Mid-Central Lost State Contract Day Before Platte Murders; Westerhuis Left Corporate Trail

Bob Mercer reports that Scott Westerhuis and his family died last Thursday morning just hours after the state Department of Education had told Westerhuis’s employer, Mid-Central Educational Cooperative, that it would not renew a $4.3-million contract to run the GEAR UP American Indian education program.

State gravy train dries up… man kills himself with a shotgun… does this sound familiar?

Mercer reports a number of questionable financial activities by Mid-Central:

The state audit found that former state Education Secretary Rick Melmer and former state Indian education director Keith Moore received payments from the state department, but initially hadn’t filed work reports, to serve on a panel to oversee Mid Central’s conduct of American Indian education programs. Their responsibilities included GEAR UP.

Mid Central’s board of directors accepted Melmer’s resignation at the board’s July meeting.

State Board of Education member Stacy Phelps of Rapid City operated a business that received a large piece of the GEAR UP funding to host an annual summer event at South Dakota School of Mines and Technology.

The audit noted a number of discrepancies and weak financial controls over the federal money by the state department and Mid Central [Bob Mercer, “Platte Deaths Came After Big Contract Wasn’t Renewed,” Pure Pierre Politics, 2015.09.22].

Mercer notes that Westerhuis had set up a number of corporations seemingly related to Indian education. The seven corporate entities that pop up in the Secretary of State’s corporate database with Westerhuis as agent are shown below:

Corporations with Scott Westerhuis, Platte, as registered agent, SOS corporate database, 2015.09.22.
Corporations with Scott Westerhuis, Platte, as registered agent, SOS corporate database, 2015.09.22.

Four of those entities—one LLC and three non-profits—were up-to-date in filings as of last week. Rock Ranch Consulting, which has no easily identifiable online presence, may refer to the Westerhuises’ rock-decorated rural home, which went up in flames last week. Here’s the aerial view from Google Maps:

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

Rock Ranch Consulting wrote the check to incorporate Westerhuis’s most recent corporate creation, the “American Indian Institute For Innovation and Excellance,” misspelled exactly like that on the articles of incorporation, on May 4, 2015. The bylaws of that new nonprofit dictate that, on dissolution, any assets should be converted to an endowment for scholarships for Indian students:

Bylaws, American Indian Institute for Innovation and Excellance, 2015.05.04.
Bylaws, American Indian Institute for Innovation and Excellance, 2015.05.04.

The AIIIE articles name Westerhuis, his wife Nicole, and Stacy Phelps of Rapid City as incorporators and Phelps; the same trio are listed as the last officers of the inactive Blackrock Consulting, Inc. The AIIIE articles name Phelps; Choctaw astronaut John B. Harrington of Lewiston, Idaho; and Carlos Rodriguez of Washington, D.C., as directors.

Herrington and Rodriguez are also listed on this state filing as officials with Westerhuis’s American Indian Institute for Innovation (no “Excellance”), which Westerhuis formed in 2008 and for which he filed an annual report on May 22, 2015, after forming the AIIIE. AIII is focused on STEM education for American Indian students. AIII’s 2014 Form 990 says Phelps and Westerhuis are CEOs of the organization alongside chairman Herrington and and secretary/treasurer Rodriguez. The 2014 Form 990 shows $2.7 million in revenue and $3.0 million in expenses, including $1.58 million in salaries and wages, $311K in pension and benefits, and $270K in travel, conferences, and meetings.

AIII’s income came primarily from the following sources:

AIII income sources, 2014 Form 990, p. 12.
AIII income sources, 2014 Form 990, p. 12.

Note the $779K that came from government contracts, including $612K from the GEAR UP program.

AIII paid ten employees more than $50K in 2014:

American Indian Institute for Innovation, five highest-paid employees, 2014 Form 990, received by IRS 2015.05.27.
American Indian Institute for Innovation, five highest-paid employees, 2014 Form 990, received by IRS 2015.05.27.

Westerhuis incorporated the Oceti Sakowin Distance Education Consortium Incorporated in 2003. It dissolved in 2012, apparently succeeded by the Oceti Sakowin Education Consortium (OSEC), formed in 2011 and still in good standing.

OSEC’s 2013 Form 990, completed by Nicole Westerhuis on November 6, 2014, shows $965K in revenue and $935K in expenses. It paid executive director Chris Bordeaux $64K (plus another $10K in other compensation) and business manager Nicole Westerhuis $39K. OSEC spent over $510K on educational services for Indian schools.

Mid-Central lists both AIII and OSEC as “partners.” Both AIII’s and OSEC’s 990s list as contact phone number 605-337-2636, the line to Mid-Central Cooperative.

Westerhuis formed Chita Corporation in 2012, named himself and his wife Nicole as officers, and filed one annual report, his 2013 report in October 2014.

Scott Westerhuis handled a number of corporate entities that handled a lot of money directed toward Indian education. GEAR UP money was part of that cash flow. Would learning that the state had cut off one source of funding for various Indian education projects have prompted the action that the preliminary autopsy finding suggest Scott Westerhuis took? Or do we have some more documents to go find?


32 Responses to Mid-Central Lost State Contract Day Before Platte Murders; Westerhuis Left Corporate Trail

  1. Great digging Cory. Now it will probably take the MSM another 8-12 hours to catch up. Maybe we can watch Stormland Keneke run in high heels down the streets of Platte looking for answers.

  2. L3wis; it’ll take the SD lame street media 8-12 days to catch up, if they ever do.

  3. Is it really this easy for corruption to happen in SD State Government?

  4. larry kurtz

    Exactly, Jenny: which shoe will drop next?

  5. larry kurtz

    you can bet there are state shredders working overtime.

  6. One of the first news articles (KELO, iirc) said their first house burned down in the same spot a few years ago. What’s the story behind that fire, I wonder.

  7. Imagine the documents and computer hard drives there were destroyed in the fire. Did Jackly sift through the ruins, or did he order everything buried in a big hole right away?

  8. Jenny: you have me in stitches. Not a week ago an otherwise reputable SD legislator concluded a speech claiming he read that the SD government was one of the most corrupt in the nation – but his willful blindness precluded him from seeing it. A most unfortunate admission in light of EB-5, Rounds-house-built-on-the-sand then accusations against the Corps of Engineers, the DES and court non-compliance with the Indian Child Welfare Act, the no-bid million dollar contract with Larry & Shriller, the fake petitions circulated by non-residents for fees, and now this. It’s like playing whack-a-mole or like clubbing baby seals — one can’t keep up. Thank goodness we have the Dakota Free Press.

    SD is likely at the point where if the state has a program that perhaps one should assume it’s corrupt – unless proven otherwise.

  9. larry kurtz

    Schoenbeck all but admitted on SuFuStu that SDGOP will do whatever it takes to control power.

  10. Keith Moore got in trouble as director of BIA education in DC for trying to steer a contract to PersonalGroup, a Pierre company. This was in blatant violation of his position. He then left in June 2012.
    1. June 2012 Appointed Acting director of SD Indian Education
    2. June 2012 State diector for Fellowship of Christian Athletes
    3. Began on payroll of Mid-central as “consultant” or whatever.
    4.???
    Busy fellow…

    AND lots of mid-centrals money is BIA education dollars. The very program Moore ran n tried to manipulate to get his friends a contract.

    This is just what little I know. Geez…

    As Pat Duffy, rest his soul, would say “Follow the money!”

    Nothing will happen. Feds gave Joop Bollen a pass n what he did was wrong.

    John, I don’t think there is enough time in the day to list all the crap piled up in Pierre but you gave it a good start. Thanks

  11. AG Jackley tells Bob Mercer he was not investigating Westerhuis before the murders and had not called for any grand jury:

    http://www.mitchellrepublic.com/news/local/3844883-ag-hadnt-been-told-about-results-audit-involving-westerhuis

  12. Pretty sure I’ve seen this episode on Longmire. Or will.

  13. mike from iowa

    So who is this Heidelberger dude whose name keeps popping up in conjunction with investigations of hooligans no one else seems to investigate? He some kinda Pulitzer Prize winning investigative investigator?

  14. mike from iowa

    SGT Schultz Jackley-I know nutheeng,Herr General.

  15. Donald Pay

    I’d like to point out a possible problem with Educational Cooperatives. School districts are highly regulated entities run by locally elected school boards. Their fiscal operation is prescribed by the state, and while there is always a fight over how much money is kept in reserve, there is relatively little leeway in how fiscal operations are reported. The cooperatives seem to be run in a far less regulated way. Am I wrong?

    I always got the impression that these cooperatives were a way for state government to circumvent local control, and set up their own pet people to run their own pet projects without any pesky locals getting in the way. When I was on the school board in Rapid City, we ran into this problem with a pilot project we were running on individualized instruction via distance education. The state pulled the money after one year and, it seems to me, started setting up these cooperatives, etc., just so the locals couldn’t control it (this was during Janklow’s reign). To get money, these cooperatives have to “play ball” with Pierre, while districts get their money through a formula, no matter how bad that formula may be.

    Even though I like a lot of the work that these cooperatives do, it seems there is a built in kind of toadyism that cooperatives have. I’m sure most of them do great work, but maybe it’s time to think about a different governance model for the cooperatives.

  16. larry kurtz

    Exactly, Mr. Pay. The late Randy Morris of the Black Hills Coop was a Republican toady and Future Fund recipient who greased Denny Daugaard’s campaigns.

  17. As always……great work, Cory. And thank you!

  18. The real losers here? The slain family members and the Native American students the funds were supposed to support.

  19. Where is Stacy Phelps and his AIII cronies in all this?

    Fact – Scott was the business manager for many groups that received Gear Up Funds, including AIII
    Fact – Stacy Phelps is the CEO of AIII as well as the program director of Gear Up.
    Fact – Scott and Nicole worked in the business office of both groups.

    How much money was paid to Stacy and Scott?

    I agree with The King, it is Indian Education that will suffer from the loss.

  20. larry kurtz

    Just watched the last part of Marty’s press conference on the Westerhuis murders and it struck me that Jackley has the dirt on all the potential statewide candidates and the cold-blooded intensity of a psychopath.

  21. I knew Scott and his family. They were good people. I worked for Gear Up, the people were great. Gear Up helped a lot of college students with jobs for the summer and kids from the reservation somewhere fun and safe. What you write seems to be only about money and negativity. Scott came from a good background. Stacy was an awesome boss. I think the fact that all you people can do is put out negative news is a joke. You haven’t seen how Gear Up is during the summer. Know all your facts before assuming. This has to be a caspericy.

  22. SD law enforcement concluded he shot and burned his family and all financial evidence. hardly “good people”. we are horrified, love the good works of Gear Up and are scared to death to find out what was really going on.

    We can only hope, in a state that will not expose economic fraud up to $600,000,000 in EB5, and perhaps here, that it will not perform its mission to uncover truth. no assumptions. Vote democratic.

  23. Then there is this (continuing with the discussion of corruption in SD generally). If Chief Justice Zinter isn’t going to follow the law what kind of chance does any regular citizen in SD have in combatting corruption?

    http://rapidcityjournal.com/news/local/sd-retirement-official-s-proposed-raise-violated-state-law/article_b8db582c-f997-5a28-99d6-cae8b9960689.html

  24. Troy Jastram

    Is Denny Dougaard going to say anything about the embezzlement? He is so busy spending time and energy worrying about whether the poorest paid teachers in the nation might get an extra dime versus monitoring his own staff, then maybe there wouldn’t be a teacher shortage??? Just sayin!

  25. Crissy, who’s saying the program was bad? What was Moore n Melmer doing getting money from them? Good people? Tell the Westerhuis kids that were murdered that.
    This is about accountability to the people, which includes the Gear Up students.

    And I know about the Gear Up program too.

  26. Children murdered, adults murdered, stolen funds, property torched to hide evidence, suicide not characteristics of good people vwake up SD! This is insane to just accept this!

  27. I must agree with Spike, Crissy. A man murdered four innocent children. That act of supreme evil pretty much overcomes any good he did and any “South Dakota nice” exhortations that we not talk about negative things.

    Murder, poor financial accountability demonstrated by an audit—yeah, that’s negative. We talk about such things so we can understand them and prevent them from happening again. But Crissy, if you can show us that we’re off track, that the GEAR UP funds can all be accounted for, that Westerhuis had good reason to set up two non-profits to run GEAR UP instead of just running it directly through MCEC, then by all means, fill us in.

  28. Donald Pay

    There really isn’t much to learn here, except to find out who really pulled the trigger on the murders here.

    Setting up these quasi-government agencies and non-profits is a tactic that’s 40-50 years old. It’s been a way to siphon taxpayer funds into the elites and from there to the Republican Party. There are other ways to siphon the money as well, but, this is a pattern that repeats because state government and the political elite are massively corrupt, and the people are “South Dakota nice” enough not to confront the reality that their “leaders” are corrupt.

    The people who aren’t “South Dakota nice”(ie., the financial and political elites) have no problem doing their best to ruin the lives of people who are nice. Usually, that’s just financial ruin or name-calling, but maybe it has escalated to murder in the last couple scandals.

    I have to say this. Cory has done a lot to expose the seedy underpinning of life in South Dakota. That’s what I consider “nice.”

  29. Boca Grande

    I think our entire country is being crippled economically by greed and corruption. Actually, today every country is being crippled economically by greed and corruption.

  30. mike from iowa

    What the devil is a “caspiracy?”Gawd and all the little gawdalmighties help us all.