♪ Welcome to This Week in South Carolina I'm Gavin Jackson.

This week, an historic first for our state.

The South Carolina Senate voted to remove State Treasurer Curtis Loftis from office after senators said he violated the state constitution by willfully neglecting his duties over his handling of the $1.8 billion accounting error that has plagued his office for years.

Loftis said he only found out about the discrepancy in early 2023, when the previous comptroller general's double accounting error of $3.5 billion came to light.

This despite Loftis' staff, knowing about this problem since at least 2016 due to the conversion to a new state accounting system.

There's no money missing.

No fraud was detected, but there was also no surplus of money to be spent or returned to taxpayers despite previous claims.

On Monday, the Senate chamber became a hearing room for two senators to present the facts in an extensive investigation and for the treasurer and his legal team to present their case, as well as for the 46 member body to question both sides.

A two thirds majority was needed and was surpassed with a 33 to 8 vote, sending the matter to the House, where with six legislative days left in session, it's unclear if it'll take up the matter it's deferred to the Senate on.

Now, before we talk with Senator Larry Grooms, who has overseen the Senate investigation, let's return to the Senate with a focus on what Treasurer Loftis and his team had to say in his defense.

Following the presentation by Senators Grooms and Goldfinch.

The treasurer and his team presented their case for three hours on Monday with attorney Debbie Barbier leading off and focusing on due process >> Embedded in both the United States Constitution and in our state constitution, due process is not a suggestion.

It is not discretionary.

It is an obligation.

A constitutional command that ensures that no citizen, no elected official, no resident of this state is deprived of liberty, property or reputation without a fair and an impartial process.

We can all agree...

I think we can all agree that the standards we set for ourselves in the United States of America exceed that of Egypt, Pakistan, Burma, Thailand, Zimbabwe.

These are examples of instances where leaders are ousted or politically neutralized without any semblance of due process.

Gavin> Loftis also read remarks in his defense, presenting a coherent and concise picture of the issue in a way that senators later said they wish he had first presented to them in previous hearings.

>> The committee has alleged that I knowingly made false statements regarding the now widely discussed $1.8 billion dollar accounting error, claiming I, I knowingly misrepresented it as cash and it's SCEIS fund 0993.

Let me be clear.

That allegation is false.

When I answered questions on April the 2nd, I relied upon documentation from the Comptroller General, the state's chief accountant, the state auditor, and our external audit firm, Clifton, Larson and Allen, all of whom stated that the $1.8 billion dollars was real cash and approximately, appropriately recorded in fund 0993.

These statements were consistent with the state's financial records, including the annual Comprehensive Financial Report and the previous Senate Subcommittee Report of 2023.

I answered in good faith with the best information possible.

That information, as we've since learned from AlixPartners, was inaccurate.

But my reliance on the Comptroller General's letter was appropriate and expected.

As the state's treasurer, I'm entitled to rely on those financial records, including when we issue hundreds of millions of dollars of bonds and managing the $50 billion dollars of the $52 billion last night of public money.

So clearly, relying on those records in the subcommittee hearing was appropriate.

There was no intent to deceive.

And furthermore, there was no reason to deceive.

Gavin> Following two other attorneys, the Senate presenters rebutted several claims, including how civil trial legal requirements aren't applicable to this hearing.

16 senators then peppered both sides with questions.

>> Treasurer Loftis, I have three questions.

You described this as an accounting error.

Do you admit you made a mistake?

Question number two, Mr. Eubanks gave a very compelling timeline about how this all happened.

Why didn't you tell us that years ago?

Was it because you didn't know or you didn't want us to know?

Number three, if you did not neglect your duty, why are we now under SEC investigation, that's going to cost us tens of millions of dollars?

Curtis> The SEC is...the reason the SEC is here is because... uh, and I have a letter that was sent to the attorney general, excuse me, sent to the Comptroller general's office.

He turned it over to the governor and the attorney general.

And it said that the SEC has a non-public investigation of the state of South Carolina, in reference to the overstatement of cash by $3.5 billion dollars, and the annual comprehensive, Comprehensive Annual Report That...has nothing to do with the State Treasurer.

And while it has been stated affirmingly over and over and over by the, by the presenters, I'm not mentioned anywhere in there.

Most of, several offices have been, interviewed.

We haven't.

Yes, sir?

Sen. Hutto> You made a mistake?

Curtis> Well, we make mistakes all the time.

>> You have to tell me which one.

Sen. Hutto> Do you admit it?

Curtis> Well, which mistake are you...?

I'm not, I'm not trying to be coy.

There's about... Sen. Hutto> All right.

Well, you or Mr. Eubanks gave as great an explanation of the timeline as I've ever heard, but I've been waiting years to hear that explanation.

And so my question is, did you not know that's what happened?

Or did you not want us to know that's what happened?

Because that, to me, is, did you make a mistake?

The mistake being either you didn't understand it.

Or you did understand it and you didn't want us to understand it.

Curtis> I assume you're talking about the creation of the 0993 account.

Sen. Hutto> Yes.

Curtis> Well, I mean, there's a lot of facets to this.

Sen. Hutto> We've been waiting for a long time to hear what he told us in about ten minutes today.

Curtis> Hindsight's pretty good.

Okay, so the 0993 account, was part of the conversion.

It was a massive conversion.

It was an ongoing process.

The committee has, has it, has it stopped on one day.

That wasn't how it worked.

We knew it would be a long term process.

I never knew that the 0993 had $1.8 billion in it, or it didn't have the $1.8 billion dollars it had 1.6 billion in appropriation, appropriated dollars, which we don't deal with.

And...I found out about that in February of 2023.

Gavin> In the House, Majority Leader Davey Hiott told reporters, It's unclear what will happen with six legislative days left over the next two weeks.

>> I...he, right now, he's a state, he's the treasurer of the state of South Carolina.

The Senate made it very clear that they believe he should be removed with their vote yesterday.

But, we'll, we'll take a look at it to the caucus, because we're fixing to go into caucus now, and that's the first item on what we'll talk about as soon as we get over there.

And we'll see where we go from there, but we will, we will, we will have some statement before too much longer.

Gavin> Joining me now is Berkeley Republican Senator Larry Grooms, whose subcommittee investigated the $1.8 billion dollar accounting error in the treasurer's office.

Senator Grooms, welcome back.

Sen. Larry Grooms> Thank you for having me.

Gavin> So a lot has happened since we've last spoken, including this, hearing that took place in the Senate on Monday.

And in our opening segment, we just heard from the state treasurer, his defense team and questions from Senator Brad Hutto.

But we've discussed this issue with you and Senator Goldfinch on this show before, so we don't have to necessarily rehash too much of it.

But tell us, what was the core of your argument when you all presented that case to the Senate on Monday?

>> There currently exists $1.8 billion dollars in errors, the cumulative errors on the Treasury books.

The treasurer is the guy in charge of the books that's his main job and the books are not accurate.

They are not complete.

The treasurer is responsible whether he says he knew about the error in 2023, or whether he knew about the error in 2016, is immaterial.

He's the guy in charge of the Treasury, and there are serious hundreds of millions of dollars in errors in the treasury books, and he tries to pass the buck on to somebody else, saying, "It's not my problem.

The devil made me do it."

Gavin> And we saw the comptroller general, Richard Eckstrom, resign back in 2023.

We saw that George Kennedy, the former auditor, resigned this year, too.

So if people have been affected by this, this error that's affected not just the treasurer's office, but the comptroller general's books too, but we're seeing the treasurer still defying this situation despite this error still being pervasive, and also him making claims in the past that this money was real and that he was making interest on this money.

A lot of people thought they were going to get money back, or that you guys could spend more money.

That wasn't the case.

So how is there still trust in him if, if it doesn't seem like he even knows what's on his own books?

Sen Grooms> Well, clearly from the Senate perspective, there's not trust in him.

While there were eight members of the Senate that voted not to remove him from office, the rest of the Senate did.

And those eight, I'm sure they all believed that there was sufficient wrongdoing, but maybe it didn't rise to the level of removal.

So there's agree... universal agreement.

There's incompetence within the office of state treasurer.

The question is, what do you do about it?

And our only remedy to hold someone accountable is section three removal.

And I had another senator, yesterday just asking me, "Well, what can we do to make him comply with the law?

"What can we do to ensure "that he does the proper reconciliations "that the office of State Auditor in 2012, 2013, "2014, 2016, 2017 and 2018 said he wasn't doing?

"You're not doing proper reconciliations."

The forensic, the internationally known forensic auditing team, Alixpartners says the state treasurer does not do proper reconciliation with the state books.

The, the accounting consulting firm, Mauldin and Jenkins says in their report, the state treasurer, state treasurer's office is not doing proper reconciliations.

And when you don't reconcile your checkbook to your bank balance, you're liable to make errors.

And we know the treasurer's office made errors, 1.8 billion of them.

And we don't know how many more errors there are.

And you're not going to know unless the state treasurer does proper reconciliations, as everyone has now looked at and said, you're not doing them and you need to do them.

So how do you make him do them when he stands on the Senate floor in defiance by saying, I'm not going to change anything I'm doing?

I'm not going to do that.

He actually said, "I'm not following the law.

"and I'm not going to."

Gavin> So try and remove him, but he's still going be in office even if there's no removal taking place?

Sen. Grooms> There were some that said, "Grooms, look away.

Look away.

"He's, he's very popular on Facebook.

"He's got a good social media crowd.

"There's some folks that really, really like him."

And the thing is, I really, really liked him up until about three years ago when things started not looking right.

When we began to ask questions, then, then I became very aware that he was not being truthful.

And then the investigation continued.

I'm looking for the truth.

But others are saying, look away, but I'm not a look away Republican.

Gavin>And I was going to say to that effect, did it have to get to this point?

I know you're saying you didn't want to look away, but I mean, even when a lot of these errors were coming out, could it have been remedied before?

I mean your, your subcommittee took, what 27 and a half hours of testimony, 11 meetings or something like that.

Sen. Grooms> 27 and a half hours... of long....testimony.

Gavin> Did it have to get to this point?

Sen. Grooms> It didn't have to get to this point.

That's, that's, that's, the central part of this, the, not doing proper reconciliations.

If they had just reconciled the books, as the state auditor said they needed to do, even back in 2016, the error would have come to light and they would have fixed the problem, but they have not done the reconciliation since 2016, as they should.

And they still don't do them.

Gavin> And that was a lot because of the transition to that new accounting system in the state, and a lot of the double counting situations.

Sen. Grooms> It led to that.

There was a transition from the old legacy system to the new system.

And while inputting the information into the new system, that's when thousands of incorrect entries were made that ended up totaling $1.8 billion dollars.

And then to make the balance work, to force a balance, this fund was created, a fund without cash.

And we didn't know what the fund was.

We're looking at the books.

I'm looking at the books.

I see this anomaly.

The new comptroller general saw the anomaly right off the bat.

Comptroller Gaines looks at it and says "This account is supposed to have zero balance "and it's got 1.8 billion.

"I don't know what it is.

"State treasury, Can you tell me?"

And the treasury says, "I...don't know, maybe it's real cash.

"It is real cash.

"The former comptroller general said it was real cash.

"And because I told him it was real cash, "he told me it was real cash.

So it's real cash."

Gavin> In the end, it's still taxpayer dollars, whether it's real or not.

So it's still worrisome to know that it wasn't actually real at the same time.

But we're talking about willfully neglecting his duty and not knowing what's happening in his own office, when we have emails showing that his staff knew about it.

Some members on his staff knew about it back in 2016, and he alleges that he didn't know about it until 2023.

I guess you can't dispel me.

You haven't seen any evidence otherwise.

But what does that say about his office?

If they're not willing to bring that problem to him, or if they're covering for him?

I mean, what was the situation with that?

Sen. Grooms> Well, think about it like this.

Anyone that has a job works anywhere.

If you're dealing with money and you make errors, such egregious errors, totaling thousands and thousands of dollars and it's brought to light, is your boss just going to say, "Well, that's okay.

"I know you made these errors and I know you covered it up "and I know you're going to continue to make errors, "but that's okay with me "because you got a really good Facebook page."

That doesn't happen in real life.

But for some reason that's happening right now inside state government.

Gavin> A little worrisome there, too.

When we talk about how this vote worked out, we talked about that defense happening on Monday.

Some speculated that, that hearing could have actually gone in his favor or that he, y'all didn't have the votes per se, the 31 votes necessary to, to remove him.

But then his third attorney, Johnny Gasser, made some comments towards Republican senators specifically about how they could be primaried essentially in the upcoming elections, years away, but still, do you think that helps sway some people to come back on y'alls side in terms of, you know, you're senators, you're not really prone to being threatened in your own chamber?

Sen. Grooms> Well there's a very interesting defense.

Since we can't defend the indefensible, we're going to try to scare you.

We're going to let you know if you don't vote right, we're coming to get you, asking the members of the Senate to look away.

Look away.

Don't look at the evidence.

Because if you look at evidence, you may make a vote.

And if the votes, if we're not happy with that vote, we're coming after you.

Gavin> Could you say, maybe, similar to what you've maybe heard or anecdotally know about the treasurer's office too?

Sen. Grooms> Threatening members of the General Assembly is probably not the best defense they could have made.

Gavin> Or the due process defense and comparing him to the likes of, Robert Mugabe from Zimbabwe, who didn't have due process when he was ousted as a tyrant.

(laughs) It's a little concerning there, so.

Sen. Grooms> Well, we're, we're not proposing that we execute anybody.

Gavin> But also, due process wasn't necessary in this case either.

This wasn't an actual civil trial, different rules, different, different procedures at play here.

Sen. Grooms> And this has happened once before in our state's history.

Only once.

And it's not impeachment.

The article, I meant section, article 15, section three of the Constitution provides this remedy.

This is the backstop.

If everything you do, if you know, you have a, a constitutional officer that's not performing his job, where there's a level of incompetence, a high level of incompetence, and you say there's trouble in the Treasury, we want you to fix it, and then he looks at you defiantly and says, "I'm not going to fix it, "and there's nothing you can do about it."

Every turn we tried to get the treasurer to take responsibility and try to correct the problems on the state books, and he wouldn't do it.

Still refuses to do so.

So it gets to a point where the last remedy is a section three removal, and that's where we are.

And it's unfortunate that he has not taken responsibility.

It's unfortunate that he says, he's not going to do the proper reconciliations.

It's unfortunate for the people of South Carolina.

It's unfortunate that we had to have this hearing only the second time in our state's history.

Gavin> And again, that's in the Constitution.

It allows for y'all to do that.

That's your right.

The Constitution is public.

It's passed by the people.

But there was also talk about y'all disenfranchising that vote to get him in office.

But again, like you said, that's your right to be able to do that.

You're empowered to do so.

Sen. Grooms> It's more than a right.

It's a duty.

When we see misfeasance and malfeasance, it's our job as legislators to try to correct that.

And the last step in that if all else fails, I think we have a duty to look to the Constitution.

What remedy do we have?

And that's the only remedy left to us.

And we, we did our duty, because he didn't do his.

Gavin> Senator, can you give me some idea of the mood on the Senate floor?

Again, that vote was 33 to 8.

It was about a ten hour long day on Monday in the Senate.

That was wrapped up.

It was getting late.

We saw, you know, the Senate majority leader, Shane Massey, going around kind of polling folks seeing where the votes were.

You guys were pretty insistent the entire time over the past few weeks that you did have the votes to get this done.

But did anything surprise you?

Did you think you'd have more?

Did you think there were some people that didn't get as swayed as possible?

What what was the vibe on the floor?

Sen. Grooms> I believe that he would probably have six senators vote with him.

He ended up having eight.

So I wasn't too far off on my vote count.

And, I can read the Senate pretty well.

And to say that this is some sort of power grab that we're trying to take the money that he has for...our own personal gain is completely ridiculous.

The money entrusted to the treasurer is done so by acts of the General Assembly.

The Treasury would have no funds if it weren't for previous acts of the General Assembly.

All the money that's in held in trust by the state treasurer has a particular purpose.

It's not like it's it's free money that we can just grant and spend it Gavin> No, appropriated Sen. Grooms> We've appropriated it or it's been collected through fees.

It could be federal pass through money.

There's...anywhere between $50 and $70 billion dollars held in cash of taxpayer money.

And if the treasurer had discretion in it, why is he hoarding 70 billion?

Why doesn't he send it back to the taxpayer?

That would be my question.

If you actually buy his argument that he's protecting that money, I think the money is best left with the taxpayer instead of us taking it in the first place.

And yesterday, the Senate just passed our version of the budget that has the largest, tax, has the largest tax breaks, in...state history.

We have more taxpayer money going back this year to the taxpayer than ever before.

And we cut the tax rate, from 6.2% down to 6%, so people can keep their money in their account instead of sending it to the state, so the treasurer can keep it in his.

Gavin> Mmm hmm.

Senator, we have yet to get clarity from the House on where this goes.

And as of our taping Thursday morning, that resolution has yet to be read across a desk in the House and assigned to a committee.

The House has deferred to y'all for all the investigative work on this matter.

Would it be negligent of them not even to take it up at this point, especially when you guys have, have shown that you don't have confidence in the Treasurer and you've done all this work, and then it's T.B.D.

in the Senate, in the House, right now?

Sen. Grooms> Well, when the case for incompetence in office is made, clearly, when there's no dispute about that, when there's no dispute about certain statutes that's been violated by the Treasurer, I think it would be a shame if the House took the attitude that we're just going to look the other way.

We know there's wrongdoing, but we're going to look the other way.

That would be unfortunate.

Gavin> And you expect to get some clarity at some point, from the House?

Sen. Grooms> I believe we'll, we'll hear something from the House shortly.

Gavin> And if they don't take this up, if they don't, even if they do take it up and they don't remove him, what's the next step?

What could you guys do?

Could you just try and again maybe get the constitutional amendment to get his position not to be, state wide elected, but also appointed by the governor?

I mean, are there other things you could pursue if this doesn't happen?

Sen. Grooms> Well, the earliest the constitutional amendment can be before the people will be in 2026, when the Office of Treasurer and the Office of Comptroller General will be on the ballot.

So if the people decide that it should be appointed, it wouldn't be until 2030 before that could happen.

And so that, that's not a remedy right now, but the resolution remains alive.

The House of Representatives can take it up at any point.

It only takes them a few hours to bring that resolution up to the floor for a vote.

So that mechanism could be triggered at any time.

Gavin> And I ask you about this after the vote on Monday, but what more needs to be done here?

I mean, like we're saying, if they don't take this up?

...does the S.E.C., which still has an open investigation into this matter, do they have to come back with the damning report or say, we're going to find you this X amount of money?

What more needs to be done for you to hope that the House will actually act on this?

Sen. Grooms> Well, I'm not sure, the timing of the S.E.C., when they will complete their investigation.

We've been told that the investigation could take a year or another two years.

They're very thorough in what they do.

They do many, many interviews.

And they look in many, many areas where this thing could go.

So we're...talking a year or two years.

Gavin> Okay.

>> But in the interim, we still have a treasurer that does not do proper reconciliations.

We know of $1.8 billion dollars in errors.

We don't know how many more errors there are.

And until he starts doing his job, the...people, I don't know how they can have trust, at least with this treasurer.

Gavin> What about credit ratings, too?

I mean, I know we talk about that often, and I know there's no money missing.

There's no fraud detected here.

But do we, do you think that, you know, when you hear from credit raters that they still have confidence in our state, if we have a treasurer who has got these errors on his books?

Sen. Grooms> The three major credit rating agencies, they're paying close attention to what we do.

They know we have a problem.

They know that three financial executives had a hand in creating the problem.

We know that Comptroller General Richard Eckstrom and State Auditor George Kennedy did the honorable thing and resigned their positions, but another troubled child is still in office, who's still at the center of the... or books not being correct.

They know that.

They're looking at that.

And I'm hopeful that we'll be able to correct that problem before our credit rating is as dinged in some fashion, which would then cost the taxpayers even more millions and millions of dollars in higher interest fees.

Gavin> And are you concerned in any way that if the House wants to move forward and if they were actually to get two thirds vote to remove them from office, that you would have to have a plan in place at that point pretty much immediately, so you could make sure that the treasurer didn't have access to maybe data systems, computer systems, especially in light of what we almost saw him do last year in terms of publishing sensitive financial data, publicly, that could have led to a crippling, devastation of our accounts?

Sen. Grooms> Well, in his own words, "cyber thieves could cripple our state."

That was his words, publicly exposing the architecture of treasury accounts so that cyber thieves could receive our money.

That was reckless and dangerous, but yet he did that.

Gavin> So concerning, that it could happen if he gets removed.

Sen. Grooms> I have many concerns, but he can't do that all on his own.

<Okay.> And the employees of the State Treasury's office there's some really good folks that work there.

I don't think they would do anything willingly to hurt our state.

And that was made clear even after last year when the treasurer said he was going to do that.

We let it be known that following orders, does not excuse you from breaking the law.

Gavin> And Senator, with 30 seconds left, you mentioned the budget that just got passed this week by the Senate.

You mentioned the tax cuts, but can we talk about transportation needs?

And hopefully, I guess, for some folks, they want to see more money for bridges in that budget.

You guys did put as much in, what about the needs in that budget?

Do you think that there might be some room for change at conference?

Sen. Grooms> Well, the chairman of the finance committee, I think he ran a really good budget hearing.

We've been working on it all year, but, this senator right here would have preferred to have seen more money going to the Department of Education.

<Transportation.> I'm sorry.

Yeah, transportation.

Yes, we, we took care of education.

We didn't take care of transportation as I would have liked.

But...I'm one of 46.

You know, I would have preferred that we would have outdone the House and put 300 million to replace our bridges or to, help escalate the bridge replacements.

Gavin> There's still time.

We'll see what happens.

That's Berkeley, Republican Senator Larry Grooms Thank you, sir, as always.

Sen. Grooms> Thank you.

>> And that's it for us this week.

For South Carolina ETV, I'm Gavin Jackson.

Be well, South Carolina.

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