SIOUX FALLS, S.D. (KELO) — The status of more than $600,000 in COVID-19 funds paid to a preschool business owned by a state lawmaker remains unknown after Attorney General Marty Jackley asked for a payment in full by 1 p.m. Monday, Aug. 7. 

On July 27, Gov. Kristi Noem and Jackley released letters sent to Republican Sen. Jessica Castleberry requesting repayment of $603,000.

The letters from Noem and Jackley said Castleberry collected the money for her business, Little Nest Preschool, illegally. The South Dakota Constitution prohibits lawmakers from receiving contracts with the state or counties. 

“If payment in full, $603,219.9, is not returned or an agreement is not reached by Monday, August 7 at 1:00 p.m. CST, we do intend to pursue this matter in court,” the letter from Jackley said. 

On Tuesday, Jackley said Castleberry and the Department of Social Services have been cooperating with his office regarding the money. 

“The Attorney General’s Office continues to receive and review documents related to this issue, and we are still awaiting documents from the State Department of Social Services,” Jackley said in an emailed statement. 

Castleberry was appointed by Noem to fill the term of Lyndi DiSanto who resigned in 2019. Castleberry served during the 2020 session. She was formally elected in 2022.

Castleberry said she consulted with independent counsel before applying for COVID-19 money.

“Upon several occasions, I communicated directly and transparently with DSS (Department of Social Services) staff regarding grant applications,” Castleberry said in a news release. “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.”

Schoenbeck wants legislature to provide ‘guidance’

On Monday, Republican Sen. Lee Schoenbeck asked the Legislature’s Executive Board to work on “what ifs” regarding conflicts with state lawmakers and government funds. 

“What does that constitutional provision mean for legislators?” Schoenbeck said. “We’ve got to do something so that we’re helping potential candidates and current legislators so they’re not getting in trouble.” 

Schoenbeck said everyone can read the South Dakota Supreme Court advisory opinion regarding interpretation of the South Dakota Constitution and state laws regarding eligibility for coronavirus relief fund grant programs. 

That advisory opinion states: “Therefore, South Dakota Article III, Section 12 precludes a current state legislator from contracting directly or indirectly with the State to receive funds from CRF Grant Programs.” 

The advisory opinion doesn’t answer all instances of South Dakota Article III, Section 12, but in relation specifically to coronavirus relief fund grant programs. 

Schoenbeck said at the executive board meeting he believes there will be “some more news stories coming out” regarding state lawmakers involved with state or county funds illegally. 

“It’s all about trying to keep people from getting in trouble,” Schoenbeck said. “It won’t control over the constitution, but it will give guidance to candidates and legislators. I think we’d be doing a service to our body if we did that.” 

Other South Dakota lawmakers involved with CRF funds

In 2021, KELOLAND’s Bob Mercer wrote about Republican Rep. Mike Derby who said he was “comfortable with the fact that everything was done prior to me being sworn into office.” Derby was elected as a state representative in District 34 in November 2020 and took office in January 2021. 

Derby was president of Derby Advertising Inc., a Rapid City-based company that owns and operates Canyon Lake Resort in Rapid City.

State government paid COVID-19 grants to Derby Advertising of $73,996.00 on January 1, 2021, and $98,049.00 on January 8, 2021. The 2021 Legislative session started on Tuesday, January 12, 2021.

“My wife Carmen made the applications with the guidance of Ketel Thorstenson CPAs and Consultants,” Derby said in 2021. “I was aware of the (South Dakota) Supreme Court advisory opinion and how it ‘precludes a current state legislator from contracting directly or indirectly with the State to receive funds from CRF Grant Programs.’” 

SD Freedom Caucus calls for more AG investigations into lawmakers  

In a news release, members of the South Dakota Freedom Caucus, a right-wing faction of the South Dakota Republican Party, called for Jackley to investigate and prosecute more lawmakers over alleged violations of the state constitution’s section prohibiting lawmakers from receiving contracts with the state or counties.   

“Sen. Castleberry is only one of many incidents revealing a pattern of corruption within South Dakota’s political landscape,” a news release said.

Freedom Caucus members — Republican Rep. Aaron Aylward, Republican Rep. Tony Randolph and Republican Rep. Tina Mulally — accused Republican Rep. Roger Chase, Republican Sen. Helen Duhamel, Republican Sen. Randy Deibert, Republican Rep. Gary Cammack and Lieutenant Governor Larry Rhoden over concerns of ethical violations, conflicts of interest or payments from state government departments.