Stacy Phelps.Photo from Lakota Country Times

GearUp Scandal Takes Center-Stage
By Brandon Ecoffey
Lakota Country Times Editor
www.lakotacountrytimes.com

LAKE ANDES --Three people appeared in court last Tuesday, March 22, in Charles Mix County to face charges for their role in an alleged conspiracy that prosecutors say resulted in the theft of more than $1 million intended to improve access to education for South Dakota's Native students.

In September of last year revelations of mismanaged state and federal funds intended for the GearUp Native American student college preparedness program became public after Scott Westerhuis -the owner of Mid Central Educational Cooperative- shot and killed his family just prior to setting his home ablaze and turning the gun on himself. The day before the crime Westerhuis was informed by the state of South Dakota that a lucrative $3 million grant allocated for the operation of the GearUp program and administered by Mid Central was going to be cancelled.

Mid Central was responsible for administering the funding for the GearUp program that was created and ran by Stacy Phelps. GearUp handled over $3 million dollars each year to run the program that was meant to improve college attendance and graduation rates amongst South Dakota's Native population. The program had a presence in nearly every reservation school in the state and also hosted a summer program for Native students on the campus of the South Dakota School of Mines and Technology.

Phelps is one of three defendants who have been charged with a crime associated with the mismanagement of the funds. Both Phelps, and former Mid Central employee Dan Guerike have been charged with two counts of falsification of evidence and two counts of conspiracy to offer forged or fraudulent evidence. Guerike is also facing another two conspiracy charges. Stephanie Hubers, a bookkeeper at Mid-Central, is charged with three counts of grand theft for allegedly creating false work invoices and for admittedly taking payments from Scott Westerhuis to keep his backwater dealings and questionable accounting practices hidden. The Dakota Free Press reported that Hubers admitted that she had "took illegal payments from Scott Westerhuis from 2009 through 2014 totaling $55,339.49, (and) alleges that two assistants received similar illegal payments."

Westerhuis has been implicated along with his wife by Hubers for doctoring books in order to hide their skimming, The mansion like home that was burned down by Westerhuis included a $1 million gym was allegedly paid for by stolen funds. The estate of Westerhuis has been sued for more than $2 million.

The charges levied against Phelps and Guerike are not for stealing funds from GearUp but instead are for backdating contracts between Mid Central and the American Indian Institute for Innovation (AIII). Phelps was delivered the pre-prepared contracts from Westerhuis, already signed by Guerike, electronically to his email. Phelps allegedly the signed the contracts and returned them to Westerhuis.

The state alleges that the actions of Phelps were part of an effort to hide known criminal actions from state auditors. Ironically, the statute used to charge Phelps with the conspiracy was originally drafted to deter the submission of falsified evidence in to a court of the law. The application of this statute as pertaining to the actions of Stacey Phelps is yet to be determined and a court must decide if the statue is relevant.

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AIII is responsible for the managing the daily operations of three reservation based schools. Stacey Phelps served as head of AIII but resigned from the position in February so that work being done by AIII would continue without the distractions that the GearUp scandal was set to bring. A representative of AIII has told LCT that contracts with the schools have shown significant positive progress and that he work being done with the schools would continue. Wounded Knee District School is one of the three schools that AIII operates. Both the Wounded Knee District School Board and C.J. Clifford, Oglala Sioux Tribal Councilman from Wounded Knee District have given AIII a vote of confidence.

Although the murder-suicide thrust the management of the GearUp program in to the news cycle, financial irregularities were brought to the attention of South Dakota Secretary of Education Melody Schop in 2012. Schop responded to the media inquiries about the problems with GearUp's financials and responded by providing "technical support". The technical support did not address what are seemingly booking errors caused by Scott Westerhuis and his wife's practices of hiding their theft within the books of other non-profits including the American Indian Institute for Innovation which operates three reservation based schools in the state.

Although GearUp has been the most scrutinized of Mid Central's contracts the cooperative was in bed with the state on 22 other programs. A recent audit conducted by the state found multiple instances where employees held multiple positions in other organizations working under the umbrella of Mid Central.

Both Scott Westerhuis and Nicole Westerhuis had multiple sources of income that were paid through organizations intended to improve educational opportunity for Native students. According to a report from Bob Mercer of the Rapid City Journal Scott Westerhuis was the business manager for Mid Central served as the chief financial officer for AIII.

According to a state audit employees for Mid Central often held multiple positions within both Mid Central and other non-profits administered by Westerhuis and Mid Central.

The same report issued by Mercer also indicates that Stacey Phelps also had also been paid from multiple sources including from AIII where he served as a high ranking administrator. The audit does not imply that the practice was illegal and the lead lawyer for Phelps indicated that suspicions around Stacey Phelps' role in the alleged conspiracy will be proved wrong at trial.

In a statement made to the press Dana Hanna, attorney for Phelps, deflected blame away from his client and said that his client was being used as a political "scapegoat" for failures by the state to adequately monitor funds that were being directed to Mid Central by the state.

The audit report seems to back up some of Hanna's claims as the report chastised the state for its inability to monitor funding that it distributed.

Questions remain as to just how high up the political chain the mess goes as conflict of interest allegations have been thrown around by both auditors and political pundits.

KELO land news has already reported that Kelly Duncan, a member of the South, Dakota Board of Regents, received $124,000 in contract payments from the South Dakota Department of Education despite working as lead evaluator Mid Central’s administration of the GEAR UP program in 2014.

Questions have also surfaced about the duties of former Secretary of Education under Mike Rounds, Roger Melmer, and former South Dakota Secretary of Indian Education Keith Moore. Both have received payments from Mid Central but have not answered questions asking them to detail their work.

The charges raised against Phelps are considered to carry a presumptive sentence of probation if he is found guilty.

(Contact Brandon Ecoffey at editor@lakotacountrytimes.com)

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