What do Aiken City Attorney Gary Smith, failed Project Pascalis, and the “appearance of a conflict” have in common? Answer: A Bond Opinion for the $9.6 million City of Aiken debt.

by Kelly Cornelius
April 8, 2023

The failure of Project Pascalis continues to plague concerned Aiken citizens as well as local officials, who are now proposing to pay the debt from the Pascalis property deals by using $9.6 million in state funds gained from the State of South Carolina’s plutonium settlement with the federal government.

The full proceedings of the general obligation bond issuance recently obtained via a Freedom of Information Act (FOIA) request (1) has revealed that embattled Aiken City Attorney Gary Smith was involved in the city’s efforts to obtain the $9.6M bond necessary for the Pascalis project property purchases. Specifically, Smith signed one of two “bond opinions” that assured the $9.6 million being borrowed under the auspices of the City of Aiken’s credit.

This involvement occurred weeks after he was reported to have recused himself via a phone call with AMDC attorney Gary Pope, Jr.; and contradicts statements made in court filings in the Blake et al vs City of Aiken et al lawsuit involving alleged illegalities during the Pascalis proceedings.

This is only the latest in a long line of appearances of conflicts for Smith associated with failed Project Pascalis, and the properties that make up the boondoggle, but it is the most troubling.

Summary of City Attorney Ethics Issues

To recap, City Attorney Smith has been the subject of lawsuits and ethics complaints regarding Project Pascalis since at least April of 2022. At the center of the controversy was the deep involvement of his law partner, Ray Massey, as a lead investor and legal agent for RPM Investment Partners, LLC; the winning developer chosen for Project Pascalis by the Aiken Municipal Development Commission (AMDC) in December of 2021.

The controversy only grew after it was discovered that RPM was selected before the public Request for Proposals was publicly advertised; that the Purchase and Sales agreement between the AMDC and RPM was for only $5 million dollars, almost half the price paid by the AMDC one month earlier; and that an invoice from Smith, Massey, Brodie, and Guynn and Mayes to WTC Investments, LLC shows the firm was involved in cobbling together the properties during the earliest phases of the project.

The “Early Juncture” and “Fall of 2021” Recusal Excuses

More than five months after announcing the first details of Project Pascalis, the AMDC finally held two public meetings on April 20, 2022. During the second meeting, I raised my concerns about the obvious conflict of interest:

“City Attorney Gary Smith sat with the City Council when they made their decision and on the 28th they made the decision to sell this property or give it away I should say. Convey it, they made that decision about Newberry street to RPM development.  The only agent listed for RPM development is a Ray Massey and when you look on the website of Mr Smith’s private firm it’s Smith Massey Guynn whatever else. This is his business partner! There is no conflict of interest in this that anyone else sees but me?”

Three minutes later, meeting moderator Tim O’Briant asked Gary Pope, Jr to address the issue. Pope claimed that Gary Smith recused himself at “an early juncture” and “has been uninvolved in these matters.” Pope’s exact comments are as follows:

My name is Gary Pope. I’m  with Pope Flynn. I work out of the Spartanburg and Columbia offices. I’ve typically served the city and capacity as bond counsel in connection with financings and also other special projects. At an early juncture in this project Gary Smith called me and said I believe that my partner may have, maybe proposing as part of a group for this so I’m going to recuse myself, and I need you to represent the city and the AMDC as we go through this process.

So Mr. Smith has been uninvolved in these matters and I’ve been handling them on behalf of the city so I wanted to make sure before his good name was besmirched and let the record sort of reflect that we have done things by the book the right way and didn’t want to let that pass right, didn’t want that angle, and also that the property was sold from the sellers to the AMDC which Mr. Smith I believe does not represent any capacity currently that’s that’s my role at present, so i wanted to also clarify that he’s recused himself.”

The video of his testimony can be seen here:

In response to a FOIA request filed after that meeting, the city wrote the following about Smith’s purported recusal from the Pascalis proceedings:

“The City of Aiken has determined that Mr. Smith declared his recusal verbally in the Fall of 2021 when RPM, LLC’s development proposal came before the Aiken Municipal Development Commission.  While no document was produced, or required, for Mr. Smith to recuse himself, an associated document responsive to your inquiry is the executed dual engagement agreement with Attorney Gary T. Pope, Jr. by and between himself, the City of Aiken and the AMDC.

“This engagement letter, dated October 14, 2021 and executed October 15, 2022 was in response to Mr. Smith’s recusal, the effect of which was replacing him as attorney of record for the City in any matter where there might be an appearance of conflict.”

The City’s FOIA response raised even more ethics issues for Mr. Smith, because:

1. According to South Carolina ethics laws a recusal cannot be delivered via phone, but must be written and then submitted into the public record. No record of a recusal, which would have a date stamp, was available.
2. Smith was on the attendance roster at a March 22, 2022, joint AMDC/ City Council closed-door, Executive Session meeting in which Project Pascalis was the only topic. Mr. Smith was there as City Attorney and billed the city 1.5 hours as part of his monthly legal work. (2)
   
   This meeting occurred five months after Pope has his phone call with Smith and then signed his engagement letter, and five months after RPM was incorporated. Of interest, Gary Pope was also at the March 22nd meeting, held just one month before telling the April 20th audience that Smith had recused himself early on and “by the book.”

(View full minutes here).

3. Smith was present and involved in (and it was broadcast) the March 28, 2022, Aiken City Council First reading to give away part of Newberry Street to RPM Development Partners. The transcript of that exchange is detailed in The Pascalis Attorneys.

Since those first vague recusal excuses were offered, more evidence has emerged:

As recently reported in In the Courts: Pascalis and the Regional Dump, Smith was paid for time advising the Design Review Board the day before their vote to demolish the historic Hotel Aiken at the request of RPM. And in The Pascalis Attorneys, Smith’s involvement in the city ordinance authorizing the $9.6 million bond is made clear.

“Ladies and Gentleman: We are Counsel….”

Now another piece of evidence has emerged: the Bond Opinion. According to the Government Finance Officer’s Association’s “Best Practices”page, bond counsel plays an essential role in ensuring the integrity of the process:

“An essential member of a government issuer’s bond financing team is bond counsel. Bond counsel not only prepares authorizing documents, disclosure documents and assists in compliance with IRS regulations, but also renders an opinion on the validity of the bond offering, the security for the offering, and whether and to what extent interest on the bonds is exempt from income and other taxation. The opinion of bond counsel provides assurance both to issuers and to investors who purchase the bonds that all legal and tax requirements relevant to the matters covered by the opinion are met.”

In response to a FOIA request for the Pope-Flynn bond opinion , the City of Aiken finally released the entire bond record, the 144-page Transcript of Proceedings; although it has still never publicly disclosed the full document.

The Pope-Flynn legal opinion for the $9,600,000 General Obligation Bond is on Page 135 of the transcript, and is signed “Pope-Flynn, LLC.” The entire law firm was behind the opinion, which begins with “Ladies and Gentleman, We have acted as Bond Counsel to the City of Aiken in connection with the above referenced bond.” (2)

On Page 132 of the transcript, Gary Smith’s legal opinion, on his firm’s letterhead, begins with “Ladies and Gentleman, We are counsel for the City of Aiken, South Carolina and have acted as such in connection with the issuance by the City of the above-referenced bond.” (below)

Oct 25, 2021 is ten full days after Pope-Flynn signed its dual engagement letter; and it is nearly 4 months after Keith Wood, then Chair of the AMDC, raised conflict of interest concerns regarding Smith in a confidential June 10th, 2021 email. Then AMDC Executive Director Tim Obriant and City Manager Stuart Bedenbaugh were both copied on that June 2021 email.

In paragraph 57 of Smith’s August 2022 response to the Blake et al vs. City of Aiken et al lawsuit, his lawyer wrote:

“With respect to the allegations set forth in Paragraph 108 of the Complaint this Defendant did not provide legal counseling to the AMDC after June 2020 and does not have sufficient information or knowledge to admit or deny the allegations set forth in said Paragraph.”

Perhaps Gary Smith’s lawyer does not consider a legal opinion necessary for the AMDC to purchase the Pascalis properties as providing legal counseling to the AMDC, or perhaps Smith did not inform his counsel of this contradictory piece of evidence.

The Ethics Issue Today.

City Council was made aware of this latest conflict of interest concern during my public comment on the evening of Feb 13th, 2023, and Council responded with what has become a tradition of cricket song and deer-in-headlight stares.

Combined on that dais are the Mayor, the City attorney, and six Council Members for a total of eight at the helm of the failed Project Pascalis and the proposed Project Labscalis. Five of the eight have recused themselves for real or potential conflicts of interests at some point in time during both processes.

The only elected official to ever directly address the public’s concerns regarding Attorney Smith was Mayor Osbon, who accused Aiken area resident and businessman Drew Johnson of libel on May 9, 2022, after Mr. Johnson raised ethics concerns (see video below). Ninety minutes later, the Mayor and five council members voted to give away part of Newberry St to RPM Development Partners.

From the origins of this bond to the proposed bailout of the bond, Project Pascalis has been littered with conflicts of interest, dogged with deceit, wrapped in secrecy, and stained with the loss of public trust. The one thing City Council and the Mayor have made transparent is their disregard for citizen’s input and concerns.

Meanwhile, the historic Hotel Aiken continues to suffer from neglect , the taxpayer-funded Pascalis properties on Newberry St sit in the crosshairs of a proposed federal contractor office complex, and a “structured parking solution,” better known as a parking garage, is proposed in support of the federal contractor office complex being designed for use by the Savannah River National Laboratory.

The question yet to be answered is this: in the battle between the City’s conflicts of interest and public opinion, who will prevail in determining the fate of Aiken’s beloved downtown and the small, privately-owned downtown businesses in the crosshairs of the wrecking ball?

Footnotes:

(1) The FOIA request from Kelly Cornelius was for: “a copy of the legal opinion from Pope-Flynn as referred to on page 61 of the ordinance 8232021D 10,000,000 Parkway Bond you can find that here and the opinion I request is again referred to on page 61 in this link. https://edoc.cityofaikensc.gov/WebLink/DocView.aspx?id=1005864&dbid=0&repo=City-of-Aiken-LF Thank You.”

This document provided is 144 pages long, whereas the version released by the AMDC included only 64 pages long, and did not contain the legal opinions and several other certifications and required documents. SC FOIA law does not require public bodies to create new records, so the entire document was provided.

(2) City of Aiken legal department invoices obtained via FOIA by Don Moniak of The Aiken Chronicles show that Gary Smith billed the city 1.5 hours for the March 22, 2022 meeting on Project Pascalis. (below)

Gary Pope, Jr. billed the AMDC 5.5 hours to attend the March 22, 2022, meeting, and have a phone conversation with Tim O’Briant. The hours discrepancy is due to travel time, since Pope-Flynn’s home offices are in Spartanburg and Columbia.