State auditor says legislative factions are spreading conflict-of-interest allegations

The state auditor said Tuesday he has fielded claims that numerous legislators are violating state constitutional provisions regarding conflicts of interest. 

“I haven’t been given any names, but I’ve been alerted that there are possibly 20 legislators out of the 105 that would probably have some sort of conflict,” said Auditor Rich Sattgast, who shared the information with the Legislature’s Executive Board on Tuesday in Pierre.

Sattgast later told South Dakota Searchlight many of the alleged conflicts of interest are being reported by lawmakers against other lawmakers.

“We have these factions that are trying to take one another out, and they’re trying to use this office as their way of going about that,” he said. 

In the Executive Board meeting, Sattgast and committee members discussed Article III, Section 12 of the South Dakota Constitution. It bans legislators from having an interest, “directly or indirectly,” in a state or county contract authorized by a law passed during their term.

Controversy flows from Castleberry situation

In August, Sen. Jessica Castleberry, R-Rapid City, resigned and agreed to repay $500,000 in federal COVID-19 relief assistance she received for her child care business. The situation had gone public earlier when Gov. Kristi Noem accused Castleberry of violating the conflict of interest law. 

Sen. Lee Schoenbeck, R-Watertown, asked Sattgast on Tuesday whether the state has procedures for handing conflict of interest allegations. 

Legislator’s conflict of interest puts meaning of ‘indirect’ under microscope

“Is there a process where you’re looking at them or doing something?” Schoenbeck said.

Sattgast said yes, but, “At this juncture, I really want to wait and see what the Supreme Court says.” He was referencing a recent request from Noem. She’s seeking an advisory opinion from the court to further clarify the meaning of the constitution’s conflict-of-interest provisions.

Sattgast told the Executive Board that he and other state officials are considering the integration of alerts within South Dakota’s accounting system. He said the system would incorporate information from legislators’ financial disclosure forms and flag contracts with any legislator-involved businesses. 

But the system would only be as good as the data fed into it, and Sattgast said that data isn’t great.

“I’ve gone through several legislators’ conflict of interest statements and many just have one line filled out on there,” he said. “One that I reviewed was from a legislator who said, in that statement where you’re supposed to name where you receive your funds, it said ‘my rental properties’ without listing the name of the rental properties.” 

Rep. Hugh Bartels, R-Watertown, the chairman of the Executive Board, said the board will send letters to all legislators soon asking them to list all possible conflicts of interest. Bartels said the information will be used to help former U.S. Attorney Ron Parsons, a lawyer hired by the Legislature, to file a brief for the Supreme Court’s use in forming its advisory opinion.

Memo explains constitutional provisions 

In a memo to the board, Justin Goetz of the Legislative Research Council explained two conflict-of-interest prohibitions in the state constitution.

The state Supreme Court has written that the purpose behind both clauses is “to remove any suspicion which might otherwise attach to the motives of members who advocate the creation of new offices or the expenditure of public funds.” 

One clause prohibits legislators from being appointed or elected to state offices created – or whose pay is increased – during their term. Additionally, they can’t receive state job appointments from the governor or Legislature during their term. That clause has not been interpreted in any state Supreme Court rulings, according to Goetz.

The other clause bars legislators, during their term and a year thereafter, from being directly or indirectly involved in state or county contracts authorized by laws passed during their term. 

The state Supreme Court has interpreted that clause in five rulings, Goetz wrote. But several questions about the clause remain unanswered, according to Goetz, including the extent to which family members’ interests affect a legislator and the impact of owning shares in publicly traded companies.

Schoenbeck said the gray areas left by the Supreme Court need clarification. 

 “There are no guidelines in those cases,” he said. “There’s a whole lot of confusion.”

Rep. Will Mortenson, R-Pierre, said he hopes the upcoming Supreme Court advisory opinion takes into consideration how much bigger state government has become since the constitution was established. 

“This was written in the 1800s, when the Legislature would approve contracts one by one,” Mortenson said. “We’re in an entirely different paradigm here.”