S.C. Treasurer Curtis Loftis on Tuesday, April 2, 2024 during a Senate Finance constitutional subcommittee meeting concerning $1.8 billion that has been discovered in an account. (Travis Bell/Statehouse Carolina/Special to the SC Daily Gazette)
COLUMBIA — In the wake of a report that South Carolina’s financial leaders allowed a $1.8 accounting blunder to linger on the state’s ledger for nearly a decade, one House Democrat is calling for the impeachment of state Treasurer Curtis Loftis.
Columbia Rep. Heather Bauer filed legislation Thursday asking the House to start impeachment proceedings for “dereliction of duty and the breach of the public trust.”
She said she hopes it prompts action from House GOP leaders.
“When it seemed like things weren’t happening, I thought, I’ll just throw a grenade at it and get the conversation started,” Bauer told the SC Daily Gazette.
The mysterious $1.8 billion – $1.6 of which auditors ultimately determined never really existed – came to light a year ago as part of a larger Statehouse investigation into $3.5 billion worth of accounting errors by the state’s former top accountant.
The unravelling began when a Senate panel started looking into errors discovered in 2022 by a deputy in the comptroller general’s office that involved the double-counting of public colleges’ revenue on annual reports given to Wall Street investors.
That ultimately led to the 2023 resignation of Republican Richard Eckstrom, who had been the comptroller general for 20 years.
The investigation, led by Sen. Larry Grooms, then shifted to the office of state Treasurer Curtis Loftis, a Republican first elected to the post in 2010.
With heads of the state’s fiscal agencies unable to account for the origins of $1.8 billion worth of ledger entries, the state spent $3 million on an outside consulting firm to figure out what happened.
After its findings were released Wednesday, Grooms again laid blame for the snafu on Loftis.
Grooms renewed calls for the treasurer to resign and said he’d like to see House leadership do the same.
“I hope the House will engage in this and will look into it, instead of just pushing it aside,” the Bonneau Beach Republican said. “Because anyone that takes a hard look at this can clearly understand that there are problems within our state’s finances and that the problems originated in the treasurer’s office.”
As an elected constitutional officer, Loftis’ boss is ultimately South Carolina voters. And he’s already said he won’t seek a fifth term in 2026. He can’t be simply fired. But he could be forced out through an impeachment process. Or he could resign on his own, which is highly unlikely.
Eckstrom, the former comptroller general, resigned in spring 2023 amid the increasing likelihood that legislators would remove him.
But Grooms stopped short of calling for Loftis’ impeachment.
“If he’d resign, it would be in the best interest of the state,” Grooms said.
Grooms said that’s because the state has been under investigation by federal securities regulators for the past year and he’s worried an impeachment trial could actually make things worse.
The billions in paper errors never affected the state budget, since legislators rely on a completely separate office that’s not headed by a politician for the numbers they use to craft the state’s spending plans.
But the state could face penalties ranging from a hit to its sterling credit rating to hefty fines, depending on how severely the U.S. Securities and Exchange Commission views the matter.
If the treasurer were to say or do something problematic during a trial, federal investigators could decide to pursue harsher sanctions.
“I don’t know what comes out in that,” Grooms said. “We’re already in rough seas.”
Loftis, for his part, continues to assert he’s done nothing wrong, pleading his case both to legislators and on social media.
“Every dollar, every dime the state Treasurer’s Office has is in our books and you can find it at any time,” Loftis told members of the Legislative Black Caucus on Tuesday.
House Republicans have said there are questions they’d still like to have answered before deciding whether to make their own calls for resignation.
“All of this bothers me on an incredibly deep level, but I’m not going to say 13 hours after getting this report that it’s time for people to lose their jobs,” West Columbia Rep. Micah Caskey told reporters.
For starters, he said, legislators have not heard from any of the officials involved to get their explanation on the audit’s findings.
“I think we would be doing a disservice to everyone to not give an opportunity for them to be heard,” Caskey said.
That did not stop Caskey from pressing the Washington, D.C., auditors appearing before his subcommittee Thursday to compare their findings to Loftis’ previous statements to reporters as well as under oath before Grooms’ committee.
He asked about Loftis’ claims that the state earned more than $190 million in interest on the funds.
“From our view, we don’t see how the $1.6 billion could have been invested given the origins of where it came from,” auditor David Bligh responded.
The team speculated it could have been a calculation the treasurer made based on his office’s average pooled investment earnings, rather than an actual financial breakdown.
Caskey went on to have the auditors confirm the timeline.
The account, created as part of the decade-long transition from the state’s old accounting system to a new one, began to accumulate in 2016.
The old accounting system did not group entries the same, creating computing confusion. During the switch, any time the treasurer’s office couldn’t match up and assign dollars to a specific investment bank, they piled the dollar figures in an account (that existed on paper only) for the questionable funds.
Officials need the state ledgers to line up with records held by the banks. The treasurer’s office assumed, incorrectly, that the proper filing for each entry would eventually be worked out, taking the account back to $0.
But by mid-2017, $1.56 billion worth of entries still remained.
At that time, the Comptroller General’s Office, Treasurer’s Office, State Auditor’s Office and external auditors contracted by the state were all aware of the situation. But none attempted to get to the bottom of what caused the discrepancies.
Funds continued to be moved in and out of the account through the 2021 financial year, ultimately ending at $1.8 billion. At no point did any state financial officials alert legislators or regulators there were discrepancies in the books, auditors’ findings show.
Senator says SC treasurer ‘breached the public trust’ by not flagging $1.8B in mystery funds
“I feel a sense of frustration and anger about the position in which we find ourselves,” Caskey said. “In the last 24 hours, I’ve learned that apparently, these monies never existed. That stands in opposition to things that we’ve been told in the past — comments that I had taken to heart and shared with my neighbors and constituents about our situation over the last year or so.”
Caskey said the budget subcommittee plans to question the treasurer, auditor, as well as the new comptroller general, when they begin meeting again early next month.
But Bauer said she was not willing to wait around to see the issue “be swept under the rug.”
“I think the report was pretty clear (Loftis) knew about this for years and did not do anything about it,” she said. “It’s my judgement that he has to go immediately … If you can’t balance our books, you’re not fit for the job.”
“We have a chance to reset trust with the public,” Bauer continued. “Why let it linger?”