The Myrtle Beach Area Chamber of Commerce paid “crony companies” more than $30 million in tax money over the last three years without competitive bidding, a new lawsuit alleges.
On Thursday, Karon Mitchell filed the suit against the chamber, Horry County and the City of Myrtle Beach. The suit was filed in the 15th Judicial Circuit of Common Pleas.
The filing argues the chamber directed money to businesses started by current or former employees, which the suit calls “crony companies.” Those businesses received money for “unsubstantiated goods” and marked-up service prices, the suit says.
In a statement, the chamber said it complied with applicable laws and selected partners on “best business practices.”
The money in question comes from two different tax streams. One is the Tourism Development Fee, of which state law requires 80 percent must go towards tourism marketing efforts. In the Myrtle Beach area, the chamber of commerce handles those expenditures.
The other 20 percent can be used for tax rebates, but at least 4 percent must go to property tax rebates.
State law also requires quarterly reports that detail the funds received and the expenditures.
The TDF is funded by a 1 percent sales tax, which was first approved in 2009. Last month, the Myrtle Beach City Council approved a first reading to continue the tax. The council is choosing to reinstate the tax through a super-majority vote instead of a referendum.
The other tax-revenue stream is through the accommodations tax. If an area receives more than $50,000, there also are state-mandated requirements about how money can be spent. Both Horry County and Myrtle Beach received in excess of that minimum.
Once some of the money is removed from the equation, 30 percent of the remaining accommodation tax must go to tourism advertising and promotion. Some of the other remaining money must be spent inside the geographical area where the funds are collected.
Horry County and Myrtle Beach chose the chamber as the group to handle those tax revenues, according to the suit.
The suit alleges that the chamber constantly redirected taxpayer money to businesses started by current and former employees.
According to the filing, Myrtle Beach Area Chamber of Commerce also provided no information in reports regarding the money’s allocation, only simply reporting the names of vendors as “search marketing,” “video advertising” and “email,” among other terms.
The distribution of tax money to the companies was without competitive bidding, the filing alleges. The companies in question also had “substantive advantage” through their insider information and influence with the chamber. That harmed other area business that could have competed for the services.
Eight companies received 46 percent of all tax expenditures from the TDF and accommodations funds, the filing argues. According to the suit, the eight companies are:
- Visibility and Conversions LLC, was formed by William Rosenthal, the internet marketing manager for the chamber, the lawsuit states. That company received $28 million over the last three years, according to the filing. It also states that the chamber paid the company $4 million in 2011, its second year of operation. At that time, the company was being operated out of a self-storage locker, the suit states.
- Com-Connect LLC, which was formed by chamber visitor services manager Nevely Graham, according to the filing. That company’s registered address is Graham’s home. During the last three years, that company received $952,690.39.
- Right Analytics LLC was formed in 2016 by chamber vice president of finance James E. Wright, according to the suit. The registered place of business is Wright’s Florida home. The chamber paid that company $82,881.90 in its first year for “research,” according to court records.
- Battle Strategies LLC was founded by chamber media communications director Nora Hembree Battle, the filing contends. Battle Strategies has an address that was previously owned by Battle’s husband. In the last two years, the chamber paid that company $60,470.80, according to the filing.
- Miller Direct Inc., was founded by Steve Miller, and he is the wife of Jackie Miller, the executive assistant to the chamber’s CEO, according to the lawsuit. In the last three years, the chamber paid that company more than $1.3 million.
- Visual Destinations LLC was formed in 2014 by unknown people, the filing states. That company received $269,915.25 during the last three years.
- Brandon Advertising, Inc. was founded by former chamber director W. Scott Brandon and the suit states the chamber paid the company more than $3 million over the last three years.
- Fuel Interactive, LLC was also founded by Brandon and paid $703,697.93, according to the suit.
The lawsuit also argues the city, county and the chamber failed to adhere to competitive bidding laws in directing expenditures to those companies. It also failed to provide reports about money received, the suit said.
Horry County and Myrtle Beach failed to complete any meaningful review of the reports, the suit contends.
The chamber does not have resources to “create, plan, implement and measure the marketing program generated by the fee revenues,” according to the filings.
The suit alleges the chamber also did not make accommodation tax expenditures inside the geographical area.
Some of the money from the "crony companies" was redirected to political campaigns of politicians supported by the chamber, according to the filing.
The suit also alleges the chamber’s funneling of money is to avoid taxes for violating its tax-exempt status.
The lawsuit asks a judge to halt further spending of the tax dollar until it can be done in accordance with state laws.
Late Thursday, the Chamber released a statement by Carla Schuessler, board chair for the chamber.
“We have not seen the lawsuit; therefore, we cannot comment on the specifics. However, it’s unfortunate that this individual has never contacted the Chamber with these questions so we could have cleared up any concerns. The Myrtle Beach Area Chamber of Commerce has complied with all applicable laws regarding the use of public funds and selects providers and partners based on best business practices.”
Spokespeople for the City of Myrtle Beach and Horry County Government both declined to comment, noting they both typically do not comment on pending litigation.
Myrtle Beach Area Chamber of Commerce Brad Dean did not respond in time for this report. Last month, he announced his resignation from the chamber to take a top tourism job in Puerto Rico.
Mitchell and the Player Law Firm, which represents her, also did not respond.