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Jury weighs case versus CEO brought after massacre of family

Stacy Phelps walks out of the court room at the Charles Mix County Courthouse during a 2017 hearing in Lake Andes. (Jake Shama / Republic)

SIOUX FALLS — A South Dakota jury is weighing the case of a former nonprofit executive accused of backdating contracts to try to avoid a potential audit in a case brought after the organization's financial officer shot dead his wife, his four children and then killed himself in 2015.

Closing arguments were Thursday in the trial of Stacy Phelps, the former CEO of the nonprofit American Indian Institute for Innovation. Prosecutors highlighted discrepancies in Phelps' testimony, trying to convince jurors he had a motive for wanting to avoid an audit of the nonprofit he headed.

But defense attorney Dana Hanna deflected blame from Phelps, saying he got played by the nonprofit's chief financial officer, Scott Westerhuis. Westerhuis was embezzling money before he massacred his family and shot himself in September 2015.

Phelps is the second and final person to face trial in a sprawling case known as Gear Up. The killings spurred a financial investigation that led to charges in 2016 against Phelps and two others who worked with Westerhuis at the Institute or Mid-Central Educational Cooperative.

The Institute helped Mid-Central administer a college-readiness grant program called Gear Up, and Phelps and Westerhuis worked for both organizations. Educational cooperatives provide services to member school districts in areas such as special education.

Hanna referred to Westerhuis as a "world-class con man," "liar" and "criminal" and said Phelps was a victim who trusted Westerhuis.

"This case is about trust and the betrayal of that trust," Hanna said.

He also said Phelps should have paid more attention to the finances of the nonprofit, defending his lack of auditing and financial knowledge. Prosecutors pointed out inconsistent answers Phelps gave during a law enforcement interview about the reason Westerhuis asked him to backdate the contracts.

Prosecutor Paul Swedlund questioned how "drastic" changes to the contracts went unnoticed if Phelps read them and asked jurors how the chief executive of a nonprofit could know so little about finances or auditing. Swedlund also focused on communications between Phelps and Westerhuis leading up to Phelps emailing in the backdated contracts.

Phelps testified that he backdated the documents in August 2015 because Westerhuis said he couldn't find the originals. Swedlund asked the jury to weigh the likelihood that the originals simply "vanished," as Westerhuis claimed.

"This is a white-collar crime version of my dog ate my homework," Swedlund said.

Phelps, 45, had pleaded not guilty to two counts of falsifying evidence and two counts of conspiring to offer forged or fraudulent evidence. He faced a maximum sentence of two years in prison and a $4,000 fine per count.

Guericke was a co-defendant with Phelps, but instead took a plea deal in September and then testified during Phelps' trial.

A jury in June cleared onetime Mid-Central assistant business manager Stephanie Hubers, who had been accused of receiving about $55,000 to keep quiet about Westerhuis and his wife's alleged stealing. Hubers was found not guilty of grand theft, grand theft by deception and alternative receiving stolen property charges.