Back to: Investigates
June 27, 2016 06:06 PM

Prosecutors Say GEAR UP Monies Went To Swanky Steakhouses, Casinos And More

Charles Mix County, SD

From swanky meals to tens of thousands of dollars in electronics and personal items, to casinos, prosecutors are laying out evidence against former GEAR UP leader Stacy Phelps about how the federal grant money was spent. 

Our KELOLAND News investigation first brought you information from a former GEAR UP worker about expensive meals and storage units full of stuff purchased with GEAR UP money. 

"And I would notice the extravagant spending; the Brazilian steakhouse, $100 plus dollar bills of one or two people," a former GEAR UP worker told KELOLAND News on May 25. 

Monday, the State said Phelps spent some $240,000 in federal grant money living the high life and that he and Scott Westerhuis worked together to hide that spending from authorities.

It was money that was supposed to help get more Native American student into to college.  Instead, prosecutors say it went to many swanky steakhouses, the restaurant in the Seattle Space Needle and several stores for personal items.  

"These particular charges by Mr. Phelps were not for and did not benefit Native American children in furtherance of their education," Attorney General Marty Jackley said.

A former GEAR UP worker told us she couldn't believe all the GEAR UP money Phelps and Westerhuis spent at a Rapid City restaurant.

"And those Minerva's walls should talk. Because every single meeting with GEAR UP was in in Minerva's. I bet if you did expense tracking, there was thousands, tens of thousands of dollars paid to Minerva's," the former GEAR UP employee said.

According to the State, it added up to $7,643 on the tab for Minerva's. 
Another $20,729 dollars went to Best Buy.
A whopping $61,242 at Sam's Club. 
And $57,776 at Walmart.

There are also charges at out-of-town resorts and casinos, as well as several thousand more for tires on personal vehicles.

"Why not bring charges of fraud, or misuse of government funds, or something like that?  At this point this is a conservative approach. The prosecution feels generally that there's been a misappropriation of funds, that a grand jury as issued several felony indictments and we will have an opportunity in the future to reevaluate whether or not there will be additional charges," Jackley said.
Phelps Westerhuis exchange
The state is also offering up this email exchange as proof that Phelps was conspiring with Scott Westerhuis to hide his activities.  The two talk about whether to run these GEAR UP charges through Mid Central or the American Indian Institute for Innovation. 

They also refer to Carlos and that Carlos thought AIII was "bare bones." Carlos Rodriguez is the STEM educator out of Washington D.C. who was the director of AIII. 

Phelps wrote in an email to Westerhius saying that if Rodriguez knew that AIII had 35 staff, "he will ask much more questions."

Kennecke: "Who was watching the money once it went out to AIII?" 
Jackley: "I think that's what we're seeing here.  Certainly when you look at some of the specifics in the personal use, it's pretty clear it wasn't being watched."

Jackley wants to see a stronger law in South Dakota regarding conflict of interest, making violation a felony rather than the current misdemeanor.  

Phelps is back in court on August 18.

 

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