PIERRE, S.D. – A single bank has been identified in a report as being the source of hundreds of deposits and withdrawals in an embezzlement case involving a state agency.
Some South Dakota lawmakers are pledging to take action following news that a former state employee was indicted for embezzling nearly $1.8 million in funding.
Members of the Government Operations and Audit Committee (GOAC) have authority to review spending and determine whether adequate controls exist to safeguard taxpayer money.
“As a member of Government Operations and Audit Committee I will be asking that we investigate this specific issue and review auditing procedures,” Sen. Tim Reed posted on X. Reed is a Brookings Republican who is the CEO of the Brookings Development Corp.
The lawmaker reaction followed Attorney General Marty Jackley’s announcement that Lonna Carroll of Algona, Iowa had been charged with two counts of aggravated grand theft. Carroll had been an employee with the South Dakota Department of Social Services in Pierre before leaving state government in March of 2023.
She’s accused of stealing money from the state’s foster care system over the course of more than a decade by submitting requests for services for individual foster children, approving the requests, and then having access to withdraw those funds from the bank where she then used the money for her personal benefit.
The Dakota Scout obtained a report prepared by the South Dakota Department of Legislative Audit, which participated in the investigation into Carroll with court authorization. The report sheds more detail into how she allegedly perpetrated the thefts that occurred over the course of more than a decade.
Legislative Audit’s review of Carroll started with activity beginning in 2010. Once Carroll had approved her own spending request, the South Dakota Office of State Auditor would endorse a check to the Department of Social Services from the state’s Family and Child Information System.
“These checks were deposited into various bank accounts in DSS’s name at American Bank and Trust, and then on the same day the funds associated with those deposits were withdrawn in the form of cash,” the report says.
America Bank and Trust participated in the review, turning over records that the state no longer had access to because they fell out of the timeframe required under state retention rules. American Bank and Trust did not respond to a request for comment, asking if they had changed any of its business practices in light of the large-scale fraud or if there was something it could have done to prevent the fraud.
The Legislative Audit’s report ended with a one sentence recommendation that the Department of Social Services consult with legal counsel to “consider options for the recovery of amounts identified in this report and the cost of our special review.” However, Jackley told reporters Thursday that recovering any money would likely not be possible because Carroll had not used it to buy assets that could be seized.
Sen. David Wheeler, a member of GOAC, said he hopes to add the issue to the committee’s next meeting scheduled for July 31. Wheeler said it’s important to know how Carroll evaded controls designed to prevent employees from approving their own spending requests and then having access to the money.
“I think that GOAC has a role,” the Huron Republican told The Dakota Scout Saturday. “One of its important functions is overseeing the operations of government in general. When you have a theft of this size, you have some inherent questions that need to be dealt with.”
Rep. Linda Duba, also a committee member, agreed.
“We need to review how it happened, what changes we’ve made, and make sure we know it is working,” the Sioux Falls Democrat told The Dakota Scout.
Salem Republican Rep. Drew Peterson said that the committee will likely have to wait until the attorney general’s investigation concludes before a thorough review can be done by GOAC. He does not want the committee to get in the way of that investigation.
“When I heard about the alleged embezzlement of nearly $2 million of funds intended for care of foster children in South Dakota, I was disappointed and upset,” he said. “Now it’s our job to make sure it doesn’t happen again.”
GOAC has previously been involved in inquiries into other high-profile investigations in state government. In 2021 the committee heard from former Department of Labor employee Sherry Bren, who was at the heart of nepotism allegations involving Gov. Kristi Noem. The committee was also involved in the Gear Up investigation in 2017 and the EB-5 embezzlement scam in 2013 and 2014.
Jackley, who was attorney general during both of those investigations, said Carroll’s alleged embezzlement, while over a longer period of time, was similar in scope to those prior scandals.
