S.C. Treasurer Loftis vows to fight fine, reprimand on ethics charge
An ethics complaint filed against S.C. Treasurer Curtis Loftis Jr. has resulted in penalties, but the matter appears far from over.
Loftis, of West Columbia, received an official reprimand and was ordered late last week to pay a $500 fine by the State Ethics Commission. Loftis had been accused of hiring a long-time friend and business associate — Richland County attorney and former County Councilman Michael Montgomery — to help represent Loftis’ office in a lawsuit against Bank of New York Mellon.
Montgomery ultimately received around $2 million in legal fees for his legal work, which resulted in a settlement with the state.
Loftis, accused of not disclosing his close relationship with Montgomery before his lucrative hiring, said he plans to appeal the commission’s decision.
“This was a subjective and unprecedented ruling — and I fear that letting it stand would impose burdens upon the selfless service of thousands of people across the state that devote their time to nonprofit boards and organizations,” Loftis said in a written statement.
“This action was filed by cronies of the S.C. Investment Commission, the same Commission that lost $7 billion of the public’s money through their disastrous investment decisions,” Loftis added.
Ethics hearing panel Chairwoman Regina Hollins Lewis wrote in the ruling, “It is undisputed that the decision to hire Montgomery was a governmental decision and Montgomery had an economic interest in his retention as special counsel for the state treasurer.”
Loftis faced a maximum fine of $2,000. But the panel, which conducted a seven-hour hearing on the matter in September, found the violation to be “inadvertent” and “unintentional.”
Legal fees from the case totaled $7 million and were split between Montgomery and the case’s original and lead attorney, Mitchell Willoughby, who testified it was his decision, not Loftis’, to add Montgomery to the legal team. However, Willoughby did not have the authority to unilaterally hire additional counsel.
The commission said it found five separate instances in which Loftis was involved in Montgomery’s eventual hiring, which subsequently was approved by S.C. Attorney General Alan Wilson of Lexington, though apparently without Wilson’s knowledge of the close relationship between Loftis and Montgomery.
“The overall circumstances surrounding the decision to hire Montgomery led us to conclude (Loftis) did participate in making the decision to hire Montgomery without disclosing his relationship with Montgomery,” the ethics ruling said.
Loftis and Montgomery have reportedly been friends since 1978, when they were fraternity brothers at the University of South Carolina. In 2011, Montgomery said he had handled Loftis’ business and personal legal work since 1986. Also central to the complaint was that Montgomery served on the board of directors of Loftis’ nonprofit, The Saluda Charitable Foundation, Ethics Commission director Herb Hayden said last year.
The complaint originally was filed against Loftis in June 2014 by state government retiree Sam Griswold and became public last year when the commission agreed to hear the complaint.
Griswold alleged Loftis violated state law that says public officials cannot use their official office to obtain economic interest for “an individual with whom he is associated.”
“Our ethics law clearly needs (to be) reformed in South Carolina,” Griswold, a former president of the State Retirees Association and former deputy director of the state Budget and Control Board, said last year.
Loftis has been a vociferous critic of the state’s public-employee pension system, which he said has been poorly managed and has resulted in poor performance from low returns, high-risk investments, and abnormally high money-manager fees over the years that have plunged the system into crisis.
The ethics allegations stemmed from a lawsuit started by Loftis’ predecessor. The suit accused the Bank of New York Mellon Corp. of losing $200 million of state retirees’ pension money through bad investments. By the time the case was settled — with the bank continuing to deny the allegations — the actual loss was estimated at roughly $120 million, attributed to partial recovery from those investments.
Loftis re-filed the lawsuit in January 2011. An agreement gave Montgomery 22.5 percent of any attorneys’ fees awarded.
Under the final settlement, signed in spring 2013, the bank agreed to put millions back into the S.C. retirement accounts and give the state discounts on future fees under a new 10-year contract with the bank, which was approved in 2014. Mellon currently holds more than $40 billion in state assets.
In July 2015, when the ethics complaint came to light, an unapologetic Loftis said he worked hard to maximize the payout to the state’s attorney’s in the case.
“Not one penny of legal fees came out of retirement money,” Loftis said last year.