Former SD government employee pleads not guilty to stealing $1.8 million

This story has been updated.

PIERRE, S.D. (KELO) – A former state government employee accused of stealing more than $1 million made a court appearance Tuesday in Pierre.

Lonna Carroll appeared in person in Hughes County Circuit Court on Tuesday and her attorney pleaded her not guilty on two criminal charges of stealing more than $1.7 million in state and federal funds from the state Division of Child Protection Services in the South Dakota Department of Social Services.

The judge rejected a request from her court-appointed attorney, Tim Whalen of Lake Andes, that Carroll, 68, of Algona, Iowa, be released on personal recognizance. Instead, Circuit Judge Christina Klinger softened the $50,000 cash bond to also allow for the possibility that a surety from a bail bondsman could be filed instead. Carroll has been confined to the Hughes County jail since her arrest last month.

Her attorney also sought broader discovery of potential evidence which the prosecutor, Chief Deputy Attorney General Brent Kempema, resisted. Judge Klinger ordered that Carroll have access to approximately 150 pages of state reports.

A three-day trial was set for December 4.

In July, Carroll was charged for stealing $1.78 million from the DSS, specifically the Child Protective Services branch over a roughly 13-year period.

The alleged thefts were discovered in February as DSS converted to a different record-keeping system. A subsequent report filed by the state Department of Legislative Audit documented dozens of instances where checks from DSS were deposited at American Bank & Trust in Pierre, and later that same day cash was withdrawn from the accounts.

The Legislature’s Government Operations and Audit Committee has scheduled a meeting for October 8 to talk about the matter.

A second instance of alleged misuse of state government records came to light on August 15 when state Attorney General Marty Jackley announced that a now-deceased former employee at the South Dakota Department of Revenue had been allegedly falsifying vehicle titles and using them to receive loans. The former employee, Sandy O’Day of Pierre, died of cancer.

The Carroll and O’Day investigations don’t appear to be connected.

Carroll had made her initial appearance in court last month via closed-circuit TV from jail. On Tuesday, she and four other defendants, all men, shuffled into the main courtroom shortly after 9 a.m., wearing jailhouse orange jumpsuits, each with hands manacled and legs fettered, guarded by a clearly armed law enforcement officer.

The other four went to the jury box to wait, while her attorney told Carroll to sit next to him at the defense table. Carroll looked tired, her short brown hair showing signs of gray, and her head slightly shook as she leaned forward in her chair to hear the two criminal charges brought against her by a Hughes County grand jury on July 15.

One was a charge of aggravated grand theft for allegedly taking more than $500,000 from the department between July 1, 2013, and March 24, 2023, punishable by up to 25 years in state prison and a $50,000 fine. The other was a charge of aggravated theft for allegedly taking more than $100,000 between January 1, 2010, and June 30, 2013, punishable by up to 15 years in prison and a $30,000 fine.

Judge Klinger asked Carroll how did she plead. Her attorney answered, “Not guilty, and we ask for a jury trial, your honor.”

Whalen, wearing glasses and a medium-blue suit, did all of the talking from there. He told the judge that he and prosecutor Kempema were trying to work out some discovery issues. Judge Klinger offered three starting dates for the trial and Whalen chose the latest of them, December 4.

Whalen next asked that Carroll be released on her own recognizance. He said her accounts had been frozen, so that she couldn’t afford to post $50,000 as bail, and that she could live with her daughter in Sioux Falls or return to Algona, Iowa, where she owned a home and her son lived. Whalen told the judge that Carroll wasn’t accused of “a violent crime” but he acknowledged that it was “a serious crime” because money had allegedly been stolen from the public.

Kempema, the prosecutor, responded that Carroll was accused of a Class 2 felony and a Class 3 felony and that she could still be a flight risk. Kempema said the state was willing to accept a smaller amount of cash bail but he didn’t specify an amount. Kempema also noted that Carroll owned a home and proceeds for bail could be generated from that.

Judge Klinger suggested that a surety could be posted rather than cash and ordered that modification.

Whalen also asked the judge to order that more discovery be allowed. “I can’t move anywhere on this until I have discovery,” he said.

Kempema said the prosecution was following the practice of what discovery is allowed in the Second Circuit Court, which covers Minnehaha and Lincoln counties. Whalen said the state had cited only federal cases in resisting his discovery motion while he cited state cases. “It’s not a trial by ambush, as it is in the federal system, to be quite frank,” Whalen said, noting that he couldn’t negotiate a plea agreement without more information available through discovery.

Whalen said he also felt hamstrung because he would need to be present on those occasions when Carroll did have access to whatever documents were turned over to her by the prosecution. “It’s a logistical issue because I’m in Lake Andes,” he said. He added, “She needs to have complete unfettered access to those documents.” He said he was willing to accept a condition that Carroll couldn’t discuss the information with anyone other than him.

Kempema said the state’s position on discovery was that it was offering only what state law required. “Quite frankly,” Kempema told the judge, “they’re not entitled to my reports.” Then he claimed that one of the clients defended by Whalen in another case had posted on the Internet various discovery information including the victim’s health records.

Whalen pointed out that the person referred to by Kempema was defended by a different attorney in a case where Whalen defended another accused person. Whalen said the South Dakota Supreme Court has interpreted the entire chapter of state code regarding criminal court proceedings. “Everybody is better served if we have more discovery in this case,” Whalen told the judge.

Kempema said Carroll could view information while under supervision at a designated spot in the jail but couldn’t take the materials back to her cell. Whalen in turn told the judge that in a previous case a judge had ordered that the materials be kept in a lock box that the defendant could access. Whalen said he would accept that condition for Carroll, too, so long as he also didn’t need to be present.

Judge Klinger ordered that Whalen’s discovery motion be granted with the materials to be made available at the jail, if the jail could arrange a space for Carroll without compromising the jail’s security. “I’m not going to require that the jail change its policy in any manner,” the judge said. She noted that other matters such as exchanging each side’s witness list had already been agreed upon by the two attorneys.

Whalen said he would draft an order and provide it to the prosecution for review before submitting the final product to the judge for her approval. Whalen said he needs to review the items before he files any additional motions.

Roughly an hour later, the five defendants left the courthouse, again under guard, to return to jail. Carroll was last in line, clutching an inch-thick manila envelope that she briefly raised to shield her face from view. She handed the envelope to a second jail-security person before being helped into the black van that. a few minutes later, would take them to the far east end of Pierre, where they would again be placed behind bars.

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