SIOUX FALLS, S.D. (KELO) – The South Dakota Attorney General’s office provided an update on the investigation regarding more than $600,000 in COVID-19 funds paid to Republican Sen. Jessica Castleberry. 

Attorney General Marty Jackley announced a resolution has been reached with Castleberry. He said an agreement has been reached to repay just over $499,000 of the funds with interest. Another portion of the funds, about $100,000, went directly to families in need and won’t be sought to be repaid by the state, Jackley said.

“Those dollars weren’t in the benefit of Senator Castleberry and won’t be part of the repayment plan,” Jackley said during a news conference which you can view in the video above. “Those dollars went to their intended purpose.”  

Minutes after the news conference ended, Castleberry, who represents District 35 in eastern Rapid City, announced her resignation.

“I formally resign from my position in the South Dakota Senate,” Castleberry said in an emailed statement. “I was humbled to be appointed and honored to be elected. Thank you for the opportunity to serve the people of the state of South Dakota.”

She said she is “glad speculation from other state departments and the executive branch regarding my ethics and intentions can be laid to rest.”

Gov. Kristi Noem, who alerted Jackley to start an investigation, will pick the person to fill Castleberry’s seat. Castleberry was appointed by Noem to fill the term of Lyndi DiSanto who resigned in 2019. Castleberry’s appointment became effective on January 1, 2020, and she served during the 2020 session. She was formally elected in November 2020 and re-elected in 2022.

“Our State Constitution prohibits a state legislator from receiving funds he or she is responsible for overseeing,” Jackley said in a news release. “The Attorney General’s investigation has determined that $499,129.79 were inappropriately received by Senator Castleberry and a repayment plan for those taxpayer funds has been established.

Jackley said the investigation didn’t find any inappropriate expenditures from Castleberry. He said the money spent all went to approved DSS expenditures. You can view the full settlement agreement in the document below.

Jackley said the first part of the investigation involved collecting documents and payments. Jackley said Castleberry “opened her books” and shared her tax returns and emails. 

“A payment plan was appropriate and viable,” Jackley said. 

Jackley said it will be a payment plan based on Castleberry’s business records, which he said is about about $2,400 a month. He said the interest was the federal rate at 4.03% and it should be all repaid to the state in 20-30 years. The payments will start 45 days after the agreement was signed.

Jackley said in this case, the state constitution and a Supreme Court advisory opinion were clear that a violation occurred regarding COVID-19 funds. He said other lawmakers should seek guidance on other specific involvements with state contracts.

On July 27, 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. 

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

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.”

On Monday, KELOLAND’s Bob Mercer reported about a new executive order issued by Noem ordering all agencies and offices under her control to add language to their contracts so that state legislators know they would be violating the South Dakota Constitution if they do business with state government.  

Last week, 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.” 

An advisory opinion from the South Dakota Supreme Court regarding interpretation of the South Dakota Constitution and state laws regarding eligibility for coronavirus relief fund grant programs 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. 

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.