March 04, 2012--Hundreds of thousands of dollars are missing from the S.C. Hospitality Association, and the prominent executive and lobbyist who built the organization from scratch was buried Friday, after apparently taking his own life. Meanwhile, another employee of the association has been named a person of interest in a federal probe into the missing money.

Now, the organization that represents South Carolina's $14 billion-a-year tourism industry must rebuild its credibility with its 2,000 members, lawmakers and the public.

To do so, experts say, it must be painstakingly honest about its mistakes and open about its finances.

The man who has taken the helm of the hospitality group said Friday that rebuilding already has begun -- even as its members mourn the death of its former chief executive, Tom Sponseller, who was buried later that day.

"We made mistakes," Rick Erwin, the Greenville restaurateur who is chairman of the Hospitality Association, said in an exclusive interview with The State newspaper shortly before Sponseller's funeral. "But it's not the end of the world for the association. It's how we handle our mistakes going forward. ... And we are going to do the right things to make this association great."

Erwin -- owner of Rick Erwin's West End Grille and Rick Erwin's Nantucket Seafood Grill, both in Greenville -- has ordered a comprehensive outside audit of the association's finances.

He said such an audit hasn't been conducted in some time; he can't recall how long.

Erwin said that on Thursday, during the first board meeting since Sponseller's death, he will urge members to adopt regular audits as a matter of policy. "Maybe even in the bylaws," he said, and "not leave it up to any individual to make that decision."

The organization is critical to the state's economic future, he added, because it represents an industry that spans the state from the mountains to the sea and employs more people than any other sector except government.

Missing money

Sponseller disappeared from his downtown Columbia office Feb. 18. Ten days later, co-workers broke into his desk and found a three-page, handwritten letter. Empty original packaging from a gun was found in the drawer with the note.

Later that day, police found Sponseller's body, with a gunshot wound to the head, in a locked room in the building's parking garage. The room had not been searched by police during three previous sweeps of the building and garage. Two high-ranking Columbia officers were pushed out of the police department after the botched search.

Sponseller's note referred to an ongoing federal investigation into the disappearance of several hundred thousand dollars from the association of which he was president and chief executive. U.S. Secret Service agents are conducting an investigation into the group's missing money.

Rachel Duncan, the association's accountant who worked for Sponseller, is a target in that investigation, the Secret Service has confirmed. Federal officials say gambling is involved.

However, Michael Williams, special agent in charge of the Secret Service's Columbia office, did not rule out Sponseller's involvement, saying last week, "He was not the initial target of the investigation, and it's still too early to comment any further at this point."

Duncan and Sponseller presented internal financial statements to the association. But it could have been years since outside audits of those statements had been conducted, sources tell The State.

That is a sign the board failed in its responsibility to oversee the association's staff, critics say.

"The board -- and some of them are good friends of mine -- clearly wasn't doing its job in monitoring the financial health of the organization," said Jim Papadea, a former Columbia City Council member who now is Horry County government's property manager. "And that's their No. 1 priority."

Papadea has worked closely with Sponseller since the 1970s. "There is blame to go around here," he said.

Part of the problem, several sources said, is that Sponseller was so trusted, so hardworking and such an institution in himself that no one thought to question the financial books.

"Tom has always been there. He did everything," said Bobby Williams, chief executive of the Lizard's Thicket restaurant chain and a past president of the association.

Another past president, Horry County Council member Gary Loftus, said: "One would like to think an organization is larger than one person. But this might be the exception to the rule."

'Leadership has to step up'

The S.C. Hospitality Association was was formed in 1993 when, largely due to Sponseller's efforts, the S.C. Hotel & Motel Association and the S.C. Restaurant Association merged under one banner. The resulting Hospitality Association became the only statewide trade association for the lodging and food-service industries. It lobbies lawmakers at the State House, offers training and educational programs, and serves as the voice of the industry in the state.

The association has about 2,000 members statewide, from fast-food restaurants to the finest dining establishments, from small motels to luxury resorts.

Sponseller ran just about every aspect of the organization with a staff of fewer than five people. He lobbied the State House, ran the office, communicated with members and handled media contacts.

He will be hard to replace, Erwin said.

"Both (lobbying and running the office) are incredibly important," he said. "The question is how we can do those two jobs and do them well."

It might take more than one person, Erwin said.

Experts in crisis management said finding out what went wrong, making the finding public and then hiring the right person to take over the organization are the three steps required to restore confidence in the association in the minds of its members, lawmakers and the public.

"The first thing to do is the audit," said Columbia public relations specialist Marvin Chernoff, who was with Sponseller the day before his disappearance. "Then, you have to be honest with people (about what went wrong), even if that puts people in jeopardy. 'Here's what happened. Here's why. The books are going to be wide open.' "

Lee Bussell, chief executive of Chernoff Newman, one of the state's largest public relations firms, says the association's board will have to take the reins of the organization.

"The leadership has to step up," he said. "It's going to take one of their own to restore integrity. Then you find someone to be an interim director. They don't have to want it on a full-time basis. Maybe someone who is retired. Somebody who understands the industry and has impeccable credentials."

Communications consultant Bob McAlister, who is working for the association during the crisis, said the organization is trying to remain optimistic in the face of tragedy and scandal.

"This is a very successful organization, but there are lessons to be learned here," he said. "You don't learn from your successes as much as you do from those areas where you don't do so well. The board will build off the things it's done right as well as the mistakes that were made. That's how it will get bigger and stronger."

Options for going forward

Erwin said that, for now, he is in charge.

"I have been charged with the responsibility of leading this organization," he said. "I look forward to working with the board."

His first decision, Erwin said, was to hire a Columbia accounting firm, The Hobbs Group, to conduct an audit. So far, that audit is not complete. Finishing the audit could take "weeks -- not months," he said.

Starting Thursday, Erwin said the board will consider a number of options for going forward, including:

--Restructuring the board. The association's board presently is four boards in one: a restaurant board, a hotel board, an executive board and a board for its charitable foundation. While Erwin doesn't think the board structure needs changing, that could be considered.

--Holding annual meetings. The association doesn't now have an annual conference for all of its members -- the equivalent of a shareholders meeting during which an annual report is presented, questions are answered and officers are elected.

--Providing more transparency. Erwin said he looks forward to sharing more information about the investigation and the association's finances with its members. He said that with the exception of a couple of conference calls to the association's executive board, he has been asked by police to reveal as little as possible about the investigation.

"The first step is to let the leadership know what transpired in the past and, once we do that, come together as a group and be solution-based about where we go from here," he said.

Erwin said he bears no ill will toward the Columbia Police Department for the way it handled the search for Sponseller.

"There are a lot of good people in the Columbia Police Department who were working hard to find Tom," he said. "It is what it is. It's not the association's (place) to judge.

"On behalf of the association, we appreciate all the attempts that were done to find Tom. Unfortunately, they were not the result we were looking for. And we certainly feel for what the family had to go through."

He said the tragedy presents an opportunity for the association to grow.

"We're a great organization now," he said. "And we want to make it better."

Reach Wilkinson at (803) 771-8495.

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