Of Safes and Smoke

by Eve Fisher

Do you remember the South Dakota GEAR UP! scandal?  The one that got started when, early in the morning of September 17, 2015, a fire destroyed the home of Scott and Nicole Westerhuis and their four children in Platte, South Dakota?  And they were all later found to be shot to death?

Quick Note:  (GEAR UP! is a federal grant program to get financial assistance to low-income students; here in SD it's primary aim was supposed to be helping Native American students.)  

SD AG Marty Jackley

Now, my regular readers may remember that South Dakota Attorney General Marty Jackley determined that Scott Westerhuis shot his wife and children, torched the house, and then shot himself, all because he was about to be caught for embezzling enough funds to build a $1.3 million rural home, a $900,000 gym complete with basketball court, etc., etc., etc., on an official combined salary (his and his wife's) from Mid Central Educational Co-Op of $130,000.  Later, it turned out that the Westerhuises had set up a number of shell organizations, and given themselves hefty salaries from them all.

Well, I'm happy to announce that the General Audit of Mid Central and GEAR UP! has finally been released and it shows:

(1) Scott and Nicole Westerhuis took nearly $8 million out of Mid Central's bank account without authorization to cover the salaries of their non-profit organizations. Supposedly most of that money was returned to Mid Central (how, when, where?), but $1.4 million was still missing at the time of the Westerhuis family's deaths.

(2) The Mid Central Board and its director, Dan Guericke, didn't have enough oversight and never addressed the risks created by Scott and Nicole Westerhuis having roles in the non-profits they set up to take the GEAR UP! grant money.

(3) Guericke didn't get approval by the board for 17 contracts and a number of payments made without contracts with the Westerhuises.

Naturally, the blame game has begun:

• Mid Central's board is blaming the South Dakota Department of Education ("lead partner" in the GEAR UP! grant and responsible for ensuring the project was carried out in accordance to federal rules and regulations).  
• The SD DOE says it did its job of conducting reviews of grant expenses and tightened up its controls when it began noticing issues in 2014, which is why it cancelled its contract with Mid Central right before the Westerhuis tragedy.  
• The Mid Central board's responded that, "no amount of reasonable oversight would have detected the complex scheme of fraudulent and illegal activities conducted by Scott and Nicole Westerhuis."  (Angela Kennecke, KELO TV)  

• NOTE:  I once put together five years of an organization's accounts from a checking account register.  You can figure out a lot if you just follow the money...

• Also, Cory's blog Dakota Free Press has all the facts and figures that we have so far, and all the excuses piled up so far.

So, June 30, 2017, Mid Central will shut down. 12 of its 13 members have formed Core Educational Cooperative.  The same staff of Mid Central (those who are not going to trial) are now going to work for Core (at least half of them had to have conflict-of-interest waivers to work for Mid Central, and will now have to have conflict-of-interest waivers to be able to work for Core); the Mid Central Board is liquidating their assets (even though $1.4 million in tax-payer money is still owed to our long-suffering public).  Please see Cory Heidelberger's article at Dakota Free Press for a fuller experience of how deep it's getting piled.  Again...

Meanwhile, no one's come forward yet to untangle the following mysteries:
(1) Who called Nicole's cell phone in the middle of the night, right before the fire?
(2) Why did Mid Central Educational Co-op, which owned the Westerhuis cell phones, cancel them and wipe the records the next morning, before the ashes from the arson had even cooled?
(3) What did Mid Central Educational Co-op Director Dan Guericke talk about with Scott Westerhuis for an hour on the evening before the tragedy?  (Guericke told the board the two really didn't talk about much at all.)
(4) What happened to the Westerhuis safe, which trotted out of the house like a trained pig right before the house was torched?

Yes, there's going to be a trial of 3 Mid Central employees, including Director Guericke.  Maybe the questions will be answered then...  But I'm not holding my breath.  Will keep you posted.

The other big news of the week hearkens back to last year, when the Flandreau Santee Sioux Tribe reversed course on opening America's first Tribal Marijuana Coffee Shop, and burned the whole crop in November.  (They had been warned that they were going to be raided by federal officials.)  AG Jackley was suspicious that they hadn't burned it all, and talked about charges.  And he did.  He charged Colorado marijuana industry consultants Eric Hagen and Jonathan Hunt for helping the tribe set up their grow room, etc.  (BTW, State AGs can’t prosecute non-Indians for crimes on reservations, but Jackley argued that his office had jurisdiction to prosecute victimless crimes committed by non-Indians.) Hunt rolled over and pled guilty but Hagen went to trial: and was acquitted by a jury. (Hagen testified that he was simply a consultant with experience in the industry who had been hired by the tribe, and apparently the jury agreed with him.) Marty Jackley was restrained, saying that he respected the jury's verdict.  (See the Argus Leader article for more details.)

Many people believe that the reason Jackley pursued this lawsuit was because he and current SD Rep. Kristi Noem (R) are going to duke it out for the South Dakota Governor's Office next year, and he's trying to get out front on the law & order issue. (Most of us think taxes and health care would be more salient...) But, as we move into yet another election year, the questions pile up:
Will GEAR UP! come up?
Will crop insurance?
Will marijuana?
Will riding horses?
Will let you know.

Meanwhile, a friend just told me that a forrmer public works director (no names were named) said that South Dakota doesn't really need federal money for infrastructure, because driving on bumpy roads isn't all that much of an inconvenience. My friend pointed out that tourists might disagree & he said tourism doesn't impact the state economy that much...

Crazy Horse Memorial - Photo by TBennert on Wikipedia

Mount Rushmore - Wikipedia

Badlands National Park - Wikipedia

The Needles - photo courtesy of
Doug Knuth - https://www.flickr.com/photos/dknuth/7677770944/
Wikipedia

Bear Butte - photo courtesy of
Jsoo1, as English Wikipedia image: en:Image:Bearbutte4.jpg

Sturgis motorcycle rally - Photo courtesy of
Cumulus Clouds, Wikipedia

Are our public officials TRYING to run our economy into the ground, or are they just stupid?

More later, from South Dakota, where we talk like Mayberry, act like Goodfellas, and the crazy just keeps on coming.

 

Barney Got a Gun

by Eve Fisher

I hope everyone had a Happy Easter, Good Passover, and other appropriate holiday.  Up here, one of our Easter Eggs held indictments - at last - for three in one of our South Dakota scandals - Gear Up!

(Wouldn't you know it, the cheap one, only a few million missing, whereas EB-5, with $120 million missing taxpayer dollars, is still blamed on the guy who supposedly shot himself in the stomach in a field while hunting...)  

But let us rejoice in small favors.  What happened was that our own Attorney General, Marty ("I'm going to be running for governor in 2018, so I need to get something on paper") Jackley held a press conference and announced that three, count 'em THREE people were responsible for aiding and abetting Scott and Nicole Westerhuis in their embezzlement and fraud.

Quick reprise:  Early in the morning of September 17, 2015, a fire destroyed the home of Scott and Nicole Westerhuis and their four children in Platte, South Dakota.  It was later declared ed by AG Marty Jackley that Scott Westerhuis shot his entire family, torched the house, and then shot himself. There is still the ongoing mystery of who called Nicole's cell phone in the middle of the night, right before the fire, and what happened to the safe that apparently got up on its hind legs and trotted out of the house before the carnage.

36705 279th Street, Platte, SD.
screen cap from Google Maps,
2015.09.22.

Further reprise:  Scott Westerhuis was the business manager of MCEC, the Mid Central Educational Cooperative, which is, among other things, a hub for distributing federal grand monies to other non-profit organizations, including Gear Up.  Nicole also worked there.  Scott Westerhuis set up as many as 7 non-profit corporations related to Indian education, including - but not limited to! -  the American Indian Institute for Innovation, a/ka AIII.  Scott Westerhuis was incorporator of all of these, CFO of some, including AIII, and his wife Nicole was business manager of at least some of them.  And the Westerhuis family lived on a $1.3 million rural Platte property that included a 7,600 square foot house, a $900,000 gym complete with basketball court, weight-lifting area, and computers, and a loft with a meeting room, rooms for guests, and a kitchen.  This was on an official combined MCEC salary of $130,549.82.

Okay, back to the news conference!  On March 16, 2016, Marty Jackley announced that he filed charges against and arrested: 

Daniel Mark Guericke, MCEC Executive: 2 counts of falsification of evidence, class 6 felony, punishable by up to 2 years imprisonment in the state penitentiary and/or $4,000 fine, 4 counts of conspiracy to offer forged or fraudulent evidence, class 5 felony, punishable as a Class 6 felony, with a maximum sentence of 2 years imprisonment and/or $4,000 fine.  Full transcript of complaint here: (PDF of Complaint filed)

Stephanie A. Hubers, Former MCEC interim business manager: 1 count of grand theft, class 4 felony, punishable by up to 10 years in the state penitentiary and/or $20,000 fine, 2 counts of grand theft by deception, class 4 felony, punishable by up to 10 years in the state penitentiary and/or $20,000 fine, 3 alternative counts of receiving stolen property, class 4 felony, punishable by up to 10 years in the state penitentiary and/or $20,000 fine.

Stacy Lee Phelps, Former AIII (see above)/GEAR UP operator: 2 counts of falsification of evidence, class 6 felony, punishable by up to 2 years imprisonment and/or $4,000 fine, 2 counts of conspiracy to offer forged or fraudulent evidence, class 5 felony, punishable as a Class 6 felony, with a maximum sentence of 2 years imprisonment and/or $4,000 fine.

NOTE:  Mr. Phelps' lawyer is mounting a vigorous defense, based on the idea that Mr. Phelps is a scapegoat.  Perhaps he is.  (If so, he should be thanking his lucky stars that he isn't lying in a field somewhere...)  

Among other things, Guericke, Phelps, the Westerhuises and “other unknown co-conspirators" were all accused of falsifying and backdating contracts, including those of 

• Dr. Rick Melmer, the Dean of Education of the University of South Dakota, who (memorably) couldn't remember nine $1,000 in payments live on South Dakota television, and 
• Keith Moore, Governor Mike Rounds' director of Indian education. 

So far, neither Dr. Melmer (who as Secretary of Education under Governor Mike Rounds, moved supervision of Gear Up from the DOE in Pierre to MCEC in Platte), nor Mr. Moore (who also received a good chunk of change), nor former Mid-Central board chairman Lloyd Persson (who actually signed the bogus contracts) have been indicted, and Jackley has indicated that they won't be.

Nor has anyone asked Secretary of Education Melody Schopp to resign, even though she let MCEC continue their interesting approach to funding for three years after she noticed that something smelled a little funny.  Apparently, they are still looking into at least two other MCEC staffers who (according to Hubers) blackmailed some money out of Westerhuis.  Cory Heidelberger suggests that Mr. Jackley look into the board members of the American Indian Institute for Innovation, which was, apparently, the hub of moving stolen money around.  And no one has mentioned my favorite, Dr. Joseph Graves, Mitchell, SD School Superintendent, who received money from the MCEC for teaching "Teaching American History" in a state that has made it optional.  

Also, we're down to only $1 million missing, instead of $14 million, but hey, it's still better than the EB-5 mess.  Right?  

Angela Kennecke, KELO-TV

Well, right now, we're all waiting for the other shoe to drop.

"Sources who have first-hand knowledge within the Department of Education tell KELO-LAND News there were questionable expenses involving GEAR UP grant money as early as 2006 that were brought to the attention of department officials."  Angela Kennecke, 3/23/16

What this means, in South Dakota speak, where no one ever admits anything is actually WRONG, is that there's something else coming.  Possibilities:

(1) People ('sources') know that more hell is about to break loose and are getting ready to get out from under it.

(2) It's possible that someone ('sources') in the higher-ups is authorizing a leak, which is the first step to a flood.

(3) They found the safe.  

Okay, the last one's HIGHLY unlikely.  And if they do find it, it'll probably just be full of pork.

And there's the recent news that "There have been several million dollars diverted out of school funding at Lower Brule [reservation] and as a result they had to go into restructuring which is a federal requirement when you have really low school performance. And so they hired AIII Stacey Phelps, which at the time was the head of AIII, and Scott Westerhuis was the COO. So they (Lower Brule) brought in AIII to manage Lower Brule schools and that had been going on for about two years."  (Thanks again, Cory Heidelberger and the Dakota Free Press!)  And people wonder why the Reservations up here are still in a world of financial hurt...

Anyway, that's the latest update from South Dakota, where we talk like Mayberry, act like Goodfellas, and the crazy just keeps on coming.

 

The Chinese Are Coming!

A while back I wrote a column called "A Little Light Corruption"  about how South Dakota looks like Mayberry and acts like Goodfellas.  The body count is still only at seven (thank God), but the money is getting weirder by the minute.
For one thing, 35 Chinese investors are suing the State of South Dakota for $18,550,000, claiming they got ripped off in the EB-5 (green cards for a $500,000 investment) program.

And Joop Bollen (a Dutch foreign national), who somehow was allowed by our own then-Governor Mike Rounds (currently our US Senator) and our current Attorney General Marty Jackley, to privatize EB-5 and turn it over to himself via his own corporation (SDRC, Inc.) is now suing the State for defamation of character.

And our AG, instead of issuing warrants, is asking the court to freeze Joop's assets which are, in one bank account, around a million dollars.

NOTE:  Remember, originally, AG Jackley determined that the only "misappropriated" funds from EB-5 was the $500,000 that Richard Benda supposedly stole before supposedly killing himself in a field.  Apparently things have changed.  Although Marty Jackley is keeping as quiet as a tomb.

Joop Bollen and then-Governor,
current SD Senator, Mike Rounds

SECOND NOTE:  Mr. Bollen has, throughout, been treated with kid gloves.  He's never even been subpoenaed.  But the State of South Dakota has finally sued his corporation, SDRC, Inc... for documents.  Like, before they're shredded. 

THIRD NOTE:  Despite the Chinese investor losses, and Mr. Bollen's interesting bank account, South Dakota is still officially missing $120 million dollars in EB-5 fees and investments.  Where did it go?  Well, the state deficit in the last year of Mike Rounds' governorship was $120 million, so it didn't go there...  

Repeat after me:  "Life is always going to be stranger than fiction, because fiction has to be convincing, and life doesn't." Author Neil Gaiman.

Okay, on to GEAR UP!  Because we can't have just one major scandal about disappearing federal grant dollars in our tiny state.

A whole lot of  money (almost $3.5 million in 2011) went to a whole lot of people, except that almost none of it went to what the purpose of the grant was:  to give scholarships and education to Native Americans.  In fact, while 50-75% of all GEAR UP funds were supposed to be spent on scholarships according to the federal grant requirements, South Dakota requested (and apparently got) a waiver to spend NO money on scholarships, but to spend 100 percent of the grant on college preparedness and college readiness. And of course the best way to prepare Native American students for college was to hire endless consultants and directors of various sub-corporations.  (Angela Kennecke investigation)  The result is, $14 million dollars spent (somewhere), and 20 people went to college.   As my blogger friend Cory says, wouldn't it have been cheaper just to give the kids scholarships?  (dakotafreepress.com/2015/12/31/)


Some of you may remember from my last post on this that the Westerhuis' cell phones were cancelled the day after the arson / murder / suicides, and all the records were wiped, including who made a call and left a voice mail about 20 minutes before the fire.  As it turns out, the Westerhuis cell phones were through the Mid-Central Educational Cooperative (MCEC, the hub corporation for GEAR UP money, and for which the deceased Westerhuises worked). And it was MCEC that cancelled the phones and had the records wiped.  No explanation why they would do this before the ashes had even cooled on the ground...

And you may also remember that there was a missing safe, which apparently had legs like a dog and got up and trotted off because it hasn't been found yet.

From the "It can't get any weirder than this" files:

Governor Dugaard and Secretary of Education Melody Schopp
at the Interview

The US Department of Education tells KELOLAND News that in 2014, the South Dakota GEAR UP State grant file was destroyed and none of the documents are available.  (More Angela Kennecke investigation)

When KELO-TV investigative reporter Angela Kennecke asked for an interview with Secretary of Education Melody Schopp about GEAR UP and MCEC, she was told by the governor's office that she could only talk to Schopp with Governor Dugaard present. (see photo to the right)  Still trying to figure out whose hand needed holding...

And the Mid-Central Educational Cooperative had a forensic audit of their books, and presented it to a public meeting of the MCEC board. Said the auditors:  “We did not have access to financial records or other information from any other business or individuals.”  (For example, any of the multiple organizations that the deceased Mr. Westerhuis set up.)  And neither MCEC board members, nor the public, nor the media were allowed to ask any questions or even speak at the public meeting.  (http://dakotafreepress.com/?s=audit)

Just another day in South Dakota, where federal grant money can disappear like magic.

Did I mention that 4 in every 10 dollars in South Dakota revenue come from the federal government? (10 States most dependent on Federal Government)

Repeat after me:  "Life is always going to be stranger than fiction, because fiction has to be convincing, and life doesn't." Author Neil Gaiman.