Governor Kristi Noem appointed preschool owner Jessica Castleberry to Rapid City’s District 35 Senate seat in 2019. Now Governor Noem has launched a legal attack on Senator Castleberry that could cost the Castleberry over $600,000, if not her Senate seat.
Yesterday the Governor released three letters, one that she sent Tuesday to Attorney General Marty Jackley concerning Senator Castleberry’s receipt of $603K in coronavirus relief funds for her Little Nest Preschool in 2020, one that Jackley sent on Wednesday to Noem in response, and one that A.G. Jackley sent to Senator Castleberry on Wednesday.
Noem’s letter alleges that Senator Castleberry violated the law and the state constitution by taking money that she voted to appropriate.
The Department of Social Services recently discovered apparent violations of S.D. Const. Art. I, § 12 involving Senator Jessica Castleberry’s receipt of COVID-19 federal stimulus funds. This letter is a formal request for your investigation and enforcement of this constitutional provision, which may include disgorgement and other penalties.
Based on public records filed with the Secretary of State, the Senator is the owner of Little Nest Preschool, LLC ni Rapid City, SD since its organization in 2010. Beginning ni 2020, Little Nest Preschool applied for and received COVID-19 federal stimulus funds totaling, what is believed to be, over $603,000.
Payments were found by Department fiscal staff who recognized the Senator’s name on arecent grant application for Little Nest Preschool to receive another $4,000. At that point, further review into Little Nest Preschool turned up over a dozen payments since 2020.
The Senator was appointed to a vacant seat in the Senate of the state legislature in 2019 and continues to serve today. These federal stimulus funds where appropriated by various General Appropriations Acts that Senator Castleberry voted on in 2020 Special Session (HB 1001 and SCR 601), 2021 Regular Session (SB 64 and SB 195), 2022 Regular Session (HB 1340 and SB 60), and 2023 Regular Session (SB 210).
The South Dakota Constitution prohibits a state legislator from having a direct or indirect interest in a contract authorized during their time in office and up to one year thereafter. See, S.D. Const. Art. III, § 12. The South Dakota Supreme Court strictly construes this prohibition and said that this provision “precludes a current state legislator from contracting directly or indirectly with the State to receive funds from [COVID-19] grant programs.” In re Noem, 950 N.W. 2d 678 (2020). The Supreme Court could not have spoken more clearly or on point to this issue. The Senator has a personal and ethical obligation to avoid conflict of interests. The Senator also swore an oath to support the state Constitution. While the ethics of this malfeasance may be resolved by the Senate body itself, the multiple alleged constitutional violations are within your jurisdiction to determine and your duty to enforce. For a century, the Supreme Court has declared that such contracts are null and void. Supporting documentation will be forthcoming separately for the Department.
In addition, while SDCL 5-18-17 through 5-18A-17.6 does not ordinarily apply to members of the Legislature because members are already bound by the state Constitution to not self-deal, the subrecipient grant agreements include a provision that references these conflicts of interest statutes. Please review the content of this provision in your investigation as the State may have a breach of contract claim which is is your duty to prosecute as well [Gov. Kristi Noem, letter to A.G. Marty Jackley, 2023.07.25].
Jackley responded to Noem the next day saying he agrees: Senator Castleberry took coronavirus relief funds, and Article 3 Section 12 says Senator Castleberry can’t. Jackley thus sent Castleberry this nastygram telling her the contract granting her that covid money was (citing the 2020 South Dakota Supreme Court opinion Noem requested and mentions in her letter) “wholly illegal, void, and against public policy, and cannot be enforced in whole or in part on any theory of any kind.” Jackley gives Castleberry until high noon her time on Monday, August 7 to repay $603,219.79. If she doesn’t cough up the coronavirus cash, he says he’ll take her to court.
As this blog reported in October 2020, some legislators, including Castleberry’s Senate boss Lee Schoenbeck (R-5/Lake Kampeska) groused about having to give up six-figure welfare checks for their paltry low-five-figure Legislative salaries. Evidently Castleberry felt grousy enough that she found a lawyer who would contradict the Supreme Court:
The senator told South Dakota Searchlight in an emailed statement that she hired independent legal counsel about her company’s eligibility to receive federal grants through the state.
“After consulting with legal counsel, I believed my company was eligible,” Castleberry said. “Upon several occasions, I communicated directly and transparently with DSS staff regarding grant applications. I am committed to resolving the issue with the state and will work with them to ensure I acted in compliance with the state constitution” [Makenzie Huber, “Rapid City Senator Accused of Illegally Accepting $600,000 in Covid-19 Relief Funds,” South Dakota Searchlight, 2023.07.27].
I look forward to hearing Castleberry’s counsel explain what the state Supreme Court got wrong in 2020.
The Governor has been selective in tackling Legislative conflicts of interest. Another Rapid City Senator, Helene Duhamel from District 32, holds down a job with the county even though that job violates Article 3 Section 12, since the county budget is made possible by state dollars on which she votes. Representative Gary Cammack (R-29/Union Center) has made money on state contracts and gotten no public keelhauling. But the party machine flagged Representative Kevin Jensen (R-16/Canton) for apparent contractual conflict of interest when he dared challenge Noem’s favored candidate for party chairman, Senator John Wiik (R-4/Big Stone City).