Journal of the House of Representatives
of the Second Session of the 110th General Assembly
of the State of South Carolina
being the Regular Session Beginning Tuesday, January 11, 1994

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| Printed Page 1600, Feb. 10 | Printed Page 1620, Feb. 10 |
Printed Page 1610 . . . . . Thursday, February 10, 1994
Q. My question, it doesn't necessarily lend itself to the contract -- the contents. I mean that's between two parties, even though they may not have been the best terms, I don't think that's the issue here. The issue, I think, goes to the character of Mr. Ross.
A. Right.
Q. And the question then becomes did he knowingly assist his client in violating the rules of the Public Service Commission?
A. Well, I -- after all, he's an experienced lawyer, he knew what the rules were and his initials --
Q. Now you say he --
A. His initials are on the agreements.
Q. Good question. You say he knows what the rules were?
A. That's right.
Q. Had he represented this client at any other time before the Public Service Commission in the sale of utilities to your knowledge?
A. To my knowledge, I have no knowledge that he ever did.
Q. Well, what is your knowledge?
A. I know that he's been the counsel -- corporate counsel or provided corporate legal services to Realtec and -- for a number of years.
Q. Prior to this transfer?
A. And continuing to this day.
Q. And it appears from the documents that I've reviewed that there was another law firm in Columbia involved in this transaction and, in fact, represented this utility before the Public Service Commission?
A. Utilities, Inc. That's correct.
Q. Now --
A. That's Willoughby and Hoefer.
Q. Then the question is were they involved at all prior to the Public Service hearing?
A. Well --
Q. Did they do the --
A. They were -- they -- I don't know what the legal technicalities are. The applicant before the Public Service Commission was Realtec and I would assume that insofar as the transfer was concerned, Utilities, Inc. was a co-applicant or a joint applicant. I do not know technically. They were represented at the Public Service Commission, but they were representing only Utilities, Inc., not Realtec.
Q. Did Mr. Ross represent Realtec in its initial application for approval when this sewer service was established?
A. I have no way of knowing. The sewer -- the sewer service was established by Certainteed (phonetic) the prior, the original developer.
Printed Page 1611 . . . . . Thursday, February 10, 1994
Q. Well, did Mr. Ross handle the transfer between Realtec and Certainteed?
A. He'd have to answer that. I don't know. It was a -- the transfer took place in 1976 and was legally between Certainteed Products or its subsidiary and a straw corporation known as Psi (phonetic) Corporation of which Mr. Ford and other unnamed people were the principals.
Q. Was Mr. Ross at all involved in those transactions?
A. I have no idea of that.
Q. So then your knowledge of his knowledge of the rules and regulations of the Public Service Commission, you don't have a basis for that?
A. Except that he was counsel as far as the -- the application in 1992 --
Q. And the --
A. -- for Realtec after -- and there was a lengthy process between the signing of the purchase agreement which took place in December, 1991 and the filing of an application before the Public Service Commission which was in March of 1992.
Q. Who handled the filing of the application? Did Mr. Ross handle that?
A. I believe his -- I assume his firm represented -- he was representing Realtec. He could answer that, but that three month period between signing of the agreement and the filing was the period in which the various legal work was done to provide a legal description of the property, a survey of the property and actually record the deed of transfer.
Q. Well, Mr. Kennard, this is -- I'm getting to -- this is what I'm attempting to get to is the fact that deeds are drawn all the time by lawyers by someone that simply walks in the door and says I want to sell this property?
A. Right.
Q. Now does that put a burden on the lawyer to research the reasons why these folks are selling the property and whether or not it violates some law or some rule somewhere?
A. Well, it seems to me, and I guess I'm just speaking what you would say as an individual, that when I go to a lawyer and I want some kind of a transaction, I expect the lawyer to, one, know how to do it; know, two, what the rules are for doing it and, number three, to give me some advice on the best way to do it, but he's acting as an attorney for me. He's not responsible for me.
Q. Well, are you alleging then that the deed was transferred improperly?
A. It was -- the deed was transferred legally correctly, I'm sure.
Q. Are you alleging then that the agreement -- the sales agreement was done improperly?
Printed Page 1612 . . . . . Thursday, February 10, 1994
A. No, there is nothing wrong with somebody selling his property on any basis he wants to.
Q. So there was nothing wrong with the legal work itself?
A. I'm not judging that at all, but --
Q. Okay.
A. -- it was part of a -- of a procedure. Not legal, some legal, otherwise, I don't know how to describe it. It's a whole series of events and I'm saying that to my knowledge Mr. Ross acted as an attorney to his client in this -- in his participation, that is the client's participation, in these events and those events included an egregious violation according to the Public Service Commission of its rules.

That is the rules of the Public Service Commission of the State of South Carolina and I suggest that that is evidence that you're not qualified to be a judge when you don't go by the rules of a commission of a public body of South Carolina. That's all.
THE CHAIRMAN: Mr. Kennard, and I think we're going to get to the heart of the matter on this, we need to inquire of Mr. Ross about the background on this representation. So any further questions? Mr. Elliott?
MR. ELLIOTT: No, sir.
THE CHAIRMAN: Thank you very much.
A. Thank you.
THE CHAIRMAN: Mr. Ross -- you're still under oath. If you wait just a second, we need to get set up. Mr. Ross?
MR. ROSS: Yes.
THE CHAIRMAN: I think the heart of the matter is your involvement with the transfer of the property. If you'd explain that to us, please, sir.
MR. ROSS: Realtec is a land development company that developed the Keowee Key. Keowee Key is just basically a retirement community. Utilities, Inc. is a utility company that owns a number of utility systems in South Carolina and most of them I think are under the name of Carolina Water System or something like that. Maybe 20. They may own 20 systems.

Realtec has a lawyer who works for them in-house,
Gary Steadman. He's been with them for a long time. Utilities, Inc., of course, is headquartered up in Illinois or somewhere and they have all kind of in-house counsel.

I had -- I just -- this contract for the, you know, the two transfers and we don't want them confused, but the contract for the sale of this water and sewer system was negotiated between -- principally between a fellow named Jim Cameron and Gary Steadman, who is in-house counsel for

Printed Page 1613 . . . . . Thursday, February 10, 1994
Realtec. He's a lawyer admitted to practice in the state of Illinois and has been with them for years.

I didn't have anything to do with that contract. I never negotiated the contract. I didn't have anything to do with typing the contract or anything of the sort. They never -- nobody ever called me about the contract. They never consulted me about the contract. I didn't have anything to do with it.

At some point they called me and said they wanted me to handle the deeds and bill of sale and those kind of things which would transfer the asset from Realtec to Utilities, Inc. and they wanted me to help them with the closing. They came down in March.

At some point I went to the courthouse and got all the stuff together and I prepared the deeds and the bill of sale for the personal property and other things that had anything to do with it. They all came down to my office on March 6th. It took all day. It's nothing like a house closing where you have those kinds of things that they wanted, this party wanted that and whatever, so I attended all those kinds of things. Nobody ever consulted me about this.

Keep in mind we're talking about Utilities, Inc. who was buying this and who was really drawing the contract or the larger utility company. They were in the business. They're over at the Public Service Commission all the time.

I've never -- I had never handled a sale of a utility company of any kind. I've been over to the Public Service Commission, but I had never handled a sale of any kind of utility system over there. If they had called me about this contract or I had negotiated the contract, I don't know what I would have done, you know, but I don't -- I mean I didn't have anything to do with it. Didn't do it.

We did the closing on March the 6th. I delivered the deed, executed the -- had the people execution (sic) and my recollection the -- anything about the rules or whether or not this would fly with the Public Service Commission was never raised to me in any shape, form or fashion.

At the end of that day, you know, I gave Real--- you know, I gave Utilities, Inc., who was buying the system a bunch of files that I accumulated that were related to it. They had had me in the past -- Realtec had had me accumulate some costs on some things. I delivered all that stuff to them and put it out of my mind. I went on to something else. I did not participate in any manner in the transfer or the approval for the sale before the Public Service Commission.

I didn't prepare any document. Mr. -- Utilities, Inc. did the work. They did all that. They -- as far as I know I'm sure Utilities -- people

Printed Page 1614 . . . . . Thursday, February 10, 1994
from Mr. Willoughby's office -- Willoughby and Hoefer never talked to me about it. I gave no advice about it. Nobody talked to me about it. You know, I had done what I was asked to do and that was a deed and a bill of sale and a closing. And I never talked to anybody at the Public Service Commission about this deal.

Now, this was a big hoo-rah-rah (phonetic) in Oconee County and I probably did read newspaper account. They had a night meeting up in Oconee about it and all. I didn't go to the meeting. I never went over to the Public Service Commission. I didn't have anything to do with anything from then until the Public Service Commission had refused the transfer when Hoefer and Willoughby, somebody from their office sent the deed to my office and asked us if we would take that deed to the court house and record it. They had prepared it.

We did that. The next thing that happened was then
-- that I had anything to do with, I still was not involved in it. Then sometime in late November, December of 1992, they called me and said they were going to file a new application and would I -- they reconveyed the property and all that, would I represent Realtec in this new application, which I agreed to do. Went down to the Public -- came down to the Public Service Commission and reviewed the file of what had transpired in the past because I didn't know. And that was my involvement in it.
THE CHAIRMAN: Mr. Elliott.
RE-EXAMINATION BY MR. ELLIOTT:
Q. The events that the Public Service Commission found to be offensive or the egregious violation really hinged on the transfer, that is, and they cited the closing and the transfer of the deed prior to the application and approval of Public Service Commission?
A. Yes, but even though the contract provided that it was a conditional sale. It said the transfer was good -- in effect only if approved by the Public Service Commission, but that's -- that's true.
Q. Do you have any obligation when you're the draftsman of the deed and you're arranging the closing to look behind that to look at the contract of the transaction between the parties?
A. Well, it depends on the circumstances. In this situation where I had two educated clients, Utilities, Inc. and Realtec. Utilities, Inc., you know, I mean they're over at the Public Service Commission all the time. I had no reason to go behind those people under the conditions. I had no reason to search that out.

If it had been my responsibility to negotiate this contract from the first instant, I probably would have gone to the Public Service Commission

Printed Page 1615 . . . . . Thursday, February 10, 1994
said "How about this?" simply because I had never done a transfer, you know. When you've never done something, you're a lot more careful than if you've done it in the past.

I probably -- because I know people over there and I'd probably have gone over there and I said "What do you think about this?" But I didn't have anything to do with the contract.

They told me -- my client told me to do the deed and I did the deed between two clients that I assumed knew what they were doing and they had negotiated that out and knew what they were about.
Q. Okay. I don't have any further questions.
THE CHAIRMAN: Mr. Beatty.
EXAMINATION BY REPRESENTATIVE BEATTY:
Q. So, Mr. Ross, is your testimony that your sole involvement in this situation as to the contract was to serve as a witness --
A. Well, I prepared the deed.
Q. You prepared the deed, but what about the contract?
A. I don't think I witnessed the contract.
Q. So you just witnessed the deed?
A. Yes. I don't think I had anything to do with the contract. The contract was shipped to me from somewhere else.
THE CHAIRMAN: Now, there is an agreement in the file, Mr. Ross. An agreement, bill of sale and assignment of easement, which you apparently witnessed.
A. Yes, but that's not the contract. The original contract for the sale of the utility was prepared I believe by the Utilities, Inc. sent to Gary Steadman.
Q. And that's their lawyer? Gary Steadman was someone else's lawyer --
A. Realtec's lawyer.
Q. Realtec's lawyer?
A. Realtec's lawyer.
THE CHAIRMAN: Now --
A. Gary Steadman. The bill of sale and whatever you got, I don't know what you've got, but all that -- those documents connected with the deed was not the contract that we're talking about.

The contract that we're talking -- the original contract -- was for the sale was a contract between Utilities, Inc. and Realtec that was negotiated between those two people and it was dated -- I don't know when it was dated. It was dated sometime in '91 and provided for the sale of the utility subject to the approval of the Public Service Commission.

Printed Page 1616 . . . . . Thursday, February 10, 1994
Q. Now, it's my understanding that Mr. Kennard's allegations are that you assisted Realtec, I believe, in circumventing the rules; is that correct? I'm assuming that that is his allegation. You're saying that you didn't even have anything to do with this contract and that Realtec had another lawyer, in-house counsel named --
A. Gary Steadman.
Q. -- Gary Steadman.
A. They got -- they did the contract. I did not negotiate the contract.
Q. Now, who is Jim Cameron or someone --
A. He's Utilities, Inc.. He's not a lawyer, but he's -- I don't know, but, you know, he is the man who negotiates for them, had a lot to do with the sale of this company, with the purchase of this system and I think he was the fellow who structured the deal.
Q. So am I correct in summarizing in saying that what these folks did is walk in your office and say we want you to prepare the deed for the transfer of this particular piece of property?
A. Well, I mean, they called me earlier and said we want you to get -- get your stuff together to prepare the deed to effect the legal transfer of our asset to Utilities, Inc. That is correct. They never sought my advice about it.
Q. And you've not represented these Realty, Inc. -- Realtec rather, before the Public Service Commission before?
A. Oh, yeah. Oh, I had done a rate increase back in '87. Yes, sir, I had done -- well, let me back up. It wasn't a rate increase. It was to establish rates.

Realtec for many, many years gave the water and sewer service away. They didn't charge anything for it and so we went and got rates established. You know, you can't charge rates unless the Public Service Commission approved it and so we went to the Public Service Commission and had the rates approved. That's the--
Q. Mr. Ross, I have two other questions. The first being when Realtec purchased the utility, did you handle that purchase?
A. No. When Realtec bought it, I didn't have anything to do with that.
Q. At the time you transferred this property or handled the drafting of the deed, if you will, did you know whether or not Realtec or Utilities, Inc., I believe it is, had applied for approval?
A. No, I knew they had not applied for approval. I knew they were going to. That's what the deed was -- the contract was conditional. It said in there that they were to meet -- apply for approval.
Q. Well, now, let me ask you this very pertinent question. Did you know approval was required --

Printed Page 1617 . . . . . Thursday, February 10, 1994
A. Well, I know --
Q. -- prior to the transfer?
A. I know that approval is required in order to operate a utility system. I knew that they would have to get approval before they would be in charge of and own the system.
Q. But did you know it was required before the transfer of the property from one utility to another?
A. Well, I knew that the rules required that -- yes, I knew that the rules -- or that -- I knew that a permit would be -- I knew that a permit would be required for them to operate the system.
Q. No, no. The question is did you know that approval was required prior to the transfer or the conveyance of the property?
A. I didn't -- I didn't have any occasion to check that. I didn't --
Q. You didn't know? You didn't know is what you're saying?
A. I didn't know at that time. It's hard for me to go back and construct what I knew and didn't know, but I had no reason to look at that --
Q. I understand.
A. -- at that time.
THE CHAIRMAN: Senator Moore, I think -- and let me pass down a question to this agreement that we referenced because I think it -- we've talked about it several times.
MR. ELLIOTT: Mr. Chairman, if I might, I obtained a certified copy of what's filed, an Asset Purchase Agreement, with the Public Service Commission and it's dated November 26th, 1991.
A. It's dated what?
MR. ELLIOTT: November 26th, 1991. And it does not bear Mr. Ross' name anywhere on the document, but there is a bill of sale that you also have in your hand. It might be helpful if you distinguish between an asset purchase agreement from the bill of sale for us.
THE CHAIRMAN: We're going to bring you a complete copy down, too.
A. Yes, this is agreement, bill of sale and easement and I prepared these documents, but this is not the agreement we're talking about.
RE-EXAMINATION BY MR. ELLIOTT:
Q. Here's an Asset Purchase Agreement, how does -- how is that distinguishable from a bill of sale?
A. Which one?
Q. The Asset Purchase Agreement and the bill of sale.
A. Well, the Asset Purchase Agreement anticipates that there will be further documents. This is the document, the Assets Purchase Agreement dated 26 November 1991, I didn't have anything to do with it. It
Printed Page 1618 . . . . . Thursday, February 10, 1994
anticipates further documents will be and title will be transferred and approval if granted by the Public Service Commission and all kinds of things that subsequently happen.
Q. And the bill of sale would be one of those documents, you're --
A. The bill of sale is one of the documents that I prepared that effected the conveyance of the personal property and certain easement and that kind of thing, all subject to approval by the Public Service Commission.
Q. It's one of the documents anticipated by the asset purchase agreement?
A. Anticipated by the purchase agreement, but the 26 November document, I had nothing to do with it. Never -- I never consulted about it.
THE CHAIRMAN: And that's the asset purchase agreement that Mr. Elliott made reference to that you had nothing to do with; is that correct?
A. Right. The asset purchase agreement was negotiated between Gary Steadman and I'm also certain Jim Cameron. I've learned that subsequent, but, you know, I didn't know who negotiated the contract at the time. They never talked to me about it. They sent it to me at some point and said we want you to get up the deeds and handle the closing statement and that kind of thing.
MR. ELLIOTT: That's all I have.
THE CHAIRMAN: If you would be at ease for a moment. I think Senator Moore had a question and he's voting right now. Senator, you have a question?
EXAMINATION BY SENATOR MOORE:
Q. Well, I guess my question was asked by Mr. Beatty. I was trying to figure, Mr. Ross, in preparing your work, were you aware of Public Service Commission approval while you were preparing it? I mean --
A. I knew that --
Q. What would cause you to -- in preparing the legal work is it necessary that you look into beyond the immediacy into the background to see what approval had been applied, had been approved or not?
A. I was not assigned to do that. These were two experienced clients who come in here and, you know, experienced with the Public Service Commission. They didn't ask me about that.
Q. Yes, sir. I understand that they didn't ask you that, but I guess being a nonattorney, not knowing enough about what your immediate task was in completing the work that you had been requested to do, was it a responsibility to look beyond or behind that to see if, in fact, approval had been granted? Should you have been aware of it if you weren't? I'm not saying that is wrong. I'm saying should you have been.
Printed Page 1619 . . . . . Thursday, February 10, 1994
A. I didn't deem it so. I did not deem it so. Now if -- every case depends on the circumstances. You know if some old person came in uneducated, I would look at -- advise them maybe different than say, well, do you want to do this, should you do this, this kind of thing.

Here I'm dealing with two -- with a lawyer who represents Realtec and an experienced utility company and they told me to do the deed. I did not deem it my responsibility to go behind what they had already agreed to do.
Q. All right, sir. Mr. Chairman, if I may, there is quite a difference in what the complainant says at the function that ya'll both attended in April. From his report he says that your response to him that you had handled the legal work personally and, two, it was a routine matter.

I suppose you were -- if that, in fact, is what was said, you were speaking from the assigned work only that you were looking at rather than the whole question about the Public Service Commission?
A. Yes, sir, that's the only thing I was involved in.
Q. That's --
A. This was a -- as I recall, this was a Republican fund-raiser and it was a dance.
Q. Well, which leads to the point, I guess, you know, making mistakes and not being as careful, maybe that's one of the mistakes you made, going to a Republican dance being a Democrat.
A. I went. I plead guilty. I went.
Q. I'm only kidding, sir.
A. And, you know, the question came up and I said the only -- my only -- what I'm telling you is my only involvement was doing the routine legal work. I mean I don't know whether -- I mean, you know, taking the circumstances where I was, I don't know that I specifically said deeds, but to me, it was not unlike a house closing. I had to do more work, but it was a routine deed and bill of sale that I just --
RE-EXAMINATION BY REPRESENTATIVE BEATTY:
Q. One other question, Mr. Ross. Did you have occasion to review this water and sewer asset purchase agreement prior to your performing the work you did?
A. Yes, sir.
Q. Were you aware of paragraph 9 of the agreement? It states in effect that there will be a guarantee that all -- all necessary permits and licensing and easements will have been taken care of?
A. Yes, sir. Well, that -- if you read the document it also has a curing clause. They will be by the time of the closing or they will supply them. They will be supplied.

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