Major bills responding to alleged state employee crimes may have to wait, lawmaker says

State Rep. Ernie Otten, R-Tea, during the 2023 legislative session. (Makenzie Huber, South Dakota Searchlight)

After several cases of allegedly criminal state employee conduct were unearthed during the summer, a legislative committee chairman said Tuesday he doesn't know if lawmakers will introduce bills addressing the issue during the next legislative session.

A former state Department of Social Services worker pleaded not guilty in August to stealing an estimated $1.8 million from the department's Division of Child Protection Services over the course of 13 years.

In the state Department of Revenue, an employee allegedly used her position to create 13 fake vehicle titles used to secure $400,000 in loans, according to the Attorney General's Office. The office filed charges against that employee last month, along with charges against another employee for allegedly failing to report the situation and cooperate with law enforcement.

While department heads say they plan to strengthen internal controls and Attorney General Marty Jackley plans to propose mandatory reporting requirement legislation, Rep. Ernie Otten, R-Tea, said the Government Operations and Audit Committee should continue investigating the cases to find where the agencies "ended up going off the rails."

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He suspects the issue is systemic and deserves more than reactive legislation, Otten told South Dakota Searchlight after he presented the committee's annual report to the Legislature's Executive Board on Tuesday in Pierre. If lawmakers don't understand the systemic issue, then legislation introduced prematurely could leave a hole in the system, he said.

He told the Executive Board that, although the cases threaten the credibility of state government, the Legislature won't have "the full dive into correcting some of these things" until 2026.

Most of the concerns can be solved with internal control software updates, he added. But, he told South Dakota Searchlight, stronger understanding and legislation is required in addition to the internal control improvements.

The State Board of Internal Control is tasked with implementing a system to detect and prevent financial fraud. The board is still implementing the statewide internal control framework.

Otten's committee will subpoena Revenue Secretary Michael Houdyshell and Motor Vehicle Division head Rosa Yaeger to testify in a closed-door session at the committee's next meeting Dec. 11-12. Houdyshell refused to answer lawmakers' questions last month because of the pending prosecutions, and the prospect of lawsuits from banks that issued loans based on the allegedly fake titles.

Lawmakers should hold a public hearing after the cases are resolved, Otten added, even though lawmakers will "know all the answers" by that time.

"If I did nothing, the public would sit there and say, 'There they go again. They're hiding it,'" he said. "And so I thought it was incumbent that even though it might not get all the answers, at least the public knows we are looking into it. We take this very seriously."

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Otten also told board members another investigation is ongoing involving a contractor with the Department of Human Services.

The Meals on Wheels program in western South Dakota, which provides free meals to elderly South Dakotans, unexpectedly shut down programs in several northwestern towns this year, according to The Dakota ScoutTimber Lake Topic

The closure reportedly left several vendors uncompensated and was allegedly a violation of a contract with the Department of Human Services by the program's provider, Western SD Senior Services Inc., which is based in Rapid City. Meals on Wheels is funded with federal and state dollars , which can include Medicaid support , in addition to private donations.

Sen. Ryan Maher, R-Isabel, fielded calls from concerned local seniors and vendors involved with the Meals on Wheels program. Maher referred the concerns to Otten and the Government Operations and Audit Committee.

"A lot of money is unaccounted for," Maher told South Dakota Searchlight.

The Attorney General's Office confirmed it is conducting a Medicaid fraud investigation. Otten said information could be slow to emerge.

"By the time we get to December, I doubt any of that information will be brought forward," Otten said, "but we'll still dive into that somewhat."