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Press Release

Former Blackfeet PoKa Project Officials Plead Guilty To Massive Grant Fraud Francis Kay Onstad

For Immediate Release
U.S. Attorney's Office, District of Montana

Delyle Shanny Augare

Dorothy May Still Smoking

The United States Attorney's Office announced that former officials of the Blackfeet Tribe's Po'Ka Project, a multi-million dollar federally funded effort to address the needs of troubled youth on the reservation, have entered guilty pleas in federal court in Great Falls. FRANCIS KAY ONSTAD, 61, of Valier, the former Director of the Po'Ka Program, DELYLE SHANNY AUGARE, 58, of Browning, the former Assistant Director of the Po'Ka Program, and DOROTHY MAY STILL SMOKING, 64, of Browning, entered pleas of guilty to conspiracy, embezzlement and fraud before U.S. District Judge Brian Morris on February 28, 2014. Onstad and Augare also entered pleas to charges of income tax evasion. Onstad and Augare face a possible 5 years in prison and a $250,000, for conspiracy to defraud the United States, and income tax evasion. They also face 10 years in prison and $250,000 fine for conspiracy to violate the False Claims Act and theft from an Indian tribal government receiving federal funding. Sentences on the four convictions could be ordered to run consecutively. Still Smoking pled guilty to a single count of conspiracy to violate the False Claims Act. Assistant U.S. Attorney Carl Rostad told the Court that, as part of his agreement with the defendants, his office would be seeking $1,000,000 in restitution from each defendant.

Codefendant Charlotte New Breast entered a guilty plea and was sentenced in 2013. Codefendant Katheryn Elizabeth Sherman has reached a plea agreement with the United States and is scheduled to enter her plea before Judge Morris on Monday, March 3.

In an Offer of Proof, the prosecutor told the Court that the Blackfeet Po'Ka Project was developed to help troubled Native American youth. Po'Ka was funded by a federal grant from 2005 through 2011 by the Substance Abuse and Mental Health Services Administration (SAMHSA) of the Department of Health and Human Services. Beginning in 2005 with a $1,000,000 federal disbursement, the grant ultimately became a $9.3 million program over a six year period (2005-2011).


It was the stated intent and proposal from the Tribe that the Po'Ka Project would ultimately become self-sufficient; a completely tribal program - entirely supported by the Tribe - by the end of the grant period. The grant required that the Tribe provide a certain amount of funding. "A requirement contained in certain legislation, regulations, or administrative policies that a recipient must maintain a specified level of financial effort in the health area for which Federal funds will be provided in order to receive Federal grant funds." Comprehensive Community Mental Health Services for Children with Serious Emotional Disturbances (SED), CMHS Child Mental Health Service Initiative Number: 93.104. To achieve the goal of final self-sufficiency, the Tribe was required to provide in-kind matching contributions to continue to secure federal payments with the idea that as federal participation declined, tribal participation would rise to fill the funding void left by the absence of federal funds. It was the intent of the parties and SAMHSA that the Po'Ka Project would survive on its own once federal funding was no longer forthcoming.

An in-kind contribution is a non-cash contribution provided by non-federal third parties in support of the project funded by the grant, and its objectives. Third party in-kind contributions may be in the form of real property, equipment, supplies and other expendable property, and the value of goods and services directly benefitting and specifically identifiable to the project or program.

As noted, a key component of the grant award was the funding arc; the ratio of federal money to in-kind contributions. Only if Po'Ka met the in-kind contribution targets could they receive the maximum amount of federal money from the grant. Consistent with the sustainability objective of the grant, the Tribe's in-kind contribution requirement was the highest in the later years of the grant. The Blackfeet Tribe was required to provide $7.0 million of in-kind contributions from FYs 2009 through 2011. That created an environment where the appearance of substantial in-kind contributions became paramount if the maximum flow of federal money from the grant was going to continue.

However, the in-kind commitment could never be honestly met, so the conspirators began making up facts and documents to try and satisfy SAMHSA and the auditors that the in-kind contributions represented on their reports to SAMHSA were legitimate. They did so by inflating the figures related to in-kind contributions, assigning values to non-existent and illegitimate "contributions," and manufacturing fraudulent invoices and records to support fictional or inflated contributions. The misrepresentations as to in-kind amounts were made in monthly reports to SAMHSA and the documents were generated to placate auditors conducting a required annual audit of the Tribe's operations. These annual audits are required of tribe's accepting federal grant funds to insure that the grant funds are being used for their intended purpose and that the requirements of the contract agreement are being met. If auditors make negative findings, those findings can result in action by the federal agency to rescind the contract, demand repayment, or make an offset, where the government deducts money from future payments.

Several witnesses, whose names were used as in-kind contributors, denied preparing or signing the invoice and denied contributing time or goods to the Po'Ka Project, at least in the amount claimed.

Based on email evidence and the statements of cooperating witnesses, Onstad, Augare, and Still Smoking, along with others, conspired to make the false representations as to the in-kind contributions made to the Po'Ka Project, and then actively managed the creation of false documentation to cover the representations so that the auditors would not question the contributions and the federal money would continue flowing unabated. The false representations were in effect false claims that resulted in the expenditure of federal grant money that would not have been expended had the principals honestly represented the woefully inadequate level of non-federal support.

Auditors with the Office of Inspector General (OIG), U.S. Department of Health and Human Services, have determined that $4.6 million in claims for grant payments paid to the Tribe on the basis of Po'Ka' s in-kind contribution are unsupported, inflated, or completely falsified.


Onstad and Augare embezzled from the program in a myriad of relatively minor ways - travel fraud, misuse of Po'Ka credit cards, exorbitant claims of overtime, etc. - but the most significant embezzlement came in the agreement they appeared to reach with the grant's national evaluator. Certain federal grants require the participation of a national evaluator; an outside observer whose job is to monitor the progress of the project. Onstad and Augare reached an agreement with the national evaluator whereby they would approve significant payments to the evaluator who would in turn kick back a sizable portion of what was provided to him. Between August 2008 and August 2011, Onstad and Augare approved over $475,000 in Po'Ka grant monies for the national evaluator, then doing business under an alias business name. In turn, between August 2008, and September 2011, the national evaluator transferred $231,550 to the Child Family Advocacy Center (commonly referred to as the Child Family Advocacy Fund or CFAF) bank accounts at the Wells Fargo Bank in Cut Bank, Montana.

Between September 2008 and September 2011, Onstad and Augare withdrew $225,482 from the CFAF accounts. Much of that money went into their personal accounts at Stockman Bank and from those accounts much was spent on gambling and travel.


In 2009, Onstad and Augare both filed federal income tax returns for the calendar year 2008 in which they claimed a certain amount of taxable income based on their salaries from the Po'Ka Program. However, they had also taken significant sums from the CFAF accounts, all of which constituted unreported income. By concealing that income from the Internal Revenue Service, Onstad and Augare paid approximately half of what was owed to the IRS.

The case was pursued by the Federal Bureau of Investigation and the Department of Health and Human Services' Office of Inspector General. The FBI and the IG also received substantial assistance from the Internal Revenue Service's Criminal Investigation Division.

U.S. Attorney Mike Cotter lauded the work of the FBI and the Inspector General's Office in the Po'Ka case as well as the myriad other cases investigated and prosecuted since the Guardians Project was made public in 2013.

Rarely does government produce such an effective anti-corruption team as has been created by the agents of the Guardians Project. Abandoning the traditional model of "You work your case and I'll work mine", these agencies have committed themselves to mutual cooperation. Working closely together-providing each other with time, resources, and expertise-has made these investigators the champions of Indian Country communities eager to rid themselves of corruption and the abuses of trust and power."

Updated January 14, 2015