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ELECTRONICALLY FILED - 2020 Jul 28 10:38 AM - BERKELEY - COMMON PLEAS - CASE#2020CP0801482

STATE OF SOUTH CAROLINA ) IN THE COURT OF COMMON PLEAS


)
COUNTY OF BERKELEY ) CASE NO.: 2020-CP-08-____

)
Berkeley County, )
)
Plaintiff, ) FIRST AMENDED SUMMONS
)
v. ) (JURY TRIAL DEMANDED)
)
William W. Peagler, III and
)
Timothy Callanan,
)
)
Defendants.
)
____________________________________

TO: DEFENDANTS WILLIAM W. PEAGLER III AND TIMOTHY CALLANAN:

YOU ARE HEREBY SUMMONED and required to answer the Complaint in this action

of which a copy is hereby served upon you, and to serve a copy of your answer to the said

Complaint on the subscriber at the office of Willoughby & Hoefer, P.A. 133 River Landing Drive,

Suite 200, Charleston, South Carolina 29492, within thirty (30) days after the service thereof

exclusive of the day of such service; and if you fail to answer the Complaint within the time

aforesaid, the Plaintiff in this action will apply to the Court for the relief demanded in the

Complaint and for a default judgment.

WILLOUGHBY & HOEFER, P.A.

s/ R. Walker Humphrey, II
Randolph R. Lowell, SC Bar No. 16145
R. Walker Humphrey, II, SC Bar No. 79426
133 River Landing Drive, Suite 200
Charleston, South Carolina 29492
Telephone: 843-619-4426
rlowell@willoughbyhoefer.com
whumphrey@willoughbyhoefer.com

Attorneys for Berkeley County

July 28, 2020


ELECTRONICALLY FILED - 2020 Jul 28 10:38 AM - BERKELEY - COMMON PLEAS - CASE#2020CP0801482
STATE OF SOUTH CAROLINA ) IN THE COURT OF COMMON PLEAS
)
COUNTY OF BERKELEY ) CASE NO.: 2020-CP-08-____

)
Berkeley County, )
)
Plaintiff, ) FIRST AMENDED COMPLAINT
)
v. ) (JURY TRIAL DEMANDED)
)
William W. Peagler III and
)
Timothy Callanan,
)
)
Defendants.
)
____________________________________

COMES NOW Plaintiff Berkeley County hereby complaining of Defendants, and would

respectfully show unto this Honorable Court as follows:

INTRODUCTION

1. Berkeley County brings this case on behalf of its citizens and taxpayers against the former

Berkeley County Supervisor, William W. Peagler III, and the former Berkeley County Deputy

Supervisor and Chief Financial Officer, Timothy Callanan, to recover public funds that were paid

as part of an illegal and bad faith scheme concocted by two outgoing public officials on the eve of

their departure from Berkeley County. Outgoing elected officials are not permitted to issue large

“severance payments” to their close, public-employee friends right before leaving elected office;

to hold otherwise would wreak havoc on local governments and taxpayers.

PARTIES

2. Plaintiff Berkeley County (the “County”) is a South Carolina county and body politic, as

defined by S.C. Code Ann. § 4-1-10, and has the capacity to contract and sue. The County is

organized under a council-supervisor form of government. Berkeley County Council’s

responsibilities include, inter alia, approving the County’s budget, appropriating public funds for
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the purpose of paying annual salaries for personnel positions, and approving agreements regarding

employment contracts.

3. Defendant William W. Peagler III (“Peagler”) is a citizen and resident of Berkeley County,

South Carolina and was elected to the position of Berkeley County Supervisor from January 1,

2015 through December 31, 2018.

4. Defendant Timothy Callanan (“Callanan”) is a citizen and resident of the State of Georgia

and was hired by Peagler as a regular full-time employee for the salaried position of Deputy County

Supervisor.

JURISDICTION AND VENUE

5. This Court has subject matter and personal jurisdiction over Defendants pursuant to S.C.

Const. art. V, § 11 and S.C. Code Ann. § 36-2-803 because Defendants’ actions complained of

herein occurred in Berkeley County, South Carolina, while Defendants were employed and resided

in Berkeley County, South Carolina. Venue is proper in this Court pursuant to S.C. Code Ann. §

15-7-30 because the acts, omissions, and causes of action alleged herein occurred in Berkeley

County, South Carolina.

FACTS

The Election of Peagler and Hiring of Callanan

6. Peagler was elected as Supervisor of Berkeley County and assumed his office on January

1, 2015.

7. Prior to Peagler’s election as Supervisor, he was elected to the Moncks Corner Town

Council and subsequently worked part-time as the Mayor of Moncks Corner for a total period of

approximately 20 years. During this time, Peagler also worked full time in the private sector.

Peagler boasted to his friends and made known that two of the main reasons he ran for the position

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of Berkeley County Supervisor were the six-figure pay and his intentions of claiming the

Supervisor salary as his “highest and best three years” to inflate his state-funded retirement.

8. Prior to Peagler’s election, Callanan was elected to Berkeley County Council and

represented District 2, which is made up of Daniel Island, Clements Ferry Road, and portions of

Hanahan and Goose Creek.

9. Prior to Callanan’s employment at the County under the Peagler Administration, Callanan

could not hold a steady job, and a foreclosure judgment was issued against him with a foreclosure

sale scheduled in the first quarter of 2014 for his house on Daniel Island.

10. However, through political favors to Peagler, Callanan secured a six-figure job as Deputy

Supervisor.

11. On January 12, 2015, Supervisor Peagler issued a signed memo indicating that his

“Transition Team Hirees,” including former Berkeley County Councilman Timothy Callanan,

were “hired by Berkeley County as regular employees” and “the positions that they hold are not

‘appointed positions.’”

12. From January of 2015 until November 13, 2018, Callanan was a salaried employee of the

County.

13. Prior to leaving the County, Callanan’s most recent official title at the County was Deputy

Supervisor for Administration and Chief Financial Officer.

14. County Council appropriated $121,037.02 as the annual salary for this position for the

period of July 1, 2018 through June 30, 2019 (Fiscal Year 2019).

15. From January of 2015 until November 13, 2018, Callanan was an at will employee of the

County.

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16. As an employee of the County, Callanan signed an acknowledgement regarding the

Berkeley County Government Personnel Manual and Policies and agreed that he was employed

on an “at will” basis and may be terminated “at any time, with or without notice or cause.”

17. In 2017 and 2018, Callanan also signed acknowledgments that stated, “you are employed

‘at will,’ which means that you or Berkeley County can terminate employment with or without

cause.”

18. Importantly, as an employee of the County, Callanan also signed the below disclaimer from

the Berkeley County Government Personnel Manual and Policies wherein he agreed that he was

an at will employee and that “any agreement regarding employment contracts must be in writing,

signed by the County Supervisor and approved by County Council.” (emphasis added).

19. In their respective roles, Peagler and Callanan agreed to “observe high ethical standards,”

“to uphold the high ethical standards of dedicated public service,” “to cause the County to use

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County funds and assets only for legally appropriate public purposes,” and to not “use the influence

of his government employment to financially benefit himself.” Berkeley County Government

Personnel Manual and Policies, “Employee Code of Conduct,” p. 78.

20. As discussed herein, Peagler and Callanan violated these provisions of the Employee Code

of Conduct.

21. As one example, in 2017, Callanan misappropriated County property, which caused a

formal disciplinary action to be brought against him. Specifically, the County issued a suspension

to Callanan because he unlawfully used a County vehicle to transport his personal belongings to

his lake house outside of Berkeley County. As discussed herein, this was not the only instance

where Callanan misappropriated County property and abused his position to benefit himself to the

detriment of the County and its citizens.

Peagler’s Loss of the Primary and the Illegal Peagler/Callanan Scheme

22. On June 12, 2018, Supervisor Peagler lost the Republican primary to Johnny Cribb with

no democrats filing to run. Supervisor Peagler’s term of office would expire on December 31,

2018. The wrongful actions complained of herein occurred in November and December of 2018,

during Peagler’s final weeks in office.

23. Callanan believed that his stint as a well-paid public employee also was about to end.

Indeed, upon information and belief, Callanan preemptively secured a private unemployment

insurance policy after Peagler lost the primary in the latter part of 2018.

24. Because Callanan believed his six-figure public employment job would soon come to a

close, Callanan, as Chief Financial Officer for the County, secretly approached Supervisor Peagler,

and the two concocted a scheme to financially benefit Callanan on the eve of his expected departure

from Berkeley County.

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25. Specifically, Peagler and Callanan secretly met and prepared a “Confidential Severance

Agreement and Release of Claims,” 1 (“Confidential Severance Agreement” or “Agreement”)

dated November 8, 2018, which purported to obligate the County to pay Callanan $49,900 in the

form of an extra allowance to his salary, which they denominated “severance pay,” within five

days of November 8, 2018, and stated that Callanan would not work but instead would be on “paid

administrative leave” until December 3, 2018, at which point his employment with the County

would end. The December 3, 2018 date was chosen in order to give Callanan employee benefits

through the end of the year.

26. Peagler and Callanan kept the Confidential Severance Agreement secret and did not

disclose it to John O. Williams, II, the Berkeley County Attorney, who was tasked with reviewing

all contracts where the County is a party. Williams learned about the Confidential Severance

Agreement from employees after it had been secretly drafted and signed by Peagler and Callanan.

27. Importantly, Peagler and Callanan also kept the Confidential Severance Agreement secret

from all members of Berkeley County Council, who were tasked with appropriating public funds

prior to their expenditure, as well as approving all agreements regarding employment contracts.

County Council was not informed of the Confidential Severance Agreement until after it had been

signed and after Callanan received and deposited the illegally paid funds. These allegations are

supported by the five Affidavits of Councilman Cox, Councilman Newell, Councilman Pinckney,

Councilman Schurlknight, and Councilman Whitley. 2

28. This concealment was not inadvertent or accidental. It was intentional and calculated.

1
The “Confidential Severance Agreement and Release of Claims” is attached as Exhibit A.
2
The Affidavits of the five Councilmen are attached as Exhibit B.

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29. On November 8, 2018, after the Confidential Severance Agreement had been secretly

drafted and signed, Peagler called Allen Milburn, 3 the Finance Director for the County, into

Callanan’s office. Peagler handed Mr. Milburn a copy of the Confidential Severance Agreement

and stated that he wanted it processed “as quickly as possible.” Mr. Milburn asked, “What is this?,”

and Peagler responded “$49,900.” Peagler stated that he wanted a check cut by the next day and

that he would fire on the spot anyone who mentioned this to County Council, specifically

Councilman Josh Whitley.

30. The next day, November 9, 2018 – one day after the undisclosed Confidential Severance

Agreement had been signed – Mr. Milburn was in meetings and had missed multiple calls from

Peagler. Specifically, at 10:04 a.m., Peagler called from Chief Financial Officer Callanan’s Office

and from his own office at 10:58 a.m.

31. When Mr. Milburn finished his meetings, he was asked to go to Peagler’s office, and

Peagler asked Mr. Milburn for an update/progress on producing the Callanan check. Mr. Milburn

stated, “you are really putting me in an untenable position.” Because of the impropriety of the

situation, Mr. Milburn asked Peagler to put his directive in writing. Mr. Milburn, as the Finance

Director for the County, also insisted that County Council needs full disclosure about this matter.

Peagler deceived Mr. Milburn and falsely stated that Council had approved the severance pay in

executive session.

32. Peagler knew that Council could not take any action in executive session. County Council

must approve any employment contracts in public session. S.C. Code Ann. § 30-4-70 (“No action

may be taken in executive session except to (a) adjourn or (b) return to public session.”); see also

S.C. Op. Att’y Gen., 1985 WL 166085, at *2 (S.C.A.G. Oct. 10, 1985) (County Council cannot

3
The Affidavit of Allen Milburn is attached as Exhibit C.

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“decide in executive session to pay severance but not subsequently ratify that action in open

session”). Peagler’s statement regarding County Council approving the Agreement in executive

session was knowingly and intentionally false and fraudulent.

33. At 11:32 a.m. on November 9, 2018, per Mr. Milburn’s request, Peagler emailed Mr.

Milburn and stated, “please process this check for the executed contract for Tim [Callanan].”

Peagler’s email also falsely stated: “Procurement has reviewed the agreement for compliance with

the Procurement Ordinance.” Finally, Peagler’s email stated “upon this matter being processed, I

will inform Council of the completion of the matter.”

34. In reality, on November 8, 2018, Christy Davis, the Director of Procurement was told by

Peagler that he wanted her to “come to Tim’s office.” 4 Peagler, in the presence of Chief Financial

Officer Callanan, stated to Ms. Davis that, he and Callanan wanted her to review the Agreement

to make sure their “T’s were crossed and I’s dotted from a procurement standpoint.” Ms. Davis

reviewed the Confidential Severance Agreement and noticed on the last page it had already been

fully signed by Peagler and Callanan. This raised a red flag. She thought, “why would they be

asking me to review whether it was lawful if it was already signed?” As a result, she asked whether

the County Attorney had reviewed the document, which was standard practice, and Mr. Peagler

stated “no,” that he was an attorney. Ms. Davis informed Peagler and Callanan that she believed

the Confidential Severance Agreement did not fall under any of the Procurement Ordinance

exemptions. Peagler and Callanan used the $49,900 payment figure to suggest that the Agreement

was a “Small Purchase” under Section 50-66 of the Procurement Ordinance, which states, “Any

procurement not exceeding $50,000.00 may be made by the director of procurement in

accordance with small purchase procedures promulgated by the director; provided, however, that

4
The Affidavit of Christy Davis is attached as Exhibit D.

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procurement requirements shall not be artificially divided so as to constitute a small purchase

under this section.” Ms. Davis informed them that this section did not apply because they were

not procuring any goods or services. Contrary to Peagler’s email, the procurement department

never approved the Agreement. Ms. Davis in fact emphasized to Callanan and Peagler that the

Agreement was not an exemption to the procurement code and did not fall within the procurement

code’s Small Purchase section. Peagler and Callanan demanded that Ms. Davis keep this meeting

confidential.

35. In the presence of Chief Financial Officer Callanan, Peagler demanded that Mr. Milburn

issue the check to Callanan and threatened to fire Mr. Milburn if he did not do so. Mr. Milburn

issued the check to Callanan on November 9, 2018, in response to these direct threats. Peagler, in

the presence of Chief Financial Officer Callanan, asked what bank the payroll check was drawn

on, and Mr. Milburn informed them that it was Wells Fargo. Peagler then asked Chief Financial

Officer Callanan to review the check, and Callanan stated, “it was weird that the payroll system

did not take out any state taxes,” but that he approved. Peagler then stated to Chief Financial

Officer Callanan, “well, if I were you, I’d go directly to the bank and take care of that.”

36. According to records from Wells Fargo, Callanan immediately left the County office, took

the check directly to the closest Wells Fargo, and obtained a cashier’s check so that he was certain

to get the funds even if County Council did not approve the Agreement and attempted to issue a

stop payment or cancel the County check.

37. Callanan and Peagler’s actions, including rushing to the bank and immediately obtaining a

cashier’s check, and the threats of firing Milburn if he informed Council about the Agreement or

payment, demonstrate that the Confidential Settlement Agreement and the “severance pay” had

not been previously approved by County Council.

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38. Callanan and Peagler knew their actions were unlawful.

39. Callanan and Peagler knew that County Council had to approve any agreements regarding

employment contracts. Indeed, as mentioned above, Callanan signed a disclaimer acknowledging

this, and Peagler has previously testified under oath that any agreements regarding employment

contracts are invalid unless they are: (1) in writing; (2) signed by the Supervisor; and (3) approved

by County Council. Specifically, Peagler previously testified that an employment contract with

Marc Hehn (a Peagler “Transition Team Hiree,” like Callanan) was invalid because it was not

voted on and approved by County Council. Despite this, Peagler and Callanan secretly prepared

the Confidential Severance Agreement, and acted in concert to hide it from the County Attorney

and County Council until after Callanan had made off with the public funds.

40. After learning what had transpired, on November 9, 2018, the County Attorney informed

members of Council about Peagler and Callanan’s threats against employees, the secret agreement,

and the misappropriated public funds.

41. Callanan has failed to return the public funds he unlawfully obtained.

42. As a result, Council duly noticed a special meeting for November 13, 2018, to address

Peagler and Callanan’s misappropriation of County funds. On November 13, 2018, in advance of

the meeting, Peagler and Callanan demanded that the County’s Public Information Officer,

Hannah Mosely, issue a press release against Council in an attempt to cover up their wrongdoing.

Ms. Mosely approached the County Attorney, who agreed that the press release Peagler and

Callanan demanded was inappropriate. Ms. Mosely approached Peagler and indicated that she was

uncomfortable writing the release they demanded. Peagler placed Ms. Mosely on administrative

leave because she did not participate in Peagler and Callanan’s attempts to cover up their

wrongdoing.

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43. At the November 13, 2018 special meeting, County Council unanimously voted to

terminate Callanan for misappropriation of County funds in accordance with S.C. Code Ann. § 4-

9-430, which allows a council to discharge personnel hired by the supervisor by a two-thirds vote

of the members present and voting. The vote was five to zero, with Councilmen Cox, Whitley,

Newell, Schurlknight, and Pinckney voting, Councilman Davis present but abstaining, and

Councilman Fish and the late Councilman Gunn not present and excused from the meeting due to

health issues.

44. Unbelievably, even after Callanan’s termination on November 13, 2018, Callanan

continued to misrepresent matters to the County and misappropriated tens of thousands of dollars

in additional public funds to benefit himself to the detriment of the County and its citizens.

45. Specifically, under Paragraph 3 of the purported Confidential Severance Agreement,

entitled “Waiver and Release of Claims,” Callanan agreed that in exchange “[f]or the consideration

provided by Berkeley County pursuant to this Agreement, Employee knowingly and voluntarily

releases and forever discharges Berkeley County and its Employee benefit plans and programs

(and it administrators and fiduciaries), from all claims or causes of action, liabilities, or damages,

known or unknown, arising in tort, contract, federal or state employment law, which Employee

has or may have as of the date he signed this Agreement,” which was November 8, 2018. (emphasis

in original). Further under Paragraph 6 of the Agreement, entitled “Employee Affirmations,”

Callanan made the following affirmations:

Employee acknowledges and affirms that, as of the date of signing this Agreement
[November 8, 2018], she [sic]: (1) has been paid all wages, bonuses, and/or other
compensation to which she [sic] may be entitled; (2) has no work place injuries or
occupational diseases other than previously reported in writing; (3) has not been
denied leave pursuant to the Berkeley County policy or the Family and Medical
Leave Act and has received all such leave to which Employee was entitled.

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46. Callanan did not disclose his affirmations in the Agreement to the County, and he

misrepresented that he was owed additional wages and compensation after November 8, 2018.

Callanan fraudulently requested, obtained, and retained additional wages and compensation from

the County on December 5, 2018, in the amount of $29,202.53 as well as a $4,655.27 payment on

November 21, 2018. These payments were in addition to the $49,900 “severance payment”

already obtained by Callanan. This directly contradicts Callanan’s affirmations that as of

November 8, 2018 he had been paid all wages, bonuses, and other compensation to which he may

be entitled and his complete release of claims against the County as of November 8, 2018.

47. The Confidential Severance Agreement is invalid and unenforceable, and all payments

made thereunder are improper. Even if the Confidential Severance Agreement is valid, which is

disputed, under its terms Callanan was not entitled to any further wages or other compensation

after November 8, 2018 other than the $49,900 “severance payment”; thus, if Callanan prevails in

arguing that the Agreement is valid in an attempt to retain the $49,000 in “severance pay,” then

Callanan owes the County in excess of $33,875 for all of the wages and compensation he

wrongfully obtained after November 8, 2018. Callanan cannot have it both ways.

48. Further assuming for the sake of argument that the Confidential Severance Agreement is

valid, which is disputed, under its terms Callanan agreed to a non-disparagement clause with

respect to the County and violated this provision by making disparaging remarks about the County

and its leadership, including posts on social media. Further, upon information and belief, he also

made disparaging posts under a fictitious Facebook account known as “Cooper Marion.”

49. As the Chief Financial Officer, Callanan knew that for Fiscal Year 2019, the year in

question, Berkeley County Council appropriated $121,037.02 for Callanan’s annual salary for the

period of July 1, 2018 through June 30, 2019. However, despite the fact that Callanan had only

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worked a little over four months of the fiscal year, he was paid $133,600.26 during that

approximate four-month period, which was more than the full annual salary ($121,037.02) he

would have received had he worked through June 30, 2019. In the calendar year 2018, Callanan

received $195,323.04 in gross wages from the County – nearly double the annual salary County

Council appropriated for this position.

50. To make matters worse, Callanan continued to bilk the County and taxpayers when he filed

for unemployment and, upon information and belief, omitted material information, failed to report

wages, and misrepresented facts to South Carolina Department of Employment and Workforce to

unlawfully obtain unemployment benefits beginning on November 11, 2018, despite the fact the

he was paid approximately $28,272 in unreported wages from the County on December 5, 2018.

Further, upon information and belief, Callanan also committed insurance fraud by failing to report

that he was also obtaining wages from his private unemployment insurance. Upon information and

belief, Callanan intentionally withheld this information from the Department. Callanan received

unemployment benefits on top of the $133,600.26 in the public funds he unlawfully obtained for

only four months of work.

The Council-Supervisor Form of County Government


and Restrictions on the Use of Public Funds

51. Under the council-supervisor form of county government, which was in place in Berkeley

County at all relevant times, Supervisor Peagler was a member and the Chairman of Berkeley

County Council and voted to break tie votes. S.C. Code Ann. § 4-9-410.

52. Under the council-supervisor form of county government, Supervisor Peagler owed a duty

to the County and public to do the following, among other things:

(1) to execute the policies and legislative actions of the council;

(2) to prepare annual operating and capital improvement budgets for submission to the
council;

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(3) to supervise the expenditure of funds appropriated by council;

(4) to prepare annual, monthly and other reports for council on finances and administrative
activities of the county;

(5) to recommend measures for adoption to Council;

(6) to inspect books, accounts, records, or documents pertaining to the property and money
of the county; and

(7) to be responsible for employment and discharge of personnel subject to the


appropriation of funds by the council for that purpose.

S.C. Code Ann. § 4-9-420.

53. Berkeley County Council is empowered to create and fund positions for the operation of

County government, but personnel to fill such positions are hired by the Supervisor. Poore v.

Gerrard, 271 S.C. 1, 4, 244 S.E.2d 510, 512 (1978). Both the Supervisor and Berkeley County

Council can discharge personnel hired by the Supervisor. Specifically, Berkeley County Council

has a statutory right to discharge personnel hired by Supervisor Peagler by a two-thirds vote of the

members present and voting. S.C. Code Ann. § 4-9-430.

54. Supervisor Peagler therefore was empowered to hire Callanan to fill the position of Deputy

Supervisor and Chief Financial Officer to assist with carrying out the duties owed to the County

and public as promulgated above. But his “power to employ personnel [was] limited, first, by the

existence of a position to fill and, second, by the appropriation of funds with which to pay the

employee.” Poore, 271 S.C. at 4, 244 S.E.2d at 512. Specifically, under the applicable statute,

Supervisor Peagler was responsible for the hiring and discharge of personnel; however, Supervisor

Peagler’s power was “subject to appropriation of funds by council for that purpose.” S.C. Code

Ann. § § 4-9-410(12) (emphasis added).

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55. The County and public placed confidence in and entrusted Supervisor Peagler and Chief

Financial Officer Callanan to act with integrity and fidelity when expending and utilizing public

funds on their behalf.

56. Berkeley County Council approves the annual budget and establishes the annual salary of

county officers and employees for the fiscal year. S.C. Code Ann. § 4-9-410 (“The compensation

for the supervisor shall be prescribed by the council by ordinance.”); id. § 4-9-410(4), (5) and (12)

(indicating that the supervisor (1) submits the budget to council for approval; (2) supervises the

expenditure of funds appropriated by council; and (3) is responsible for employment and discharge

“subject to appropriation of funds by council for that purpose”). Supervisor Peagler and Chief

Financial Officer Callanan were not authorized to spend (or receive) public money for a purpose

that was not approved or appropriated by Berkeley County Council.

57. As mentioned above, Callanan signed a disclaimer, and Peagler previously confirmed

under oath, that any agreement regarding employment contracts must be in writing, signed by the

Supervisor, and approved by County Council. The requirement that any employment agreement

be approved by County Council is based on (1) County Council’s statutory right to create positions

and appropriate funds each fiscal year for the annual salary of personnel; and (2) County Council’s

statutory right to discharge personnel hired by the Supervisor by a two-thirds vote of the members

present and voting. For example, Supervisor Peagler needs approval from County Council before

he commits to a two-year employment contract for an employee because Council has not

appropriated funds beyond the current fiscal year. In year two, Council could decide to not fund

the position. Thus, a multi-year employment agreement entered without council approval allows

the Supervisor to unilaterally eliminate Council’s statutory authority to create and funds positions

for each fiscal year. Further, a multi-year employment contract, without prior Council approval,

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would allow the Supervisor to unilaterally eliminate council’s statutory authority to discharge the

personnel on a two-thirds vote.

58. Similarly, as is the case here, the Supervisor is unilaterally eliminating Council’s statutory

authority to create and fund positions when he enters into a severance agreement with a public

employee without prior council approval and pays an employee more than their entire annual salary

only four and a half months into the fiscal year. This is the case because the position has now been

effectively eliminated for the eight months remaining in the fiscal year as no appropriated funds

remain to hire a new employee to fill that position. Compounding the error, this eliminates a new

Supervisor’s statutory right to fill the position created and funded by Council because the funds

appropriated for payment of the position’s salary for the entire fiscal year already have been

exhausted. This is prohibited under South Carolina law. Newman v. McCullough, 212 S.C. 17,

25, 46 S.E.2d 252, 256 (1948) (invalidating actions that “bind successors to forego or to exercise

their legislative functions.”); see also Piedmont Pub. Serv. Dist. v. Cowart, 324 S.C. 239, 242, 478

S.E.2d 836, 838 (1996) (employee ordered to repay severance because the contract impaired

successor commissioners' right to exercise discretion regarding governmental functions).

59. In the 2018-2019 Annual Budget for the 2019 Fiscal Year (July 1, 2018 through June 30,

2019), Berkeley County Council appropriated funds for the purpose of funding the annual

“Salaries” of each personnel position in the County Supervisor’s Department, including Callanan’s

position of Deputy Supervisor of Administration and Chief Financial Officer. The appropriated

funds were labeled “Salaries” in the budget and were a non-transferrable budget item. In the 2018-

2019 Annual Budget, Berkeley County Council did not appropriate any funds to the County

Supervisor’s Department under the budget item “Special Contracts” and did not approve the use

of any public funds for “severance pay.”

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60. Supervisor Peagler and Chief Financial Officer Callanan were not authorized to utilize (or

receive) public funds for “severance pay” when those funds were appropriated by County Council

for the purpose of funding the annual “salaries” of each personnel position through June 30, 2019.

S.C. Code Ann. § 4-9-420(12) (noting a supervisor’s employment powers are “subject to

appropriation of funds by council for that purpose”).

61. A “properly-passed county budget has the force of law because it is a legislative action

passed by ordinance.” Op. S.C. Att’y Gen., 2016 WL 3946153, at *1 (S.C.A.G. July 5, 2016)

(quoting S.C. Code Ann. § 4-9-120 (“The council shall take legislative action by ordinance . . . .”)).

The Attorney General’s office “has opined that ‘[w]hen the council properly enunciates policies,

the supervisor’s only function is to carry out such policies.’” Id. (citing Op. S.C. Att'y Gen., 1970

WL 16805 (S.C.A.G. April 22, 1970)). “Moreover, our State’s constitution mandates that ‘[m]oney

shall be drawn from the treasury of the State or the treasury of any of its political subdivisions only

in pursuance of appropriations made by law.’” Id. (citing S.C. Const. art. X, § 8). “Therefore, if a

county supervisor spends public money in a manner that is contrary to an ordinance of the county,

then he or she has acted unlawfully by exceeding his or her legal authority.” Id.

62. Supervisor Peagler and Chief Financial Officer Callanan were not authorized to spend (or

receive) public funds in a manner that was contrary to the annual budget ordinance of the County.

63. Importantly, by statute, Supervisor Peagler, as the Chairman and a member of Berkeley

County Council, was not permitted to allow for “an extra allowance to any person who is paid by

salary, nor shall the treasurer of any county knowingly pay to any such person any extra allowance.”

S.C. Code Ann. § 4-11-170.

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64. Here, it is undisputed that Callanan was paid by a salary. Thus, by statute Peagler was

prohibited, as a matter of law, from providing Callanan any extra allowance. Neither could County

Council have voted to appropriate funds allowing for Callanan to receive any extra allowance.

65. Similarly, Article III, Section 30 of the State Constitution provides, “[t]he General

Assembly shall never grant extra compensation, fee or allowance to any public officer, agent,

servant or contractor after service rendered, or contract made, nor authorize payment or part

payment of any claim under any contract not authorized by law . . . .” Although the language of

this provision expressly prohibits only the General Assembly from taking any such action, the

Attorney General’s Office has “repeatedly advised that it also serves to limit political subdivisions,

such as counties and municipalities, at least in the powers delegated to them by the General

Assembly.” Op. S.C. Att’y Gen., 2013 WL 3762704, at *1 (S.C.A.G. July 8, 2013); see also S.C.

Code Ann. § 4-11-170 (prohibiting “extra allowance to any person who is paid by salary”). The

Supreme Court of South Carolina has interpreted “extra compensation” to mean “any

compensation over and above that fixed by law or contract at the time the service was

rendered.” State ex rel. McLeod v. McLeod, 270 S.C. 557, 559, 243 S.E.2d 446, 447-48 (1978)

(emphasis added). Here, Callanan only worked a little over four months of the fiscal year; yet, he

received more than his entire annual salary without having to work the remaining eight months of

the fiscal year. The Attorney General’s Office has “repeatedly concluded that bonus payments,

retroactive compensation or severance pay are violative of these provisions where such uses of

public funds were not fixed by law at the time services were rendered by the public employee and

thus truly constituted ‘extra compensation’ as defined by our Constitution.” S.C. Op. Att’y Gen.,

1989 WL 406130, at *2 (S.C.A.G. April 3, 1989) (emphasis added).

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66. Under South Carolina law, Supervisor Peagler and the Chief Financial Officer Callanan

were not authorized to use (or receive) public funds for “extra compensation” in the form of

severance pay for services not yet rendered when those funds were appropriated by County

Council for funding the annual salary of the personnel position through the entire fiscal year. That

is by definition, an unconstitutional, illegal form of extra compensation.

67. Under State law, Supervisor Peagler and Callanan, the Chief Financial Officer, were also

not authorized to spend public funds for a private purpose. Anderson v. Baehr, 265 S.C. 153, 162,

217 S.E.2d 43, 47 (1975) (holding public funds must be expended for a public, not private, purpose

and stating “a public purpose has for its objective the promotion of the public health, safety, morals,

general welfare, security, prosperity, and contentment of all the inhabitants or residents, or at least

a substantial part thereof”). “A payment to an individual with no assurance of more than a

negligible advantage to the general public does not serve a public purpose within the meaning of

the Constitution.” S.C. Op. Att’y Gen., 1985 WL 166085, at 1 (S.C.A.G. Oct. 10, 1985) (citing

Anderson, 265 S.C. at 162, 217 S.E.2d at 47).

68. The Callanan “severance pay” was for a private purpose, and did not have “for its objective

the promotion of the public health, safety, morals, general welfare, security, prosperity, and

contentment of all the inhabitants or residents.”

69. Under the South Carolina Ethics Act, no public official or public employee may make,

participate in making, or in any way attempt to use his office or employment to influence a

governmental decision in which he has an economic interest. S.C. Code Ann. § 8-13-700.

70. Here, Callanan, as the Chief Financial Officer of the County, and Peagler, as the Supervisor,

acted in concert to use their offices and positions of employment to influence a government

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decision in which Callanan had an economic interest, including firing and threatening to fire

employees.

71. Under the South Carolina Ethics Act, a public employee who, in the discharge of his

official responsibilities, is required to take an action or make a decision which affects an economic

interest of himself shall: (1) prepare a written statement describing the matter requiring action or

decisions and the nature of his potential conflict of interest with respect to the action or decision;

(2) and furnish a copy of the statement to his superior, if any, who shall assign the matter to another

employee who does not have a potential conflict of interest. S.C. Code Ann. § 8-13-700.

72. Here, Callanan, as the Chief Financial Officer, took actions and made financial decisions

that affected his own economic interest, and he failed to comply with the State Ethics Acts by

concealing the conflict and failing to comply with the procedures of the South Carolina Ethics Act.

FOR A FIRST CAUSE OF ACTION AGAINST PEAGLER AND CALLANAN


(Breach of Fiduciary Duty)

73. The County repeats and reiterates each and every allegation contained in the foregoing

paragraphs as if set forth verbatim herein.

74. The County and the public placed confidence in and entrusted Supervisor Peagler and Chief

Financial Officer Callanan to act with integrity and fidelity when carrying out their statutory and

employment duties, including expending and utilizing public funds on behalf of the County and

its citizens, such that a fiduciary relationship exists.

75. Chief Financial Officer Callanan and Supervisor Peagler, as public officers were “trustees”

of the County and taxpayer’s funds. Sumter Cty. v. Hurst, 189 S.C. 316, 1 S.E.2d 242, 244 (1939)

(“[T]here can be no dispute of the proposition that when a public officer receives money for the

public use, he is a trustee . . . .”); see also Op. S.C. Att’y Gen., 2016 WL 3946153, at *2 (S.C.A.G.

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July 5, 2016) (“Personal liability for misspent public funds arises from the role of public officers

as trustees of the taxpayer’s funds.”).

76. The South Carolina Supreme Court has recognized that:

The obligations of public officers as trustees for the public are established as a part
of the common law, fixed by the habits and customs of the people. Among their
obligations as recipients of a public trust are to perform the duties of their office
honestly, faithfully and to the best of their ability (and) to use reasonable skill and
diligence. Every public officer is bound to perform the duties of his office honestly,
faithfully, and to the best of his ability, in such manner as to be above suspicion of
irregularities, and to act primarily for the benefit of the public. The fact that the
treasurer in this case was vitally, personally interested in the payment to
himself put upon him, in the sight of the law, the strict necessity of being a
model ‘Caesar's wife.’ These are not mere platitudes but important principles,
necessary to be observed and enforced, particularly in a democracy.

O'Shields v. Caldwell, 207 S.C. 194, 216, 35 S.E.2d 184, 193 (1945) (emphasis added).

77. Like the treasurer in O’Shields, Callanan “was vitally, personally interested in the payment

to himself” and “put upon him, in the sight of the law, the strict necessity of being a model ‘Caesar's

wife.’” Callanan’s bad faith and fraudulent actions demonstrate that he was the antithesis of a

model “Caesar’s wife.”

78. “[A] public officer responsible for the handling and collection of public funds ‘is

considered a trustee, a bailee, or an insurer with all applicable duties and responsibilities of such

funds or property.’” Op. S.C. Att’y Gen., 1997 WL 208002, at *4 (S.C.A.G. Mar. 3, 1997) (quoting

67 C.J.S., Officers, § 211). “Such public funds . . . ‘are considered trust funds, and he [the public

officer] is responsible to the same degree as the trustee of a private fund.’” Id. (quoting 67

C.J.S., Officers, § 211) (alteration in original)). “It is the policy of the law to hold an official

custodian of public funds to strict accountability, and he must exercise ordinary diligence to keep

informed of the conditions of funds subject to his disposal.” Id. (quoting 67 C.J.S., Officers, § 211).

“Any public officer who wrongfully withholds or misappropriates public funds, or who pays or

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authorizes the illegal payment of public funds is personally liable for such misappropriation or

illegal payment.” Id. (quoting 67 C.J.S., Officers, § 212 (emphasis in original).

79. Supervisor Peagler and Chief Financial Officer Callanan, as public officials and public

employees tasked with the statutory duties of supervising the expenditure of public funds

appropriated by Council (S.C. Code Ann. § 4-9-420(5)) and providing financial reporting to

Council (S.C. Code Ann. § 4-9-420(6)), owed a fiduciary duty to the County and it citizens. “It

is well established that a public officer occupies a fiduciary relationship to the political entity on

whose behalf he serves.” Chicago Park Dist. v. Kenroy, Inc., 78 Ill. 2d 555, 564, 402 N.E.2d 181,

186 (1980); see also Skilling v. United States, 561 U.S. 358, 417 (2010) (“‘[A] public official owes

a fiduciary duty . . . and misuse of his office for private gain is a fraud[.]’”) (quoting McNally v.

United States, 483 U.S. 350, 355 (1987)); Anderson Cty. v. Preston, 420 S.C. 546, 562, 804 S.E.2d

282, 290 (Ct. App. 2017), vacated on other grounds, 427 S.C. 529, 831 S.E.2d 911 (2019) (finding

that a South Carolina county administrator owed the county a fiduciary duty throughout his

employment).

80. “Failure by a public official to disclose material information [] constitutes a breach of

fiduciary duty.” United States v. Mandel, 591 F.2d 1347, 1363 (4th Cir. 1979), on reh’g, 602 F.2d

653 (4th Cir. 1979). “When the conduct of a government official is involved, the affirmative duty

to disclose material information arises out of the official’s fiduciary relationship to the public.”

United States v. Sawyer, 85 F.3d 713, 732 (1st Cir. 1996). Indeed, under South Carolina law,

“[p]arties in a fiduciary relationship must fully disclose to each other all known information that

is significant and material, and when this duty to disclose is triggered, silence may constitute fraud.”

Moore v. Moore, 360 S.C. 241, 251, 599 S.E.2d 467, 472 (Ct. App. 2004). “[W]here a person

occupies a fiduciary relationship to the City . . . and is aware of material information pertaining to

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the expenditure of large sums of the City’s monies . . . which will secretly enrich another at

the expense of the City, that person has an affirmative duty to disclose the information.” United

States v. Silvano, 812 F.2d 754, 759 (1st Cir. 1987).

81. Supervisor Peagler and Chief Financial Officer Callanan breached their fiduciary duties to

the County to the detriment of the County and its citizens by, inter alia:

a. Secretly obligating the County to paying $49,900 to Callanan as an extra allowance to his

salary;

b. Illegally paying an extra allowance to Callanan who was paid by salary in violation of S.C.

Code Ann. § 4-11-170;

c. Illegally receiving an extra allowance while being paid by salary in violation of S.C. Code

Ann. § 4-11-170;

d. Spending and receiving public money for a purpose that was not approved or appropriated

by County Council;

e. Demanding that County employees hide the existence of the Agreement and its terms from

County Council;

f. Threatening to fire County employees if they disclosed the Agreement and its terms to

Council;

g. Failing to disclose to County Council the payment of $49,900 in “severance pay” until after

it had been paid and obtained by Callanan;

h. Wrongfully utilizing and receiving public funds as “extra compensation” in violation of

the South Carolina Constitution;

i. Wrongfully utilizing and receiving public funds for services not rendered;

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j. Unlawfully using and receiving public funds for “extra compensation” in the form of

severance pay for services not yet rendered when those funds were appropriated by County

Council for funding the annual salary of a personnel position through the entire fiscal year;

k. Unlawfully using and receiving public funds for a private purpose;

l. Wrongfully using their office or employment to influence a governmental decision in

which they had an economic interest;

m. Making false statements to County employees, including misrepresenting that County

Council had approved the Agreement, when it in fact had not been approved;

n. Making false statements to County employees, including misrepresenting to the Director

of Finance, that procurement had reviewed the Agreement for compliance with the

procurement code, when in fact the Procurement Director indicated that the Agreement did

not fall within the Procurement Ordinance Exemptions;

o. Failing to disclose the Confidential Severance Agreement to County Council;

p. Spending public money in a manner that was contrary to the annual budget ordinance of

the County;

q. Wrongfully utilizing and receiving public funds for “severance pay” when those funds

were appropriated by County Council for the purpose of funding the annual “salaries” of

the personnel position through June 30, 2019;

r. Secretly attempting to obligate the County to confidentiality and a non-disparagement

clause without prior County Council approval;

s. Secretly paying Callanan an extra allowance to his salary for services not yet rendered in

the form of “severance pay”;

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t. Immediately taking the County check to the bank and obtaining a cashier’s check prior to

Council being informed of the payment;

u. Intentionally failing to obtain County Council approval prior to entering into the

Agreement;

v. Intentionally failing to obtain County Council approval prior to utilizing and receiving the

public funds;

w. Refusing to return the public funds despite demands;

x. Terminating the Public Information Officer for not issuing Callanan and Peagler’s self-

serving press release in furtherance of their wrongdoing;

y. Misappropriating public funds to benefit themselves to the detriment of the County and its

citizens;

z. Paying Callanan his entire annual salary for Fiscal Year 2019, despite the fact that Callanan

only worked a little over four months of the fiscal year;

aa. Receiving and obtaining public funds in excess of the annual amount appropriated by

County Council for Callanan’s salaried position;

bb. Failing to exercise that degree of care and prudence in the management of the funds which

a person of ordinary care and prudence would exercise in his own business;

cc. Upon information and belief, omitting and misrepresenting information to the South

Carolina Department of Employment and Workforce to unlawfully obtain unemployment

benefits;

dd. Failing to properly carry out the statutory duties of the Supervisor;

ee. Failing to properly carry out the assigned duties of Deputy Supervisor and Chief Financial

Officer;

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ff. Improperly using their titles and positions of power to obtain an improper benefit;

gg. Usurping the statutory authority of County Council;

hh. Improperly taking actions to wrongfully bind their successors in office;

ii. Failing to comply with provisions of the South Carolina Ethics Act;

jj. Failing to comply with provisions of the Berkeley County Government Personnel Manual

and Policies;

kk. Failing to “to uphold the high ethical standards of dedicated public service” as required in

the Employee Code of Conduct and Berkeley County Government Personnel Manual and

Policies;

ll. Failing “to cause the County to use County funds and assets only for legally appropriate

public purposes” as required in the Employee Code of Conduct and Berkeley County

Government Personnel Manual and Policies;

mm. Improperly “us[ing] the influence of his government employment to financially benefit

himself” as required in the Employee Code of Conduct and Berkeley County Government

Personnel Manual and Policies; and

nn. Assuming the Agreement was valid, which is disputed, Callanan wrongfully claimed he

was owed additional wages and compensation after November 8, 2018, in violation of the

Agreement’s terms, and improperly requested, obtained, and retained additional wages and

compensation from the County on December 5, 2018 in the amount of $29,202.53 as well

as a $4,655.27 payment on November 21, 2018;

82. The County was damaged as a proximate result of these breaches of fiduciary duties and is

entitled to recover actual damages, including pre-judgment interest, from Callanan and Peagler, in

an amount to be determined by the Court.

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83. Further, because these actions were willful, wanton, or taken with a reckless disregard of

the County and its citizen’s rights, the County is entitled to recover punitive damages from Peagler

and Callanan.

84. Because Peagler and Callanan’s conduct was willful, wanton, reckless, grossly negligent,

and/or intentional, Defendants are jointly and severally liable to the County. S.C. Code Ann. §

15-38-15.

FOR AN ADDITIONAL CAUSE OF ACTION AGAINST PEAGLER AND CALLANAN


(Conversion)

85. The County repeats and reiterates each and every allegation contained in the foregoing

paragraphs as if set forth verbatim herein.

86. The County claimed and claims an interest in the public funds that were wrongfully

transferred and obtained by Supervisor Peagler and Callanan.

87. As set forth above, Peagler and Callanan acted in concert and converted the County’s funds

for Peagler and Callanan’s own personal use without the County’s approval and permission and in

violation of state law.

88. As a direct and proximate result of this conversion, the County suffered damages for which

it seeks actual and punitive damages together with pre-judgment interest.

89. Because Peagler and Callanan’s conduct was willful, wanton, reckless, grossly negligent,

and/or intentional, Defendants are jointly and severally liable to the County. S.C. Code Ann. §

15-38-15.

FOR AN ADDITIONAL CAUSE OF ACTION AGAINST PEAGLER AND CALLANAN


(Unjust Enrichment)

90. The County repeats and reiterates each and every allegation contained in the foregoing

paragraphs as if set forth verbatim herein.

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91. As set forth herein, Callanan received public funds belonging to the County in the form of

wages, illegal extra compensation, severance pay, and other benefits from the County.

92. Callanan realized and obtained the benefits of the County’s public funds, which in justice

and equity belong to the County.

93. Callanan was unjustly enriched as a result of the transactions he and Peagler, working in

concert, caused the County to undertake as described more fully in the preceding paragraphs.

94. To the extent there is no other remedy at law, the County is entitled to recover the amount

by which Callanan has been unjustly enriched, including pre-judgment interest, in an amount to

be determined by the Court.

95. Because Peagler and Callanan’s conduct was willful, wanton, reckless, grossly negligent,

and/or intentional, Defendants are jointly and severally liable to the County. S.C. Code Ann. §

15-38-15.

FOR AN ADDITIONAL CAUSE OF ACTION AGAINST CALLANAN AND PEAGLER


(Declaratory Judgment)

96. The County repeats and reiterates each and every allegation contained in the foregoing

paragraphs as if set forth verbatim herein.

97. There exists an actual controversy between the County, Peagler, and Callanan involving

their respective rights, liabilities and legal relations relative to each other.

98. The County is entitled under the South Carolina Declaratory Judgment Act, S.C. Code Ann.

§ 15-53-10 et seq., to a judgment of this Court declaring the rights, liabilities and relations of the

parties hereto. Specifically, the County, is entitled to declarations that:

a. The Confidential Severance Agreement is invalid and unenforceable because its provisions
violate S.C. Code Ann. § 4-11-170, which prohibits an extra allowance to any person who
is paid by salary.

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b. The Confidential Severance Agreement is invalid and unenforceable because its provisions
improperly authorized unconstitutional extra compensation.

c. The Confidential Severance Agreement is invalid and unenforceable because its provisions
improperly authorized the use of public funds for a private purpose.

d. The Confidential Severance Agreement is invalid and unenforceable because its provisions
improperly authorized the use of public funds in a manner that was contrary to the annual
budget ordinance of the County.

e. The Confidential Severance Agreement is invalid and unenforceable because its provisions
improperly authorized the use of public funds for a purpose that was not approved or
appropriated by Berkeley County Council.

f. The Confidential Severance Agreement is invalid and unenforceable because it constitutes


an employment contract and was not approved by County Council.

g. The Confidential Severance Agreement is invalid and unenforceable because its provisions
purported to bind the County without County Council approval.

h. The Confidential Severance Agreement is invalid and unenforceable because its provisions
improperly authorized the use of public funds for “severance pay” when those funds were
appropriated by Berkeley County Council for the purpose of funding the annual salary of
Callanan’s personnel position through June 30, 2019.

i. The Confidential Severance Agreement is invalid and unenforceable because its provisions
usurp the statutory powers of County Council, including Council’s power to create and
fund positions, as well as, discharging personnel on a two-thirds vote.

j. The Confidential Severance Agreement is invalid and unenforceable because it unlawfully


bound Supervisor Peagler’s successor, Johnny Cribb, to forego or to exercise his legislative
functions.

k. The Confidential Severance Agreement is invalid and unenforceable because it unlawfully


bound County Council’s successors to forego or to exercise their legislative functions.

l. The Confidential Severance Agreement is invalid and unenforceable because it was


unlawfully entered into by Peagler and Callanan in breach of their fiduciary duties to the
County and its citizens;

m. The Confidential Severance Agreement is invalid and unenforceable because its provisions
violate the Berkeley County Government Personnel Manual and Policies.

n. Callanan’s actions violated the State Ethics Act.

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o. Because the Confidential Severance Agreement is invalid and unenforceable, Callanan is
personally liable to the County for any payments received under the Agreement.

p. Because the Confidential Severance Agreement is invalid and unenforceable, Peagler is


personally liable to the County for any payments made under the Agreement.

q. Alternatively, if the Court determines that the Agreement is valid, which is disputed,
Callanan breached the terms of the Agreement and must return to the County the funds he
received under its terms; and

r. Alternatively, if the Court determines that the Agreement is valid, which is disputed,
Callanan breached the terms of the Agreement and must return to the County any funds he
received beyond what the Agreement provided for.

99. The County requests that this Court grant it such costs as authorized by statute to

compensate it for bringing the present action.

PRAYER FOR RELIEF

WHEREFORE, the County, prays that judgment be granted in its favor against Peagler

and Callanan, jointly and severally, for:

(A) an award of actual damages in an amount to be determined;

(B) an award of punitive damages;

(C) an award of pre-judgment interest;

(D) the declaratory relief as set forth above; and

(E) for such other further legal and equitable relief as the Court deems just and proper.

JURY DEMAND

The County demands that all issues of fact in this case be tried to a properly impaneled

jury.

[Signature page follows]

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Respectfully submitted,

WILLOUGHBY & HOEFER, P.A.

s/ R. Walker Humphrey, II
Randolph R. Lowell, SC Bar No. 16145
R. Walker Humphrey, II, SC Bar No. 79426
133 River Landing Drive, Suite 200
Charleston, South Carolina 29492
Telephone: 843-619-4426
rlowell@willoughbyhoefer.com
whumphrey@willoughbyhoefer.com

Attorneys for Berkeley County

July 28, 2020

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