Current and former employees of the state's workers' compensation agency took the stand Tuesday, describing spending of public money and concerns about special treatment of a contentious employee.

That employee was Dave Spencer, former chief of employer services of Workforce Safety and Insurance, who took the stand Tuesday during the felony trial of Charles"Sandy"Blunt. Blunt faces two felony charges of misapplication of public funds.

According to testimony, Spencer's erratic behavior made him unpopular with his direct employees, leading to discussions about termination. Two former employees, Billi Peltz and Jim Long, testified that Spencer was to be fired or asked to resign and that Blunt said he would lead that charge.

Instead of immediately leaving the agency, however, Spencer was allowed to use 131 hours of sick leave worth $7,053.14, according to testimony from Camie O'Connor, currently an accounting specialist at WSI. She had previously processed payroll for the agency for nine years.

But he wasn't sick, Spencer said on the stand Tuesday.

"I am not sick; Iam not going to see a doctor,"Spencer said he told Peltz, then the human resources manager at the agency, when she called him with questions during his sick leave. Spencer indicated he had been instructed by Long, then chief of support services, to exhaust his sick leave before leaving the company.

Both Long and Peltz have since been fired from the agency; both had previously filed for whistleblower protection after working with the state Bureau of Criminal Investigations regarding varying allegations within the agency.

Long took the stand Tuesday and disagreed with Spencer's testimony, saying he distinctly recalled Blunt explaining that Spencer would take sick leave. Long said he advised Blunt against allowing Spencer to use up his sick leave.

Long also said Blunt may have given direction to not recoup moving expenses from Spencer, although Spencer's original hiring letter indicated he may have to pay 50 percent of the expenses if he were to leave the agency within one to two years of his employment. That repayment was more than $7,000, as Spencer had been recruited by Blunt and moved from Ohio, where the two had previously worked together.

Michael Hoffman, Blunt's attorney, asked if Long could produce any evidence about his conversations with Blunt regarding Spencer; Long did not have documentation.

Current and former employees also described gift card and meeting expenditures practices, some painting the picture that Blunt spent freely.

Long said Blunt classified themed meeting expenses and a retreat to Medora as "promotional expenses,"using the agency's classification as a promotional agency under Office of Management and Budget policy. Those expenses included costumes, trinkets and some food and drink items.

"My input was to try to find a way to justify them to the best of my abilities,"Long said.

Long did take part in the meetings, once even being master of ceremonies at a meeting themed around pickles and wearing a rented lime green leisure suit. He could not recall if it was rented with WSIfunds.

Pam Sharp, director of OMB, testified that although the agency was allowed promotional expenses, spending money within the agency for meetings was not the intent of the policy. The intent of promotional expenses, she said, is to promote North Dakota outside of the agency or to the general public.

The litmus test, she said in an e-mail to Blunt after he had asked her to explain the policy, was to think about how taxpayers or the general public would react if an expenditure was discussed on the front page of the Bismarck Tribune.

Hoffman noted that Sharp was unable to distinguish where the policy clearly outlined that expenses were to promote outside of the agency. He also noted an e-mail that Long sent to Blunt on Feb. 06, 2006, where Long wrote that he could honestly say that every promotional expense would pass that test.

Other employees gave testimony of gift card spending practices, part of one felony count of missapplication; various practices were apparently in place far before Blunt's tenure. Documentation on gift card spending during Blunt's tenure was not immediately provided on Tuesday.

Anne Green, an agency attorney, also testified that a grant of up to $150,000 offered to the North Dakota Firefighter'sAssociation did not initially exist. That offer was in a letter signed by Blunt in March 2006. She testified that a grant was later developed and money was given to the association through a legitimate grant application process.

South Central District Court Judge Bruce Romanick is hearing the case.

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