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The Duane Grantham, Warren Lasch, and State Ports Authority timeline
This is a good example of why public agencies should not be operating in areas where private business can do the job. Watch how our taxpayer dollars flow through the State Ports Authority into a company controlled by Warren Lasch. Taxpayers never had a chance.
Except as permitted by regulations of the State Ethics Commission, it is a breach of ethical standards for a public official, public member, or public employee who is participating directly in procurement, as defined in Section 11-35-310(22), to resign and accept employment with a person contracting with the governmental body if the contract falls or would fall under the public official's, public member's, or public employee's official responsibilities.
Please keep in mind, the SPA never sought other bidders for the property.
August 30, 1999- L. Duane Grantham, acting as executive vice -president and chief operating officer of the South Carolina State Ports Authority (SPA), signs a 30 year profit-sharing license with Charleston International Ports (CIP). According to the Legislative Audit Council (LAC), he was instrumental in negotiating the CIP contract.
Some background history from the Post & Courier, October 11, 2003
"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 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."
January 12, 2000- President and CEO Mr. Groseclose accepts Grantham's resignation
January 12, 2000 - Post & Courier reports Grantham offered job as President of CIP.
January 14, 2000 - Journal of Commerce reports Grantham offered job as President of CIP.
January 14, 2000- Grantham officially requests confidential ethics opinion from our state ethics commission. January 14th , 2000 was a Friday . The next Monday, January 17th, was an official state holiday.
January 19, 2000- Grantham receives confidential ethics opinion. It only took Grantham three business days to get the ethics commission to give him an opinion. This is faster than normal for the ethics commission to act.
January 19, 2000 Grantham accepts job, not with CIP as the above newspapers stated, but with Opportunity Research, Inc. (ORI) for 300K per year for 10 years - page 1 , page 2 , page 3, page 4, page 5 Warren Lasch is a principle owner of both CIP and ORI.
April 13, 2000- The South Carolina Legislative Audit Council's legal opinion on the question," Does section 8-13-760 of the State Ethics Act apply to a situation where the chief operating officer of the State Ports Authority resigns to take a position with a contractor, after he was instrumental in getting a lease for this company for property at the Charleston navy base, where this company will operate and share profits with the SPA?
June 6, 2000- Who does Mr. Grantham really work for ? The LAC asked Peter Hughes , SPA chief financial officer, that very question.
August 11, 2000 Legislative Audit Council requests Grantham opinion from Ethics Commission.
August 24, 2000 Ethics commission denies audit council the opinion and withholds the information.
November 2000 Charleston Propeller Club membership roster shows Grantham representing CIP.
January 23, 2001- In response to Mr. Grantham's request, Peter Hughes of the SPA, writes Jack Sprott at the RDA about more land for CIP. Prior to Grantham leaving the SPA, Peter Hughes reported to Grantham.
May 31, 2001- SPA manager of pricing and tariffs asks Warren Lasch for a $150-175K loan. IF YOU ONLY READ ONE DOCUMENT, READ THIS ONE!!!!
November 14, 2001- SPA CEO Groseclose writes Warren Lasch, principle owner of ORI and CIP, a 6 page letter and on page 2 states, " In fact, the chief negotiator of the Agreement on behalf of the Authority now works for or on behalf of CIP. Mr. Grantham on several occasions assured me and members of my staff that CIP would not compete with the Authority". ( pages 1-3 & pages 4-6)
January 23, 2002- Grantham asks private railroad operator to be ready for sale of South Carolina public railroad.
Feb. 7, 2002- Mr. Groseclose asks Lasch to quit expensing political contributions on CIP's books. "In fact, it is our preference that any and all contributions be handled through other of your companies." Letter was ineffective as taxpayers never saw any profit on this deal.
April 15, 2003 SPA's audit of CIP by PricewaterhouseCoopers LLP .
April 19, 2003 Post & Courier - Sides differ on reasons for port partnership split
June 26,2003 Port authority worker back after probe "It was not the most appropriate request to make," Miller said. "But there was never any evidence that an economic benefit was received for the request." Here is the email. This sets a precedent. If you work for our state, and ask a customer for a loan (even though the customer is not a bank), you can keep your job since no money changed hands.
November 17, 2003 - Legislative hearing called on CIP situation. Citizens are upset and concerned over questionable practices. Read Ken Alfaro's statement to the Charleston Legislative Delegation.
December 9, 2003- SPA and CIP settlement agreement releasing all members of SPA and CIP from liability. Rather than do the right thing and request an investigation into Grantham and CIP for breaking our ethics laws, our SPA "settles" with CIP and pays them off $4.9 million dollars. How did South Carolina make out on the deal Mr. Grantham negotiated for us? South Carolina lost approx. 6.5 million dollars (including attorney fees) in out of pocket expenses, and we never got a penny of rent on this 100 acre property for 4 years (see article below).
December 16, 2003 - Read the joint SPA-CIP press release. A far cry from a couple of months earlier when Chairman Smith stated, " The August 31, 1999 License Agreement is void and unenforceable due to an illegal conflict of interest and other violations of the South Carolina Ethics Act by CIP, Warren Lasch, and L. Duane Grantham."
January 2004- The SPA wants to speed up the port building permitting process for another terminal at the Navy Base.
Feb. 4, 2004- We asked Mr. Groseclose, SPA President and CEO, if he had anything to add to the timeline, and we began to send emails to elected officials alerting them to this issue. So far, Mr. Groseclose has not notified us of any additions to make.
Feb.5, 2004 - We asked President Groseclose why the SPA used Ric Tapp as their attorney on the CIP-SPA "profit-sharing license", when Tapp was already representing CIP, as well as being an officer of CIP. See Mr. Tapp tell his fellow CIP officers he will be working for SPA as well as CIP. Wouldn't it have made more sense for our State to get an independent counsel? We will post Mr. Groseclose's reply when we get it. Ric Tapp, in this document, represented himself and CIP, and used phrases like "try to influence the SPA" and "political pressure influence". Dec. 14, 1998 This document shows Ric Tapp working for the SPA , as an attorney for Nexsen-Pruet. Does anyone have Mr. Tapp's email address so we can ask him if he has anything to add to the timeline? Mr. Tapp now serves on the South Carolina infrastructure bank.
Feb. 17, 2004- We do a FOIA request to the SPA asking for the compensation of the SPA employee requesting the loan from CIP majority owner Lasch for 2002 , 2003, and the first month of January of 2004 .
Feb. 17, 2004- We ask SPA President Groseclose if the SPA board knew the contents of the SPA employee's email request asking CIP majority owner Lasch for a 150K to 175 K loan. We also ask Mr. Groseclose if the board was involved in the disciplinary action taken by the SPA.
Here is some information on Warren Lasch's criminal background. and here is an article from May 2001 by the Charleston City paper that reveals more on Mr. Lasch.. Mr. Lasch tried to get on the South Carolina Infrastructure Bank board but couldn't due to his criminal record.
Stay tuned for more updates . Should we just give up ? Is this the type of precedent we want to set for South Carolina government? Will the SPA do a deal like this again at the Navy Base?
Ruling on a similar ethics case- State ethics commission opinion on state ethics case with state employee resigning position to work for engineering company.
Post & Courier
December 17, 2003
SPA
settles its dispute with cargo firm Wednesday, December 17, 2003 The State Ports Authority has settled its bitter contract dispute with
private cargo-handling firm Charleston International Ports, ending a tumultuous
partnership that spawned accusations of questionable accounting practices and
political favoritism.
The settlement, which will cost the SPA nearly $5
million, ends a 1999 contract that required CIP to
operate a 100-acre shipping terminal at the former Charleston Navy Base and
permanently returns the facility to the SPA.
CIP, which was created to run that terminal, might
still survive as a company, CIP spokesman Richard Quinn
said on behalf of CIP managing member Warren Lasch.
"CIP's future is still being discussed,"
he said Tuesday night.
As part of the settlement, unanimously accepted by the SPA
board on Tuesday, the state agency will pay CIP $1.5
million as reimbursement for improvements and equipment the company paid for at
the 100-acre breakbulk cargo terminal.
The SPA also will assume CIP's
roughly $3.4 million debt at Carolina First Bank, where the company secured a
$5.75 million line of credit to finance terminal improvements. The $3.4 million
represents what CIP had drawn to date.
In addition, the SPA has spent more than $1 million
to fight CIP in court and review the company's books.
The SPA insisted in recent months that it was only
responsible for repaying CIP's investments in the
terminal. CIP had said it was owed a buyout of its
30-year contract, which it estimated at between $25 million and $40 million.
Neither side can claim outright victory, said state Sen. Arthur Ravenel Jr.,
R-Mount Pleasant, who was credited with bringing both sides to the bargaining
table. "It's good for both. If one side can come out claiming victory,
that's not a compromise."
Port officials were tight-lipped about the discussions leading to the
settlement, but they did say it grew out of a Dec. 9 meeting between Lasch and SPA
board members Whit Smith and Harry Butler Jr.
The settlement, dated that same day and signed by all three men, is expected
to be fulfilled within 10 days.
Gov. Mark Sanford "is pleased that the situation has been
resolved," said his spokesman, Will Folks.
Both sides agreed to withhold comment on the settlement beyond a joint press
release issued Tuesday. The statement says the parties "resolved their
disputes and differences amicably" and that "there is mutual respect
and good will between the parties."
Those sentiments are a far cry from the barbs traded over the past year.
Citing an April 2003 financial report that called CIP's
accounting practices "highly questionable," the SPA
accused CIP officials of making spending decisions that
harmed the terminal's profitability.
The contract required CIP to split terminal profits
with the ports authority. Port officials said that never happened because the
terminal never generated profits.
According to the financial report, Lasch made political and charitable
contributions with CIP funds and loaned money to one of
his other companies.
The report also said that CIP drew on the line of
credit without prior approval from a joint SPA/CIP
committee. Those and other findings prompted the SPA
board to terminate CIP's contract and seize control of
the terminal.
CIP claimed that in spite of what it alleged were
attempts by the SPA to harm the relationship by not
adequately marketing the shipping facility, the terminal was profitable. The
company's attorney, Gedney Howe III, called the SPA's
action at the time "a power play and an old-fashioned land grab."
CIP suggested that the SPA
had ulterior motives for wanting the terminal back, arguing that the SPA
began to show interest in the terminal only after its port expansion plan for
Daniel Island was redirected to the former Navy Base.
Following unsuccessful attempts to mediate a settlement, CIP
sued the SPA in October to win back control of the
terminal. The case made it to the S.C. Court of Appeals, which referred a narrow
legal question over jurisdiction to the S.C. Supreme Court.
The jurisdiction issue is now moot because of the settlement, and the SPA
will withdraw its appeal, SPA attorney Rutledge Young
said Tuesday.
Future court proceedings are unlikely because both sides agreed not to pursue
litigation.
Outside the courts, the dispute also veered into the political arena. Ravenel
challenged the amount of money the SPA spent to fight CIP,
and state Rep. Jim Merrill asked the S.C. Attorney General's Office for an
opinion on the legality of SPA's seizure of the
terminal.
Lasch, who heads fundraising for the H.L. Hunley submarine project and has
close ties to that project's chief proponent, state Sen. Glenn McConnell, was
accused by port officials of wielding political influence in the dispute.
McConnell could not be reached for comment Tuesday but has said that Lasch's
work on the Hunley did not afford him any political favors and that the SPA
only made such claims because it had a weak case.
State Sen. Bill Mescher, R-Pinopolis, who was critical of the terminal
contract when it was first proposed because Lasch's start-up company had no
business background, said he hopes the settlement serves as a lesson to state
agencies considering contracts with private companies. "They should pay
more attention to who they are dealing with," he said.
By Ron Menchaca
AH: Contract settlement with CIP will cost the ports
authority nearly $5 million
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