The broke and soon-to-be defunct educational cooperative in Platte, at the center of the GEAR UP scandal in South Dakota, is suing its former partner organization in the GEAR UP program, The American Indian Institute for Innovation, once run by Scott Westerhuis and Stacy Phelps.

Mid Central Business Manager and AIII Chief Financial Officer Scott Westerhuis killed his family and set fire to his home before killing himself in September.  That happened immediately after the South Dakota Department of Education pulled its contract with Mid Central to run the multi-million dollar GEAR UP grant program.  Legislative audits had turned up problems with the accounting of the federal GEAR UP funds coming into the state.  Mid Central paid out the GEAR UP funds to AIII to run the college-readiness program in the state’s reservation schools.

Mid Central has filed a lawsuit in Charles Mix County against AIII, once headed by Phelps, who now faces felony charges in the GEAR UP investigation for falsifying documents in the legislative audit.  Mid Central’s lawsuit accuses AIII of breach of contract, as well as fraud and deceit and taking Mid Central’s property for its own use.  Mid Central is asking the court for damages, but no specific dollar amount is names in the court papers.

Mid Central points to the state investigation, which found that Scott and Nicole Westerhuis embezzled hundreds of thousands, if not well over $1 million, in grant money.  The suit alleges that AIII would improperly use between $40,000 to $150,000 of Mid Central’s funds every month.  According to the lawsuit, starting in March of 2015, AIII was paid $200,000 in advance and by November 2015, AIII owed Mid Central as much as $826,000.  Mid Central states that it did not know that AIII was using Mid Central’s money to cover the payroll and other unauthorized payments, but the lawsuit does not go into specifics of what those payments were for. 

KELOLAND News reported in February that Mid Central is also suing Scott Westerhuis’ estate for $2 million  because the education cooperative is worried the South Dakota Department of Education may ask  it to pay back grant funds stolen by the Westerhuises. 

KELOLAND’s Angela Kennecke is also working on getting details on another lawsuit involving GEAR UP and will bring you that story tonight on KELOLAND News.