SD AG requests Sen. Jessica Castleberry return $600K in COVID funds from small business

Gov. Kristi Noem is alleging a Rapid City state senator violated the South Dakota Constitution and an opinion made by the South Dakota Supreme Court when she accepted federal COVID-19 funds for her small business.

Republican Sen. Jessica Castleberry owns Little Nest Preschool, which allegedly received $603,219.76 in COVID-19 stimulus funds. She now has 10 days to repay the funds or face court action, according to a letter from Attorney General Marty Jackley.

"The Governor alleges that you own the business and that the business has illegally collected over $603,000 in Covid funds, during your terms in office," according to the letter. "The Supreme Court has expressly forbidden such payments to legislators, in its Advisory Opinion issued in 2020."

The South Dakota Constitution bans a state lawmaker from having either a direct or indirect interest in a contract made during their time in office as well as a year after their term.

The South Dakota Supreme Court also issued an advisory opinion in 2020 banning current state lawmakers from using such payments and that the contract is considered "wholly illegal, void and against public policy and cannot be enforced in whole or in part on any theory of any kind."

According to Noem, the Department of Social Services had recently found the violations and fiscal staff recognized Castleberry's name on a recent grant application for Little Nest Preschool. Dozens of payments to the business were found by staff between 2020 and 2023.

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Jackley recommended any COVID relief fund payments to Castleberry's business be stopped immediately.

In a statement, Castleberry wrote she had hired legal counsel to give an opinion on if her childcare center would be eligible for federal grants meant to help childcare centers across the state "without application to help offset employee payroll, provide personal protection equipment and ensure child care centers remained operational to support the workforce."

"After consulting with legal counsel, I believed my company was eligible," she wrote, adding she had communicated with DSS staff about grant applications.

"I am committed to resolving the issue with the State and will work with them to ensure I acted in compliance with the State Constitution," Castleberry wrote.

Castleberry was appointed to the Senate in 2019 after former Sen. Lyndi DiSanto announced her resignation. She also voted on General Appropriation acts that contained federal stimulus funding.

This article originally appeared on Sioux Falls Argus Leader: AG requests Rapid City senator return COVID-19 business funds