FILE/WADE
SPEES/STAFF
The
SPA and CIP are battling for control of this property, about 100
acres of waterfront at the former Charleston Naval Base. The
breakbulk cargo shipping terminal includes three piers, (from
left) November, Mike and Zulu.
Lasch, 57, is a powerful presence, a big, well-groomed man who wears tailored suits and shirts with monogrammed cuffs. He has a round, reddish face and gray hair parted high on his head.
This self-made millionaire from Ohio, who can't stomach an oyster and talks with a distinct Midwestern accent, has a Southern charm about him.
When he listens, he clasps his hands in front of him, like he might have during his time as an altar boy serving Catholic Mass.
Ask him about the submarine or his other passion, the trucking industry, and he becomes lively, launching into detailed descriptions of machinery.
If you look bewildered, he'll sketch you a diagram from memory.
He can work a room, too. A confident hand-shaker, Lasch offers engaging blue eyes with an introductory gaze that signals trust.
He's been known to be generous with his wallet and to live well, picking up group tabs at restaurants, ordering the best wine, driving the latest BMW or Mercedes and residing in a beachfront home on Kiawah Island. He maintains another elegant home, which doubles as an office, on one of downtown Charleston's cobblestone streets.
When Hunley boosters went looking for someone with the time, energy and connections to raise millions of dollars for the submarine conservation project, they unanimously chose Lasch.
When the State Ports Authority needed a private company to help it get a foothold on the former Charleston Navy Base, it tapped Lasch; and he assembled what would later become Charleston International Ports. That partnership required Lasch's start-up company to operate a shipping terminal at the old base on land controlled by the SPA.
But four years into the 30-year agreement, which entitled the SPA to half of CIP's profit, the agency says it hasn't made a penny from the facility. Instead, it has forked out more than a million dollars in an attempt to prove that Lasch and other company officials made spending decisions that harmed the operation's ability to make money, such as donating to pet causes and loaning money to another company owned by Lasch.
Port officials say Lasch misused company funds while under contract with the SPA and contend that Lasch's political connections caused them to tread lightly in addressing the issue, even after the partnership began to fall apart.
Lasch and other CIP officials say the SPA failed to live up to its end of the contract, terminated the deal prematurely and failed to allow CIP time to address defaults alleged by the SPA. As a result of the dispute, the SPA seized control of the terminal.
CIP officials say the takeover of the shipping terminal is nothing more than a land grab by a rogue state agency with plenty of reasons to want the waterfront property for its own use, especially after state legislators ordered the agency's port expansion plans from Daniel Island to the former base.
The accusations and finger-pointing from both sides have all but torn apart the once-heralded union of public and private interests. Mending the split could cost even more public money if the dispute is sent to a tribunal of high-profile arbitrators selected by both parties. Each of the arbitrators would be paid $500 per hour.
Former S.C. governor and U.S. Education Secretary Dick Riley, former College of Charleston President Alex Sanders and former Georgia Gov. Roy Barnes could rule that the SPA owes Lasch a multi-million- dollar settlement for kicking his company off the base before its contract expired.
Or they could side with the SPA's argument that it was justified in ending the contract early and without the need for a buyout, putting Lasch's Charleston International Ports out of business and officially returning the land to SPA control.
CIP lobbed the latest volley earlier this month -- a lawsuit asking a judge to allow CIP to run the terminal while negotiations continue. The judge, who last week said he's inclined to grant CIP's request, is expected to rule Monday.
PAST MISTAKES
How is it that Lasch, a popular, likeable man with many powerful friends in South Carolina, is now caught in a growing financial and legal storm?
The answer involves a combination of politics and lucrative waterfront trade. Lasch's work on behalf of the Hunley project and his friendship with that project's champion, state Sen. Glenn McConnell, have, perhaps unjustly, drawn him the ire of critics of McConnell and the Hunley conservation project.
But Lasch willingly stuck his hand into a potential hornet's nest when he went into business with the SPA, a politically influenced agency often accused of using heavy-handed tactics to get its way.
Lasch's falling out with the SPA has given rise to a variety of allegations, some new, some old.
While he's been forced to defend CIP's spending decisions, Lasch has been confronted also with a chapter of his life he'd rather forget.
In 1995, federal authorities in Michigan said they were prepared to indict Lasch on felony criminal charges of embezzling funds from his former company's 401(k) savings plan before he agreed to plead guilty to a misdemeanor and restore missing money.
While the Michigan record is not related to Lasch's contract with the SPA, its merits are the subject of disagreement, and, almost since he arrived in Charleston, fodder for Lasch critics.
His supporters say the Michigan record is a mountain made out of a molehill and that bad legal advice locked Lasch into a business arrangement in which he was a powerless president. Lasch says he pleaded guilty to a misdemeanor to make the situation go away, but "in retrospect, I probably should have fought it."
FILE/MIC
SMITH/STAFF
A
ship is berthed along Pier Zulu, the newest and best pier at the
former Charleston Naval Base. At the time this photo was taken
in April 1999, the terminal was operated by a different company,
which was replaced later that year by CIP.
BMW CONNECTION
A common thread runs throughout Lasch's business history in Michigan and South Carolina.
For more than a decade, luxury auto-maker BMW, which churns out new cars at its Upstate assembly plant, has been a critical ingredient in Lasch's success.
In 1991, Lasch's first auto-hauling company, Robin Transport, collapsed amid allegations that he misused company and employee funds.
Still, BMW had been impressed with the company's stellar record of delivering cars damage-free and wanted to give Lasch truckloads of new business.
Without a company to handle BMW's offer, Lasch said he launched a new company, Bavarian Motor Transport, in 1992. Business filings with the state of Michigan show that BMT was incorporated in August 1991, several months before Robin Transport shut its doors. Lasch said BMT's creation appears to predate the collapse of Robin Transport because BMT previously existed as a "shelf company," which allowed BMT to get up and running quickly without the need to form an entirely new company.
The BMW business boomed. In coming years, that led to other well-known auto manufacturers, such as Mercedes and Porsche, signing up Lasch to haul their precious cargo.
Ask Lasch how he manages to make such a nice living in the trucking industry and he explains that it's not just a matter of hauling cars around the country.
The industry's average damage rate is about 8 percent. For 13 years, Lasch's companies have averaged just over 1 percent.
Those cars are like babies to their owners, he said, and that's how they should be handled. "You make your goals the customer's goals."
Some might consider Lasch a micromanager when he talks about tracking his truck drivers' whereabouts by satellite, even tailing them in his own car and scolding them at rest stops when their loads are not properly secured.
He pays his drivers an average of $73,000 a year and offers them laptop computers and access to a library of audio books -- anything to keep them happy and less inclined to cheat his company.
"You hire your own problems," Lasch said. "A driver has 10 hours a day to think about 'How can I beat the system? How can I get something for nothing?'"
A GO-GETTER
Free rides weren't part of Lasch's Ohio upbringing. This self-described workaholic showed an entrepreneurial spirit and good work ethic early in life, holding down a newspaper route in Cleveland and helping out at his dad's meat market.
After high school, Lasch worked his way through John Carroll University, a Jesuit school near his home that teaches its students to balance rational thought with human affection.
While earning his degree in business and theology, Lasch worked in the mailroom of Leaseway Transportation Corp., a trucking company.
He was just 19, but he had heard his life's calling playing out in an orchestra of big rigs, gritty truckers, tight deadlines and wheeled cargo.
Throughout the 1970s, Lasch ascended through the industry. By 1983, he was ready to lead his own company.
With a little help from Uncle Sam, which in the early 1980s was deregulating the trucking industry and opening the doors to smaller businesses, Lasch became president of Robin Transport. He got the job through a friend, who had just purchased the Michigan company for $560,000.
Life was good. The company grew quickly moving parts for General Motors and pioneering the latest wave in car-hauling: soft-sided trailers. Because their sides can be peeled back like a theater curtain, these specialty trailers offer tremendous flexibility for loading and unloading.
But the breakthrough performance was short-lived. In an attempt to customize the company's trailers so they could haul both auto parts and autos, Lasch went in search of an investor, setting off a chain of events that would result in his company being the subject of a federal criminal investigation.
CRACKED ROBIN'S EGG
Throughout the 1980s, Charles Brown was enjoying his ride at Robin Transport. Lasch was his boss.
A trucker, Brown logged thousands of miles to support and raise his family in a suburb of Lansing, Mich., and took comfort in building a nest egg through the company's 401(k) plan.
"The business was expanding," said Brown, 49, who started with the company in 1981. "We had hundreds of employees."
But the company's success also caused tensions between drivers and management. As a result, the drivers unionized with the United Auto Workers.
Brown became one of the union's trustees of the employee savings plan, the same one he hoped would allow him to retire with financial peace of mind.
Business hummed at the company's terminals in Oklahoma, Ohio, Michigan, Missouri, Maryland and New Jersey as its telltale trailers -- painted robin's egg blue -- zipped loads of cars and parts around the country.
Lasch had a $120,000 annual salary and shuttled around town in a Cadillac. He lived in an upscale neighborhood in East Lansing, Mich.
He made inroads into Michigan society with handsome charitable donations, something he would continue to do in Charleston years later.
His employees regarded him as a big spender.
"Everything was first-class with him," said Brown, who knew Lasch personally during the decade they worked together at Robin. "He's not a cheap man. He wouldn't stop in for a hamburger. He goes in and eats a T-bone and orders the most expensive wine on the menu. It was no problem for him to take seven or eight people out to dinner and spend a thousand bucks."
Brown said the company seemed to be doing well and he and the other employees had no reason to be alarmed when in 1986 Robin Transport was sold to Indiana-based TNT Transport Group for $2.4 million.
Behind the scenes, Robin Transport was struggling to get over a money hump. Even the purchase by TNT was stalled for months because of Robin's poor financial health.
Lasch hoped the sale would provide Robin with a badly needed infusion of cash to buy the new specialty trailers. Instead, the company continued to rack up losses.
Lasch and other Robin Transport executives clashed with TNT's people over the company's direction.
By 1989, when Lasch and a group of investors bought the company back from TNT, Robin Transport had sustained operating losses of $15 million, nearly $4 million of it occurring in a single year.
Then Brown got a telephone call that would change his life. The manager of the company administering Robin Transport's pension plan was on the other end. He told Brown that Robin Transport was not making payments to the plan.
The money was going elsewhere, investigators would later allege.
"Robin Transport was running into a cash flow problem and ... began using funds that were supposed to go to the plan ... to operate its business," assistant U.S. Attorney Daniel Y. Mekaru argued in a 2001 court hearing on Lasch's request to expunge his record.
"Lasch was mis-billing receivables and inflating the amount of business that was being done by the company because he wanted the books to look better," Mekaru told the court.
From there, the situation only worsened, Mekaru argued in a Western District of Michigan courtroom. "Beyond even misusing employer contributions to the pension plan, the company began to misuse employee withholdings," Mekaru told the judge.
By fall 1991, Robin's financial egg had begun to crack.
TNT, which, according to Lasch and his attorney, retained broad operational control over Robin Transport after selling the company to Lasch and his partners, soon caught on to the company's troubles, Mekaru said in court. "When (TNT) realized they were being defrauded by Mr. Lasch, they withdrew his line of credit and they shut him down," he explained to the judge.
While they agreed that money was missing from Robin Transport's 401(k), Lasch and his attorneys said TNT executives were responsible for the disappearance.
TNT Transport no longer exists, said a spokeswoman for TNT Logistics, a Florida-based company that spun off its trucking division. Officials who worked at TNT Transport during the period it was associated with Robin Transport could not be contacted.
'VICTIM OF CIRCUMSTANCE'
Michigan attorney Alphonsus Murphy said he rarely goes out on a limb to personally vouch for his clients, some of whom he concedes are crooks.
But he's willing to do so for Lasch.
"Warren Lasch is a good man," Murphy said. "This guy has character to the nth degree."
Murphy said it pained him to watch his client toil over the charges levied against him by the government. "The guy was an absolute wreck," Murphy said. "Warren told me once he was waking up at night with his pajamas wringing wet with sweat."
Lasch was ill-served by bad legal advice on his purchase arrangement with TNT and subsequently by an overzealous Michigan prosecutor, Murphy said. He referred to his former client as a "victim of circumstance."
Lasch should never have signed an agreement as part of his purchase of Robin Transport from TNT that handcuffed his ability to make financial decisions as Robin's president, Murphy said. "It was the absolute worst deal," Murphy said, adding that he doesn't know if a copy of that contract still exists. "The thing was a mess."
Lasch said that as president he had no check-writing authority and no keys to the building where his title suggested he was the boss. TNT was running the company and TNT employees used money from the 401(k) plan to pay off company debts, he said.
The government invested a lot of time and resources in its investigation of Robin Transport and was under pressure to "come up with a pound of flesh," Murphy said. "Here was a guy who was absolutely railroaded."
Mekaru, who is still an assistant U.S. attorney in Michigan, said in a recent telephone interview that he stands by all of his and the government's statements in Lasch's case, including his statement in court that his office was prepared to indict Lasch on a felony charge of embezzling funds from Robin Transport's pension plan.
But with the statute of limitations nearing and Lasch's lawyers looking for a deal, the government agreed to allow Lasch to plead guilty to a misdemeanor offense of failing to file an annual pension plan report with the state of Michigan, Mekaru said in the 2001 court hearing.
Murphy said that he and Lasch offered to help Michigan authorities make a case against TNT employees but that Mekaru had a "certain vindictiveness" and seemed out to get Lasch.
Still, Murphy was confident he could successfully defend Lasch and urged him to fight to clear his name.
But Lasch said that even though he "never took a dime from anybody," he didn't want to put his family through the stress and expense of a legal fight, deciding that pleading guilty to the misdemeanor was the quickest and easiest way to end the ordeal. He now calls that decision "the biggest mistake I ever made."
In 1995, as part of the plea agreement, Lasch agreed to pay $48,068 in restitution, which included about $30,000 in unpaid employee contributions to the pension plan and loan debt. The court also barred him from holding any fiduciary role with any company pension plan until 2008 and required him to cooperate in any future investigation of TNT.
The government's lawyers conceded in court, however, that Lasch's failure to file the annual report was not designed to conceal embezzlement from the pension plan.
No action was ever taken against TNT or its employees, Murphy said, adding that a substantial amount of the money Lasch was ordered to pay represented his own portion of the pension plan.
Lasch said he had every reason to believe that he had put Robin Transport behind him, never imagining that within a couple years he would become a public figure in South Carolina.
"I don't think he ever took into consideration that (the conviction) was going to come back up," Murphy said.
FROM THE ASHES
The end of Robin Transport in late 1991 arrived abruptly and at the worst possible time.
Brown said he got his pink slip four days before Christmas that year.
"Nobody saw it coming," said Brown, who was later interviewed numerous times by agents from the U.S. Attorney's Office and FBI in Michigan as part of their investigation. "A lot of people lost their incomes. I lost about $6,000 that I had paid into the pension. I was pretty upset."
Now disabled from an auto accident and no longer driving big rigs, Brown said he never got all of his money back.
But Lasch bounced back after Robin's fall. Just days after the company went under, the man who considers resilience and persistence his best attributes launched a new car-hauling company and signed a lucrative deal with BMW North America to haul its cars to U.S. dealers.
After he "lost everything when Robin went out of business," Lasch said he borrowed money to start Bavarian Motor Transport.
Brown, the only remaining trustee of the Robin Transport pension fund, said he was shocked that Lasch reappeared with a new company so soon after his first company failed.
It's unclear what financial role BMW might have had or still has in BMT. Lasch said he relied on the car-hauling contract with BMW to secure start-up money but that BMW never loaned the company money and that he has always been sole owner.
Numerous bank filings with the Michigan Secretary of State list BMT as a debtor to BMW's financial institution, BMW Financial Services. BMW spokesman Bobby Hitt, at BMW's Spartanburg County facility, said it's not unusual for BMW to loan money to its contractors.
In the mid-1990s, with BMW at his side yet again, Lasch rolled into South Carolina, home of BMW's only U.S. assembly plant.
Building on his successes with BMW, Lasch formed another car-hauling company, Tri-Star Transport, in 1997. Today, in addition to BMWs, Lasch's trucking companies also transport cars for Saab, Porsche and Mercedes-Benz.
Last year, BMT reported annual sales of more than $31 million and TST nearly $12 million.
Through another company he formed called Performance Automotive Services, Lasch oversaw rail car and parking operations at the sprawling BMW assembly plant just outside Greer.
Maintaining the comfortable lifestyle he'd become accustomed to in Michigan, Lasch in 1995 began building a home on Kiawah Island.
He had visited the Palmetto State only once, years earlier on a family vacation, but he said he knew even then he'd return some day to make it his home.
THE PITCH
By 1997 it had become clear that if anybody could spot a business opportunity involving BMW, it was Lasch.
With his new island house complete and his car-hauling businesses lunging forward like the high-horsepower speedsters they carried, Lasch devised a plan that would steer him into a relationship with the State Ports Authority.
Lasch thought BMW was wasting money by importing its foreign-made cars through the Port of Charleston's downtown Union Pier Terminal and sending them by rail some 200 miles to the Upstate BMW plant for minor additions such as audio equipment.
He thought BMW could relocate that relatively small part of its operation, called a vehicle processing center, closer to Charleston's port and eliminate the rail shipments to the Upstate.
Lasch commissioned a study that found his idea would save BMW as much as $5 million a year.
"BMW was very supportive," said Lasch, who set out to pitch his plan to state leaders and hired the local law firm of Nexsen Pruet Jacobs Pollard & Robinson to fine tune the plan's details.
During this period, Lasch became friendly with two of the law firm's lawyers, former Navy Adm. William Schachte and Richard Tapp.
BMW spokesman Hitt said the company did not officially endorse Lasch's idea, which only had the support of one BMW official who had overstepped his authority in backing it.
Still, Lasch and the lawyers honed in on the former Charleston Navy Base as a possible location for the BMW operation. The base was then being transferred from military to civilian use by the Charleston Naval Complex Redevelopment Authority, or RDA.
Tapp suggested early on in a letter to Lasch that Lasch's company, BMT, lease a parcel at the base and sublease the land to BMW for the proposed processing center.
So in 1997 Lasch went to the authority's waterfront offices and made a pitch to its top executives, including SPA President and CEO Bernard Groseclose Jr. and L. Duane Grantham, the authority's second-in-command.
"I didn't know a lot about him," Groseclose said of Lasch, describing him as "a very positive individual."
Grantham was less diplomatic, explaining in a 2001 legal deposition stemming from a related Navy base lawsuit that he and Groseclose couldn't shoo Lasch out of the office quickly enough.
The SPA's apparent lack of interest stemmed from the fact that it was sinking money into upgrades at Union Pier to accommodate more BMWs.
The last thing the SPA was interested in was handing over one of its highest-profile customers to some new player, particularly if there wasn't anything in it for the agency, Groseclose said in a recent interview.
Today, the SPA is considering a plan similar to the one Lasch pitched in 1997. With its BMW storage contract set to expire next year and Union Pier already filled to near capacity with BMWs, the SPA is considering moving the storage operation to the former Navy Base. One possible location is Charleston International Port's former shipping terminal.
A SURE THING
Lasch took the 1997 rejection from port leaders in stride and went back to the drawing board.
Before long, he was talking with them again about another business opportunity, one in which the port stood to rake in a profit.
Following a two-year roller coaster ride of morphing plans and closed-door talks, the RDA awarded the ports authority a sublease for one of the base's most sought-after waterfront parcels.
But because North Charleston residents and leaders objected to a non-taxable agency running a shipping terminal at the base, the SPA needed a private firm to run the operation. The thinking was that an arm's length arrangement with the ports authority would deflect public criticism of the plan.
The role of surrogate would eventually be filled by Lasch's company, CIP, which in 1999 signed an unprecedented 30-year agreement with the SPA to run the terminal and handle breakbulk cargo, loose goods not suitable for shipping containers.
The SPA couldn't lose, or so its leaders thought. The agency would market the terminal in exchange for half of CIP's profits.
To seal the deal, state leaders sent letters urging the RDA to bless the maritime marriage. Gov. Mark Sanford, who then was a member of the House of Representatives, called the partnership "a win-win."
State Sen. McConnell, R-Charleston, and other lawmakers wrote to RDA officials that the project "seems to be in the public interest."
Although the shipping terminal proposal they endorsed was later shifted to a different area at the base -- because North Charleston Mayor Keith Summey decided he wanted a public park on the first site -- the basic plan remained largely the same.
It is unclear whether anybody checked into Lasch's business background during the reviews of either base reuse plan.
During a subsequent investigation by the Legislative Audit Council into the lease award process at the base, RDA Executive Director Jack Sprott said his agency did not look into CIP's finances and instead relied on the "expertise, reputation and financial stability" of the ports authority.
RDA board members were, however, provided with a list of Lasch's personal and business assets. But the values of some of those assets are debatable.
For example, Lasch listed the value of his Kiawah Island home at $10 million even though at the same time Charleston County appraised its value at $1.2 million. Lasch, who has worked in real estate, said it is not uncommon for market value and appraised value to differ drastically.
There were also differences in the value of two of his trucking companies. Lasch said Bavarian Motor Transport was worth $6 million and Tri-Star Transport was worth $2.5 million.
Based on information from the companies themselves, financial ratings firm Dun and Bradstreet reported the companies' values during that same period at $1 million and $76,000, respectively.
Lasch said all the values provided to the RDA are correct and, if anything, were understated.
Still, there were concerns about the proposed deal.
RDA board member Susan Dunn voted against the CIP arrangement, later telling audit council investigators that the whole thing was just "too pat."
In a recent interview, she added, "I didn't feel like I could figure out what was going on, and nobody was telling me."
SPA board chairman Whit Smith, who in 1999 had just been appointed to the SPA board, said he doesn't recall any detailed discussion of the CIP deal before the board's approval of it. "I was sort of like a sheep. I sort of relied on the (port) staff that they had done due diligence."
ARCH ENEMIES
If there was relatively little public scrutiny of the partnership, it wasn't because H.R. "Jock" Stender didn't try to make waves.
Stender, whose Carolina Marine Handling operated a shipping terminal at Pier Zulu before CIP arrived there in 1999, will still try to convince anyone who will listen that the SPA's deal with Lasch wrongfully pushed his company off the base and into a bottomless financial hole.
Since then, Stender has waged a campaign to discredit Lasch and anything associated with him, including McConnell and the Hunley. He has filed lawsuits and countless requests for documents under the state's open records law and lobbied the media to write about his findings.
His legal fight against CIP and the SPA has drained his finances and his accusations have landed him in court to defend a libel suit brought by an RDA official. That suit, later settled out of court, and other actions have led many in Charleston's waterfront community to view much of what Stender says with suspicion.
A third generation waterfront businessman, Stender, like Lasch, is imposing. They share a command of and passion for their respective industries.
Mention the name of one to the other and both become tense and angry.
Lasch said he has never met Stender and doesn't care to. He accuses Stender of stalking him and feels threatened by Stender's own admission that he has rummaged through garbage cans belonging to Lasch and others.
Far from apologizing, Stender boasts of the "explosive" documents that his night-time raids have netted, such as CIP expense sheets, insurance letters and personal correspondence.
McConnell, a lawyer, concedes that as long as Stender is rummaging through garbage on public property, he's probably within his legal rights. Richard Quinn, whose public relations firm does work for Lasch and the Hunley, said Stender has been seen going through his company's dumpster on private property.
For anyone trying to grasp the years-long play-by-play that led up to and followed the CIP deal, the reams of public documents collected by Stender as part of various lawsuits against CIP and others tied to the terminal deal can't be ignored.
Smith, the SPA board chairman, said some of the concerns raised by Stender years ago, including that CIP did not have a proven track record in the shipping industry, now seem prophetic in light of the agency's recent split with CIP.
But four years ago, as CIP was ramping up to do business, few were willing to criticize a deal that showed so much promise.
SWITCHING SIDES
The CIP family became a virtual who's who of Lowcountry power brokers.
As a CIP consultant, former North Charleston Mayor John Bourne pitched the company to city leaders.
North Charleston Mayor Keith Summey flew to Texas with CIP officials on a business trip, according to CIP expense reports.
The mayor's son, Elliot Summey, took a job running CIP's terminal operation.
Schachte, the Charleston lawyer who had advised Lasch on the BMW vehicle processing center, became one of CIP's managing members.
But Lasch believed that he needed a strong, experienced leader to run the company, a pillar of the "team-building" philosophy he espoused.
As it turned out, a nationwide candidate search wasn't necessary. Lasch hired Grantham, the SPA executive vice president who crafted and signed the agency's agreement with CIP.
Though his first meeting with Grantham two years earlier had been somewhat cold, Lasch offered to more than double the port executive's $144,000 annual salary to $300,000.
Grantham resigned his public post at the end of 1999 to do consulting for CIP, raising ethics concerns and prompting the Legislative Audit Council to call for strengthening of the state ethics law.
State employees are required to wait at least one year before taking a job with a company that is regulated by the agency where the public employee worked, if the job involves a matter in which the public employee participated.
The State Ethics Commission approved Grantham's employment in the private sector. The SPA's own attorney wrote the commission a letter saying he had no problem with the move.
The move did not represent a conflict of interest because Grantham said he was seeking employment with a different Lasch-owned company, Opportunity Research Inc., where he would provide "services" to CIP, the commission's attorney explained in an opinion.
That's a different explanation than the one Smith, the SPA chairman, remembers getting from Grantham before he resigned. Grantham didn't mince words when he relayed that he planned to take a job running CIP, Smith said, adding, "I just didn't think it passed the smell test."
After the deal took wing, Smith and other port officials say they dealt almost exclusively with Grantham on all CIP business matters.
The Legislative Audit Council said in its report that it was unable to make a definitive ruling on any possible ethics violation because it was denied access to the ethics commission's opinion. At Grantham's request, the opinion was kept confidential, which is allowed under state law.
The day after the ethics commission okayed Grantham's employment, he and Lasch inked an employment contract entitling Grantham to a $300,000 annual salary, a $12,000 annual car allowance, a 19 percent stake in CIP's operating profits and a 19 percent share in any profits from the sale of CIP.
Based on the $25 million estimate CIP says it is now owed by the SPA for a buy-out of its contract, Grantham stands to earn a handsome check, perhaps in the millions of dollars, if arbitrators decide in CIP's favor.
While Grantham's salary was initially paid through Opportunity Research Inc., an accounting probe paid for by the ports authority found that the money came from CIP, which paid "management fees" to Opportunity Research Inc.
Sometime after the one-year wait requirement passed, Grantham officially became CIP's president.
Grantham declined to comment for this story, citing the ongoing legal dispute with the SPA.
Late last week, in court papers filed in response to CIP's lawsuit, the SPA took the position that its contract with CIP is void because of ethics questions surrounding Grantham's move.
ROCKY MARRIAGE
Like most new marriages, the terminal partnership enjoyed a honeymoon.
The celebratory mood was reflected in an $18,500 tab for CIP's kick-off dinner, according to CIP expense reports.
In an early 2000 interview with the SPA's Port News magazine, Grantham, referred to in the article as CIP's president, said he was pleased with how well the start-up had gone and was encouraged by his company's great potential.
After all, the port authority's breakbulk business at the time had been in decline for years. The CIP deal was expected to lure some of that cargo back.
But the happy family soon turned dysfunctional, in part because the partners had differing interpretations of some of the contract's more basic terms.
While it required the SPA to market CIP's terminal, the contract didn't specify how much business the port would steer to Lasch's company.
Groseclose said the SPA never intended to transfer any of its existing breakbulk business to CIP. The plan was to direct only overflow cargo to CIP, Groseclose said. He added that CIP's lack of profitability was caused by its expenses being out of line and not from stinginess on the part of the SPA.
Virtually every facet of the union seemed a source of contention. CIP sublet parcels and buildings and made bids to accept cargo shipments without telling its partner. In one instance, involving a bid to accept a spent nuclear reactor, the partners offered competing bids.
"There was always something," Groseclose said.
Lasch said he never would have agreed to the deal if he felt his company's success hinged on the whims of port leaders to share business.
"It's like I fought my way into the gas chamber," Lasch said, suggesting that other forces caused the split.
CIP officials have alleged that an SPA manager whose job it was to pitch CIP's terminal to potential customers had motives to do otherwise.
In a business letter sent from his state agency e-mail account, the manager asked Lasch for a personal loan of $150,000 to $175,000.
In the same letter, the employee assured Lasch that he would generate revenue for CIP.
Lasch said he declined the request through a third-party. Soon after that, CIP officials said they noticed a drop in business.
The SPA says it investigated the matter and found no other examples of similar behavior. The employee was reprimanded and remains an employee of the SPA.
Both sides' grievances were supposed to be aired in a joint CIP/SPA committee, but the group met irregularly; and when it did, members couldn't agree on basic meeting protocols such as keeping minutes.
There were occasional periods of reconciliation, but such calm quickly succumbed to new problems.
In a March 2002 letter to Groseclose, Lasch shared responsibility for some of the frictions, vowing to become more involved in his company's operations.
At the time, he was increasingly distracted by another maritime project, the Hunley.
HONORARY CONFEDERATE
By the end of the 1990s, Lasch was in business with the state of South Carolina and making a name for himself through the Hunley project.
Just a couple of years earlier, Lasch had to ask what the Hunley was, but today he recounts the sub's remarkable history to spell-bound audiences.
The Civil War relic and the efforts behind its recovery and conservation have moved Lasch to tears.
His downtown dining room is a virtual shrine to the Confederacy. Famous battles and Civil War scenes are depicted in ornately framed artwork. Miniature cannons and Rebel soldiers' gear are table centerpieces.
Though he's made millions in trucking, Lasch doesn't pass out business cards suggesting that fact. In a meeting, he whips from his pocket a thick stack of business cards that identify him as chairman of Friends of the Hunley, the project's fund-raising arm.
McConnell, chairman of the state Hunley Commission, endorsed him for the job.
Widely considered one of the state's most powerful politicians, McConnell has played a central part in speeding Lasch's rise in society and business.
It was Schachte, the attorney whom Lasch had met while studying where BMW might fit at the old base, who introduced the two.
McConnell was either directly involved in or on the periphery of several efforts that fueled Lasch's public standing.
The Hunley conservation lab at the base was named after Lasch. Former Gov. Jim Hodges gave Lasch the Order of the Palmetto Award, the state's highest civilian honor.
The Charleston maritime community gave Lasch its prestigious Christopher Gadsden Award. The Citadel awarded him an honorary degree, a doctorate of business administration.
McConnell's ties to Lasch also popped up in places where the senator would seem to have had no obvious role.
For example, a fiery letter that Lasch wrote to Groseclose in November 2001 complaining about friction between CIP and port officials was copied to McConnell.
Another letter suggests McConnell had a more direct stake in Lasch's business dealings with the SPA. The letter, written by Grantham on behalf of CIP, to Groseclose in December 2001 was first submitted as a draft to McConnell's legislative office.
McConnell's legislative counsel, John Hazzard, to whom Lasch once gave free use of a Porsche Boxster as a thank-you for his legal work on the Hunley project, was asked to review the letter.
McConnell said it's not unusual for him or others on his staff to review letters written by constituents, even close friends.
But the senator said he has been hesitant to assist Lasch because some might link such help to Lasch's pledge to raise millions for the Hunley project.
Critics, McConnell said, "are trying to make it appear that he got favorable treatment because of his political connections. They are going to try to make it appear there is some kind of quid pro quo going on to the Hunley. We've always kept the two separated."
Smith, the SPA chairman, said the agency would have acted sooner in severing its relationship with CIP if not for Lasch's friendship with McConnell, who has never been shy about leaning on SPA leaders.
"I'm sure that played in," Smith said. "Everybody was pretty much aware that (Lasch) was well connected and we needed to make sure we did everything right. You sort of mind your Ps and Qs."
McConnell said his name is being dragged into the CIP dispute because port officials have a weak case against Lasch.
"I've been around in politics long enough to know that there are two sides to every story," he said. "The experience I've had with the port is that they play hardball, real hardball, and I'm talking about politically, too."
While port leaders say the mere mention of Lasch's political connections caused them to act gun-shy, such influence did little to shield Lasch's business past.
Like the Hunley, it was about to resurface.
PHILANTHROPIST
In 2001, as Lasch was being called onto public stages in South Carolina for pats on the back, his attorneys were in a Michigan courtroom arguing that Lasch had become a prominent figure in his adopted state and deserved to have his criminal record wiped clean.
Describing Lasch as a philanthropist serving on numerous charitable boards, Michigan attorney Charles A. Palmer said Lasch had "raised most of the funds for the raising of the Hunley."
Palmer asked the court to expunge Lasch's conviction, which he said was making it difficult for Lasch to serve on a public board in South Carolina.
That board was the state Infrastructure Bank Board, which doles out billions of dollars of public funds for road and bridge projects. Lasch had been named to the board by McConnell, who as president pro tempore of the Senate controlled the appointment.
But Mekaru, the same assistant U.S. attorney in Michigan who in 1995 was prepared to indict Lasch in the Robin Transport 401(k) case, didn't think purging the record was a good idea.
"Mr. Lasch was in a position of authority, a position of trust," Mekaru told the judge, according to a transcript of the hearing. "(Lasch) had fiduciary responsibilities to the plan, its employees, and to this company. And what did he do? He violated their trust. Now he's asking that he be put in the position of trust with the state of South Carolina and that this conviction be hidden from those people."
Lasch said he was again the victim of bad advice from friends who suggested he attempt to have his record expunged. He said he did not attend the expungement hearing and never met the attorney who argued on his behalf.
McConnell said he was unaware of Lasch's conviction at the time he made the board appointment. When he later learned of it and reviewed the court record, he thought little of it.
"It isn't a big deal to me," McConnell said. "It was only a fine and failure to file a tax form. Knowing Warren, he probably (pleaded guilty) to get rid of the problem."
McConnell said he didn't know if the conviction would have hampered Lasch's ability to serve on the board.
That turned out to be a moot point anyway. Citing his time commitment to the Hunley, Lasch decided not to serve on the bank board.
Lasch continues to act as a steward of public funds as chairman of Friends of the Hunley, which pays Hunley-related bills using state and federal funds awarded to the project.
McConnell stands behind Lasch.
"I just believe he's as honest as they come," McConnell said. "I have no misgivings about voting for him for chairman of Friends of the Hunley, and I think he has done a great job."
Lasch's effort to have his criminal record expunged was unsuccessful. Murphy, Lasch's former attorney, said he wasn't surprised the request was rejected because the judge and the prosecuting attorney at the hearing, both of whom were involved in the 1995 plea agreement, probably didn't like having their legal decisions challenged in court.
Because of that, Murphy said the government overstated its argument that it was prepared to indict Lasch on a felony federal offense.
Mekaru, the U.S. attorney, said, "We do not exaggerate our cases."
The Michigan judge who rejected the request said that Lasch's attorneys failed to prove that federal courts had ever "set aside a valid criminal conviction to enhance a defendant's employment or other life opportunities."
Lasch's criminal record would remain in the public realm, where it was available to one South Carolina senator who had long had reservations about Lasch's business venture with the SPA.
'STUBBORN DUTCHMAN'
State Sen. Bill Mescher can relate to Lasch. They share Midwest roots and both know what it's like to have Charlestonians refer to their hometowns as "from off."
"In a small state like South Carolina, they take care of their own. Charleston is an insider town," said Mescher, R-Pinopolis. "I'm an outsider. I'm told I'm a bull-headed, stubborn Dutchman."
In 1998, based on public allegations by Stender, the Charleston County Legislative Delegation directed Mescher to lead an inquiry into the fairness surrounding the CIP-SPA sublease.
Mescher said he was concerned that the arrangement was at the expense of small business owners such as Stender, who he felt "got the shaft," and that not enough was known about the SPA's partner. The inquiry, however, was independent of Stender, Mescher said.
"CIP didn't have the background," Mescher said. "It was sort of a created paper operation."
Mescher's hearings, which he characterized as "extremely unwelcome" by all those involved in the deal, were eventually folded into the investigation by the Legislative Audit Council, which didn't issue its report until after the CIP deal was approved.
When McConnell and other lawmakers who were waving pom-poms for the proposed CIP/SPA deal asked Mescher to join their cheer, Mescher declined.
"They thought CIP was the white knight. Everybody just fell in line. One would think they would check into their background."
As McConnell's association to Lasch became more public, Mescher hand-delivered a copy of Lasch's court record to McConnell.
"I said, 'Do you know anything about this guy's background?' (McConnell) said, 'He's clean as a whistle.' I said, 'I beg to differ.' "
Mescher was concerned earlier this year when the SPA released a financial report of CIP's books that called some of the company's accounting practices "highly questionable."
A deal that he believed had been formed under a cloud of suspicion proved to have been contentious and lacking oversight nearly from the start.
The SPA-funded report found that CIP made unapproved draws on a line of credit and used CIP money to make political and charitable contributions and loan money to one of his other companies.
The report prompted the ports authority to terminate its agreement with CIP, forcing the company out of business.
McConnell said he's suspicious of the report's findings because it was paid for by the SPA. CIP's attorney, Gedney M. Howe III, took his appraisal a step further, calling the report a "hatchet job."
The ports authority continues to operate the shipping terminal today, despite an opinion from the state Attorney General that says the SPA should not have pulled the plug on Lasch's company before differences could be settled in binding arbitration. CIP is seeking a court-ordered injunction to re-claim the terminal.
Among the key issues that could be ironed out by three arbitrators is what amount of money, if any, the port owes CIP for severing the partnership.
CIP has said it is owed a buy-out of at least $25 million because the ports authority had no grounds to terminate the contract.
McConnell said the SPA is grasping at irrelevant issues because its case against CIP is flimsy. The strength of CIP's position is bolstered by the fact that Howe, one of the city's best-known trial lawyers, is working the case, McConnell said. "Gedney ain't on a charity run, in my opinion."
Because the SPA never made a penny of profit from the deal, any settlement it could be ordered to pay would effectively cost the state money at a time when the port needs millions of dollars to build a new terminal and when the state is caught in a budget crunch.
That worries Mescher, who suggested that the messy, and perhaps costly, split is simply the result of a lack of scrutiny.
"There were flags here and there and everywhere," Mescher said. "Nobody paid any attention to them because of the power certain people have in Charleston. They didn't do what we said and now look. We are in a nasty fight that's going to cost a lot of money. Nobody is going to come out on top except the lawyers."
THE BATTLE:
Following a financial report on Charleston International Ports, the State Ports Authority terminated its 30-year contract with the private firm April 16. The SPA, which paid for the report, was entitled to half of CIP's profits, but in four years the authority never earned a penny of profit. Two weeks later, the SPA assumed control of the company's shipping terminal.
Port officials say they ended the relationship with CIP, whose managing member is Hunley fund raiser Warren Lasch, because the financial report found that the company:
-- Loaned money to Opportunity Research Inc., a Nevada corporation owned by Lasch. Some of the money was moved from CIP to ORI "supported by no more than handwritten notes." ORI is estimated to owe CIP about $514,000.
-- Contributed about $200,000 to political and charitable groups, including the Hunley conservation project, without SPA approval.
-- Failed to seek prior SPA approval for draws on a $5.75 million line of credit at Carolina First Bank.
-- Failed to provide complete annual financial records on time.
-- Sought to handle types of cargo prohibited under the agreement.
-- Sublet property without prior approval from the SPA.
CIP officials contend the SPA:
-- Failed to provide adequate marketing and sales support and revenue forecasts to CIP.
-- Terminated the contract before differences could be settled in binding arbitration.
-- Failed to allow CIP time to cure defaults alleged by the SPA.
A tentative settlement reached in mediation last month has been abandoned and CIP is now suing the SPA to regain control of the terminal. Both sides have agreed to have the dispute settled by a tribunal of arbitrators who would conduct a public trial-like proceeding.