Lawsuit claims Myrtle Beach chamber paid millions to ‘Crony Companies’ backed by employees

Grand Strand

MYRTLE BEACH, SC (WBTW) – An Horry County taxpayer has filed a lawsuit against the Myrtle Beach Area Chamber of Commerce, the City of Myrtle Beach and Horry County, claiming the chamber gave millions of dollars in taxpayer cash to businesses started by its current and former employees.

You can read the latest fact check from the News13 team at the bottom of this article.

The lawsuit, filed Thursday by Karon Mitchell, states that the Myrtle Beach Area Chamber of Commerce “has consistently redirected taxpayer funds” to Crony Companies. Court documents allege the Crony Companies receive taxpayer money for “unsubstantiated goods and services at a mark-up.”

Mitchell’s lawsuit goes on to say that a number of the companies to which the chamber gave money were chosen only because they had a connection to the chamber and not for any “research-based outcomes,” as is required by law, the suit claims.

The Local Option Tourism Development Fee Act requires 80% of the money generated by the one-percent sales tax to be used for out-of-market advertising. Myrtle Beach gives the money – 80% – to the Myrtle Beach Chamber of Commerce. The rest of the tax money pays for residential property tax relief and tourism-related capital projects.

The lawsuit notes that the 1% Sales and Use Tax is collected by the South Carolina Department of Revenue (SCDOR) and distributed to the city on a quarterly basis. The city gives 80% of the money to the chamber and keeps 20% to “use as a credit towards property tax bills for citizens and tourism-related capital projects,” the lawsuit states.

The tax, which was originated in 2009, is set to expire in 2019, but Myrtle Beach City Council and Mayor Brenda Bethune unanimously passed the first reading of an ordinance March 27 to “reimpose” the one-cent sales tax without a voter referendum. A second and final reading of the ordinance would keep the one-cent sales tax in operation for another decade.

The lawsuit claims that 46% of the total money spent through the TDF Funds, MB-A-Tax Funds, and HC-A-Tax Funds were paid to eight companies over the last three years. The lawsuit then identifies the companies.

Visibility and Conversions, LLC, according to the lawsuit, was formed in 2010 by William Rosenthal. Rosenthal is listed as the “Internet Marketing Manager” for the chamber. The lawsuit also claims that the address for Visibility and Conversions is a self-storage unit and business office facility in Myrtle Beach. According to the suit, the chamber paid over $4 million to Visibility and Conversions, LLC in 2011, its second year of operations, while it purportedly operated out of the self-storage facility.

“In the last seven years, MBACC has paid Visibility and Conversions, LLC approximately $60 million in TDF funds, MB-A-Tax Funds, and HC-A-Tax Funds,” the lawsuit claims. Work provided by Visibility and Conversions, LLC is described as internet advertising, internet promo, online promotion, digital advertising and other advertising elements.

When News13 contacted Visibility and Conversions LLC for comment, William Rosenthal stated the company would not comment on any lawsuits against their clients, but he was able to provide details regarding the location of the business. According to Rosenthal, the company rented an office at the Myrtle Beach Storage and Business Center when they started, but moved to a location on Prather Park Drive in 2014. Last month, Visibility and Conversions moved to Grandhaven Drive in Murrells Inlet and the newest address is in the process of being updated with their business license renewal due this month, according to Rosenthal.

Com-Connect, LLC was formed in 2013 by Nevely Graham, according to the lawsuit. Graham is currently listed as the “Visitor Services Manager” for the chamber. The registered address for the business is a home in Galivants Ferry, also registered to Graham, the suit states.

In the last three years, the chamber has paid Com-Connect, LLC $952,690.39 in tax funds for “inquiry fulfillment, general consumer promotion, and general consumer.”

Right Analytics, LLC was formed in October 2016 by James E. Wright, the Vice President of Finance for the chamber, claims the lawsuit. The business is listed to a home address in Bonita Springs, Florida. The chamber has paid Right Analytics, LLC $82,881.90 in taxpayer money for “research.”

Battle Strategies, LLC was formed in October 2013 by Nora Hembree Battle, Media Communications Director for the chamber in 2012, according to the lawsuit. The business address for Battle Strategies, LLC is a Conway home previously owned by Battle’s husband, the suit claims. In two years, the chamber paid $60,470.80 in taxpayer money to the company for “video production, public relations, tourism promotion, and internet promotion-social.”

Miller Direct, Inc. was formed in 2008 by Steve Miller. The lawsuit claims that Miller’s wife, Jackie Miller, served as the executive assistant to the CEO of the chamber. Steve Miller passed away in 2015, the suit claims, and his wife took over the business. In the last three years, the chamber paid Miller Direct, Inc. $1,316,276 in TDF funds, MB-A-Tax Funds and HC-A-Tax Funds, according to the lawsuit.

Visual Destinations, LLC was formed in 2014, but an owner’s name was not made available on the lawsuit. The business office address is listed as a Surfside Beach home, and, according to the suit, the chamber paid the company $89,192 in 2015. Over the past three years, the company has received $269,915 in taxpayer money from the chamber for website related services.

Fuel Interactive, LLC was formed in 2007 by W. Scott Brandon, and the lawsuit claims that Brandon is a former director of the chamber. The chamber paid Fuel Interactive $703,697 in taxpayer money over the last three years, the suit states.

Brandon Advertising was formed in 2000 by W. Scott Brandon, and received $3,004,634 from the chamber over the last three years, according to the lawsuit.

Mitchell’s lawsuit claims that the chamber, city and Horry County must “comply with applicable procurement laws,” which call for a fair bidding process before work and taxpayer money is distributed. Since the origination of the TDF tax, that has not occurred, the suit claims.

“MBACC did not and does not have sufficient resources to create, plan, implement, and measure the marketing program generated by the fee revenues,” the suit states. “The City of Myrtle Beach and Horry County failed to conduct any meaningful review of the ‘reports’ provided by MBACC for the last 8 years.”

The lawsuit goes on to claim that the chamber has used a large amount of the TDF funds to support current and former chamber employees and members.

The lawsuit requests that spending and allocating of the TDF funds, Myrtle Beach A-Tax funds and Horry County A-Tax funds stop until the chamber, city and county “comply with State, County and local procurement and ethics laws by implementing a competitive bidding process for the expenditure of those funds.”

The suit also requests attorney fees for the Mitchell and “additional relief as the Court deems Proper.”

The City of Myrtle Beach spokesperson Mark Kruea says the city does not comment on pending litigation and officials with Horry County state they were unaware the lawsuit had been filed. Even still, officials say they do not comment on pending litigation.

Carla Schuessler, board chair of the Myrtle Beach Area Chamber of Commerce, issued a statement to News13. “We have not seen the lawsuit; therefore, we cannot comment on the specifics,” the statement said. “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.”

Mitchell is being represented by the Player Law Firm out of Columbia.

Fact Check

The News13 team spent several hours on Thursday fact-checking these serious allegations although the lawsuit doesn’t give a lot of evidence.

Mitchell claims the chamber improperly spent penny sales tax and accommodations tax money and cites data from the last three years. She claims about 46% of the money has gone to eight companies tied to former and current chamber employees.

News13 is still going through the data but last year those eight companies appear to have only received about 11% of the tax money.

As for the ties to former and current chamber employees, News13 independently found four companies linked to people whose names are associated with the chamber. 

While the lawsuit claims money has be funneled through companies into political contributions, it doesn’t give any evidence. The lawsuit also claims the City of Myrtle Beach and Horry County don’t verify how the tax money is spent but again, gives no evidence.

The lawsuit also says the money goes to the eight companies for “unsubstantiated goods and services at a mark-up” but the chamber only shares generic descriptions of a transaction so those claims cannot be verified.

Mitchell appears to want competitive bidding when the chamber spends tax money on advertising and she wants a judge to cut off the tax money until that happens.

You can count on News13 to continue following and fact-checking this story.

Copyright 2019 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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