Senator accused of illegally pocketing COVID funds cooperating with state

Attorney General Marty Jackley says a Rapid City state senator accused of illegally accepting more than $600,000 in COVID relief funds is working to resolve the situation.

Monday was the Jackley-imposed deadline for Sen. Jessica Castleberry, R-Rapid City, to either pay back the $603,219 in funds she collected for her daycare business, Little Nest Preschool, or to come to an agreement with the state on how to move forward.

Rapid City senator accused of illegally accepting $600,000 in COVID-19 relief funds

A letter from Jackley dated July 26 said failure to do so by 1 p.m. Aug. 7 would cause Jackley’s office to “pursue the matter in court.”

Jackley’s statement did not elaborate on the nature of Castleberry’s cooperation. It’s unclear if she’s agreed to pay back all or some of the funds immediately, to pay back the funds over time, or if she’s committed to paying back the funds at all.

The statement says only that Jackley’s office “continues to receive and review documents related to this issue, and we are still awaiting documents from the State Department of Social Services.”

“Senator Castleberry and the State Department of Social Services have been cooperating with this office,” he wrote.

The letter from Jackley and a news release from Gov. Kristi Noem each noted late last month that Castleberry had run afoul of conflict-of-interest laws by accepting the funds, which came from the federal government but were administered by state agencies over which Castleberry has a say in her role as senator. Noem’s news release said a staffer for the Department of Social Services noticed the senator’s name on an application for $4,000 additional dollars.

The state Supreme Court has ruled that lawmakers cannot vote on bills from which they would personally benefit through state contracts. Castleberry voted on the appropriations bills which included the funds she’d later collect for her business. 

Castleberry’s current situation with the Attorney General is tied to the collection of funds funneled through the state to support her business in the face of the COVID-19 pandemic, but she also took in federally administered funds. Little Nest Preschool also received $164,520 in federal PPP loans, which are not part of the state-allocated federal funds.

Castleberry was appointed by Gov. Noem to fill a vacant seat in 2019 and ran unopposed on the ballot last fall. She issued a statement on the allegations last month that claimed that she’d followed all applicable laws. Her statement to South Dakota Searchlight also pledged to cooperate with authorities to resolve the matter.

Castleberry later told The Dakota Scout newspaper she would not seek reelection in 2024. 

Ian Fury, spokesman for Gov. Kristi Noem, said all questions on the matter should be referred to Jackley’s office. Castleberry has yet to respond to a request for comment from South Dakota Searchlight.

Sen. Lee Schoenbeck, R-Watertown, told his fellow lawmakers during a meeting of the South Dakota Legislature’s Executive Board on Monday that he’d like that committee to discuss the Constitutional provision on conflicts of interest that led to an investigation into Castleberry’s pursuit and acceptance of COVID relief funds.

The Senate Pro Tempore said people with an interest in running for office have asked him recently if they might wind up in violation of the provision if they’ve done business with the state. He also said current lawmakers need more clear guidance on the rules.

“We’ve got, and I suspect you’re going to hear it in the news in the next month, more instances of people that are in transactions (with the state),” Schoenbeck said. “We have to do something for potential candidates and current legislators so that they’re not getting in trouble. The more hands that look at that, the better.”

Schoenbeck said he’s already begun drafting some verbiage to clarify guidance for lawmakers, and that he’d like to add it to the agenda of the executive board’s next meeting.

EDITOR’S NOTE: This story has been updated to include comments from Gov. Noem’s office and South Dakota Sen. Lee Schoenbeck.