by the governor seemed to resolve the situation.
“The governor made a direct appeal to him by telephone, asking him to please don’t do it,” he said. “The governor believed the treasurer was backing down (and) the crisis was over.”
In response to Tuesday’s report, Loftis blasted Grooms and his subcommittee colleagues, noting in a statement that senators enjoy immunity from defamation laws when speaking on the floor.
“There are no penalties for senators making false statements, and no court action available to me,” Loftis said. “I’ll not read the Senate’s report, nor will I watch the Senate proceedings, as the subcommittee’s mission is not one based on honor and integrity.”
Tuesday’s report and continuing scandal arrive on the heels of S.C. Comptroller General Richard Eckstrom’s resignation last March after he admitted to a decade-long series of errors that artificially inflated the state’s cash reserves by $3.5 billion.
Putting Humpty Dumpty back together again
Efforts to right the state’s fiscal ship are currently moving forward in two lanes.
FIrst, McMaster convened an interdepartmental meeting of state financial officers last Thursday and charged them with getting to the bottom of the mysterious $1.8 billion by July 1, according to McMaster spokesman Brandon Charochak
“The governor believes the public’s confidence is best maintained when elected officials and agencies work together to solve problems through collaboration, cooperation and communication,” Charochak said.
And second, with an eye toward restructuring, legislators are working on bills that would bring the state’s financial management under the control of the governor, with the comptroller general, the state auditor and now probably the treasurer becoming his appointees.
“Politics really shouldn’t come into play,” Grooms told reporters on April 2, in reference to the legislation. “People prefer their accountants not be crusaders.”
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