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Divide and contract: De la Howe flouts law while spending taxpayer dollars

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JDLH campus

An aerial view of the S.C. Governor’s School for Agriculture at John De La Howe on April 14.

Editor’s note — The Index-Journal is one of the newspapers collaborating with The Post and Courier on the Uncovered investigative project.

When officials and media gathered to watch Gov. Henry McMaster anoint John de la Howe as the Palmetto State's newest governor's school in December, there was more than a fresh coat of paint on the walls.

Roofs were rebuilt, bathrooms had new tile and modern fixtures, and students were already on campus. After two years of soul searching and site work, John de la Howe emerged ready for its next chapter.

But an Index-Journal review of invoices and requisition forms found something hiding on the school's 1,300 acres in rural McCormick County.

Those charged with breathing new life into the Governor's School for Agriculture at John de la Howe's crumbling buildings flouted South Carolina procurement law while awarding hundreds of thousands of dollars in work, keeping the public, potential contractors and even state regulators in the dark.

Ken Durham

KEN DURHAM

At the center of this taxpayer-funded fiefdom is Facilities Director Ken Durham and his top deputy, Scott Mims.

Scott Mims

SCOTT MIMS

It's the latest revelation from Uncovered, a partnership between The Post and Courier and community newspapers — including the Index-Journal — to shine a light on questionable conduct by government employees. The series has previously highlighted Mims' close relationship to a contractor he hired at the school and former interim President Sharon Wall negotiating a contract with a consultant she then joined, both of which might have violated state ethics laws.

Tim Keown, the school's president, has not responded to an interview request from the Index-Journal. Emails seeking comment from Durham and Mims went unanswered.

Timothy Keown_0.jpg

TIM KEOWN

Despite working in McCormick County, which had the state's third-lowest per capita income in 2010, they are among the top earners with their titles. Mims, a member of Edgefield Town Council, receives $70,674 a year, making him the highest-paid facilities maintenance manager listed in the state salary database. Durham, Edgefield's mayor, isn't listed but makes more. He rakes in $91,755.

Together, they exercise broad discretion in deciding who gets to participate in large portions of the renovations, which have topped $5 million.

Their secret? Divide.

A review of invoices dating back to 2018 found that while some major projects, such as significant roof work or building a security checkpoint, were put out to bid, others were spread across dozens of invoices and multiple vendors. This kept each request under thresholds for adverting work, seeking state approval or offering a competitive process. This opaque process allowed Durham and Mims to funnel hundreds of thousands of taxpayer dollars to their contractors of choice, including one with close ties to Mims.

But artificially dividing purchases runs afoul of South Carolina law.

Blackboard

Notes on a blackboard are seen April 14 at the S.C. Governor’s School for Agriculture at John de la Howe.

Legal limits

The morass of text that makes up procurement law is hardly tantalizing. It seems like a function of bureaucracy, perhaps even red tape.

But it's important.

This section of South Carolina code dictates how the government can spend the public's money. It's designed to create a competitive process that makes sure the government gets the best possible deal for the taxpayers. It's designed to make it difficult for greedy officials to line their pockets or funnel public funds to friends. It's designed to let the light shine in.

To accomplish this, the law sets limits and thresholds. For purchases of up to $10,000, an agency can spend just by certifying it's getting the best possible rate. Above that amount, purchasers are required to get multiple quotes or bids.

There's also a limit on how much an agency can spend without getting the state Division of Procurement Services to sign off. For John de la Howe, that cap is $50,000. That amount also triggers a requirement to advertise on South Carolina Business Opportunities website, the ability for businesses to petition unfair treatment and a requirement that contractors have bonds to cover damage and missteps.

Statute prohibits buyers from dividing purchases to thwart these limits.

While the law doesn't spell out what constitutes artificially dividing purchases, state procurement audits have highlighted a number of such violations over the years.

There have been occasional attempts to circumvent this provision by breaking up purchases from the same company for the same item — sometimes on the same day — to keep it below that level. For instance, Lander University divided $11,780 in printing services between two purchase orders. Auditors in 2017 said that was a no-no.

That same year, the state took issue with Will Lou Gray Opportunity School spending $42,437 with the same vendor for media planning and placement services across two years and seven purchases.

"Based upon the aggregated expenditures for each fiscal year exceeding $10,000 for media planning and placement, and the frequency of such procurements, the Agency should have solicited bids for such services," the audit found.

In another 2017 finding, Winthrop University was getting billed more or less quarterly from a cleaning service, with those invoices coming in at less than $10,000 apiece, but tallying $61,229 across eight payments. Officials said Winthrop should have awarded the service through a competitive process.

Auditors have dinged several other agencies for divided purchases. No agency has seen more than a handful of these, or at least not ones that were caught in these audits. More often than not, findings in these reports have been minor and lead to nothing more than assurances that an agency will comply with statute.

But the law does allow action when entities have major problems complying with state procurement law. It's even possible for an agency to lose its ability to oversee its own procurement process.

It's happened before.

At John de la Howe.

De la Howe, unscripted

It was like something out of a movie, Mary Cartledge told state leaders. She wouldn't believe it could be true if she hadn't seen it first-hand.

Days before a procurement audit at John de la Howe, then a school for troubled children, employees put page after page through a paper shredder, obliterating more than a year's worth of procurement documents. When auditors arrived and asked for documentation of 16 purchases, there was nothing to show them.

That wasn't the extent of the auditors' findings. The school bungled its handling of blanket purchase orders and failed to file reports on sole source, emergency, trade-in sale and unauthorized procurements. Training was a clear problem.

The scathing report was now a topic of the Feb. 8, 2010 state Budget and Control Board meeting. Cartledge, then business operations director at de la Howe, had the challenging task of explaining to then-Gov. Nikki Haley what had happened: The agency was short-staffed, its employees ill-trained and the payables department did not realize the requisition forms and purchase orders had not been scanned.

After years of abiding by state procurement law, this was a slip-up and changes were made to ensure compliance, Cartledge said, trying to reassure the five-member board. Still, the body weighed whether to suspend the agency's spending authority from $50,000 to $25,000. Haley wasn't satisfied with the changes and decided to take it a step further, proposing to require all purchases receive approval from the state Division of Procurement Services.

Other members of the board agreed and voted to effectively strip the agency of its ability to purchase with taxpayer dollars, with auditors returning for 90-day checkups until the board was satisfied de la Howe was back on track.

On June 14, 2011, then-Superintendent Thomas Mayer had to explain why the school defied the board and paid 20 invoices without state approval and without creating purchase orders. He blamed incompetence, said two senior staffers were no longer there and admitted the school hadn't had a procurement specialist since 2007, instead relying on an administrative assistant who wasn't trained in procurement.

Despite his assurances that he was addressing the shortcomings, a fuming Haley told him if problems persist, she would ask the Legislature to strip his agency of funding. Subsequent check-ups, however, provided clean bills of health. On March 6, 2012 — more than a year after the board stripped de la Howe of its purchasing authority — it lifted the suspension.

And the agency again controlled its own finances.

Bathroom

School President Tim Keown, left, and Facilities Director Ken Durham stand outside the door to a restroom in one of the S.C. Governor’s School for Agriculture at John de la Howe’s cottages April 14 while giving a tour of the 1,300-acre campus.

Divide, divide, divide

The rural campus was flush with contractors for much of the year leading up to its reopening to students in fall 2020.

As part of that work, de la Howe staff sought to renovate a number of bathrooms on campus. Instead of putting the project out to bid to see which contractor or contractors might emerge with the best rate, the staff decided to piecemeal out the project.

One contractor charged just more than $75,000 across 11 invoices to retile bathrooms. Improvements by a local plumber, including installing a number of fixtures de la Howe bought, topped $30,000 across nearly 20 requisition forms. Another contractor added partitions and performed more contract work, with de la Howe paying more than $16,000 across three bills.

In total, the school spent about $120,000 to renovate bathrooms on campus — and that doesn't count supplies, which the school bought separately. Because it was spread across three companies and more than 30 purchases, the staff did not solicit a single bid or even a competing quote, nor did it need the state engineer to sign off on the work. Instead of a top state official guaranteeing the quality and safety of the final product, Mims was able to verify completion.

And the qualified businesses that were shut out from work that was never advertised or put out to bid had no recourse because de la Howe's flouting of state procurement law kept the price of individual projects too low to allow protests.

Costs from some of the contractors crept up throughout the renovations, even with de la Howe providing the materials. The business that provided tiling work charged $5,700 the first time it retiled a gang bathroom in one of the cottages, then jumped the price to $9,975 and $9,995 — just below the threshold for seeking quotes — for the six subsequent gang bathrooms. The plumber charged $3,250-$3,500 to install fixtures in some of the same restrooms, then increased the price to $4,500 despite performing roughly the same amount of work.

The Index-Journal is waiting for de la Howe to release documents pertaining to its purchases of materials, which the newspaper requested more than three weeks ago. According to the state Comptroller's website, the school spent just shy of $25,000 on tiles across five purchases and nearly $30,000 for plumbing supplies across four bills during bathroom renovations. Without requisition forms, invoices or receipts, it is unclear whether these materials, which totaled $55,000, were used in the restroom renovations. What is clear is that keeping those individual purchases below $10,000 meant de la Howe did not have to seek multiple quotes or bids.

While these renovations had the highest dollar amount of divided projects, other needed services to get de la Howe ready were also contracted out piecemeal.

As of February, painting services from the start of renovations tallied nearly $200,000 across about 30 requisitions with one contractor. More than 20 of those, which totaled more than $94,000, were purchases under $10,000. One of the clearest cases of dividing was with the four wilderness classrooms, which were all painted at about the same time and spread across four purchase orders for $3,000 each, or a total of $12,000. Because each remained under $10,000, the agency avoided getting competing quotes.

Even some of the paint jobs that were more than $10,000 could have been combined to make for a larger job. Painting ceilings, walls and trim in five cottages totaled $86,000 but were divided into five projects — keeping it under the threshold for state approval, public advertising and bonding. Instead, the person who requested the work only needed three quotes from whichever companies he asked, with other businesses, state regulators and the public being none the wiser. Touch-up work, painting exteriors and other work at the cottages were split up among multiple smaller purchases, all below the $10,000 threshold.

Another example is work by an Edgefield roofing and tree company. The business had the lowest quote for roofing work at Carolina Cottage: extending the roofline cost $7,080 while reshingling cost $12,790, for a total price of $19,870. When it came time to do similar work on Abbeville Cottage the following month, the company charged $9,950 to extend the roofline and another $9,950 to reshingle, and de la Howe paid for the work in two purchases. The total: $19,900.

When de la Howe was ready for sidewalk work costing $70,000 — above the agency's $50,000 spending cap — the job was divided into two tasks: demolishing old sidewalks and pouring new ones. Many of the quotes were solicited from Edgefield County companies, including one from a business that doesn't even list concrete work in its description in the state contractor's database. One quote came from a company in Georgetown that would have subcontracted out the project, nearly doubling the price.

The winning company for both projects was Faith Remodeling 2 Construction, which has a thin paper trail but is owned by Shannon Philpott, a Trenton Town Council member who has been associated with Mims and some of his businesses for at least a decade. Philpott's residential developer’s license is connected to Edgefield Asphalt and Concrete, which Mims owns, and the online record for that license even lists Mims' home address.

It was unclear whether Mims reported a possible conflict of interest to Durham or de la Howe. Keown has not responded to an emailed question sent a month ago about whether there was a disclosure. The Index-Journal requested any such documentation under the Freedom of Information Act and is awaiting the production of those filings, should they exist.

The Index-Journal is still awaiting procurement documents detailing payments to other vendors that were requested more than three weeks ago, but payments visible on the Comptroller's website are mostly under $10,000. Among them:

— The school paid more than $50,000 for flooring services across 12 payments and more than two years, with individual amounts ranging from $600 to $9,900.

— A drywall company received $58,365 across eight payments, with just one exceeding $10,000 — and it's unclear from the Comptroller's website whether that $13,500 sum was from a single purchase or multiple.

— The agency made nine payments totaling nearly $30,000 to an electrical company last fiscal year, with the amounts ranging from $760 to $6,425. The same company was paid nearly $30,000 in a single payment in February, but it's unclear whether the payment is from a single purchase or if it's spread across multiple invoices.

— A company that performed renovations and carpentry work tallied nearly $45,000 across 13 payments, which ranged from $800 to $6,300.

— The school paid a little more than $20,000 to a siding and window company across four payments, the highest of which was $9,100.

In total, the school spent about half a million dollars in purchases under $10,000 as part of campus renovations — and perhaps far more — with a number of these expenditures likely violating state procurement law. A number of purchases above that amount, including paint and concrete work, also appeared to be divided in a way to avoid an open bidding process, bonding requirements and the approval of the Division of Procurement Services.

And the number of small purchases came with a substantial increase in paperwork. A weekly update sent Nov. 2, 2020 from de la Howe reported the procurement and finance departments saw a more than 270% increase in new purchase orders while having paid out more than $2.5 million so far that year.

During an interview with The Post and Courier and the Index-Journal in April, Durham defended his series of small purchases.

"We’re smart enough to know what the hourly rate is so it’s just a good benefit and good service for the state," he said, referring to work performed by the plumber that totaled $90,575 across nearly 40 requisitions. "If I had gotten a large company in here and gotten a bid and gotten a change order every time they found something."

He stressed that he did nothing wrong.

"It doesn’t look good as it could have if I’d been more aware," Durham said. "It wasn’t out of any bad intention."

Huguenot Cottage

In February 2019, then interim-president Sharon Wall bills Huguenot Cottage as a template for John de la Howe’s other cottages.

Survive an audit

In weaving through the do's and don'ts of purchasing, the South Carolina Consolidated Procurement Code stresses no less than five times that documentation of the process "must be sufficient to satisfy external audit."

A key element is explaining the determination for each procurement. It's simple for purchases of up to $10,000. Somewhere on the requisition form, the requester should write five words: "Price is fair and reasonable."

Yet on 61 of the 78 purchasing requisition forms released for such purchases, those words don't appear.

Most also merely explain that pricing came from a phone call, something that limits documentation, with a few forms differing substantially in cost from the final invoice. For an urgent plumbing repair, the requisition form recorded a cost of $7,500, but the plumber only ended up charging $1,900. The same form initially labeled the repair an emergency, which was likely unnecessary and comes with greater reporting requirements. At some point in the process, someone crossed through the designation.

Because so many invoices and requisition forms were for similar work from one cottage to another, some had copy-and-paste problems, such as repeating a cottage name. For the sidewalk work, many of the quotes contain the full description of both projects despite de la Howe dividing them.

There was also nothing on any of the requisition forms that indicated why pieces of seemingly the same projects were so divided.

Sunken floor

A sunken floor is seen with water damage April 14 at the S.C. Governor’s School for Agriculture at John de la Howe.

Keep the sunshine out

Keown has pledged to be transparent throughout the requests made as part of Uncovered. Hugh Bland, who chairs John de la Howe's board, has also promised to be above board — after an hours-long meeting behind closed doors to discuss coverage of the agency.

But when it comes to releasing documents requested under the state's Freedom of Information Act, the school has decided to take its sweet time.

The Post and Courier submitted a request just after reporting on questionable behavior at the school. The agency took the full 10 business days allowed by law before responding to the request, but has yet to provide those documents. State law allows up to 30 calendar days for de la Howe to produce those records, and that countdown didn't start until the venerable Charleston daily paid a deposit on the request. The agency has made the Index-Journal wait, too, using the full 10 days for two different requests from the Greenwood newspaper.

Each response contains the same, vague paragraph: "Your request is granted in part and denied in part. The Agency will produce any responsive emails that are not exempt from disclosure under S.C. Code § 30-4-40, state, or federal law and that meet the definition of public record under S.C. Code § 30-4-20."

Which part is denied? It's not clear in the response. And that wording was even used to respond to a request that sought procurement documents, not emails.

"A cardinal rule of life should be 'When you’re in a hole, stop digging.' This school is in a hole because its actions have caused the public to lose confidence in the integrity of the institution," longtime press attorney Jay Bender said after seeing de la Howe's response. "The law requires the school to respond to a request for public records by stating within a specified time whether a record will be made available, and the reason for the school’s decision. To meet the requirements of the law the reason advanced to withhold a record must be one of the exemptions to mandatory disclosure contained in the law. These exemptions are to be narrowly applied to promote disclosure.

"As the Office of the Attorney General stated in a recent opinion, 'When in doubt disclose.'"

This vague language is not unlike the state Department of Revenue's response to Edward D. Sloan Jr., which was later the subject of Sloan v. SCDOR. In responding to a FOIA request from Sloan, the agency ended with: "If we are unable to locate, obtain or release the requested file(s) you will be notified of the decision and the reasons for it."

In that case, the South Carolina Supreme Court ruled that "DOR's response did not comply with the statutory dictates of FOIA. While DOR did respond to Sloan, its equivocal and evasive response was not a final opinion on the public availability of the requested documents and did not state whether the information requested by Sloan was publicly available for inspection, copying, or production."

When the Index-Journal first received the response informing it the "request is granted in part and denied in part," the newspaper informed the agency it did not comply with state law. It received no response.

While FOIA provides deadlines to ensure compliance, public bodies can use the public records law as a cudgel to slow or prevent the release of unsavory information, taking every available moment before responding or releasing information, and at times charging exorbitant rates for gathering information.

After becoming the subject of Uncovered, de la Howe decided to comply with a portion of FOIA and post on its website its rates for completing such requests. The agency charges 25 cents per page for copies and $25 per hour of work fulfilling FOIA requests.

According to FOIA, "The fee for the search, retrieval, or redaction of records shall not exceed the prorated hourly salary of the lowest paid employee who, in the reasonable discretion of the custodian of the records, has the necessary skill and training to perform the request." That employee would make in the neighborhood of $50,000 a year despite the work being largely clerical.

For one request from the Index-Journal, which sought invoices and other documentation of purchases from 12 vendors, the school estimated it would take 35 hours to complete "due to the volume of materials that must be searched by hand," running up a bill to $875 — a prohibitive fee for many in the public who would want to pull back the veil on the school's opaque system for divvying out work.

Even a decade ago, when de la Howe faced state scrutiny for how it procured, the agency stored such documents digitally in a centralized system. Responding to an earlier request for similar documents for other vendors, the school was able to provide them in a short time with no charge.

The Index-Journal asked for an explanation about what made the request so labor intensive, offering to narrow the request to trim potentially unnecessary work for the agency. It also again noted that the agency's copy-and-paste response falls short of complying with FOIA and that the requested documents were likely not emails, but that is the only kind of record listed in the statement.

"I cannot speak to what happened ten years ago, nor will I argue with you about our response to your request," Hayley Belton, director of communications wrote in response. "The estimate we provided you is just that, as we obviously cannot know how long it will take to search, retrieve, and redact the documents until we actually do it."

She did not provide information on why the request was expected to take 35 hours to fulfill.

Contact Managing Editor Matthew Hensley at 864-943-2529 or on Twitter @IJMattHensley.