Jackley: 'GEAR UP' Defendant misuses nonprofit funds for personal use

Published: Jun. 27, 2016 at 9:47 PM CDT
Email This Link
Share on Pinterest
Share on LinkedIn

There are new developments in the 'GEAR UP' investigation.

South Dakota Attorney General Marty Jackley filed new evidence, Monday, accusing the CEO of American Indian Innovation Institute of misusing the nonprofit's funds.

That CEO is Stacy Phelps who is already facing felony charges from South Dakota's GEAR UP scandal. He's now accused of spending hundreds of thousands of dollars of state money that was earmarked for the nonprofit through Mid-Central Educational Cooperative to help Native Americans do well in school and get to college.

Court documents show transactions of state money spent between 2011 and 2015. For example, nearly $58,000 at Walmart, $13,000 at Subway or $20,000 at Best Buy.

In total, more than $300,000 according to the Attorney General's office.

"When we ultimately went through some of the financial records, we felt this was a continued evidence of that misuse, or misapplication of monies designated for Native Americans and their education. We felt strongly enough that we've now given notice that we intend to show a jury this particular spending and the specifics regarding that spending wasn't in relation to Native American youth," Marty Jackley said.

That's not all. Copies of e-mails between Phelps and GEAR UP Business Manager Scott Westerhuis show how the two men agreed to discuss running the program elsewhere so none of the board members got suspicious of how the money was being spent.

In September of 2015, Westerhuis shot and killed his wife and their four children before setting his home on fire and turning the gun on himself. This, after the nonprofit threatened to expose Westerhuis had embezzled nearly $1 million.

"We don't have very often situations where federal or state funds are misused in South Dakota. But when you look at the GEAR UP program -- the tragic death of a young family -- we've had a misappropriation of funds of at least $1.2 million. Specific evidence introduces a lot of money used for inappropriate personal spending," Jackley said. "Part of the overall investigation that we felt pretty strongly this evidence is relevant, goes directly to where the money went to. We'll have to see what the judge ultimately decides."

Phelps' next scheduled hearing is August 18th and should include more discussion of this evidence. A trial date for the GEAR UP Investigation could come as early as this winter or early next year, Jackley says, to bring closure to the case and misuse of money.