Investigates

Phelps Trial Only Part Of The Story

SIOUX FALLS, SD - For three years we've been following the aftermath of the Westerhuis tragedy in Platte.

Scott Westerhuis killed his family, set his house on fire and then killed himself.

KELOLAND Investigates revealed he was operating several organizations that took grant money and held multiple, conflicting roles.

Authorities determined Westerhuis embezzled more than $1 million.

That's not all KELOLAND Investigates took a deep dive into the GEAR UP grant terms from the federal government.  We looked at what was promised and what wasn't delivered. 

We also uncovered elaborate spending that didn't seem to fit with the grant's mission of preparing Native American students for college. 

In the end, the state charged three people with crimes. Former Mid Central Educational Cooperative Assistant Business Manager Stephanie Hubers was acquitted on theft charges that stemmed from payments she took from her boss, Scott Westerhuis. 

Former Director of the Coop, Dan Guericke plead guilty to one charge of falsifying evidence. He was accused of backdating contracts to avoid an audit. 

Then just last week, head of AIII Stacy Phelps was acquitted on all charges against him for falsifying evidence by backdating those same contracts.

Stacy Phelps' family and friends waited for a verdict as the jury deliberated for nearly 9 hours. 
In the end, jurors found Phelps "not guilty" of four charges that all stemmed from 2 backdated contracts. 

Angela Kennecke: Can you tell us how you feel at this moment? 
Defense Attorney Dana Hanna: Stacy would rather have me tell you. The Indian people of this state have always know that he was innocent of these charges. 

The jury listened to a recording in which Phelps admitted to investigators that he had backdated the contracts, but he said that was only because Scott Westerhuis told him to do so, not because he was trying to avoid an audit of the American Indian Institute for Innovation.

Phelps' attorney painted his client out to be a poor financial manager of AIII and said he had left the finances up to Westerhuis, while Phelps worked on the programs. 

Prosecutors claimed Phelps had reason to want to avoid an audit of AIII, because his board of directors didn't know about the $8,000 to $10,000 a month in contract business it was doing with reservation schools and 22 vehicles it owned. 

Most of the evidence of elaborate spending by Phelps and AIII was not allowed in the trial. 

In June of 2016, KELOLAND Investigates reported that the state had receipts of Phelps' spending $240,000 in federal grant money on high-end steakhouses, the restaurant in the Seattle Space Needle and several stores for personal items.

Those receipts matched what a former GEAR UP worker, who did not want to be publicly identified, reported to KELOLAND Investigates in May of 2016. 

"And I would notice the extravagant spending; the Brazilian steakhouse, $100 plus dollar bills of one or two people," she said on May 25, 2016. 

AIII receipts from the Rapid City Minerva's alone added up to more than $7,000. 

"And those Minerva's walls should talk. Because every single meeting with GEAR UP was in in Minerva's." the former GEAR UP employee said on May 25, 2016.

According to a special state audit in May of 2017, Scott and Nicole Westerhuis, along with Stacy Phelps, were compensated not only by Mid Central, but also their various nonprofits, which amounts to double-dipping. 

A chart in the report shows that those three employees made as much as $170,000 a year each.

Our KELOLAND News investigation dug into Mid Central's own audit and over a two-year period, the co-op paid out $853,000 in GEAR UP money to AIII. 

During that same time, Mid Central also paid an additional $386,000 to 10 members of the Phelps family in salary, benefits and expenses.    

The special state report said AIII should have been subject to a state audit when it got more than $500,000 in grant money from 2012 to 2014. That didn't happen. 

On the stand in Phelps' trial AIII board member and former astronaut John Herrington testified that he didn't know about the spending or the contract work that Phelps was doing on behalf of AIII until after the Westerhuis' deaths. 

In closing arguments the Phelps' attorney told the jury his client was just another Westerhuis victim.

Something a former GEAR UP worker told KELOLAND Investigates two months after the tragedy. 

"I think Stacy Phelps may have made some bad decisions, but I don't think he did anything wrong. I think he trusted people he shouldn't have trusted. And those people would have been at Mid Central or on the advisory committee," Drew Lerdal said in November of 2015. 

In the end, much of the inappropriate activity involving grant funds may not be illegal and there is still little recourse under the law if something like GEAR UP were to happen again. 

"The courtroom isn't the place to necessarily solve some of these financial corruption type of cases. And when you talk about transparency the media has a role. You heard some of the trial testimony when Bob Mercer was poking and prodding, people were noticing and if we look at these cases, the lesson learned is our state needs to look at its transparency," Attorney General Marty Jackley said on October 11, 2018.

"We've always maintained his innocence and we've proved it! God is great. That's all I have to say," Hanna said on October 11, 2018.

KELOLAND Investigates has reported about Mid Central and AIII's lack of data about results of the GEAR UP program.

While Dan Guericke boasted to state legislators a 95 percent success rate of Native American students going onto college, there actually was no data to back that number up.  

Since the not guilty verdict, KELOLAND News has received a dozen emails from students who say the GEAR UP program enabled them to go to college. We've invited them all to sit down with us for an interview.

Meanwhile several civil suits over GEAR UP continue to make their way through court. 

Two Native American students have filed a class action lawsuit against AIII, Mid Central and its board members, on behalf of all the reservation students who were supposed to be served by GEAR UP.


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