Scammers target individuals, businesses, and even the government. KELOLAND Investigates has learned of a $2.77 million scam perpetrated against the State of South Dakota in 2019. It’s been kept quiet until we started asking questions.

KELOLAND Investigates obtained a complaint that was sent to the Government Accountability Board, the Attorney General’s Office, and the Department of Legislative Audit.

It outlined fraud perpetrated against the Office of the State Engineer in Pierre. After days of trying to get answers from state officials, we’ve finally confirmed what happened and found out that the state narrowly escaped losing $2.77 million dollars in taxpayer money.

This letter outlines some of the details of what happened.

In 2019, someone posing as one of the contractors working on a state building project called the Office of the State Engineer. They asked that the direct deposit for that contractor be changed to another bank. According to the complaint, the legitimate contractor called the Office of the State Engineer to ask why a payment was late and the fraud was discovered.

KELOLAND Investigates received confirmation from South Dakota’s Auditor General, Russell Olson, and State Auditor, Rich Sattgast, that the incident took place. However, they told us that the funds were “stopped before being delivered to the fraudulent account” and returned to the state. According to the officials, law enforcement was notified. We reached out to the DCI to find out if the scammer was caught but haven’t heard back.

KELOLAND Investigates also contacted State Engineer, Stacy Watters, to inquire about the incident. She said, “I don’t know anything about fraud against the Office of the State Engineer,” but refused to answer any other questions, referring us to someone else in the Bureau of Administration, who hasn’t gotten back to us either.

According to Auditor General Olson, because of this incident, the South Dakota Bureau of Finance and Management issued a new policy for payments to vendors. KELOLAND Investigates obtained this email from the BFM. It outlines that policy which includes that “any change of banking information will require the previous routing and account numbers, as well as the new numbers.”

KELOLAND Investigates asked the Bureau about this change in policy and received the following statement:

“We are constantly reviewing our internal controls and looking for ways to reduce risks.  As Commissioner Clark testified to the Government Operations and Audit committee the very next day, on July 18, our environment is always changing and state government is frequently targeted by attempts to defraud the state. Because of that we often make changes to systems, security, and operational procedures to protect state assets.”

Colin R. Keeler | Director of Financial Systems, Sd Bureau of Finance and Management

KELOLAND Investigates also asked the Attorney General’s office if they had investigated the incident but were told they had not received the complaint obtained by KELOLAND Investigates.