48. The Grant (Scott Westerhuis)

Support for swindled comes from Simply Safe.

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This episode of Swindled contains descriptions of violence.

Listener discretion is advised.

Steve Supal has been in the news recently for his alleged involvement in a bank embezzlement case.

Prosecutors say that Supal embezzled more than $550,000 during the seven-year period that he worked at Hills Bank and Trust.

It was true.

From July 26, 2000 to September 12, 2007, Stephen Supal, the vice president and controller of Hills Bank and Trust Company of Hills, Iowa, had stolen $559,040.

During that time period, Stephen had been diverting funds from the bank where he was employed to a personal account at a different financial institution.

Nothing too complicated.

Stephen controlled all the money.

No one would ever find out.

But one day in October 2007, Stephen Supol was confronted by his banking superiors about some discrepancies.

When he realized there was no way out, Stephen admitted that he was responsible for taking a little more than $200,000 over the past three years.

Stephen told the banking officials that he had spent it all on cocaine.

But when the FBI raided his house, there was no evidence that Stephen Supol was a coke fiend.

They found no little baggies or razor blades, no missing appliances or grandiose business plans.

So the investigators asked him again, what happened to the money?

Stephen Supol could not explain what happened to the money.

He said that he had made up the story about drugs because he didn't know what else to say.

Later analysis of Supol's bank statements would reveal that at least some of the cash was used to pay his mortgage and other bills.

Perhaps no one ever told Mr.

Supol that it is never a good idea to live beyond your means.

Stephen Supol lived in a two-story gray brick and siding house in the Windsor Ridge subdivision of Iowa City, Iowa.

The 42-year-old banker lived with his wife Cheryl, a former teacher, and their four young children, all of whom were adopted from Korea.

The family was well known in the community.

They were regulars at St.

Mary's Catholic Church.

Everybody in town knew their names.

Which probably made things that much more difficult when Stephen Supal was indicted by a federal grand jury on embezzlement and money laundering charges.

Everybody was going to know about what happened.

Stephen would plead not guilty, but still, everybody would know that he had stolen the money and lost his job.

He had to find work at a local concrete plant because the conditions of his bond restricted him from handling finances, the only skill he had ever learned.

And of course, the townspeople were going to talk about Stephen's poor wife, Cheryl, and how she had to come out of retirement to keep the family afloat.

And those poor kids, adopted and abandoned by a criminal father.

Stephen Supol's trial was scheduled for April 2008.

He was facing a decades-long prison sentence and millions of dollars in fines.

Stephen Supol's life, as he once knew it, was over, and it was embarrassing.

But he put on a brave face in public.

The Supol family even attended Easter Mass at St.

Mary's on March 23, 2008, less than a month before Stephen's trial was set to begin.

Cheryl's parents were also in attendance that morning.

They said that they had not noticed anything unusual about their son-in-law's behavior.

But by the next morning, it became very apparent that nothing was okay.

No, this is

where what is the location of your your emergency?

Iowa City, Iowa.

What's the address, ma'am?

629 Barrington Road.

Please go there immediately.

What's going on there?

At 6.31 a.m., March 24th, 2008.

An unidentified man called 911.

It turned out to be Stephen Supol, and he was speeding speeding down Interstate 80 in the family minivan.

At 6.36 a.m., witnesses described seeing the van veer onto the median at a high rate of speed to deliberately crash into a concrete pillar.

The van burst into flames.

The doors never opened.

It was burnt to a crisp.

Stephen Supol was identified through dental records a few days later.

Meanwhile, police were responding to the 911 call that requested their presence at 629 Barrington Road.

It was the Supol family home.

The door was unlocked.

There was a handwritten letter in the kitchen.

It was four pages long, written by recently deceased Stephen Supol, addressed to no one in particular.

In the letter, Stephen discussed the unfortunate turn his life had taken as a result of the criminal charges and his upcoming prison stay.

He expressed guilt for leaving his wife behind to raise four children on her own.

Stephen decided that he couldn't live without them.

So sometime after 11 p.m.

on Easter Sunday, according to the letter, Stephen Supol gathered the kids and instructed them to sit in the family's minivan, which was parked in the garage with the door closed.

10-year-old Ethan, 9-year-old Seth, 5-year-old Myra, and 3-year-old Eleanor climbed in and buckled up.

Stephen wrote in the letter that he sat down in the driver's seat and cranked the ignition.

hoping that the carbon monoxide would kill them all.

But he grew impatient.

Stephen turned off the engine and ushered the kids back into the house where he beat each one of them to death with a baseball bat.

The three oldest were found in their bedrooms.

Eleanor, the youngest, was downstairs with her toys.

Cheryl Supal was also murdered that night, bludgeoned in the same fashion earlier that evening while she slept in the master bedroom.

On March 24th, at 6.31 a.m., a cell phone call was placed to 919, notifying dispatch operators to respond immediately to 629 Barrington Road, Iowa City.

Fearing for the safety of the residents, officers entered the unlocked residence and conducted a sweep finding five deceased.

Among the dead were one adult female and four children.

According to the officers and investigators at the scene, it appeared that the cause of death was brought forth trauma.

After brutally murdering his family and writing his farewell letter, Stephen Supol left the house in the minivan.

At 3:52 in the morning, he called home and recorded a message on the landline's answering machine, expressing regret for what he had done.

Less than 10 minutes later, Stephen left another message informing the future listener that he had just tried to drown himself in the Iowa River, but wasn't successful because he, quote, kept floating.

Stephen also left voicemails at the office of his former employer, Hills Bank, details of which were never released.

And he left a message for his father and brother at their law firm, letting them know that his family was now in heaven.

Hours later, Stephen Supal crashed the van, killing himself.

We believe

that probably

she died first.

At that point,

He probably had the children in the garage with him in that suicide attempt.

When that failed, then the children

were subsequently

killed.

And then the suicide attempt at Lower City Park occurred after that, followed by the

accident on the interstate.

There was no specific reason why he did this.

The messages in the note

basically contained apologies for his action

and his feeling of despair over what had happened.

And by that you mean embezzlement charges?

Probably partially the embezzlement charges and the effect that that had on him and his family, yes.

There was nothing in our investigation that indicated there was any kind of domestic situation prior to this that may have led up to this.

Most people we spoke to described it as an ideal family.

Obviously, they had their problems here recently, but

he was described as a kind, loving father, and he and his wife got along well.

A funeral mass was held for the Supal family at St.

Mary's on March 29th, 2008.

About 800 people were in attendance.

Others stayed home because they were disgusted with the church for including Stephen in the ceremony.

St.

Mary's priest Ken Kuntz defended the church's decision.

Quote, I know that Steve loved his family, loved his wife, loved his children.

But personally, I would be convinced that he did not do this out of malice.

The scourge of mental illness leaves us bewildered, confused, and perhaps angry.

Tom Baldritz, a Supol family friend, agreed with the church's non-licensed diagnosis of mental illness.

He told KGANTV, quote, Stephen's mind snapped.

He couldn't have gotten into the thought process that would have allowed him to do this if he were rational and sane.

But Stephen Supol's actions were cold and calculated, like a seven-year-long embezzlement scheme.

His murders and suicide were planned and even chronicled in letters and voice memos over a seven-hour period.

According to psychologists, that's typically not the kind of trail left behind of someone who just went berserk.

No, Stephen Supol knew exactly what he was doing.

His final hours were just a continuance of the selfishness and greed that put him in that situation in the first place, combined with the belief that a better world awaits after death.

Why not take the easy way out?

And why not take your loved ones with you?

That's what Stephen Supol did.

And that's what a man in South Dakota named Scott Westerhouse did too, for similar reasons.

Except Stephen Supol ripped off a bank.

Nary a tear was shed.

Scott Westerhouse, on the other hand, stole education from underprivileged children for years.

the ramifications of which would be felt long after he was gone.

Federal grant money intended to fund education programs for Native American children in South Dakota goes missing, and the main culprit takes an early exit on this episode of Swindled.

They bribed government officials

and clear violations of

the Adam.

Dumping up the team's records into high places.

Support for Swindled comes from Simply Safe.

For the longest time, I thought home security meant an alarm going off after someone broke in.

But if the alarm is already blaring, it's too late.

The damage is done.

That's a reactive approach.

And it leaves you with that awful feeling of violation, even if the intruder runs away.

That's why I switched to Simply Safe.

They've completely changed the game with Active Guard outdoor protection designed to stop crime before it starts.

Their smart, AI-powered cameras don't just detect motion.

They can tell you when there's a person lurking on your property.

That instantly alerts SimplySafe's professional monitoring agents in real time.

And here's the game changer.

The agents can actually intervene while the intruder is still outside.

Talk to them through two-way audio, hit them with a loud siren siren and spotlight, and call 911 if needed.

It's proactive security, and that's real security.

I trust SimplySafe because there are no long-term contracts, no hidden fees, and a 60-day money-back guarantee.

They've been named best home security systems by U.S.

News and World Report for five years in a row, and I can see why.

Get 50% off your new SimplySafe system at simplysafe.com/slash swindled.

That's 50% off your new SimplySafe system by visiting simply safe.com slash swindled.

There's no safe like SimplySafe.

GIRIP is a federal grant program that works with students starting in seventh grade and will follow those students through high school, doing whatever it takes to get them to graduate from high school and go on to some form of college.

This could in turn change the rest of their life.

They could go to college and get a job and make money and help their families and, you know, make a difference in the world.

It is a very positive experience.

I wouldn't trade it for you.

In 1998, the Gear Up Federal Grant Program was established in an amendment to the Higher Education Act of 1965.

The program, which stands for Gaining Early Awareness and Readiness for Undergraduate Programs,

is intended to prepare students for a post-secondary education.

by providing resources to them throughout middle school and high school.

The goal of GEARUP is to increase the number of low-income students that attend state universities to raise expectations.

I feel like I have a chance to go to college because before I think I was like, okay, I want to go to college, but I don't know if I'm going to get accepted or if I'm going to go into it.

But now

I've been through this whole Gear Up program.

It has taught me a lot of ways to go into college.

And the program has been relatively successful.

Gear Up students reportedly graduate from high school at a higher rate than their peers, regardless of ethnicity or income, and they attend college at a higher rate as well, which is why funding for Gear Up has increased year after year.

In 2014 alone, there was over $300 million up for grabs in the form of smaller grants and partnerships.

The United States Department of Education divvied out those funds to almost every state in the Union, including South Dakota.

There are students who have a lot of potential, but who just basically need the tools to really kind of help pull that potential forward and some exposure to different career opportunities.

That's the voice of a man named Stacey Phelps.

Mr.

Phelps was the founder and CEO of a school focused on science and technology named the American Indian Institute of Innovation, or AIII, as well as a member of the South Dakota Board of Education.

As a Native American himself, Stacey Phelps understood the challenges and the value of receiving an education in the United States of America.

The 42-year-old Phelps had dedicated over a decade to opening that door for others in his community.

Some of the kids Stacey worked with had literally never been off the reservation.

Stacy Phelps was also the administrator of South Dakota's Gear Up Grant as an employee of the Mid-Central Educational Cooperative, or MCEC, which is essentially a pooling of resources between different school districts across the state.

The organization uses that pool of resources to provide special education services and training opportunities to smaller rural districts in South Dakota who cannot afford them on their own, districts that many impoverished Native American children call home.

And since the GARA program was primarily targeted at those types of students, the South Dakota Board of Education decided that MCEC was the most suitable organization to manage the grant.

The ARGUS leader newspaper referred to the Mid-Central Cooperative as a valued asset in a constant effort to meet a diverse range of student needs.

According to the Dakota Free Press, since 2005, South Dakota has spent a total of $48 million in federal and state funds on Gear Up, all of which was handed over to Mid-Central for implementation.

But in May 2015, a state audit revealed multiple issues with MCEC's management of the contract, most notably the numerous and glaring conflicts of interest.

Take the aforementioned Stacey Phelps, for example.

He was the Gear Up Grant Administrator for MCEC and the CEO at AIIII.

No issue with that until you realize that AIII received gear-up funds from MCEC, who was allocated those funds by the South Dakota Board of Education, where Stacey Phelps also held a seat.

And that's not even half of it.

The CFO of AIII was a man named Scott Westerhaus.

And like Stacey Phelps, Scott Westerhaus also worked at Mid-Central Educational Cooperative.

Scott was the business manager and budget specialist at Mid-Central.

And his wife, Nicole Westerhaus, she was the assistant business manager.

In addition to receiving a second salary as the head business manager of a different nonprofit that received gear-up funds from MCEC as well.

There were also other questionable people sucking on that gear-up teat.

My name is Rick Melmer from the state of South Dakota.

A man named Rick Melmer received $241,000 from MCEC in March 2015.

Coincidentally, Rick Melmer had served as the state of South Dakota's Secretary of Education when Mid-Central was picked to administer the grant.

And there was Keith Moore, who had served under Melmer as the state's Director of Indian Education.

Keith Moore was listed as a Gear Up Project Director at MCEC and was being paid $4,000 every month.

Board of Education member Kelly Duncan was also receiving payments from Mid-Central for her work on a different grant.

I know.

It looks bad, doesn't it?

Any rational person that analyzes MCEC's tangled web would arrive at the conclusion that something fishy was going on.

The grant administrator was administering funds to the company for which he was the chief executive officer.

There was a family of business managers receiving multiple salaries and awarding contracts to each other.

There were former public officials literally on the payroll.

But who are we to say for sure?

All of the organizations involved were education related after all.

Maybe the multiple roles of certain individuals could be explained by a lack of qualified applicants.

I mean, this was happening in South Dakota, a state where there are four times as many cows as people.

Maybe human resources were spread thin.

What I'm trying to say is that maybe the gear up money was being used as intended.

Maybe everything was copacetic.

Besides, if something illegal or unethical was happening with the South Dakota Gear Up Grant, don't you think someone would have noticed?

Perhaps someone like the education evaluator that was handpicked by the state to evaluate the effectiveness of the gear-up grant?

Her name was Brenda Kuhn, and in 2009, as a contractor, she received hundreds of thousands of dollars from Mid-Central, of which she earned every penny.

Brenda Kuhn's evaluation of Mid-Central's Gear Up program at the time was unsurprisingly and overwhelmingly positive.

She wrote, The program is strong and continues to gain momentum in serving students, parents, and teachers, as well as establishing sustainable activities to create a systemic change within the schools it serves.

Well, that's a relief.

Despite the optics, it sounded like the Gear Up program was working well, but apparently not well enough.

Because on Wednesday, September 16th, 2015, South Dakota's Secretary of Education, Dr.

Melody Schopp, phoned the director of Mid-Central Educational Cooperative, a man named Dan Garici, to inform him that the South Dakota Department of Education had decided to terminate its partnership with MCEC as it related to the Gear Up program.

Dr.

Schop followed up with a letter that outlined all the reasons for not renewing the contract.

She wrote that MCEC had failed to successfully implement the program and that it had not complied with the terms of the grant.

Schop listed numerous deficiencies that MCEC had inadequately addressed, including but not limited to the lack of project oversight, lack of internal controls, lack of documentation for grant activities, and conflicts of interest.

The state's decision to terminate the contract was also based on a recent evaluation of the GIRAP program that showed that MCEC had only achieved six of its 18 key outcomes during the 2014-15 budget year.

And according to information later obtained by the Dakota Free Press, the ineffectiveness of the program had been apparent since day one.

The newspaper accused the South Dakota Department of Education of letting a, quote, $48 million boondoggle roll on for over 10 years without demanding any concrete results.

For instance, during its first six years, the state's gear-up program reportedly sent only 20 kids to college at a total cost of $14 million federal dollars.

That's $700,000 per student.

And that doesn't even include the other $14 million that the state was required to match in order to receive the original grant.

But finally, the state had caught on and pulled the plug.

The gear-up program in South Dakota was officially put on hold, at least until a different administrator was chosen.

And going forward, the Native American children of South Dakota would finally benefit from what rightfully belonged to them, except for, you know, all the land and stuff.

As for Mid-Central's Educational Cooperative, they were spiraling out of control.

The organization had just lost out on its upcoming $4.3 million contract with the Department of Education.

$4.3 million that MCEC's employees and sister organizations were depending on.

Now they weren't even sure if the cooperative would survive or if they would even want to.

What happened to all that money anyway?

The $48 million that had funneled into Mid-Central since 2005.

If those grant funds didn't go to the kids for college, then where did it go?

And who was to blame?

Why, I thought you would never ask.

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Your

Platt, South Dakota.

Okay, we're at in Platte.

Okay, it's about a mile and a quarter south

on uh

coming out of Platte from the four-way stop.

There's a place on fire out there and I just come by and I didn't see no fire trucks or anything there.

It'd be about oh two hundred and

eightieth.

Three hundred and eightieth on uh three hundred and sixty-seventh Avenue, I believe is what they call it.

380th on 360th Avenue?

I believe that's what it is.

I think it's

a house business type place there.

But yeah, I don't see no fire trucks or nothing out there, so it looks like it's been burning a little while.

On September 17th, 2015, At 5.36 a.m., emergency dispatchers in Charles Mix County received a report of a structure fire near Platt, South Dakota.

By the time the fire department arrived at the scene, it was already too late.

There was nothing left to save.

The house had already collapsed onto itself, with the entire Westerhouse family still inside.

Investigators found Scott Westerhouse's body in the basement below the space that used to be the kitchen.

There was a 12-gauge shotgun lying next to him and some kind of fire accelerant that could not be identified.

Even though his remains were burned beyond recognition, it was clear that Scott had used the shotgun to take his own life.

The remains of Scott's wife, Nicole Westerhouse, and their two daughters, 10-year-old JC and 9-year-old Kaylee, were found clinging to one another in the foundation space of the master bedroom.

All three had been shot in the head.

On the other side of the house were the two oldest kids, both boys, Michael the high school athlete and his brother Connor, the eighth grade class clown.

The order in which it happened isn't certain, but Scott Westerhouse murdered both of his sons that night too, in their individual bedrooms, one after the other, with the last one remaining certainly cowering under his covers, listening to the footsteps between shotgun blasts getting closer to his bedroom door.

They were a picture-perfect family, like the stick figures you might find on the back glass of a mid-sized SUV.

living together in blissful harmony until one night they were slaughtered and burned inside of their own home by the father.

An old-fashioned traditional nuclear family reduced to nothing more than charred bones and mattress springs.

Today, dozens of firemen, investigators, and division of criminal investigation agents comb through what's left of the Wester House home.

The house that once stood three miles south of Platt caught fire in the early morning hours.

At 5.30, a driver passing by saw flames and called 911.

That's about the time when Marcus King noticed fire trucks.

We go out there and we go where the house is and it's all in one great big ball of flame and it's already falling down.

There was hope for a couple hours that as they were putting the fire out that someone would get a hold of them and they had gotten out and left but it didn't happen.

This is South Dakota's Attorney General at the time, Marty Jackley, discussing the early results of the investigation.

In the early morning hours of Thursday, first responders answered a call for service in Platts, South Dakota.

When they arrived, they met the unthinkable tragedy of the loss of an entire family of six.

Once the fire was extinguished and the family's remains preserved, the crime scene was walled off.

The process of gathering evidence began.

After the evidence had been gathered, there was also an autopsy process.

The initial autopsy results indicate that Nicole, the mother, and the four children had died from gunshot wounds, homicide.

At this point, the father, Scott Westerhouse, has been identified as having died by a gunshot wound to the head with apparent suicide as the manner of death.

Although it was becoming more clear as to what happened that night at the Westerhouse residence, there were still questions about why it happened.

The timing of the incident was peculiar.

Less than 24 hours had passed since Mid-Central Educational Cooperative, where both Scott and Nicole Westerhouse had worked, found out that they had lost the gear-up contract.

Shortly after the fire, law enforcement was advised of some financial concerns or issues.

Specifically, we've been advised that the state legislative audit and the Department of Education had been involved in an audit process of of a contract geared up about a $4.3 million contract.

Earlier that day had advised the company that Mr.

Westerhouse worked for that the contract had been terminated.

The investigation continued for over a month and a half.

Cell phone records obtained indicated that just hours before the murder-suicide, Scott Westerhouse had four separate conversations between 6.22 p.m.

and 8.05 p.m., all of which were determined to be related to the $4.3 million gear-up grant.

The financial motive was seeming more and more likely.

We are in a situation where we've lost a family of six, and we think it's due diligence and prudent for us to look at that financial information.

And as with any matter, we'll go where the evidence leads us.

The evidence included a missing safe and a surveillance video from that night that featured unusual traffic near the Westerhouse home.

A white pickup hauling an empty flatbed trailer stopped at a convenience store before before heading in the direction of the Wester house's house.

Investigators wondered if Scott had made arrangements to have the safe removed before he pulled the trigger.

That theory was disproved when the safe was later determined to have disintegrated in the blaze.

Apparently, the model of safe that the Wester houses owned could only withstand fire for up to 30 minutes.

Any clues it may have held had gone up in flames.

Detectives were also able to track down the man driving the white truck with the flatbed.

He claimed he was simply transporting live pheasants to a hunting preserve down the street on the night in question, but that's what they all say.

The only real clue that remained was a 43-second voicemail left on Nicole Westerhouse's cell phone at 2.57 a.m.

the night that she was murdered.

The call had come from the landline in the Westerhouse home.

Investigators were never able to listen to the message because Nicole's phone had been destroyed in the fire.

And the request to obtain the data from her cell phone provider had come far too late.

It had already been deleted.

That voicemail would forever remain a mystery.

The very next call or contact, as you can see, is into the early morning hours of Thursday morning.

At 2.57 a.m.,

a call was made from the Westerhouse landline to Nicole's cell phone.

What I can tell you about that call is that it lasted 43 seconds.

It was forwarded to voicemail, that the phone was destroyed and believed to be destroyed in the catastrophic fire.

So I can't tell you what was left on that message, if anything.

However, authorities later discovered that a similar call was made from the landline to Scott Westerhouse's cell phone around the same time.

The detectives confirmed that the calls were most likely automated smoke detection warnings from the house's alarm company.

Another dead end with nowhere else to turn.

Case closed.

The law enforcement investigation has indicated and come to the conclusion that Scott Westerhouse was responsible for the death of his wife, Nicole, and their four children before setting fire to their home and ultimately committing suicide.

And there's no evidence that would indicate that anyone else was responsible for those actions.

The investigation at this point has included 26 witness interviews, the collection of physical evidence and the forensic testing of that evidence, the review of significant phone records and other type text information, and certainly the medical and autopsy information that was available.

Today, I'm focusing on the death investigation.

I will tell you that there is a joint state and federal financial investigation into the financials of Gear Up and other programs that has been given the highest priority by both the Attorney General and the United States Attorney.

The joint investigation into the financials of MCEC and the Gear Up grant hinged on the results of a forensic audit.

Investigators hoped that the remaining pieces of the puzzle would be found in the numbers.

There was no other way to explain why Scott Westerhouse, a seemingly normal, caring, and loving father, would annihilate his entire family.

Unfortunately, that audit would take a few months to complete.

In the meantime, the effects of the Westerhouse deaths, as well as the original audit and lost grant that presumably spurred those deaths, were already taking shape.

On October 2nd, 2015, Stacey Phelps resigned from his position as Mid-Central's gear-up administrator and vacated his seat at the South Dakota Board of Education.

Later, Mid-Central's director Dan Garici announced his retirement, and Department of Education Secretary Melody Schop was asked to step down.

But Dr.

Schop declined.

Through a spokeswoman, Schop announced that she would be staying on the job and would continue to oversee the gear-up program.

Quote: The last thing you do in good leadership is back away from problems instead of just stepping up and addressing them.

And that's what I intend to do, see this through.

Melody Schop would remain in place as head of the South Dakota Department of Education, and she had the unwavering support of the state's governor, Dennis Dugard.

And I have every confidence in Melody Schop, and I think the state is very lucky to have someone like her leading our Department of Education.

But maybe she shouldn't have, because according to information obtained by Kellaland News, Dr.

Melody Schop was made aware of issues with the Gear Up grant years earlier.

Two different South Dakota directors of Indian Education had expressed concern over the contract with MCEC and even warned the Department of Education about possible criminal activity.

One of those directors, Roger Campbell, had sent multiple emails to the department about potential conflicts of interest, as well as Brenda Kuhn's inaccurate evaluation reports.

Five months passed before Secretary Schop addressed Roger's concerns in an email.

It read, quote, Roger, we need to stop doing this back and forth.

I don't know where this is going and it seems like all this is going to do is further the issues.

This was April.

It is useless at this point to address the issues again.

Can we simply move forward?

Melody.

When Dr.

Schop was later questioned about Roger Campbell's warnings, she was unable to remember specific details about their correspondence.

I don't have a specific

email exchange.

There were conversations that went on between the two of us.

And there's conversations that went on.

And I would have to go back and try to find something very specifically that you're speaking of because I can't identify or remember anything that would have been very specific to the level of detail that you're asking about.

This is Luanne Wardell, the other director of Indian Education, describing Melody Shop's response to her warnings about the administration of the Gear Up grant.

And she said, Luanne, she said,

I'll try to protect you.

She said, but,

you know, you just need to not worry so much about the grants.

You need to just focus on larger policy issues.

To her credit, Melody Schop was the person who eventually put a stop to the contract after giving MedCentral three years to clean up the program to no avail.

Dr.

Schop retired two years later.

Good evening, Governor Dennis Dugard has selected Don Kierkegaard to replace outgoing Secretary of Education Melody Schop.

While that selection still has to be confirmed by the South Dakota Senate, and with the Republican majority, that confirmation is almost a given.

However, Kierkegaard has long-standing ties to people directly involved in the gear-up scandal.

Really?

There was no one else available?

Again, more cows than people.

Four days after the Westerhouse incident, MCEC released a statement written by Dan Gorecki before he retired.

It read, Mid-Central Educational Cooperative is shocked and incredibly saddened to learn the tragic news about the Scott and Nicole Westerhouse family.

Scott and Nicole were employed at Mid-Central Cooperative for over a decade.

Our thoughts and prayers are with the extended families of Scott and Nicole as they mourn the loss of children and grandchildren.

We join the community of Platt as we grieve the loss of lives that will impact this community for the foreseeable future.

But at the time of that statement, Dan Garici nor anyone else knew just how much of an impact the Westerhouses had already made on their community's foreseeable future.

No one knew that they had stolen at least $2 million from the Gear Up grant for personal use, injecting their own children's college funds with money meant for Native American kids who had no other option, kids whose lives could be improved with just a little bit of help, a nudge in the right direction, as Gear Up was designed to do.

But instead, Scott and Nicole Westerhaus took it from them and built an empire of lies.

And they were not alone.

The forensic audit would reveal that the Gear Up program in South Dakota was almost more of a criminal enterprise than an educational one, and there were a lot of familiar names involved, and eventually they would all be revealed.

But would anyone be held accountable?

What do you think?

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We're talking about seven different

corporations or organizations that were formed during that time.

Money going back and forth to these different corporations, and ultimately a lot of it going to the Wester House family.

Before it was just ashes and ghosts, the Westerhouse property three miles south of Platte, South Dakota, was impressive.

A 7,600-square-foot house set on 40 acres of land with additional recreational buildings and equipment.

There was even half a football field complete with goalposts and a separate two-story gym, batting cages, and a weight room, all of which emerged undamaged from the fire.

I'm going to have the gym here, you know, so the kids from the Platte School and get a school or anybody, they can come and use a gym to work out.

The property was valued at $1.3 million

and there were new additions all the time, like the 10,000 square foot storage facility or the indoor swimming pool, which was still under construction at the time of the Westerhouse's untimely demise.

So clearly, they had plans for the future.

That is, until the gear-up grant was pulled out from under them and their entire house of cards was burned to the ground.

Six months after the murder-suicide, Attorney General Marty Jackley announced that the financial investigation had revealed that Scott and Nicole Westerhaus had been embezzling grant money through Mid-Central for at least five years before their deaths.

The Division of Criminal Investigation wrote in an affidavit that initially the family tried to hide their crimes by transferring money back and forth between seven different organizations, creating false invoices and using secret credit cards.

That's on top of collecting salaries for each of their conflicting roles.

But as time went on, they, especially Scott, became a little complacent, living like that pool of money would never dry up.

Financial documents at the time of his death revealed that Scott Westerhaus had an enormous amount of debt.

He owed more than $120,000 on vehicles alone.

He owed tens of thousands more in credit cards and personal loans, and another $45,000 to a contractor who remodeled parts of his home.

More than 20 creditors came forward with claims against Scott Westerhouse's estate.

Another 24 filed their claims too late to qualify.

And the Westerhouses weren't just stealing from the gear-up funds.

There were other grants as well.

In total, more than $7.8 million flowed through the non-profits the family had created, most of which was tracked down, but at least $1.4 million had simply disappeared.

But really, judging by the complex the Westerhouses had built for themselves, it was hiding in plain sight.

Along with the ATVs, tractors, boats, saunas, and spas that could also be found on the property, all of which was auctioned off after their deaths to pay back debts they'd left behind.

Sale of the property, worthy $370,000.

Plant Ministerial Association.

Every round of the money.

The New Hope Christian Camp and Retreat Center sign is up, and a lot of work has gone into transforming this

into this.

The site where the Wester home once stood has been filled in, and what was supposed to become an indoor swimming pool is now being transformed into a chapel.

Scott Westerhouse had been asked about financial irregularities in Mid-Central's books when he was still alive during the organization's board meetings.

Scott used to blame voided checks and journal entries on why things weren't adding up.

It was nothing to be alarmed about, he would assure them.

just a few accounting errors that could be easily fixed.

And Scott had people that were willing to fix it.

People like his wife, Nicole.

She certainly had no issues submitting backdated contracts to auditors.

Anything to keep that money train chugging along.

Nicole was more than happy to help, but according to A.G.

Jackley, she wasn't nearly as involved in the embezzlement scheme as her husband.

Scott was the mastermind.

Jackly said Nicole's crimes were minor compared to the fate she sustained.

Quote, We found her laying dead next to her two children.

She suffered far beyond what she might have done in uploading the contract.

And then there were those who were involved whose fates had not yet been decided.

People like Stacey Phelps, the gear-up administrator and CEO of AIII, an organization that was discovered to have received over a million dollars from Mid-Central.

Stacey Phelps had also helped backdate and sign employment contracts for Rick Melmer and Keith Moore so that AIII could avoid being audited by the state.

Phelps had thousands of reasons to discourage anyone from looking into his books.

He had spent more than $200,000 of AIII's funds on personal expenses, gorging at retail stores, casinos, and restaurants.

This is a former gear-up employee speaking to Kellaland News.

And I would notice the extravagant spending,

the extra, you know, the Brazilian state house, $100-plus dollar, you know, bills off of one or two people.

The hands-off chairman of the board of AIII was a former astronaut named John Harrington, also known as the first Native American to ever fly in space.

After the Westerhouse tragedy, Harrington said he paid Stacey Phelps and AIIII a visit, where he was surprised to find 22 vehicles, all purchased without board approval.

John Harrington had been under the impression that AIII was a bare-bones operation.

but the fleet of vehicles suggested otherwise.

He also found a stack of contracts AIII had entered into without his knowledge.

It seemed Stacey Phelps had simply gone rogue, but the details of Phelps' unapproved personal expenditures coming to light proved to be the final straw.

John Harrington fired the AIII CEO.

That these particular charges by Mr.

Phelps were not for and did not benefit Native American children in furtherance of their education.

You know, certainly when you look at some of these specifics and the personal use, I mean, I think it's pretty clear that it wasn't being watched.

There was no better example of GearUp not being watched than the $4 million Microsoft DreamSpark software it had supposedly purchased but never used.

The software, which was required to receive the grant, was intended for use by students enrolled at a summer program at the South Dakota School of Mines and Technology, but there is no evidence that it was ever implemented.

What we didn't, as I'm understanding the finding, what we did not record is to which student which software went to, because it varied somewhat on which schools they were in.

All the schools had access to all of it, but we did not record which exact piece of software went to which students.

That's Dan Gorecki again, the director of Mid-Central Educational Cooperative.

His name was also on the backdated contracts related to the employment of Melmer and Moore.

Gorecki told investigators that Scott and Nicole Westerhouse told him that the original contracts had been lost, so they just recreated them.

Gorecki claimed he wasn't aware that the date had been changed, but he would have to save that explanation for a judge.

Both Dan Gorecki and Stacey Phelps were charged with multiple counts of falsifying evidence, as well as conspiracy charges for offering falsified evidence.

The forensic audit also found more than $55,000 in payments to a woman named Stephanie Hubers.

She was the former interim business manager for Mid-Central, and apparently she knew too much.

Investigators believed that the payments to Hoovers were supposed to be some kind of hush money, and she had sent false invoices to Mid-Central for work that was never performed to cover their tracks.

Stephanie Hoovers was charged with six felony counts of grand theft, grand theft by deception, and receiving stolen property.

Hoobers, Phelps, and Garicki voluntarily turned themselves in on March 16, 2016, when the warrants were issued.

They were the only three people charged in the Gearup scandal.

Through their lawyers, Huber's, Phelps, and Garicki asked for a trial by judge rather than by jury.

The defendants were afraid that they could not receive a fair trial.

They were afraid that the locals would seek vengeance against them for the deaths of the Westerhouse children.

Stephanie Huber's lawyer, Clint Sargent, accused the Attorney General's office of making his client and the other defendants scapegoats for a crime they didn't commit.

Quote, She has become the face, along with these two gentlemen, of the Attorney General's riding the deaths of those children and stealing from those Native American children.

There is no one for the community to have retribution from because Scott Westerhouse is dead.

In court documents, Sargent wrote: The state and the public at large have an appetite for vengeance and punishment that cannot be satisfied because the meal they crave is gone.

The trials were rescheduled and relocated to Sioux Falls.

All three would plead not guilty.

However, days before his trial was set to begin, Dan Garici accepted a plea deal, admitting that he had backdated the contracts, but was adamant that he had no idea how the Westerhouses planned to use them.

For his role in the scandal, 61-year-old Dan Garici was ordered to pay a $1,000 fine and $104 in court cost.

Dan had no idea what Scott Westerhouse was up to, and nobody alleges he did.

Dan was not involved in trying to interfere with an audit of HII

and the state has never alleged that.

And so at this point, the state felt it was a fair resolution.

We took into account the accepting responsibility for the backdating of the contract.

We took into account the willingness to cooperate.

Stephanie Huber's trial began in June 2018.

Almost three years had passed since the Westerhouse tragedy.

Over the course of four days, the prosecution set out to prove that Hubers was not only aware of Scott Westerhouse's money funneling scheme, but also instrumental in helping him pull it off.

Hubers maintained a secret set of books to hide the actual numbers from the organization's board and auditors.

She helped conceal the fraud.

But Stephanie Hubert's defense claimed she was just doing what she was told.

Hubers herself admitted that she was, quote, probably your ideal ignorant employee, and she denied ever accepting money to keep quiet about what was going on even though she knew what was happening hubers told investigators quote i guess i was the lesser person i kept my mouth shut and kept going huber's attorney clint sergent also argued that his client was not guilty of receiving stolen property because she didn't know the money she had received was stolen I think the law requires under these theft charges or receiving stolen property that a person has to know, they have to believe it in their heart that they're stealing or that they're receiving stolen property.

We don't apply criminal liability for what people should have known.

That's what the civil law is about.

Stephanie didn't know.

In his closing argument, Sargent reminded the jury of who was really responsible.

Quote: We all know that Scott Westerhouse was the worst kind of monster.

He was a control freak who named himself as a savior, but he was a destroyer.

He was a destroyer of lives.

He didn't have accomplices.

He only had victims, especially those closest to him.

We begin tonight, breaking news in a verdict in the first gear-up trial here in Sioux Falls.

A Minnehaha County jury has found Stephanie Hubers not guilty on all charges.

After six hours of deliberation on her 46th birthday, the jury acquitted Stephanie Hubers of all charges.

This is her attorney, Clint Sargent.

Stephanie Hubers

had asked me to tell everyone that

her biggest disappointment in this whole thing has been the way that the Gear Up program has now become synonymous with a scandal.

And it was a wonderful program.

It helped so many people and that's the thing that she hates most about all of this is that now Gear Up is connected to a scandal.

Stacey Phelps trial began in October 2018.

Like Stephanie Huber's defense, Phelps' attorney Dana Hanna kept Scott Westerhouse front and center, using words like criminal, liar, and conman to describe his client's former partner, while Hannah portrayed his client, Stacey Phelps, as an innocent man who got duped.

It was true that Phelps had backdated the contracts.

He admitted to doing so on the stand, but Hannah said that Phelps, like Dan Garici, thought they were merely replacement copies.

It hadn't even occurred to Stacey Phelps what other use the contracts could have served because he lacked the financial knowledge.

Dana Hanna described his client, Stacey Phelps, the CEO of AIIII and presidential medal winner, a poor leader with the added reminder that, quote, being a bad executive is not a crime.

The state attorneys told a very different story about how Stacey Phelps was very aware of his involvement and helped cover it up.

Assistant Attorney General Paul Swedland pointed at Phelps' extravagant spending and how he provided five inconsistent answers to investigators when asked about the backdated contracts.

Quote, Stacey Phelps wants you to believe he was duped.

He knew the contracts were different.

There were so many irregularities, no CEO would ignore them unless he was in on it.

This is a white-collar crime version of my dog ate my homework.

No matter how Phelps wants to slice it, the omitted contracts are fraudulent.

The prosecution also outlined text, emails, and phone calls between Stacey Phelps and Scott Westerhouse, where they had discussed the contracts in question.

Stacey Phelps claimed he didn't remember.

After hours of deliberation, a jury has found Stacey Phelps not guilty.

Late last night, a Minnehaha County jury acquitted Phelps of four counts of being accused of backdating contracts to try to avoid a potential audit.

Can you tell us how you feel at this moment?

Stacey would rather have me talk to him.

What do you think it was that swayed the jury to acquit him?

The fact that he's innocent.

The Indian people of this state have always known that Stacey Phelps is innocent of these charges.

Another disappointing loss for the state of South Dakota.

Millions of dollars missing or misspent, six dead bodies and no one held accountable.

The Attorney General's office just could not overcome that one giant missing piece.

See, the challenge in this case has always been

the lack of Scott Westerhouse.

The fact is that the state is unable to present some of the co-conspirators in its cases.

That makes it challenging.

I think another thing that was important that came out of the trial is the

importance of transparency.

I mean, if you look at the courtroom isn't the place to necessarily solve some of these financial-type corruption cases.

And when you talk about transparency, the media has a role.

I mean, you heard it, some of the trial testimony that people were noticing.

And I think if we look at these cases, I think the lesson learned is our state needs to look at its transparency.

What can we do as a state to be more transparent about what the financial dealings are?

In the wake of the gear-up scandal, South Dakota lawmakers aimed to close loopholes in state law that allowed it to go unnoticed for so long.

New laws that went into effect on July 1st, 2016 required additional disclosures about conflicts of interest.

It also enacted whistleblower protections for public employees.

and set up the state board of internal control.

But some in the state, including the two most recent gubernatorial candidates, say the new laws do not go far enough and that even more transparency should be required.

In April 2016, member districts of the Mid-Central Educational Cooperative voted to dissolve the organization and agreed to pay back nearly $300,000 to the South Dakota Department of Education, but not before a frenzy of lawsuits arose.

MCEC filed suit against AIII for improperly using their organization to bankroll its payroll, while both MCEC and AIII sued the Westerhouse estate to recover over $2 million.

And I didn't want my daughter to become a statistic of either teen pregnancy, alcoholism, high rates of suicide.

You know, I didn't want that for her.

I wanted to her, I wanted for her to have a better life.

And I always pushed education, always pushed her, pushed her, pushed her.

In May 2016, two Native American high school students named Alyssa Black Bear and Kelsey Walking Eagle Espinoza filed a class action lawsuit against Mid-Central, AIII and the Westerhouse estate, for misspending the funds intended for their people.

The students claimed that they were entitled to financial compensation because they didn't benefit from the grant that was supposed to give them access to higher education.

A class action lawsuit filed by Native American students concerning Gear Up is going all the way to the South Dakota Supreme Court.

In 2016, Kellowland Investigates told you Alyssa Black Bear and Kelsey Walking Eagle filed the lawsuit saying they want justice and restitution for 6,600 Native American students.

Our investigation found that despite millions of dollars being spent on the Gear Up program in South Dakota, there was no data to show any Native American kids went to college because of participating in it.

The South Dakota Supreme Court handed down its ruling in March 2019.

The chief justices had come to the unanimous opinion that the students' claims lacked legal standing and that they had failed to show a causal connection between the alleged wrongdoing and their alleged injury.

The defendants also argued that it was never proven that gear-up funds were missing, only that Bid-Central funds were misappropriated, so there was no proof that the missing money would have benefited the plaintiffs.

The students' case was dismissed on summary judgment.

Again, the Native American children were left with nothing.

All the Native American children that didn't benefit anything from it.

And we're not thinking just hundreds of dollars.

We're thinking millions of dollars that probably could have put a lot of our Native children into colleges across the state.

Swindled is written, researched, produced, and hosted by me, a concerned citizen, with original music by Trevor Howard, aka DeFormer.

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