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March 20, 2017 10:03 PM

Why Software Valued $4 Million Is At Center Of GEAR UP Case

A supposed $4 million donation by Microsoft in educational software to the GEAR UP program is proving to be a key piece of evidence for the state in the GEAR UP trial.

Former Mid Central Director Dan Guericke's attorney Mike Butler calls it a "non-issue," and wants it thrown out. 

In the GEAR UP grant, the state had to match every dollar it got in federal funds.  That match could be with something like donated software.

But Attorney General Marty Jackley says in this case, Guericke was conspiring with Scott Westerhuis to hide what was really going on with the millions in GEAR UP grant money. 

Jackley believes South Dakota could end up having to pay the federal government back that $4 million because the overvalued software was part of a bigger scheme to defraud the federal government. 

Guericke's own words to the South Dakota Government Operations and Audit Committee outline who the software was supposedly benefiting. 
  

DreamSpark is a Microsoft program that gives students the tools to build a game, design an app or launch a project.

While it’s free to students, institutions that offer the software pay a licensing fee.  At issue in South Dakota is the cost of that licensing fee that was used to match the federal GEAR UP grant.

A letter signed by Westerhuis to the South Dakota Department of Education put the value on the DreamSpark software licensing at $2 million a year. But a Legislative Audit found the value was $499 a student totaling $250,000 a year; that's a difference of $1.75 million.

Department of Education Finance and Management Director Tamara Darnall testified before the Government Operations and Audit committee in 2015 that state auditors got it wrong.

“$1.75 million, it's a fairly large discrepancy.  But again, if you went out and looked at the items that are included in this Microsoft package, we come to well over the amount per student; for a total value per user of $18,037.96," Darnall said on August 25, 2015.

When Guericke appeared before the same committee, he was asked which students actually used the expensive software:

“What we didn't, as I'm understanding the finding, we did not record as to which student, which software went to, because it varied somewhat as to what schools they were in.  All the schools had access to all of it. But we did not record which piece of software went to which student," Guericke said on August 25, 2015.

In an email a few days following Darnall's and Guericke's testimony, an auditor with the U.S. Department of Education wrote that the GEAR UP program officer planned to recommend the department accept the value of the Microsoft donation as a match for millions in federal tax payer dollars. 

But he said he was concerned about the "lack of record keeping for use by students." 
The auditor requested data to document use and the plan to use the software during the next school year. 

In an email, Darnall told Guericke to "take a quick minute to do a happy dance," and then help out with his follow up request.

Guericke’s defense attorney says the email shows the issue was resolved with the Feds.

“The Microsoft issue has nothing whatsoever to do with if my client knew what Mr. Westerhuis was up to. It's the proverbial red herring. They said today, 'We're still looking for students that are using it.'  It's right under their nose. All the evidence appears to be hiding in plain sight,” Butler said.

But that's not what Guericke told the legislative committee back in August of 2015:

“We did not record which piece of software went to which student," Guericke said in August of 2015.

“It demonstrates the work that was being done to essentially cover things up. I think it's evidence to show motive, evidence to show intent.  It's not just Scott Westerhuis, operating by himself," Jackley said.
 
We asked the South Dakota Department of Education if any of the information requested by the federal government on which GEAR UP students were using the software was ever provided to the Feds, but did not get an answer by our deadline.  

We also asked Microsoft if it had indeed donated software to the GEAR UP program in South Dakota and how much it was worth.  Microsoft is currently looking into it.  We'll let you know when we get an answer.

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