- Associated Press - Thursday, March 17, 2016

SIOUX FALLS, S.D. (AP) - The defense attorney for a Rapid City man facing felony charges from a financial investigation of South Dakota’s GEAR UP grant program argued Thursday that his client is a political scapegoat for a state and attorney general who allowed taxpayer dollars to be stolen.

The investigation has resulted in charges against three people, including Stacy Phelps, a former GEAR UP administrator who also previously served as CEO of the American Indian Institute for Innovation, a nonprofit where Scott and Nicole Westerhuis had financial oversight positions.

The couple, who died in a murder-suicide last year that also claimed the lives of their children, allegedly stole hundreds of thousands of dollars from the Platte-based educational cooperative where they worked, according to investigative findings released this week by Attorney General Marty Jackley.

Investigators say Phelps and Dan Guericke, director of Mid-Central Educational Cooperative, helped them attempt to avoid a potential audit of the Institute by backdating documents. The couple allegedly raided the nonprofit for personal financial use after siphoning money from the cooperative’s bank account to the Institute for payroll.

Investigators believe the total amount that Scott and Nicole Westerhuis stole exceeded $1 million. Defense attorney Dana Hanna said Phelps isn’t accused of theft, and said the charges for falsifying evidence are “groundless.”

“The guy who did this is dead,” Hanna said. “Now they’re looking for scapegoats to take attention from the fact that the state was sleeping while Westerhuis stole $1 million from the taxpayers.”

An attorney for the American Indian Institute for Innovation said Wednesday that Phelps is no longer an employee there.

Authorities investigated after the deaths, determined there was probable cause to believe a crime was committed and filed charges, Jackley said.

The deaths occurred just hours after the state informed Mid-Central that it was losing a contract for GEAR UP because of financial problems and accounting failures.

Gov. Dennis Daugaard said in a statement after the announcement that the charges show the state was right to cancel the contract.

An attorney for Guericke, who is on administrative leave, didn’t immediately return a telephone message requesting comment. An attorney for Stephanie Hubers, who faces charges related to theft or receiving stolen property, has previously declined to comment.

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