Employees say reports of suspicious activity dismissed by department of revenue management, cabinet secretary
PIERRE, S.D. – Internal reports of a potential fraud by a state employee within the South Dakota Department of Revenue went unchecked by top department officials for years, an investigation by The Dakota Scout has unveiled.
Leadership within the state agency that employed Sandra O’Day, a former supervisor in the motor vehicles division who used her state position to create fake vehicle titles that were then used to obtain bank loans, received multiple tips from former coworkers about suspicious activity over the course of the years. But they failed to act on those tips, or alert authorities before O’Day’s death earlier this year.
That’s according to at least five former coworkers of O’Day, who allege their highest-ranking bosses were directly notified of suspicious behavior involving O’Day as early as 2019.
Among those are Jim Terwilliger — now serving as Bureau of Finance and Management (BFM) Commissioner, who was revenue secretary through several years of O’Day’s service as a state employee, and Rosa Yeager, director of South Dakota’s Motor Vehicles Division – the department responsible for vehicle titling.
“They had the tools to look into this,” said a source who spoke with The Scout on condition of anonymity due to fear of retribution. The response by Revenue Department management was characterized as “dismissive.”
In July, The Scout reported O’Day was the subject of an investigation by the Attorney General’s Division of Criminal Investigation (DCI) following a years-long scheme in which she created fraudulent vehicle titles in her mother’s name — over whom she had power of attorney — before using the fake titles as collateral on bank loans.
It’s estimated O’Day defrauded banks out of about $400,000 over nearly a decade before her retirement in 2023.
O’Day’s former coworkers acknowledge that her being appointed the manager responsible for internal office fraud prevention likely played a role. It’s also why violations of internal office policies around document security frequently occurred, they say.
O’Day was known to take titles and paperwork home from work, though department policy prohibited it and her bosses were aware. O’Day was also said to have improperly secured documents, most often having them strewn across her workspace – causing them to get lost. Others raised alarm bells when O’Day was strongly suspected to have taken money intended as gifts from the office for coworkers.
When confronted directly about lost documents, O’Day told fellow employees to “just lie” about it to consumers, one employee said. This was part of at least one of the complaints forwarded up the chain of command, but not acted on.
“People who were, and still are, in leadership looked the other way,” said another source, also speaking with The Scout on condition of anonymity due to fear of retribution.
Neither Yeager nor Terwilliger responded to requests for comment about the allegations.
The discovery of O’Day’s vehicle titling scheme — reported to state authorities by her family following her death in early 2024 — was one of two fraud investigations related to the Department of Revenue this year. In August, The Scout first reported that the employee who replaced O’Day as a supervisor, Lynne Hunsley, was fired for an alleged incident of fraud on the job. DCI’s investigation into the matter is still ongoing, at least one other employee has been fired by the department of revenue since.
Problems within the Department of Revenue — coupled with an ongoing criminal proceeding against a former Department of Social Services employee who allegedly embezzled $1.8 million in state funds — have policymakers in Pierre considering actions to prevent such incidents in the future.
Attorney General Marty Jackley has signaled his interest in bringing legislation that would protect whistleblowers and give him more authority to pursue allegations — while the Government Operations and Audit Committee (GOAC) is slated to hear from leadership with Revenue and Social Services before the end of the year. Lawmakers have signaled their intent to address fraud in the upcoming 2025 legislative session.
In the meantime, leadership within the respective departments has begun to implement their own changes. South Dakota Searchlight reported last month that Social Services Secretary Matt Althoff told the State Board of Internal Control that the agency was considering an anonymous tip line for employees to report suspicious incidents.
The Revenue Department is also making moves.
“The department has already implemented an anonymous reporting process for our employees,” a spokeswoman for the department said in a statement to The Scout.
As head of BFM, Terwilliger also chairs the State Board of Internal Control. In June, during a board meeting, the Department of Revenue presented on “five control failures,” later linked to O’Day. However, no specific details were provided, and committee members did not ask for clarification on the incidents.
