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Justice News

Department of Justice
U.S. Attorney’s Office
District of Montana

Friday, May 23, 2014

Former Oklahoma State University Professor Convicted On 26 Fraud And Public Corruption Charges Involving Blackfeet PoKa Program

The United States Attorney's Office announced that on May 22, 2014, a federal jury found GARY JOSEPH CONTI, 68, of Three Forks, guilty on 26 of 27 felony charges relating to his role in deceiving the government in an "in-kind" scheme that auditors have determined resulted in at least $4.6 million in fraud against a grant designed to help troubled and at-risk youth on the Blackfeet Indian Reservation.

The Blackfeet Po'ka Project was the result of a 2005 grant application from the Blackfeet Tribe and designed to provide a comprehensive support structure to assist troubled and at-risk youth. Po'ka was funded by a federal grant from 2005 through 2011. Po'ka received its funding from the Substance Abuse and Mental Health Services Administration (SAMHSA) of the Department of Health and Human Services through a grant relationship between SAMHSA and the Blackfeet Tribe. The Tribe in turn operated the Po'Ka Project as a tribal enterprise. Managers and staff were tribal employees subject to tribal employment rules and regulations, with oversight from the Blackfeet Tribal Business Council. 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). The funding arc started with the $1,000,000 award, rose to $2,000,000 per year for two years (2007, 2008) and then tapered off to $1,000,000 in 2010 and $300,000 in 2011.

According to the SAMHSA grant synopsis, the Po'Ka Project - also known as Blackfeet Children System of Care - was a reservation-wide children's mental health system. "Po'Ka goals are: (1) to implement the systems of care philosophy at the local Tribal level; and (2) to identify, plan for, or enhance coordination and facilitate a wraparound process enabling children with SED (Severe Emotional Disorders) and their families to access services to meet their needs."

Francis Onstad served as the Director of Po'Ka and Delyle Shanny Augare as the Assistant Director. Dr. Gary Conti, then a full professor at Oklahoma State University in Stillwater, Oklahoma, served as the national evaluator for the grant and Dr. Dorothy Still Smoking--who had received her doctorate from Montana State University when Conti was a professor in Bozeman during the 1990s-served as the local evaluator. Still Smoking, who was a full time employee with the Blackfeet Housing Authority, provided her services as an independent contractor for Conti and his business, Learning Associates, and was paid for her services through Conti. Conti's services were also billed and paid for through Learning Associates' contract with the Po'Ka Project.

Liz Sherman served as the In-Kind Coordinator for Po'Ka and Charlotte New Breast was the administrative assistant for Po'Ka.

Onstad, Augare, Still Smoking, Sherman, and New Breast were named in the 37-count indictment handed down by the Grand Jury in July 2013, but all reached plea agreements with the United States and plead guilty to charges in the indictment. There sentencing is scheduled for June 2014.

The In-Kind Contribution Requirement And The False Claims Conspiracy

The SAMSHA grant required that the Blackfeet Tribe make the Po'Ka Program 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." (Emphasis added) 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 matching contributions-either cash or in-kind-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.

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.

Evidence produced at trial revealed that 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 tribes 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.

Based on email evidence and the statements of cooperating witnesses, Onstad, along with Conti, Sherman, and 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.

Emails entered into evidence by the prosecution indicated that Conti was often consulted for advice as to how to appease auditors hired by the Tribe to perform a mandatory audit.

Auditors with the Office of Inspector General (OIG), U.S. Department of Health and Human Services, have determined that at least $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.

The Embezzlement Scheme With Conti

At trial, witnesses described how Onstad and Augare had embezzled from the program in a myriad of ways - travel fraud, misuse of Po'Ka credit cards, exorbitant claims of overtime, theft of program property, etc. - but the most significant embezzlement came in the agreement Onstad and Augare appeared to have reached with Conti wherein they would approve payments to Conti with the understanding that he would kick back a sizable portion-roughly one-half of the payment amount-to a bank account they controlled in the name of a children's charity, the Child Family Advocacy Center CFAC).

A forensic accountant with the FBI told the jury that between August 2008 and August 2011, Onstad and Augare approved over $475,000 in Po'Ka grant monies for Conti's business, Learning Associates. In turn, between August 2008 and September 2011, Conti transferred $231,550 to CFAC bank accounts at Wells Fargo Bank in Cut Bank.

Conti had declared bankruptcy in Oklahoma on April 29, 2009. Four days later Conti opened a Browning bank account for Learning Associates and began having his payments from the Blackfeet Tribe deposited into that account. Between May 2009 and August of 2011, each time a Po'Ka check would be deposited into the Browning account, Conti wrote checks from approximately half the amount to CFAC. The FBI witness testified that the amount from Conti was split roughly equally by Onstad and Augare through withdrawals from the CFAC accounts and deposits into their personal accounts and that the disposition of the money from their appeared mostly casinos and travel to Nevada.

Conti was convicted of conspiracy to defraud the United States, conspiracy to submit false claims against the United States, aiding theft from an Indian tribal government receiving federal funding, money laundering, theft of federal money, and twenty-one counts of wire fraud. Another jury found Conti guilty of bankruptcy fraud in March.

U.S. Attorney Mike Cotter lauded the jury's verdicts. "Grants like Po'Ka reflect the generous spirit of this country to help the least fortunate among us. For their objectives to be accomplished they must be protected and their integrity preserved. When a group of predatory opportunists see these grants as a golden goose ready to be exploited for personal gain, this office will respond with clear and decisive prosecution as a message to all that corruption in in any community in Montana will not be tolerated and that those who pillage public funds had best factor dire consequences into their decision to commit fraud."

Updated January 14, 2015