A company in Custer has bounced a $116,588 check to state government, triggering a repossession of a former juvenile detention campus that the company bought from the state last year.
Ryan Brunner, the state’s commissioner of school and public lands, said the state received notice from its bank Wednesday morning that the check did not pass.
SLIC-e Holdings LLC gave the check to Brunner’s office last Thursday, which was the final deadline for the company to make a contractually required annual payment to the state.
The payment was due May 1. After the company failed to make the payment, the state granted a legally required three-month grace period before issuing a default notice, which triggered a final 30-day grace period that ended Thursday.
The check that SLIC-e gave the state on Thursday temporarily staved off repossession while the state waited for the check to clear. After receiving notice Wednesday that the check bounced, Brunner said he dispatched employees from his office to file an affidavit of repossession in Custer County.
SLIC-e Holdings was the only bidder and submitted the minimum bid of $2.34 million for the state's former STAR Academy campus during a January 2018 auction in Custer.
The company’s contract with the state required a series of payments totaling $351,000 by May 1, 2018, which the company paid in full, Brunner said. The money went into a state trust fund, where it generates interest for the Department of Corrections, which formerly managed the property. Brunner said the state will keep that money.
The contract then required annual payments of $115,801.21 beginning on May 1 of this year. The higher amount of the bad check written by SLIC-e last week included interest tacked on since the missed deadline.
The only person identified on SLIC-e’s publicly available corporate filings is Jared Carson, of Custer, who served as the company’s president but told the Journal recently that he no longer has any active role with the company. Carson said he signed a non-disclosure agreement that prevents him from publicly identifying any investors in the company.
The Journal received multiple tips Wednesday from other sources who said the main figure in SLIC-e Holdings is Kevin Teasley, who also operates a woodworking business called It's Rustic on the former STAR Academy campus. Teasley did not immediately return a message Wednesday from the Journal.
Steve Leonardi leads a group of about a dozen artists that leases space on the campus from SLIC-e and also operates a gallery there. He said Teasley had shared plans for a hydroponic operation on the campus that would sell vegetables to restaurants throughout the Black Hills, but the operation never began. Leonardi said Teasley also shared plans to install biomass technology that would cut the campus' heating costs, but that never came to fruition.
"We all liked him and we all drank the Kool-Aid he was passing around," Leonardi said.
Besides the artists and It's Rustic, there is also a barbecue restaurant and a digital marketing/media company among the campus tenants, plus 11 occupied homes. Leonardi hopes the state will let the tenants stay for perhaps a year and add value to the campus, so that if the state puts it up for sale again, there will be more potential bidders.
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In response to a Journal voice message seeking Gov. Kristi Noem's plan for the facility, Noem's spokeswoman sent an email Wednesday that said, "The governor is aware of the situation and will evaluate options with the property going forward."
The campus of the former STAR Academy is about 5 miles south of Custer and measures 173 acres with a collection of buildings totaling 168,880 square feet.
The campus dates to 1911, when it was the site of a sanatorium for tuberculosis patients. It was later converted to a state hospital for severely disabled people and was converted to the State Training and Rehabilitation (STAR) Academy in 1996.
The academy had a dwindling number of children assigned to it in its final years and was closed by state government in 2016 following implementation of statewide juvenile-justice reforms.
In 2017, the Legislature and then-Gov. Dennis Daugaard passed legislation authorizing a sale of the property. A first auction in October 2017 drew no bidders, and the second auction drew an overflow crowd of about 75 people to the Custer County Courthouse but produced only the one bid from SLIC-e Holdings.
When the company purchased the property, it announced plans for an “ecologically minded, clean-air, light industrial project” and “a place for economic development” for the Custer community. The company's name, "SLIC-e," stands for "Sustainable Light Industrial Complex and energy."
The sale was opposed by some legislators and members of the public who said state-run juvenile detention facilities were still needed, and said the state’s criminal-justice reforms had passed the burden of juvenile justice on to schools and local governments.
Rep. Julie Frye-Mueller, R-Rapid City, represents Custer County and opposed the sale of the campus.
“There are many different ways in which we can use that facility and I hope we can work together with the state to accomplish something positive for the community and the people of this state,” Frye-Mueller said in emailed comments to the Journal on Wednesday.
She also said there “needs to be consequences” for not only the recent bad check that SLIC-e wrote to the state, but also for an earlier bad check the company wrote to the state just prior to the May 1 payment deadline.
An insufficient funds check can be prosecuted as a crime. Tim Bormann, chief of staff to South Dakota Attorney General Jason Ravnsborg, said Wednesday morning that it was too early to say whether any legal consequences for the insufficient funds checks will be pursued.
“That’s going to be something that’s going to have to be looked at across the board from all angles,” Bormann said.
A spokesman for the state Treasurer's Office said the state is not charged a fee by its own bank when a deposited check is returned for insufficient funds.