GREAT FALLS — Six people who oversaw a Blackfeet program for troubled youth were arraigned Thursday on charges they embezzled from the $9.3 million project and doctored invoices to embellish the tribal contributions needed to keep the federal money flowing.
The indictments kept under seal until Thursday include the two former leaders of the Po'Ka Project, director Francis Onstad, 60, and assistant director Delyle "Shanny" Augare, 57. Po'Ka means "child" in the Blackfeet native language
Augare is the father of Blackfeet Tribal Business Council member and state Sen. Shannon Augare, who is facing charges that he fled a Glacier County sheriff's deputy during a drunken-driving stop on the northwestern Montana reservation. He has pleaded not guilty to the charges.
Shanny Augare and Onstad appeared in U.S. District Court in Great Falls along with former Oklahoma State University and Montana State University professor Gary Conti, who was the national monitor for the Po'Ka Project; Dorothy Still Smoking, a local evaluator for the project; Katheryn Sherman, the project's former in-kind coordinator; and former administrative assistant Charlotte New Breast.
The six face a total of 37 criminal counts, including 21 counts of wire fraud, along with conspiracy to defraud the United States, theft of federal property by fraud, theft form an Indian tribal government receiving grants, money laundering, violating the Federal False Claims Act, bankruptcy fraud and income tax evasion.
They pleaded not guilty during a hearing before U.S. Magistrate Keith Strong.
Conti's attorney, Josh Van de Wetering, said his client "very vociferously" denied the charges.
Augare and Onstad declined to comment.
The Blackfeet Tribal Business Council in 2012 asked federal authorities to look into allegations into the Po'Ka Project, which stopped operating after the federal money ran out and the allegations surfaced. U.S. Attorney Mike Cotter said the two-year investigation began before the tribe's 2012 request, but he declined to say what led investigators to examine the program.
The project received $9.3 million from the U.S. Department of Health and Human Services over six years starting in 2005, with the intention that it become a reservation-wide children's mental health system supported by the Blackfeet tribe without federal assistance.
To do so, the tribe was supposed to increase its in-kind contributions to the program over the life of the grant from $1 for every $3 of federal funding to $2 of tribal contributions for every $1 of federal money in 2010 and 2011, Cotter said.
But instead, the program's leaders doctored claims, records and invoices to make it appear as though they were meeting those obligations and to keep the federal money flowing to the project, the indictment alleges.
A total of $4.6 million in federal money was lost in the scheme, Cotter told reporters after the arraignments.
The FBI, the federal health department and the Internal Revenue Service aided in the investigation.
"The substance and the foundation of this scheme was just simply greed," said Stephen Boyd, the special agent in charge of the IRS criminal investigations division. "These people simply stole money that was intended for people with definite needs — children — and use it for personal benefit."
Gerald Roy, special agent in charge of the HHS office of inspector general, said more cases are likely to follow. His agency is investigating cases worth more than $90 million meant for Montana Indian Country residents, he said.
The invoices used to convince auditors the tribe was meeting its funding requirements included fake bills for training, rent and equipment.
One invoice claimed a man had contributed a set of Blackfeet storytelling CDs after he had suffered a stroke and was incapable of making such a contribution. Another claimed the staff of a U.S. senator from Montana contributed $80,000 in in-kind services to the project.
The embezzlement charges include Onstad and Augare sending $475,078 to a business owned by Conti called Learning Associates between 2008 and 2011, using fake invoices to justify the payments.
Conti, in turn, kicked back $231,550 in 44 separate transactions to the Child Family Advocacy Fund's bank account in Cut Bank, from which Augare and Onstad drew $225,482 for their person use, prosecutors said.
The program's leaders are also accused of using project credit cards for their personal use and inflating or faking travel reimbursement forms to claim more money than they were owed.
In addition, Onstad and Augare are charged with not filing tax returns for some years and filing false returns in others.
Conti, who filed for bankruptcy in Oklahoma court in 2009, also is charged with concealing assets and property in those proceedings. Conti, a retired adult education professor who won an outstanding professor award at Oklahoma State University in 2001, now lives in Three Forks.
Each wire fraud charge carries a maximum 20-year prison sentence upon conviction. The other fraud, theft, money laundering and conspiracy charges carry five- to 10-year sentences, while each count of failure to file a tax return has a one-year sentence.