Guest Column: Senator Deb Peters – Public deserves straight facts on GEAR UP

District 9 State Senator Deb Peters (R-Hartford) is currently Chair of the Government Operations and Audit Committee, and President of the National Conference of State Legislatures

I am a District 9 state senator, the chair of the legislature’s Government Operations and Audit Committee, and a certified public accountant.  In those roles, I get a lot of questions about the GEAR UP Grant and Mid-Central Education Coop. With all the news coverage and the claims being made, it is confusing and would I’d like to set the record straight with a few facts as I know them:

  1. The heart of this matter is an embezzlement scandal involving Mid Central Coop’s former business manager, Scott Westerhuis. Mid Central Coop was created by a group of small school districts, and it is controlled by a board made up of representatives from those districts. Auditors have found that $1.4 million from Mid Central’s bank account is not accounted for.
  2. That missing $1.4 million was not GEAR UP money. GEAR UP is a federal program to help at-risk high school students go to college, and in South Dakota it is used to help Native Americans. Mid Central administered the program for the State of South Dakota. The federal funds went to the state Department of Education (SD DOE). Mid Central would submit receipts to SD DOE, and if the expenses were related to the federal program, Mid Central would be reimbursed. Although some GEAR UP dollars may not have been spent effectively, the audit did not find that any GEAR UP money was missing and no money was stolen from the State.
  3. Secretary of Education Melody Schopp has been accused of illegal and unethical conduct which has been based on hearsay and rhetoric not facts. What hasn’t been stated correctly is because of the SD DOE oversight of the federal grant; GEAR UP had fewer problems than the other direct federal programs that Mid Central administered without state oversight. Audit Reports show the other direct federal grants (not GEAR UP) administered by Mid Central had a myriad of issues.
  4. In fact, although some people like to talk about “Pierre insiders” or “establishment Republicans,” that is exactly who found and exposed the Mid Central wrongdoing.
    1. Going back to 2012, concerns by SD DOE staff led to increased oversight of and reporting by Mid Central. The Department of Legislative Audit, which answers to the Republican-controlled legislature, found compliance and oversight problems that SD DOE attempted to require Mid Central to fix.
    2. And in 2015 when Mid Central failed to improve, Secretary Schopp terminated Mid Central’s contract. Even before the Westerhuis tragedy attracted press attention, our Republican-controlled Government Operations and Audit Committee held public hearings on this very issue, at which the SD DOE staff and Mid Central staff offered testimony.
    3. And it was Attorney General Jackley who investigated the embezzlement scandal and is pursuing criminal charges against those involved.
  1. South Dakota state officials have taken many steps to learn from this situation and to enhance procedures and improve operations.
    1. In 2016, Governor Daugaard and Lt. Governor Michels proposed a new Board of Internal Controls and adopted by the Legislature, which created strict and detailed new policies for entities receiving grants and contracts, to prevent another Mid Central-like situation from happening.
    2. In, 2017, Attorney General Jackley proposed legislation and adopted by the legislature that strengthened prosecutors’ ability to pursue public corruption and conflict-of-interest cases.
    3. In 2016 and 2017, Speaker Mickelson and myself led the efforts to create tough new laws on conflicts of interests by state employees, school officials and public board members.
    4. And in 2017, State Rep. Karen Soli, a Democrat, sponsored legislation to create a new Government Accountability Board, made up of non-political retired judges, to investigate and respond to ethical complaints.
    5. Every one of these steps have been received with broad bipartisan support.
    6. In 2018 Government Operations and Audit Committee will have additional proposals to shut down even more loopholes presented during the current hearings in process.

This is a big topic and I can’t cover everything in one op-ed. But I want people to know these facts. There are always those who grandstand or use a tragedy for their own political purposes. My priority for the Government Operations and Audit Committee is to understand the FACTS about what exactly happened, and to make tangible improvements to our processes to ensure nothing like this tragedy happens again.

43 Replies to “Guest Column: Senator Deb Peters – Public deserves straight facts on GEAR UP”

  1. MC

    Thank you, for providing the real facts.

    I also want to make sure there is balance. We don’t want a process that is bogged down in procedures, boards, oversight controls, processes and other means of red tape that we are unable to get anything done.

  2. Anonymous

    All of the underlings in the SD DOE who know all the truths should be brought up and asked some pointed questions.

  3. Anonymous

    If you wondered why IM 22 passed, and why the constitutional amendment version will pass as well, look no further than this. A Pierre insider deflecting blame and refusing to accept responsibility for anything. “Nothing to see here,” she says.

    Whatever you say, Deb.

    You want some “straight facts?” Here’s one: the average South Dakotan doesn’t trust his or her representatives and civil servants anymore.

    In a little a year we will have a new constitutional amendment to prove it.

    1. enquirer

      when the constitutional version of IM22 fails, and it will next time because the public will understand how much worse it is the next time around, it will be faithful servants like deb and so many others who show how well kept the state actually is, and what a new door to yet unknown corruption the ballot measure will be.

    1. Steve Sibson

      So lets have an accounting of who received salaries under GEAR UP and then do a little cost/benefit analysis to determine if that big government program being defending by a liberal Republican needs to continue. Conservatives should be pushing for less government, not writing apologetics for liberal tax and spend big government that funnels monies into the pockets of whoever is willing to play the game. Just because the SDGOP has helped legalize corruption, doesn’t make it right.

  4. Troy Jones

    Wow,

    Good question. There is a court case being pursued to litigate and discover those facts. If Peters has facts or insight, she has likely been told to not discuss them less she imperil the trial (e.g. defendants right to a fair trial and impartial jury who hear facts only under the supervision of a judge).

    I too am frustrated we didn’t not know more now but I don’t want to know more now if it impacts our ability to know more later and administer justice.

  5. Anne Beal

    nothing proves the existence of a criminal conspiracy like a map with a lot of push pins and colored yarn.

  6. Cliff Hadley

    Rackets force innocent people to pony up in return for phony protection. The nice people at GEAR UP raked in fed cash from innocent taxpayers, and in return they split $1.4 million through phony expense reports and doing phantom work. No real difference.

  7. Anne Beal

    It can be murkier than that. One trick used be embezzlers is to create a paper trail which indicates the money was paid to somebody else who knows nothing about it.
    Most of us would not notice if an extra $1000 or so showed up on our W-2 forms. Or if we notice our year-end total is larger than we expected, we think “”wow I made more money than I thought.” And then we cheerfully (sort of) pay taxes on that money we never received.

    Inflated or phony expense reports can be another, When submitting invoices for reimbursement, it is really hard to prove that the person who issued that reimbursement realized the charges were fraudulent, unless there is evidence of a kickback. A piece of yarn stretched between a couple of pushpins is not sufficient evidence.
    You need more than that.

  8. ADG

    The 1.4 million was not gear up money, it is the left over money that was not accounted for after Scott Westerhuis used the Mid Cental Coop bank account as his personal ATM.

  9. Troy Jones

    Steve Sibson,

    I’m not sure what you are asking or driving at.

    1) Are you asking for this information to determine if there was fraud committed? If so, I think we have a trial going on for that and as Anne says it is likely the “tools” for the fraud are much broader than just wages.

    2) Are you asking so we can assess whether this program is justified from a cost/benefit standpoint? Besides that question being subjective (liberals and conservatives of good will and sound mind are likely to reach different conclusions), we need more than salaries but total expenses as well as results.

    3) Are you asking for salary inforamiotn for something other than the above two items? If so, to insure we don’t miss something relevant, knowing what that purpose is would be helpful.

    1. Steve Sibson

      ” Are you asking for salary inforamiotn for something other than the above two items?”

      To find out who the real beneficiaries are. It certainty is not the taxpayers.

      1. Troy Jones

        Got it. Then I think we have to let the trial take its course because if there was unjust enrichment, I think Anne is right that it is going to be found in items other than wages and the forensic accounting has to be thoroughly vetted so things get put in the right buckets lest preliminary information causes us to make inaccurate and unjust assessments.

        1. Steve Sibson

          Unjust enrichment is not necessarily illegal. My argument is that the system has legalized corruption. The problem is systemic, with both parties responsible for the creation and maintenance.

  10. Troy Jones

    Steve, you are exactly correct that unjust enrichment MIGHT (but may be a crime especially when fiduciary is violated) not be illegal but if such is determined the person wronged can get an order to get back that which unjustly enriched another.

  11. Anne Beal

    According to Sibby, “the system has legalized corruption”
    I think “legal corruption” might be an oxymoron, but now I see what all the fuss is about: the AG is going to prosecute only the non-legal corruption and the failure to prosecute the “legal corruption” constitutes a cover-up. Please tell me why anybody would want to coverup something that’s legal?

    1. Art Marmorstein

      Anne…There’s a great book by William Riordan called “Plunkitt of Tammany Hall. It’s George Washington Plunkitt’s account of how he and his Tammany friends made their money. Plunkittt made a distinction between “honest graft” and “dishonest graft.” He said only a fool would choose the latter: there was more money to be made in honest graft. Plunkitt made the equivalent of millions through government “service,” but he maintained you could go through his dealings with a fine tooth comb and you’d never find anything illegal. The worst you could say of him was that he saw his opportunities and he took ’em. Great book. https://www.marxists.org/reference/archive/plunkett-george/tammany-hall/#s01

  12. Liz May

    1. Rick Melmer was SEC. OF EDUCATION from 2003-2008 and secured the original Gear Up Grant
    2. Tom Oster was SEC. OF EDUCATION from 2008-2011Rick and Tom were partners in Dakota Education Consulting
    3. Keith Moore was DIRECTOR OF SD INDIAN EDUCATION from 2005-2009. Forensic Audit revealed that Moore had directed a sub-contract to Melmer.
    4. Stacy Phelps was appointed to the SD BOARD OF EDUCATION IN 2008-2015. During this time he held several positions associated with the Gear Up Grant through the SDDOE.
    5. Kelly Duncan was appointed to the SD BOARD OF EDUCATION in 1996-2017. From 2006-2015 she held several positions within the School of Education at USD. From 2008-2012 the USD Dean of School of Education was Rick Melmer.
    6. Julie Mathiesen was appointed to the SD BOARD OF EDUCATION in 2011-2016. During this time she signed nearly $2 million of contracts with the SDDOE.
    7. Don Kirkegaard was appointed to the SD BOARD OF EDUCATION IN 2006. He’s currently the Pres. Of the SD Board of Education. He was a partner with Rick Melmer and Tom Oster in Dakota Education Consulting.
    8. Melody Schopp has been with the SDDOE from 2000-present. She was Deputy Sec. and in 2011 was appointed as Cabinet SEC. FOR THE DEPT. OF EDUCATION. SHE WORKED UNDER RICK MELMER AND TOM OSTER.

    Senator Peters says, “The embezzlement scandal involving Mid Central Coop, “Is the heart of the matter.” SDDOE was the “Principal” partner in the Gear Up Grant so the idea no one in the department saw “Red flags” before 2015 is insulting to say the least! The Gear Up Grant was secured in 2005 so it took the SDDOE seven years to increase oversight? And to add more fuel to the fire SDDOE (Principal Partner) Sec. Melody Schopp receives credit for cancelling the contract with Mid Central only after the GOAC questioned the Micro-Soft Licensing expenditures in 2015, ten years after the original grant was secured.

    As Senator Peters points out, “This is a big topic and I can’t cover everything in one op-ed. But I want people to know these facts.” Well I too, want people to know the facts and when Senator Peters alludes, that people such as myself are “Grandstanding” what’s the descriptive adjective for “Running political interference?”

    1. Anne Beal

      Liz, just because all these people knew each other proves cronyism, maybe, but not corruption. It’s otherwise known as networking within a profession. Over the course of my career I obtained a few jobs because I had worked with key people at other jobs. More than once, a former subordinate at one facility was in a position to hire me at another. That’s how networking works. My profession was nursing, but I have seen networking within my father’s and brother’ engineering careers, my sons’ IT careers, and my daughter-in-law’s education career.
      The assumption that all these people are criminals because they all know each other is ridiculous.

      1. Tara Volesky

        Follow the money Anne. These people should all be under investigation. Why only 3? An outside prosecutor needs to be brought in.

            1. Tara Volesky

              Most people would agree that the other side should get a chance to present their case. I think it is only fair to the taxpayers because they want to know the truth. It’s just the right thing to do.

            2. Anne Beal

              Nelson’s side consists of a map covered with push pins and colored yarn showing that these people know each other. All that’s missing is everybody’s connection to Kevin Bacon.

              1. Tara Volesky

                You will find out, it’s quite accurate. The GOAC shouldn’t have a problem meeting at USD and hearing the other side. Might save some travel expenses also.

      2. Liz May

        I find it interesting Anne that you consider “Networking” with taxpayer dollars to come under the umbrella as a “Profession”

        1. Frank

          Liz, your whining is tiresome and unbecoming. Why don’t you grow some and run for governor. Than fix the state and shut up.

          1. Tara Volesky

            Frank is trying to censor our Legislator who is one of the few that is transparent and informing the people. Thanks again Liz.

        2. Anne Beal

          Public as well as corporate funds are often used to send professionals to conferences for the purpose of networking and professional development. Most corporations and government agencies consider such expenses a good investment in human capital.

          1. Liz May

            I’m afraid Anne we’re above and be on “Conferences and networking” in this situation. You know I’m getting just a little bit exhausted from you talking out of both sides of your mouth. One day you’re railing about the corruption at the National level and the next day you’re defending it at the state level. Can’t have it both ways.

    2. Tara Volesky

      Thanks Liz for reporting the real facts to the people. Deb Peters needs to remove herself from the board because it’s hard to subpoena these people when she has ties with them. To many friendships involved.