Beaufort County schools hire referendum advisor, despite $50M Berkeley Co. lawsuit
Beaufort County’s school board voted Tuesday to continue work with its current bond attorney, months after concerns were raised about the attorney’s connection to a 2017 embezzlement scandal and an ongoing $50-million lawsuit in Berkeley County.
Columbia-based firm Burr & Forman will oversee the purchasing and refinancing of the $345 million in school bonds voters approved in November, and stands to make hundreds of thousands of dollars in bond fees.
The bond adviser’s firm made $304,000 in fees from the district’s last successful referendum in 2008. At $163 million, it was a little less than half the size of the 2019 referendum.
Both Burr & Forman and attorney Frannie Heizer, a partner there who has worked as the district’s bond attorney for 20 years, are named as defendants in a lawsuit stemming from a 2017 FBI investigation into embezzlement at the Berkeley County School District.
That district’s chief financial officer, Brantley Thomas, pleaded guilty in 2019 to 35 charges of public corruption that included stealing nearly $1.3 million from the district over 16 years. He was sentenced to a total of 16 years in federal and state prison last year.
In March 2019, the Berkeley school district filed a $50 million lawsuit against the lawyers and firms who gave the district financial advice. The lawsuit claims Heizer did not alert the school district after learning Thomas had overspent on a $100 million bond issuance in 2012 that was part of a school bond referendum.
Heizer previously told the Island Packet and Beaufort Gazette that “unless specifically engaged for such purposes, bond counsel does not monitor, identify, evaluate or report cost overruns in a capital building program.”
“Bond counsel generally does not have access to all necessary information regarding the expenditure of bond proceeds that would be required to do so,” she wrote.
She added that “most, if not all” school districts hire a construction project manager to monitor spending and overruns, which the district did in February.
A six-figure difference
The board voted 6-4 Tuesday to select Burr & Forman as bond counsel in a special called executive session meeting.
JoAnn Orischak, John Dowling, William Smith and Tricia Fidrych voted against the motion. Rachel Wisnefski was absent.
Several board members said cost was the reason they chose Burr & Forman over the two other firms that were considered. David Striebinger cited “around a six figure difference” between the cost of Burr & Forman and other firms over the course of the $345 million referendum.
The board approved Burr & Forman to issue $124 million in referendum funding in March, with the caveat that the board would seek new bids for a bond attorney by June 30.
The firm offered a discount on the fee for that bond issuance, which was approximately $91,000 compared to the regular price of $97,305.
Heizer said Friday that the discount was also offered in the proposal board members accepted Tuesday.
The exact amount the firm will net in fees is not yet known, and the contract between the district and the firm is still under negotiation.
“The total fees will ultimately depend on the number of bond issues,” Heizer said Friday.
Some board members referenced the firm’s reputation and longstanding relationship with the school district as the reason for their “yes” votes. Heizer has previously said she represents about 45 of the state’s school districts in bond issues and refinancing.
“I believe it’s a frivolous lawsuit,” board member Richard Geier said. “I believe it’s not indicative of the reputation they have throughout the state.”
Others disagreed.
“I won’t be here,” said Dowling, who announced in December that he would not seek re-election. “But if it blows up, you’re going to have to look at the voters and say, even though I was warned about the possibility of this happening, I chose, for a lousy $100,000 on $345 million worth of borrowing, I chose a firm that had a cloud.”
Orischak had previously called for Burr & Forman to be disqualified from consideration due to the ongoing lawsuit and Heizer’s decades-long relationship with the district, which she said “truly flies in the face of our procurement code and providing opportunities for other firms.”
She left Tuesday’s executive session almost immediately because she did not sign a confidentiality agreement given to board members ahead of the meeting. A motion she made at that meeting to disqualify Burr & Forman failed 7-3-1.
Orischak announced in May that she was not running for re-election.
Orischak also said board members were contacted by former interim superintendent Herb Berg and state senator Tom Davis, who vouched for Heizer.
“I have great respect for the elected official who contacted me,” she said. “If I was an inexperienced board member, it might have influenced me. It’s particularly problematic when you factor in how close this board vote was.”
Heizer said she did not ask either man to contact the board ahead of the meeting.
Davis said Saturday the only time he contacted a board member about Heizer, who he has known for 30 years, was “several months ago” in a phone call to Orischak after being copied on emails of her raising questions about the Berkeley County lawsuit.
“I’ve got no dog in the fight on what bond counsel get retained, that doesn’t matter to me at all,” Davis said. “But I know Frannie, and I did vouch for her.”
Heizer said Friday she and her firm are “vigorously defending ourselves” against the Berkeley County lawsuit. She told the board in November that she is “confident I personally will be vindicated.”
Update: This story has been updated with comment from S.C. Sen. Tom Davis.
This story was originally published June 20, 2020 at 10:39 AM.