MB chamber responds to lawsuit, calls it 'a baseless, vindictive attack'
The Myrtle Beach Area Chamber of Commerce fired back Tuesday afternoon and responded to a lawsuit filed by Karon Mitchell against the chamber, Horry County and the City of Myrtle Beach.
"The legal action filed by Karon Mitchell against the Myrtle Beach Area Chamber of Commerce is a baseless, vindictive attack on the chamber's staff, board of directors, marketing council and several member businesses, filled with unsubstantiated allegations," board chair for the chamber Carla Schuessler said.
"Ms. Mitchell is a disgruntled former member of the chamber who refused to pay a late charge levied by the chamber's board of directors and her membership was dropped," she said. "Subsequently, she failed in an attempt to create a competitor chamber of commerce. Make no mistake, the chamber will vigorously defend itself against each false, incorrect and baseless allegation included in this action."
In a press conference Tuesday, Matt Klugman, with the chamber, made a case for each of the eight businesses cited in the lawsuit, saying that many of the businesses were picked through a "competitive bidding process," a request for proposal or a request for quotation.
Mitchell, who was at the press conference, said, "I will tell you how I will respond to that. The facts will come out and the evidence will be there."
She continued: "I do not want to do away with the TDF or the people's tax credit for their property. I'm asking for accountability. I'm asking for accountability for the money. Let us know where it's going, let us know your procedure, let us know why you're not bidding on it and sending out bids on everything.
The lawsuit
The lawsuit accuses the chamber of paying “crony companies” more than $30 million in tax money over the last three years without competitive bidding.
The suit argues the chamber directed money to businesses started by current or former employees. Those businesses received money for “unsubstantiated goods” and marked-up service prices, the lawsuit alleges.
Eight companies were cited in the suit as receiving 46 percent of all tax expenditures, with owners who are allegedly connected to the chamber:
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, the suit alleges.
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, husband of Jackie Miller, the executive assistant to the chamber’s CEO, according to the lawsuit. In the last three years, the suit says 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, according to the lawsuit.
Brandon Advertising Inc., according to the court filings, 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.
According to the suit, these companies had a “substantive advantage,” because they were distributed the funds without competitive bidding.
The money in question comes from the Tourism Development Fee and the accommodations tax, the suit says.
According to state law, 80 percent of funds from the TDF must go toward out-of-area marketing for tourism.
In Myrtle Beach, those funds go to the chamber.
Of the remaining money, 20 percent can be used for tax rebates, but at least 4 percent must be used for property tax rebates. The rest of the money can go back to the city.
Both Horry County and the City of Myrtle Beach receive more than $50,000 in A-tax funds. Due to the excess, there are state-mandated requirements about how money can be spent.
In the city, 30 percent of the funds are given to the chamber for advertising. In 2017, The Sun News reported that about $1 million is given to the chamber from county A-tax funds.
Remaining funds can be spent in areas where the tax is collected.
On top of the allegations, the suit also states that the chamber did not provide information in online reports for the money’s allocation.
Online reports for both taxes are provided on a Myrtle Beach Area Convention and Visitors Bureau website called Transparency and Accountability.
However, the filing states that vendors are reported as “search marketing,” “video advertising” and “email,” among other terms.
According to the suit, both the city and county failed to any meaningful reviews of the reports.
Other allegations provided in the suit contend that the chamber did not make A-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 and that 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 money until it can be done in accordance with state laws.
City and county officials declined to comment on the lawsuit, saying they do not comment on pending litigation.
"We are committed to promoting, protecting and improving the Grand Strand and its business community," Schuessler said. "And, we are prepared to vigorously defend the chamber in a court of law, where the chamber will prevail, because Ms. Mitchell's lawsuit is built upon misinformation, rumor, innuendo and baseless accusations."
This story was originally published April 10, 2018 at 1:41 PM with the headline "MB chamber responds to lawsuit, calls it 'a baseless, vindictive attack'."