DLN Issues : South Dakota Government -- Racism
(Pierre, SD) Since serving as Treasurer of South Dakota, Dick Butler has overhauled banking practices, overhauled primary banking contracts of colleges and universities, overhauled collateralization of public deposits and in six years returned unclaimed properties accounts that totaled more than 500% of what had been returned to citizens during the previous 20 years combined. Millions of dollars have been returned to South Dakota citizens through his efforts.
During the time Butler has been Treasurer his actions have been the impetus for the creation of a gag law intended to silence his efforts. The Commissioner of Banking in South Dakota, Richard Duncan, wrote a memo to all state banks in South Dakota advising them not to give information to Butler regarding executive accounts, and a bill was proposed that was intended to strip the State Treasurer of his banking authority for colleges and universities.
The controversial gag law, spurred by Janklow, was passed in 1996. It closed some corporate records and prohibited state officials from discussing information on investigations into the actions of corporations.
Butler's efforts to demand standard banking practices to protect citizens of South Dakota have been called politically motivated by one editorial staff of a major paper and despite giving information to the mainstream press in South Dakota that has included the wrongful use of blank checks, deletion or destruction of unclaimed properties files authorizing payment of unclaimed properties money totaling hundreds of thousands of dollars of paid accounts and serious questions regarding financial deals made by the current administration, his findings have received little to no coverage.
As the first Democrat to hold that office in 58 years, Dick Butler shared his thoughts on what he has accomplished in that office and what he would like to see accomplished during the coming term by the next person elected as Treasurer. Butler is currently running for State Auditor.
Butler spoke with Lakota Journal, "I think the gag law should be repealed. I am not interested in pursuing it in the courts because I think that South Dakota needs to have a public discussion about open government. This overreliance on the courts to solve every problem and to undo every piece of mischief by our legislature is just begging the issue."
A report by the Better Government Association, in Chicago, ranked South Dakota the worst in the nation overall in terms of availability of public records following a review of state public access laws. The study graded states on the response time for records requests, available appeals, fees or other costs and penalties for noncompliance. South Dakota's law met none of the requirements that the Better Government Association said a good law should contain. According to the 2001 study, South Dakota's public access laws are among the most restrictive in the nation. A vague open records law in South Dakota declares many documents public, but additional laws written over the years have included numerous exceptions to it and have overridden it's purpose.
Jay Stewart, Attorney with the Better Government Association told Lakota Journal that the open records law in South Dakota, "Is so vague as to be meaningless. It doesn't say how long does an agency have to respond, what is your right to go to court, does it get expedited in court, what is the penalty for noncompliance, none of that is in South Dakota's law. Looking at the law, you can't tell what it is and that is why it scored so poorly."
Dick Butler was asked how he sees the gag law affecting the average South Dakotan. Butler responded, "In essence, it reflects the intolerance of one party rule, it's just one part of that. It's a very tight ship here in South Dakota. The Republican Party dominates both houses of the legislature and no one thinks that it's an issue. We typically have one or two democrats in our congressional delegation of two senators and one at large house."
Butler explained, "I gave to the press in South Dakota a folder full of information on a bill that was intended to strip the State Treasurer of his banking authority for colleges and universities. It included correspondence with university presidents, the members of the board of regents, the governor and also showing that the bank used at South Dakota University had on the board three South Dakota State University presidents, two former and the sitting president. They were on the Board of the bank that happened to have all the business. There was very good information from competing banks. This was an explosive issue that was handed to the largest press in South Dakota and they never touched it. Nothing about this was ever published in South Dakota."
Butler cited the effects of a closed government compounded by what Butler sees as a cloak of silence. He said, "South Dakota is a closed shop and one of the most skillful ways to maintain power is to deny information. An example is the sale of the state owned cement plant. The governor would not allow the members of the legislature to look at the contract. This is a state asset. Ultimately, the leadership was allowed to look at the contract but not take notes or make any copies. This legislature actually passed this for the governor. No citizen has a clue of what is on the contract and the legislature said, 'essentially, whatever you tell us is fine, we'll vote for it.' And they did. The latest thing is that the legislature gave the governor the sole authority to securitize the tobacco settlement money, which he did with the firm he used to work for."
Butler was referring to the recent tobacco settlement with the states. He explained, "So many million a year are paid to the state and the governor securitized it." Securitization refers to the immediate sale of future income from the money, essentially accepting a lump sum payment in exchange for a future revenue stream. Butler said, "A number of states or counties have securitized all or a portion of the money, but they are places that are in deep financial crisis, such as Wisconsin. My view of this transaction is that it was vendor driven . Why was the governors former firm participating and what did they bring to the table besides the governor? We gave up at least a third of the revenue stream, probably more."
Butler commented on the failure of any of the major press in South Dakota to cover the deals. Commenting on the failure to question whether or not deals should be made, he said, "All they reported was that he made the best deal possible. That was the logic on the cement plant deal as well…that's just what you do. It's a disgrace, we're a small state and we can't afford a lot of things like this."
He said, "The legislature in South Dakota is busy trying to move into the executive branch as I see it in any number of areas, from the management of pension monies to some of the audit functions."
Currently running for State Auditor, Butler was asked what the state auditor does. He said, "Right now, not much. Like the state Treasurers Office before I took over. When I took the state treasury, there had been a secret deal between the former treasurer and Citibank. I rejected that deal stating publicly that I would perform an audit and make my own assessment of what was owed to the unclaimed property division. Because I dared to publicly jawbone Citibank, whose CEO was a former Chief of staff for the governor, the governor and the present gubernatorial candidate spearheaded the gag law. Republicans said Citibank was a good corporate citizen and I damaging their reputation. Now, Citibank has been implicated in the Enron, WorldCom and Smith Barney scandals. They owed, in my opinion 30 to 80 million in unmatched payments. However, our Supreme Court said the Governor can usurp the power and the authority of the Treasurer, and cut his own deal. Additionally, the state treasurer was cut out of the lawsuit, this was a lawsuit designed to get a negotiated settlement that would then be sealed."
That settlement with the state of South Dakota has remained sealed, meaning citizens will never have access to that information. He added, "Frankly, the courts of appeals are getting tired of these friendly lawsuits that have been commenced to then do a negotiated settlement that is sealed so that there is no publicity. These are public issues, involving public officials and involving public money, and they remain sealed."
Commenting on the failure to provide coverage of these issues, Butler said, "If the newspapers are not part of the problem in South Dakota, then I would say they have no influence whatsoever. Either they have zero influence or they are part of the problem."
Butler spoke about the time shortly after he was elected. He said, "I cleaned up an unreal mess. During the transition audit when I took over, we had to demand and beat on the table, at three meetings with the auditor general, to get information into the audit findings that we knew they had. The findings included the use of blank counter checks in the state treasurers office outside of the voucher warrant system." He explained, "I paid more unclaimed property money back in three years than had been paid back in the previous twenty years combined. This was money paid back to the rightful owners and includes unclaimed bank accounts and other funds. They were just keeping that money, with only feeble attempts to return it to the rightful owners. And they were deleting paid files…how interesting…deleting paid files. Paid to whom? Well, we don't know; because the files were deleted. In Massachusetts, they put the Unclaimed Properties Division Manager in jail because he had stolen millions of dollars of unclaimed property money. In South Dakota they have simply deleted the files, so there is no audit trail. Who did they pay the money to? It becomes impossible to even question anything here, because the records have been destroyed, if they ever existed."
Butler said, "The fix is in in South Dakota, and we've done our best to unfix it. Officials have given great stories to the press that have just gone into the wastebasket. This all should have been reported." He explained that the state legislature responded to this information by limiting the access the South Dakota State Treasurer has to records. He said, "If a treasurer came before them on this subject, they should have been asking what are you doing about this? We found as much as a million plus in one account. Well, I go in and show them that I have pulled in over a million and I think another six to eight million may be out there, and they quickly pass a law to stop me from getting any more information from the banks."
The Commissioner of Banking wrote to the banks raising the issue of account confidentiality, discouraging them from giving Butler any more information on state accounts. Butler said, "They used the excuse of confidentiality. In other words they established accounts without the Treasurer's authority, which state statutes require, and then claimed confidentiality because I wasn't on the signature card. He said, "There was a lot here if anyone wanted to report it. One party rule is corrupt, and if it were not corrupt in South Dakota, it would be the only example of one party rule in the last hundred years that is not corrupt. Perhaps human nature in South Dakota differs from the rest of the human race."
On August 5, 2001 Janklow said, "If you think I care where all the state bank accounts are, I don't."
Former Representative and Senator Pat Haley (D-Huron) commented on the difficulty in getting information to the press regarding the fact that he had repeatedly been denied information by the governor's office regarding the house building project at Mike Durfee State Prison in Springfield. Haley alleges that a state employee told him that if you want to understand what is going on with this project, as well as the wiring the schools project, look at the cash flow and look at the vendors. Haley said, "Specifically, the people in the companies providing the materials for these projects. I became more specific in my requests at that time. I began to ask for a list of vendors and how much they are being paid and what is the state receiving for the amount paid out. Again, I could not receive the information because the governor's office blocked the access to it. My last attempt was to go through the legislature and that effort was blocked by Mike Rounds and Steve Cutler." Finally, Haley explained, "In the fall of 1998, I spoke with Bob Mercer about my inability to access this information. By that time I had been told by this state employee to check the vendors and the cash flow. I told Mercer about that because at the time he was a reporter for the Rapid City Journal and I was hoping the newspaper would make inquiries of their own." Haley alleged that he was never contacted back by Mercer and that within a few months Mercer became the Press Secretary for the Governor. He was hired at around $60,000.00 his first year.
Mercer's wife is employed in the personnel division of the governor's office and was employed in that office at the time.
Haley alleges that another media failure occurred in December of 2000. He said, "That was my last full month as a legislator. There was a meeting of the operations and audits committee. The legislature had turned oversight of the juvenile corrections over to that committee during the session of 2000. The governor gave his budget address that day. So I attended that meeting because there was going to be discussion by that committee about possible legislation dealing with the juvenile corrections problems we were having. At the time I believed it may be the last time I would appear at a committee as a legislator. I brought with me a long list of requests for information that I had been denied access to by the Janklow administration for years. It included many things including the house building project, the school wiring project, information regarding lawsuits brought against the DOC and information on the outcome of those suits and the ultimate cost of the lawsuits. I asked about statistics on suicides and suicide attempts inside the DOC. The committee didn't respond to me. Secretary of Corrections Jeff Bloomberg appeared before that committee after I did and was faced with my requests. His response was, I was sitting behind him in the audience and he swiveled around in his chair and said to me, "If you want that information sue me." And the committee did not respond. There was no mention in the media of my request for information and there was no mention of Bloomberg's response to my request."
Scott McGregor is the Deputy Treasurer for the State of South Dakota. McGregor commented that there are two major things that the treasury does. He said, "We are responsible for maintaining, in conjunction the Division of Banking, the collateral protection program for the deposit of public funds in state banks and under the law that includes funds of tribal governments. Quarterly we make sure the banks that hold those funds have sufficient collateral to cover them in the case that the bank should fail, so that those funds are fully protected." He continued, "The second big thing the state treasurer does is administer the South Dakota unclaimed property program." That program is where banks and other business institutions that have money that belongs to individuals and can no longer find those individuals, turns the money into the state treasury and that office attempts to locate those persons and give the money back to them. That program applies on and off the reservations. He said, "Our performance last year in that program was that we returned 1.9 million dollars to people across South Dakota. How that stacks up against the history is that more money was returned last year than was returned in the entire first 22 years of the program. In the first 22 years of the program, from 1975 to 1995 they returned 1.6 million to people. This was the first time a Democrat has served in that position."
Dick Butler was elected in 1995. McGregor added, "Since Dick Butler has been in the position of Treasurer we have given back around 8 million dollars."
From1975 to 1995 the total returned $1,626,572.00. Butler took office in January of 1995. From 1995 until 2002, the amount returned was $7,884,983.00. Last year's figure alone was $1,927,716.00. McGregor was asked what would have caused this disparity. He responded, "They weren't paying attention to it. They weren't making a diligent effort to give the money back. We publish our list and make an effort to get the word out. There is over 12 million in the pot waiting to be returned. We do not have an exact figure on that amount because the records are not precise. We have tried in the past to get it stuck into a separate, secured fund, but it remains in the states general revenue fund. And the state uses that money, much like the federal government uses the social security money, for whatever purpose it is needed for until the time comes to pay it back. It may have historically been the idea that the more you don't pay back the more the state has to use. But that has not been our philosophy. Our philosophy is that money does not belong to the state, it is money that belongs to the people. It is our obligation to get it back to them as quickly as we can."
Bob Mercer did not return our phone call for comment concerning allegations in this article.
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Photograph--Alfred Bone Shirt Sr. wearing a peace medal.