Prosecutors outlined more than $40,000 in alleged misspent public funds in their opening statements of the first day of a felony trial against a former state agency director, including money related to allegedly unjustified sick leave, grant money, employee incentive spending and alleged bonus systems.

But the defense said the agency had more oversight than just from the director, questioned the use of the word "bonus"and contended that grants and incentives were already in place and at the discretion of the agency and its executives.

The trial for Charles"Sandy" Blunt began Monday morning and is expected to last through the week; at issue are two felony counts of misapplication of public funds, including one count of more than $10,000 and another of more than $500. The charges carry up to 10 years in prison and up to $10,000 in fines.

"With great power comes great responsibility,"started Burleigh County Assistant State's Attorney Lloyd Suhr, a quote most recently made popular by comic book legend Stan Lee and the Spiderman movies.

Comics aside, Suhr argued that Blunt was responsible for allegedly misspending $41,402.33 in public money for non-public purposes.One count involves illegal bonuses of more than $7,500. The other includes: the payment of sick leave to a Dave Spencer for about $7,000 and loss of relocation expenses for Spencer of nearly $8,000; payment of more than $15,000 in alleged non-existent grant monies given to the North Dakota Firefighter's Association; and more than $11,000 on meeting expenses and employee gifts.

Blunt's attorney, Michael Hoffman, said Blunt was working within his authority as the workers' compensation agency's executive director, with the approval and oversight of the board or working on precedent. He also stressed that power was delegated to chiefs and that none of the monies were spent in the "back room,"without the scrutiny and approval of legal counsel or the agency's board.

It was all within the limits of an organization expending money for a purpose, to better the organization, Hoffman said.

Suhr gave intense focus to $7,509 in salary payments to four employees; these payments exceeded the performance and other compensation adjustments as calculated by the state auditor's office during a 2006 audit of the agency, testified Jason Wahl, senior state auditor. Wahl was the prosecution's first witness, as much of the information backing the charges stemmed from his agency's audit.

The state said the director has the discretion to award salaries, but that backpay of these salaries was the issue and resulted in what is perceived to be bonuses.

The state has strict guidelines as to how state employees are awarded bonuses, which are not to exceed $1,000 every two years. Three employees received money in excess of that statute, Wahl said: John Halvorson received $1,388; Jodi Bjornson, legal counsel, received $2,452 and Mark Armstrong received $3,360. Another employee received $309.

"It was additional payment above and beyond what was required,"Wahl said, responding to why the state characterized the payments as illegal bonuses.

Hoffman contended that WSInever referred to the payments as bonuses and never intended them to be such.

Wahl also outlined some of the meeting and employee gift expenditures; Hoffman questioned on more than one occasion whether it was apparent that Blunt knew or bought every item, including a cake that was purchased for his welcome reception to the agency. Hoffman also noted that funds were spent on employee incentives before Blunt took charge as executive director in 2004.

Also at issue was the payment of sick leave to Spencer, former chief of employer services of the agency. Spencer had apparently put in his resignation but used sick leave from August through his departure date in September. The state also noted that Spencer was under contract to repay 50 percent of his moving expenses paid by WSI, incurred from his move from Ohio to North Dakota to work for the agency. Those expenses, adding up to more than $7,000, were never pursued, Suhr noted.

The prosecution's second witness was Lori Hartman, executive director of the firefighter's association. Hartman testified about a letter she received, unsolicited, from Blunt, dated March 1, 2007. The letter said her association was eligible for up to $150,000 in grant money for a firefighter's safety training program.

Hartman testified that they normally apply for grants in a different manner, but that they couldn't have expanded the safety program without it. Due to timing, they were only able to spend a little more than$15,000.

A former employee of WSIand now an employee of the Burleigh County State's Attorney's office, Kelly Bengston was the next and last witness to testify on Monday. Bengston worked in the agency's loss prevention department and helped coordinate grant programs.

She testified that she was concerned about Blunt sending the letter to the firefighter's association, because as of the date of the letter, association safety grants had been discontinued and that association was not eligible for any other grants. The only grants available at that time, she testified, were employer hazard elimination learning programs, or HELPgrants.

"We were instructed to come up with a new grant program to help fit this one in,"Bengston said.

(Reach reporter Crystal Reid at 250-8261 or at crystal.reid@bismarcktribune.com.)