EAGLE BUTTE, S.D.? A bail-out plan for the financially struggling Si Tanka-Huron University is part of a proposal to leverage compensation money for a $30 million bond issue that will be put to referendum vote.
The issue was brought up during a two-day special council session shortly before Thanksgiving.
Karen Walker, representing Banc of America Securities in Chicago, Ill., told the council it could leverage compensation money for economic development, infrastructure, education and recreational, health and social welfare projects.
The tribe will receive nearly $290 million and accrued interest under a congressional act that authorized payment for lands taken during the Missouri River Pick-Sloan Dam project.
The $30 million, 20-year bond issue would net about $26.5 million the tribe could spend on refinancing debt and new capital projects.
The council is considering using it to pay off the debts of the university, repay a loan for the tribally operated Super 8 motel, refinance an outstanding bond issue for a tribal buffalo ranch and construction of a new 60-bed nursing home facility.
Also on the wish list, is manufactured housing plant and expansion of Lakota Technologies, the tribe’s communications, Internet and technology company.
About $5 million of the bond issue would be set aside for debt service from 2011 to 2022 and $3 million for debt service reserve fund. Walker said the tribe would pay about 5 percent interest and receive the highest bond rating based on federal government security.
The tribe faces a daunting challenge to restore financial health of the university system. Si Tanka purchased Huron University earlier this year, but overspending on salaries, alleged undisclosed outstanding debts tied to the transaction, accounting irregularities, accusations of overspending on travel and a lower student enrollment than owners estimated spiraled into massive debt.
Former key administrators allege that when the tribal college bought Huron University, its officials were misled about its financial status.
The tribal college bought the university using a $3 million direct loan from the U.S. Department of Agriculture and a $3.3 million loan from Marquette Bank, guaranteed by USDA. That bank loan was an existing debt the university’s previous owners had at a lower USDA guarantee rate.
Following the purchase of the university, a board composed of tribal representatives and people from the Huron community was formed. Three of the four new board appointees from Huron were owners of NEWCO LLC, the holding company that previously owned the university.
Financial problems surfaced after the firing and shuffling of key administrators including former president T.L. Traversie who levied accusations against the university’s board, saying it violated its own charter when he was fired.
Keith Jewett, vice president for research and development who was later appointed chief operating officer, was forced to return to the Si Tanka campus at Eagle Butte.
Jennifer Schoelerman, Jewett’s daughter, serving as university chancellor, took over as acting president until the North Central Association of Colleges and Schools team visited the campus in late October. She was fired shortly after that visit.
In mid-October, the board had appointed R. John Reynolds, a former Huron University president, to serve as a consultant. Two weeks later, Schoelerman fired Reynolds but on Nov. 3, the board hired Reynolds as the university’s chancellor.
Mitch Schoelerman, Jennifer’s husband, who had served as special assistant to the president for finance, and Chastity Guthmiller, executive assistant to the vice president and cheerleading coach, alleged they were targeted along with 33 other employees for termination.
Traversie, Jewett and Schoelerman filed suit in the Third Judicial Circuit Court against the university and its board of directors seeking an injunction and reinstatement to their positions.
Rumors of financial woes spread through the small northeastern South Dakota town like wildfire when Theresa Hofer, the university’s former finance officer, and another employee in the department were fired.
Downplaying the staff shuffle and financial woes, Dick Shelton, who became director of administration, and Chastity Jewett, another of Keith Jewett’s daughters, who was director of public relations and development, said the firings were simply part of corporate restructuring. Sheldon suggested the rumors were merely disgruntled employees wishing ill will against their previous employer.
Hofer was accused of having deleted more than 123 files from an accounting program, a charge she denied.
Gerald D. Biby, a Nebraska professor of finance and a former Certified Public Accountant, told the tribal council Nov. 8 that the files were recovered, including one revealing a $3,000 transaction to a Swiss bank account in August.
The 2001 budget for salaries for the two campuses was $6.59 million. Biby’s accounting of the salaries showed increases and new hires had put the tribal university further in the red, nearly $2.3 million.
Some increases included hefty pay raises for university employees named in the suit. Jewett received a salary of $75,000, but his salary was listed as $100,000 as of July 31. Jennifer Schoelerman received a $75,000 salary as chancellor as of July 31. Mitch Schoelerman’s position was budgeted at $39,600, but the salary was boosted to $75,000 as of July 31. Chastity Guthmiller, earning $24,292, had received a $6,000 raise as of July 31 and by Oct. 15, her salary was boosted to $49,250 with another $18,764 raise.
Other salary increases appeared suspect, including raises for others closely aligned with the former key administrators. Dick Shelton, listed as director of administrative services, received a $25,915 pay raise, from $46,920 to $72,832. Chastity Jewett, with no previous experience in her position, was making $36,000 when she started her job and received a raise of $13,250 bringing her salary to $49,250.
The financial questions continued as Huron sources suggested bills went unpaid amid allegations of lavish spending on travel by Jewett.
Chastity Jewett, who spoke on behalf of her father, said money spent on travel was for fund-raising trips, trying to lure investors to donate to the university. Traversie and Keith Jewett were contacted by phone and ignored messages.
Although some new employees without permanent housing stayed in dormitory rooms, Jewett stayed for months at a hotel just a few blocks from the college. Sources, including a former tribal councilwoman, suggested the bill tallied nearly $30,000.
Gary Montana, a Wisconsin lawyer hired to find financing for the purchase, said he warned the tribal college officials against buying the university without checking out its outstanding debt.
While attempting to put together a financing package to buy the Huron campus, Montana said Jewett continued to ignore requests for budget figures. Montana said Traversie and Jewett later reneged on the consulting agreement and failed to pay him for his efforts.
Pat Haley, a consultant hired by Jewett to write a grant and develop a statewide inmate education program, said Jewett paid only a small portion of his consulting fees. Haley reported that Jewett pressured him to write quick, turn-around grants for desperately needed income.
Haley confirmed that Jewett spent thousands of dollars on trips to destinations such as San Francisco and the nation’s capital while refusing to pay Haley for his work.
‘He would bring people like me aboard, looking for us to pull a rabbit out of the hat and turn some money right now,’ Haley said.
‘I’ve written grants for 15 years and any grant proposal you are turning out in two or three days isn’t worth writing because it is not for real.’
Haley said he repeatedly asked Jewett for budget figures he could use for the grant application, but Jewett failed to provide the financial information.
Biby said other accounting irregularities included a $1 million athletic scholarship account that had been deducted twice causing the appearance that the athletic program was losing money and a separate set of books for an alleged bogus corporation called ‘Company 201.’
‘It appears there has been something going on. I went well beyond what I want to get involved with this because I don’t do this type of work anymore,’ Biby told the council.
Jennifer Schoelerman accused Reynolds of making racist comments during board meetings and meetings with the USDA officials, suggesting that because Huron was a ‘white town’ and the university campus would have to have a white president. Reynolds has denied he made the remarks.
From the start, the university began to draw on a $ 1 million line of credit and as it began to run dry and enrollment was down nearly 200 students below estimates, officials began to see the university would be in the red by at $1.5 million in anticipated revenue.
With the university clearly in financial trouble, Traversie attempted to negotiate a second loan with the USDA. He asked for a $2 million loan and a $1 million grant to help the university recover.
USDA officials, under the direction of congressmen, told Board Chairman Mike Rousseau Oct. 17 that a loan wouldn’t be extended until the ‘present management’ was dismissed, documents in the lawsuit show. One reason listed is because Traversie ‘could not control’ Jewett, the chief operating officer accused of overspending.
Biby said he also found that former Chancellor David O’Donnell, who left to return to a Colorado college even though his position was guaranteed as part of the purchase agreement, had begun to draw on a $270,000 note allegedly paid off when the Si Tanka bought the university.
Biby said the former university official allegedly directed the university’s former finance officer to set up an account at Marquette Bank where he began to draw at least $5,000 a month until August. ‘We have the cancelled checks.’
At least $1 million of the debt outstanding was supposed to have been retired before the purchase took place. Because of that, Biby said the university isn’t liable for the debt.
After lengthy debate and still trying to determine who was physically in charge of the dual-campus university system, Tribal Chairman Gregg Bourland said,’ This is a dilemma. It’s not like we can just drop Huron like a hot potato and go back to having Cheyenne River Community College or Si Tanka as a stand alone ?one fails, they both fall. This college is in need of anywhere from $10 million to $12 million dollars just to pay off all their debt and get on with the business of being a college.’
Tribal Attorney Tom Van Norman, and at least two tribal councilmen and several enrolled tribal members, said they tried to warn Si Tanka officials and the remainder of the council to carefully investigate the university’s financial status prior to the purchase, but Traversie and Jewett pushed the deal forward suggesting there was competition.
Tisha Moran, a tribal member who signed a petition along with 400 others, opposing the purchase, told the council, ‘The people don’t want this.’
Alverda Iron Bird asked the council what would become of the university?
‘I’m going to do everything I can in cooperation with this tribal council to find a way to save both colleges and at the very least our local college,’ Bourland said.
University officials said 619 students, including 80 Native American students, attend classes at the Huron campus and more than 200 students attend classes in Eagle Butte.
Traversie and Jewett were scheduled to return to discuss the matter further during the special session, but neither appeared. University Board Chairman Mike Rousseau also was absent.
Nov. 21, Chairman Bourland directed the election board to prepare for the referendum. Councilman Zack Ducheneaux said the vote will take place in 60 to 90 days. Tribal officials are expecting to issue the bonds in January.