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Daugaard Says GEAR UP Corruption Reached “Ridiculous” Level

The GOP spin blog can’t bear to say much about the Governor’s State of the State speech, because a huge portion of the Governor’s speech affirms stories which the GOP spin blog has worked doggedly to deny but which Dakota Free Press has been backing with evidence for months, if not years. The Governor affirmed that raising taxes to pay teachers more is essential to solving the teacher shortage. The Governor reaffirmed the positive health, economic stimulus, and budgetary benefits of expanding Medicaid under the Affordable Care Act.

And then the Governor talked about GEAR UP and the Mid-Central Educational Cooperative. The GOP spin blog has doggedly avoided mentioning that sordid story, except to occasionally dismiss the story, the way he dismissed the EB-5/GOED/Benda story, as Democratic political haymaking.

The Governor disagrees with the GOP spin blog. The Governor said the corruption unearthed in the GEAR UP/Mid-Central scandal is bad enough to warrant putting the Lieutenant Governor in charge of reviewing and strengthening anti-corruption safeguards:

The state needs better internal controls to manage these entities that are “arms length” to the state.  We must install safeguards that will ensure that federal and state objectives are met, expenditures are documented and appropriate, and potential conflicts of interest are recognized and avoided.

I have asked Lt. Governor Michels to lead an effort to review state government’s internal control processes and to recommend changes.  In particular, I have asked him focus on situations involving these “arms length” outside entities, such as Mid-Central Coop, where it is more difficult for state government to maintain direct oversight.

Lt. Governor Michels is working closely with the Bureau of Finance and Management and with your Department of Legislative Audit to design internal control reforms to be instituted in every agency that maintains relationships with third parties.  Having these controls in place will identify areas where the state can improve and prevent future problems from occurring.  I hope to have specific recommendations for your consideration during this legislative session.  We can do a better job of providing oversight and transparency in these instances and we will [Governor Dennis Daugaard, State of the State address, Pierre, SD, 2016.01.12, as transcribed in that Sioux Falls paper, 2016.01.12].

On SDPB Dakota Midday this noon, Governor Daugaard said members (yes, plural) of Mid-Central Educational Cooperative had conflicts of interest. He referred specifically to Mid-Central’s former business manager Scott Westerhuis’s formation of a clump of corporate entities through which he hired himself to perform GEAR UP duties as “ridiculous.” That’s almost as good as getting Joop Bollen to admit that his signing a contract with himself to do state work was “goofy.”

South Dakota needs to raise teacher pay. South Dakota needs to expand Medicaid. South Dakota needs to pay attention to and root out corruption. Dennis Daugaard has stopped buying ads on Dakota War College and adopted those key policy positions from Dakota Free Press.

36 Comments

  1. rsterling 2016-01-13 16:28

    These “arm-length entities” were created by the legislature several years ago when voters were outraged at the enormous increase in the number of “state employees.” The gov (at that time) along with his crony legislators created these non-state employee organizations and fed federal grant money to them as the state siphoned off huge $$$$ for (administrative purposes). The result is that local yocals who are buddies of the gov view grants as “free money” that they can use to line their pockets. The entire system has been corrupted by the overwhelming one-party rule in state govt. And no one really cares in the majority as its the goose that continues to lay the golden egg with no fear of reprisal as long as you adhere to the party line.

  2. mike from iowa 2016-01-13 17:05

    Is Daugaard fixing to meet his maker soon and is looking to redeem his careless hide before then?

  3. 96Tears 2016-01-13 17:19

    Is Daugaard going to anoint Michels as his successor, just as Rounds did for Daugaard? Is this whom Denny Sanford wants anointed?

    It’s a smart political play to be seen solving a problem where scandals erupted, which was where Mark Mickelson wanted to be seen with the puff piece J. Ellis did for him in the Sanford Leader. It’s smarter than letting your butt hang out there like a piñata for the press and pundits to whack.

    And what about Lee Schoenbeck? Is going to upstage the new swarm of reformers?

    My guess is Daugaard and his chief-of-staff son-in-law (no, no nepotism here!) see the GEAR UP scandal as on their watch. And they see the EB-5 racketeering and Joop Bollen as on Mike Rounds’ watch and not on their watch. Jabba the Gant’s scandals belong to Jabba the Gant and his right hand man PP. See? When you separate this out and compartmentalize, it doesn’t seem so bad and corrupt in Pierre, unless you’re Ol’ Snake Eyes Jackley. All of this crap happened on his watch, and other than a dead guy Richard Benda and a punk who stole a state flag and took it to D.C. with his next political job, Jackley hasn’t done jack.

    Jackley’s last chance to be seen as a contender worthy of a sitting Lieutenant Governor and the heir to the Mickelson Legacy is to produce some worthy indictments of criminal activity and sweep the rats’ nest out of the State Capitol. He could out-trump them all.

    Or, he could go online and order a sexy black robe and follow his two predecessors to an obscure tenure on the circuit court bench. Maybe in Martin. “Thanks Marty. Here’s your gold watch. Now, buh-bye.”

  4. leslie 2016-01-13 17:59

    This sounds good ironically delegating oversight of economic development-i mean indian education-to his lt. Gov. Just like rounds did to him, while EB5 Was Spinning (theres That Word That Republican News And Entertainment Does 247365) off The Rails. What Ever Tepublicans Get Caught With Their Hands In The Cookie Jar They Spin It So That It Is Dems That Do It Not Repubs. This Has Gone On For Years And Rush Did It All Morning Concerning SOTN, Iran & the 2 captured Military Boats , Hayley’s remarks And Angry White Males.denny ALEs X 2 verbiage Is Designed To Remove Blame For Failure To Oversee Mcec Minions.

  5. Bob Newland 2016-01-13 18:02

    I have hitherto regarded Daugaard as something like one of those desiccant packages you find in packages of electronic devices. Chemically inert, designed to absorb moisture. Throughout five years or so of tenure, he’s managed to fit that description pretty well.

    Now, with the help of a fairly insignificant rise in sales tax, he’s proposing to pack a few thousand dollars more into every SoDak teacher’s pay. 96 Tears is justifiably cynical about Daugaard’s general apparent swing to populist. But then, anybody, at any time, can get fed up with a despotic cronyistic incestuous political system. Even Governor Daugaard. Maybe.

    “Politics” is, in Lewis Lapham’s words and the most succinct definition I’ve seen, “the continuous argument over who gets to do what to whom, for how long, and against what degree of dissent.”

    It’s early, but Dennis Daugaard may be the beginning of the reversal of Janklowism. I am hopeful, but not optimistic.

  6. Bob Newland 2016-01-13 18:06

    One more thing; Jackley doesn’t need to do anything to be elected governor, except not get caught not praying when he should be. The only possible threat is Matt Michels, and all Jackley has to do is be better-looking and at least as pious as Michels, and he’s in. There is no Democrat who can raise the money to gain the public profile necessary to become the next governor of SoDak.

  7. grudznick 2016-01-13 18:17

    Bob, do you find Mr. Jackley better looking than Mr. Michels? I think Mr. Michels has much better facial hair, but despite that you are correct about there being no Democrat who can raise enough money or accomplish anything noteworthy enough to become the next Governor of the Great State of South Dakota. The race comes down to the GOP Primary, in which many cannot vote.

  8. mtr 2016-01-13 18:36

    Out of curiosity, and not connected with this particular post, but how much money would a Democratic candidate for Governor need to raise in order to win?

  9. grudznick 2016-01-13 18:57

    mtr, $1.5 Billion Dollars. Let us hope that young Ms. Buhl has bought her tickets.

  10. moses 2016-01-13 19:03

    96 Tears words can’t describe how you just took apart the machine in Pierre.No one comes close to you unless its Winston, C.H. or Porter at this level.

  11. Bob Newland 2016-01-13 19:07

    Just about ANYONE who declared hisself (or herseff) Democrat could dominate the paid ad discussion with $10 million. (S)he would need three issues on which (s)he illustrated problems and suggested solutions, and these issues would have to resonate with a majority of those who deign to vote (assuming the votes are counted accurately).

    Should that proclaimed Democrat candidate for governor be a SoDakian already, and one with a high public profile already, then the price might only be $3-$5 million.

  12. grudznick 2016-01-13 19:08

    Mrs. Newland in the race, then?

  13. leslie 2016-01-13 20:03

    Trumps spending strategy so far seems to be baiting the press for free coverage spiked by notoriety. So A Dem W duffy Hair and GRAVITAS COULD MAKE OUTRAGEOUS PRESS RELEASES GET FREE PRESS AND THROTTLE IT BACK TO PREDETERMINED REASONABLENESS NEARING THE ELECTION. BY 2018 EB5 And Mcec Will Be Forgotten By Most Voters Though.o

  14. Porter Lansing 2016-01-13 20:07

    Mr. Jackley has involved the state in a couple lawsuits that are contrary to the good of the people. e.g. The Obamacare contraceptive case and the WOTUS (go ahead Koch Bros. and leave little pollution pockets above USA’s groundwater) case.

  15. leslie 2016-01-13 20:08

    Incumbents too have a huge advantage. Esp. Those w law practice exp.
    Typing/sending Via Smart Fon Not My Cup O Tea:)

  16. Donald Pay 2016-01-13 22:00

    Fine. Daugaard sounds like he wants to increase financial control. That’s good, but that’s just part of the problem.

    Another part of the problem is that these third party contracts are usually handed out to folks who are political allies or outright political toadies, and not for any special expertise they possess. Enriching political allies and starving out real independent expertise has been historically the way the Republican Party has gained and maintained control. You go off the Republican reservation, and your funding is sliced.

    Another issue is the recycling of money handed out back to the Republican Party apparatus. They pay out money to these third party organizations, who pay elevated salaries to people who then fork over a good chunk to the Republican Party or Republican candidates. That really needs to be nipped. No one getting taxpayer money this way should be funneling to any money at all to any candidate or party.

    In reality, what’s so bad about hiring state employees to do the job, or running education grants through a school district, which already is under considerable fiscal control, as well as having the oversight of local voters? It’s far less likely that a state employee or a school district employee is going to get away with massive corruption. And what about a good whistleblower law to protect employees who turn in bosses suspected of unlawful behavior?

  17. grudznick 2016-01-13 22:29

    Mr. Pay hits on the nut here. The libbies attacked government for hiring more employees so the government outsourced this stuff which really does not need to be done at all if we weren’t handing out money. Then the outsourcees are corrupt and the libbies holler more. This means they want to grow government. So the libbies cannot holler if the “conservatives” grow government or they are just hollering to hear their own shrill voices echo off the “Welcome to Iowa” signs that ring Sioux Falls.

  18. Porter Lansing 2016-01-13 23:05

    Hear, hear Guvna’.

  19. leslie 2016-01-13 23:41

    Spin it rush i mean grdz. We did not critique govt hiring too many employees. Your premise is shot to hell. Btw arent u howling about 55 new employees dd will hire for medicaid expansion?

  20. Madman 2016-01-13 23:57

    I guess we may have forgotten John Thune’s idea from last May to “require that the federal government procure from the private sector the goods and services necessary for the operations and management of certain government agencies”.

    It worked well in South Dakota with small government oversight.

    Outsourcing can be done well but it needs to have the appropriate checks and balances. Also creating jobs for the sake of creating jobs is an issue. What happened to all of the government jobs that Rounds created? Strategic government jobs versus creating redundant government jobs.

  21. caheidelberger Post author | 2016-01-14 05:57

    RSterling, excellent point. Governor Daugaard appears to be crafting a narrative that says, “State government is just fine, don’t blame us, local entities are the bad apples.” That narrative insulates him and the Legislature from consequences in the upcoming election. But the Legislature created these local entities. The Governor and his appointees handed these entities their authority and their contracts. The Governor and his appointees let these entities hand benefits to their friends. That’s what happened with EB-5. Exactly the same thing happened with GEAR UP/Mid-Central.

  22. caheidelberger Post author | 2016-01-14 06:04

    Madman, outsourcing is exactly the problem. Joop Bollen and Scott Westerhuis both outsourced their own public duties to their own private corporations for a double-dip shell game.

  23. Roger Elgersma 2016-01-14 06:18

    So all the talking points about private business does it better just turned out to be private business is harder to control. This could be a wake up call for repubs that private business has a real greed factor that needs to be regulated.

  24. caheidelberger Post author | 2016-01-14 06:20

    MTR, by my count, Susan Wismer raised $254K in 2014. Obviously, that amount was insufficient. Dennis Daugaard entered 2014 with $1.72M in the bank and raised another $1.06M during the campaign. He ended 2014 with $1.42M in the bank, so he spent about $1.36M. He would likely have spent more if Wismer had mounted a stiffer challenge, but those numbers tell me that a smart Democrat could wage a competitive campaign for $1 million to $2 million. Mike Huether can certainly spend money on the scale Newland proposes, and I’ll be happy to spend $10M if you’ll send it my way, but let’s not imagine the hill is higher than it really is.

  25. leslie 2016-01-14 07:23

    CJ Gilbertson thinks drug and alcohol addiction are different requiring TWO different courts to “punish” the behavior from the illness.

    Stay with me. A frmr guvnr thinks ALEs (“arms length entities”) are needed to administrate ed grants so fewer state employees reduce size of government.

    I think highly educated specialized professionals like chief justices are obsolete and need to lose their jobs with no safety net because they lack skills to resolve the social problem of addiction disease behavior. Alcoholism and addiction are the same disease process. Denial and relapse are primary symptoms along with a myriad of well-known complex behaviors.
    Creating ineffective systems (24/7; sentencing IMPOSSIBLE conditions despite science of craving; ect.) to process wholesale “offenders” should be punishable with jail, probation, imprisonment, parole, restitution, liens, garnishment and community service. For the sentencing judges! Stay with me.

    There are MANY non-skilled empathetic people who understand this disease process, and often a judge, prosecutor or public defender suffers from the same illness while meteing out “justice”. Ineffectively. Ours is a self-medicating society that consumes intoxicants for fun a coping. No one knows where the line is where use becomes abuse and the misbelief in will power is, like science denial, MALPRACTICE. Religion doesn’t help such faulty thinking either.

  26. leslie 2016-01-14 07:52

    In addition, and btw, we pay school board administrators big bucks expecting competence to avoid mistakes made by elected and appointed officials mentioned above; but Daugaard makes the same mistake with arm-chair philosophy that sales tax on milk, eggs, vegetables, bread, grain ect (btw-tax the sheit out of high fat/salt/sugars that kill us along w/ tobacco, alcohol and recreational drugs) is fine because the poor have a safety net in food stamps. Put a MUZZLE on this guy.

    Wismer, CPA and mother would have made so much better a governor than the nieve republican selection made in 2014. Seriously if EB5 and MCEC are too complex for the electorate to understand, SD should be tasked with re-fighting Vietnam and Iraq alone.

  27. Madman 2016-01-14 09:03

    Cory outsourcing is not exactly the problem.

    Outsourcing projects actually makes sense such as having agencies bid for projects that can do it cheaper then the state. Of course with these projects we still need the appropriate checks and balances otherwise we end up with printers not being paid for items produced. Hiring a marketing company to create an advertising campaign once again is good example of outsourcing done properly. These are short term contracts that have visible results and if they are reviewed during and following the project then I have no problem outsourcing projects.

    Outsourcing programs do not make sense in the long term. While in the short term you are saving money by hiring a company to take on the overhead of handling the federal grant or *gasp* state money. In the long term though you are not able to properly screen these organizations, audit the program (not just the financial but the goals), and have a visible presence.

    So outsourcing projects in my opinion is good if competitively they are bid on, but bad for outsourcing programs.

  28. 96Tears 2016-01-14 09:30

    Cory, as I said earlier, it makes great politics and optics to be the guys who fixed a problem, especially when it’s rooted in messy scandals.

    Mark Mickelson sees it. Daugaard sees it (after his disastrous comments about longstanding one-party rule and corruption last fall) and wants on the bandwagon with his Lt. Governor. This is a much smarter response than circling the wagons and waiting until things die down, which was the GOP response to EB-5. My guess is they’re looking at all the great press Shantel Krebs got by throwing Jabba the Gant under the bus.

    The downside for Democrats is if they had introduced similar proposals, Sanford Leader and the other propagandists would mewl that Democrats are grandstanding a Republican controversy.

    What the SDGOP knows will happen is Sanford Leader and other SDGOP propagandists in the press will rewrite history to create the lasting impression going into 2018 all about these heroic Republican reformers. That way, whenever someone talks about EB-5, Joop Bollen and the fleecing of federal programs to enrich cronies, the press will say the Republicans fixed those a long time ago. Move along.

    Look for many more heroic GOP reformers to jump on the reform bandwagon this year.

  29. 96Tears 2016-01-14 09:35

    One more thing, look for the GOP nominee for Governor in 2018 selecting Shantel for Lt. Governor. South Dakota Republicans, we’re all about honesty and transparency in state governance.

    I believe that’s the horse Jabba the Gant rode in on after becoming the poster child for the S.D. Newspaper Association’s massive failure at reforming state government several years ago. Remember that? They talked about open meetings, open records and transparency and fixed it good. Real good.

  30. caheidelberger Post author | 2016-01-14 09:41

    Agreed, Madman: outsourcing is o.k. if openly and competitively bid (which did not happen in EB-5 or GEAR UP), but you are right that in the long-term, we lose transparency and accountability. I’d suggest we also lose long-term institutional knowledge: do work in-house, and your people are better able to do that work again in the future and train new people to do it. The longer you outsource, the harder it is to effectively evaluate the bids your agency receives and the work your contractors do, because no one in house has done work like that themselves to give evaluative perspective on the outsiders’ work.

  31. caheidelberger Post author | 2016-01-14 09:45

    96, I will be very suspicious of Republicans claiming to be reformers.

    But what if corruption is following the same arc as teacher pay? What if letting the problem fester for a generation has allowed the problem to get so bad that even the ruling regime can no longer ignore it? Perhaps they realize that if they don’t act now, the public will revolt and vote them out wholesale in the next election. Even if Republicans raise teacher pay and fight corruption just to keep their seats, they are at least adopting the agenda that we Democrats have been demanding for decades. Now we Democrats just need to get our poop in a group fast enough to turn “I told you so!” into votes before the Republicans steal all our thunder.

    But does anyone believe that a one-party regime can clean up its own corruption?

    Curious: would a Shantel insurgency supplanting all the previous favorites be better for the state than a Mickelson, Jackley, or Noem regime?

  32. 96Tears 2016-01-14 10:01

    Good questions, Cory. I’ve seen the Republican legislators do this before, but not with scandals as wide, ugly and deep as in recent years. What matters is what do the people of South Dakota know and believe to be true? Also, are Democrats sharp and deft enough to keep the heat on the Republicans and their phony reform agenda? That takes real discipline and focus to keep the heat on the schmucks and never let up, and to call out the Republicans (GOAC members and others) for their votes to help cover up racketeering and fleecing federal programs.

    Again, the key here is if the press are honest brokers of information and not carrying water for the power clique.

    Back to Shantel. I’m also curious. She is the first and most believable agent of reform in Pierre. My guess is Mickelson, Jackley, Schoenbeck, Michel and Noem are all wondering, “what does Shantel want?”

  33. Jackie Jessop Rising 2016-01-14 10:48

    It reached “ridiculous levels,” yet the director of MidCentral has yet to be held accountable. Seriously, can someone please tell me how Dan Guericke has avoided having fingers pointed at him and not having to answer for what went on at his Co-Op? I also feel that Secretary of Education Schopp dropped the ball, yet she is not being held accountable for her inaction. Why???

  34. Wayne B. 2016-01-14 11:51

    Great, give Michels (the lawyer who strong-armed Avera into hiring the Soosan, the surgeon who killed/maimed so many patients in Yankton) the keys to internal controls.

    That’s rich.

  35. Douglas Wiken 2016-01-14 11:53

    The real irony is that in the push to shove government functions off to business and other agencies, the state has failed to do business-like control over expenditures and income in a transparent way. The same problem exists with state and federal money dumped into school districts where is is often wasted on sports and sports facilities instead of real education. We hear a lot of talk about “bang for the buck”, but viable measurement systems don’t exist. The time for them is before the funding, not after huge waste and fraud are discovered.

    As for judges and science, they are lawyers who with rare exceptions (such as Jackley) have all avoided any courses related to science and scientific method in every way possible. There is a real shortage of lawyers who know anything about science, medicine, environment, whatever isn’t simple.

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