Public Cost of Investigating Disputed $1.8B Grows to Over $11M

Editor’s note: This story is part of a two-article package today. The other story can be found here.

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More than $11 million in state funds have been spent on investigations of and other matters related to the disputed $1.8 billion, The Nerve’s latest review has found.

The growing tab is $3.2 million more than the total revealed by The Nerve in March.

Of the known overall $11.25 million spent through Aug. 8, a collective $7.76 million was paid by four state agencies to six outside law firms in connection with an ongoing U.S. Securities and Exchange Commission (SEC) investigation – which started at least two years ago – into the $1.8 billion and related issues.

The Nerve learned since its last story in March that the S.C. Treasurer’s Office has paid a second law firm in connection with the SEC investigation, plus obtained records on other related expenses incurred by the office and other agencies.

The remaining $3.49 million of the total $11.25 million spent so far included payments to:

• A global consulting firm hired by the state Department of Administration for a forensic accounting report published in January on the $1.8 billion, which, along with two S.C. Senate subcommittee reports, led to the Senate’s historic vote in April to remove state Treasurer Curtis Loftis from office.
• An “independent compliance consultant” hired by the Department of Administration in April to ensure that recommendations in the forensic accounting report are carried out.
• A law firm retained by the Senate to represent the 46-member chamber in a related hearing sought by Loftis before the S.C. Supreme Court before the Senate’s removal proceeding.

The Nerve’s latest review was based largely on 14 S.C. Freedom of Information Act requests filed since April.

The Nerve has a companion story today on a dispute between Loftis and state Attorney General Alan Wilson over the reimbursement of legal costs that Loftis says he personally paid to defend himself in connection with his Senate removal hearing.

The public costs related to the disputed $1.8 billion likely will continue to grow this year.

In the adopted $41 billion total state budget for this fiscal year, which started July 1, the Legislature designated $6 million in legal fees to the S.C. Attorney General’s Office, approximately $5 million of which, according to an office spokesman, would be used to pay additional expected legal fees and costs to a law firm hired to represent the state in the SEC investigation.

Lawmakers also appropriated $1.8 million for this fiscal year to the Department of Administration for the “independent compliance consultant.”

To put the known total $11.25 million spent so far into context, it’s bigger than this fiscal year’s overall budgets of at least 16 state agencies, including the State Ethics Commission, Department of Consumer Affairs and Public Service Commission, as well as the Auditor’s and Comptroller General’s offices, which to date collectively have paid nearly $3 million in outside legal fees in connection with the SEC investigation.

What exactly the SEC is probing isn’t publicly known. The Attorney General’s Office earlier this year told The Nerve that the matter is a civil investigation, though it repeatedly has declined to discuss details.

In an Aug. 5 written response to The Nerve, an SEC spokesperson repeated the federal agency’s earlier statements that it “does not comment on the existence or nonexistence of a possible investigation.”

The Nerve in January requested, under the state’s open-records law, that the Attorney General’s, Auditor’s, Comptroller General’s and Treasurer’s offices provide all emails and letters between the respective agencies and the SEC, though the agencies at the time either declined to do so or say whether they had such records.

Following is a breakdown of the collective $11.25 million spent so far on investigations of and other matters related to the disputed $1.8 billion, according to records provided to The Nerve:

Hefty consulting fees

In 2022, the Senate Finance Constitutional Budget Subcommittee investigated a $3.5 billion accounting error that occurred during the tenure of state Comptroller General Richard Eckstrom, who revealed the lower state general-fund balance in a fiscal year 2022 financial report. The error, which was connected to a years-long conversion to a different state accounting system, led to the Republican Eckstrom’s resignation in 2023 after 20 years in office.

The subcommittee conducted a related inquiry last year into the disputed $1.8 billion, which resulted then in an interim report that was critical of Loftis’ handling of that matter, accusing him of failing to disclose the funds for seven years “despite his explicit statutory duty to do so.”

Then-state Auditor George Kennedy resigned in January this year, just eight days after the release of a forensic accounting report into the $1.8 billion by AlixPartners, a New York-based consulting firm hired in July 2024 by the Department of Administration, as authorized by lawmakers, under a “potential” $3 million contract.

The latest records provided to The Nerve show that the department paid AlixPartners, which, according to its website, has 26 offices worldwide, the full $3 million.

In addition, the department on April 15 awarded a “potential” $1.2 million contract for the period of April 16 through June 30, 2029, to the Greenville office of the national consulting firm Forvis Mazars LLP to be an “independent compliance consultant” – as required under a joint resolution passed in February by the Legislature – to ensure implementation of the recommendations in the AlixPartners report.

In advertising for proposals, the department said the hired contractor “may be required to assist” the state Comptroller General’s, Treasurer’s and Auditor’s offices in the “implementation of all recommendations”; and “may be required to monitor” the results for a period “lasting through no later than” June 30, 2029.

In addition, the selected contractor would be required to make presentations “concerning the status, reports, or completed implementation of the recommendations” to the governor, lawmakers and “any other State or federal agency as may be necessary.”

In a written response this month to The Nerve, Department of Administration spokeswoman Brooke Bailey said that as of Aug. 8, the agency has paid $235,728.42 in fees to Forvis Mazars.

No ‘expertise in SEC matters’

Among its conclusions, the AlixPartners report said about $1.6 billion of the disputed $1.8 billion didn’t actually exist – contradicting last year’s testimony by Loftis to the Senate Finance subcommittee that the money was real.

The report said the Treasurer’s and Comptroller General’s offices were “both aware of the (what we now know to be an incorrect) decision to exclude” a specially created fund that listed the $1.8 billion from the state’s Annual Comprehensive Financial Report for fiscal year 2016 and “the years thereafter.” The report also noted that the $1.8 billion was part of the $3.5 billion accounting error made during former Comptroller General Eckstrom’s tenure.

In its final report on the $1.8 billion, which was released in March this year, the Senate Finance subcommittee recommended that Loftis, a Republican who was first elected in 2010, be removed from office, as allowed under the S.C. Constitution for “willful neglect of duty, or other reasonable cause” upon a two-thirds vote of each chamber.

Loftis unsuccessfully in April tried to convince the S.C. Supreme Court to stop a Senate hearing to remove him from office, and after an hours-long debate on April 21, the Senate voted 33-8 in favor of removal. The removal resolution went to the S.C. House, though it took no immediate action on it.

Records provided to The Nerve by the Senate under the Freedom of Information Act after the removal hearing show that the chamber had retained the Alabama-based Burr & Forman law firm to represent the chamber in Loftis’ petition to the Supreme Court to stop the hearing, with a listed hourly attorney rate of $375 for a former lawyer in the Senate clerk's office who, according to the firm's website, currently works in the firm's Daniel Island office; and a $175 hourly rate for paralegals. The firm billed the Senate a total of $16,165 for services provided through May 31, according to records.

The Nerve in writing this month asked House Speaker Murrell Smith, R-Sumter, about whether the House, either in a special session this year or when it reconvenes in regular session in January, will take up the removal resolution. No response was provided by publication of this story.

Loftis, who annual salary is $164,000, is not accused of any criminal wrongdoing. He has repeatedly denied allegations made in reports issued by the Senate Finance subcommittee chaired by Sen. Larry Grooms, R-Berkeley, publishing lengthy defenses of himself and his office on the agency’s website.

In its latest review, The Nerve learned, through an open-records request to the Attorney General’s Office, that the Treasurer’s Office on Feb. 28 asked the Attorney General’s Office to approve the hiring of the Washington, D.C. law firm of Wiley Rein LLP to represent “current and former STO (State Treasurer’s Office) employees for actions within the course of their employment with the STO, which may be subject to the SEC investigation,” adding that STO lawyers “do not have expertise in SEC matters.”

An attachment with the request, which was approved by the Attorney General’s Office, provided background on the Wiley Rein firm, noting that the “defense of SEC enforcement matters is a highly specialized and complex area requiring significant expertise and experience in navigating the SEC’s unique enforcement investigations process.”

In its March 13 retention agreement, the Wiley Rein firm said it would provide "legal services in connection with an investigation by the United States Securities and Exchange Commission related to a restatement disclosed in the 2022 South Carolina Annual Comprehensive Financial Report," though six pages of the nine-page agreement provided to The Nerve were completely blacked out. The agreement letter indicated that the firm would represent a former Treasurer's Office employee, though his legal fees would be paid by the office.

State law generally requires the Attorney General's Office to approve outside lawyers for state agencies, including fees to be paid. Wiley Rein has more than 250 attorneys, according to online legal sources.

The hourly rates for three Wiley Rein attorneys listed in the Treasurer's Office's request ranged from $487 to $980 – a "discounted" rate, according to the retention agreement – with total maximum requested fees of $200,000 through June 30, and a maximum $200,000 requested for the fiscal year that started July 1. Records provided by the Treasurer’s Office to The Nerve under the state’s open-records law show the firm was paid a total of $153,345.73 in fees and costs for services rendered through June 27.

That’s on top of the $775,883.27 in total fees and costs paid so far by the Treasurer’s Office to the Washington, D.C.-based BakerHostetler law firm for services rendered from August 2023 through June 30 of this year in connection to the SEC investigation, records show. The firm has more than 1,000 attorneys in 18 offices nationwide, according to its website.

“This is a unique matter,” according to an attachment filed with the Treasurer’s Office’s request to the Attorney General’s Office to approve BakerHostetler’s fees. “It is a serious matter when the State of South Carolina and various state agencies are being requested to provide information to the SEC in connection with an SEC investigation of the State’s Annual Comprehensive Financial Report and State bond offerings in which the conduct of the State and State agencies will be subject to investigation.”

In addition to the legal fees paid to BakerHostetler and Wiley Rein, the Treasurer’s Office paid Washington, D.C.-based FTI Consultants, which was hired to assist BakerHostetler with forensic auditing tasks related to the SEC investigation, a total of $71,610.08 listed in invoices dated from October 2023 through last November, according to Treasurer’s Office records provided to The Nerve in April under the Freedom of Information Act. Contacted Friday, agency spokeswoman Kristin Buchman said FTI's fees were included as part of BakerHostetler's billed expenses.

FTI has offices in 85 cities and 32 countries and territories, according to its website.

The Treasurer’s Office also paid a total of $68,967.50 from March 2024 through March of this year for related “crisis communications” services provided by Infinity Marketing of Greenville, according to records obtained under the state’s open-records law.

Other multimillion-dollar bills

The Attorney General’s Office leads all state agencies in the total amount spent so far – $3.92 million paid as of  June 5 – in connection with the SEC investigation, The Nerve’s latest review found. In January 2024, the office hired the Atlanta-based King & Spalding law firm, which, according to its website, has more than 1,300 lawyers in 25 offices worldwide, to represent the state in the investigation.

A retention agreement that was provided last year to The Nerve under the Freedom of Information Act described the SEC investigation as “In the Matter of State of South Carolina, A-04055,” though it didn’t give details of the probe.

Under an amended retention agreement signed on Jan. 7 this year by Attorney General Wilson and provided to The Nerve in February, hourly billing rates this year for six identified King & Spalding lawyers range from $734 for an associate attorney to $1,517 for a firm partner.

As with the original contract, under the amended agreement, which was retroactive to Oct. 1, 2024, the Attorney General’s Office noted that it “understands that the cost of handling a matter is not predictable and that Special Counsel has not made a commitment or promise as to the maximum fees and expenses necessary to complete the Matter.”

The Nerve has a pending Freedom of Information Act request to the office for updated payment amounts. The last payment as of June 5 was for a March bill for $129,588; records show the single-largest monthly payment since last year was $433,296.64 for a September invoice.

The latest records from the State Auditor’s Office show that the agency through June paid a total of $1.78 million to the New York-based Milbank law firm, which, according to its website, has more than 400 attorneys in its New York office, with 11 offices in the U.S. and elsewhere globally.

In January 2024, then-State Auditor Kennedy hired the Milbank firm in to represent the agency “in connection with an investigation” by the SEC into a “multi-year overstatement of the cash balance in the General Fund of the State of South Carolina and the State’s resulting restatement of its historical financial statements,” according to its retention agreement obtained earlier this year by The Nerve, though no other specifics were provided about the probe.

The firm in its agreement agreed to cap hourly billing rates at $1,400 for “any timekeeper,” noting it was offering a 20% discount off its standard hourly rates, which at the time ranged from $1,695 to $2,245 for partners, $1,575 to $1,795 for “counsel,” and $595 to $1,475 for associates.

Since August 2023 through June of this year, the Comptroller General’s Office paid the Columbia office of the Wyche law firm and the Atlanta-based Robbins Alloy Belinfante Littlefield law firm a total of $1.12 million in fees and costs, records show.

In the summer of 2023, current Comptroller General Brian Gaines hired the Wyche law firm, which has offices in Greenville and Columbia, to represent his agency on “Issues Regarding SEC Investigation,” though no details of the probe were included in the copy of the agreement provided last year to The Nerve, which appeared to have at least one paragraph deleted.

Under a separate May 2024 agreement, Gaines approved hiring the Robbins law firm to represent “certain employees” in his office in the SEC investigation. As with the Wyche contract, no details about the investigation were listed in the copy of the agreement provided last year to The Nerve, which appeared to have several paragraphs deleted.

Among other practice areas, the Robbins firm, which bills itself as “One of Atlanta’s Leading Litigation and Regulatory Firms,” represents “whistleblowers” in SEC cases, according to its website.

In addition, the Comptroller General’s Office last week confirmed to The Nerve that it paid a total of $171,580 to the Atlanta-based Mauldin & Jenkins accounting firm for a March 2024 audit report that was cited in the Senate Finance subcommittee’s interim report published in April 2024.

Brundrett is the news editor of The Nerve (www.thenerve.org). Contact him at 803-394-8273 or This email address is being protected from spambots. You need JavaScript enabled to view it.. Follow The Nerve on Facebook, Instagram and X (formerlyTwitter) @thenervesc.