More than two dozen foreigners who took part in an investment-for-green-cards immigration program had their $500,000 contributions transferred to a South Dakota beef plant after initially committing their funds for other projects, according to state records.
Federal officials say such transfers are legal if certain conditions are met.
Northern Beef Packers, which filed for Chapter 11 bankruptcy protection in July, is one of a handful of large projects in South Dakota to solicit funds from the federal EB-5 program, which allows foreigners to get visas if they invest $500,000 to $1 million in projects or businesses that create jobs for U.S. citizens. Approved investors can become legal permanent residents after two years and can later be eligible to become citizens.
Six foreigners who contributed to the Dakota Provisions turkey processing plant in Huron had their investments transferred to Northern Beef, according to documents released Monday by the South Dakota governor's office. Another 21 people who invested in an Iberdrola wind farm, which eventually took another financing route, wound up investing in the failed beef plant.
Chris Bentley, a Washington, D.C.-based spokesman for the U.S. Citizenship and Immigration Services, said he can't comment on specific investment projects, but in general, once an immigrant investor puts money into a project a regional center can move the money around to other projects if certain conditions are met.
"It is possible, and it's completely legal," Bentley said Monday.
In September, the South Dakota Governor's Office of Economic Development ended its contract with SDRC Inc., the private regional center administering the federal EB-5 immigration program in the state, "for cause."
Officials have not specified the cause, but Tony Venhuizen, a spokesman for Gov. Dennis Daugaard, has said it became clear that SDRC needed better oversight.
Venhuizen said Monday that any transfers from one project to another would be an issue between the investors and SDRC Inc., which would have managed the process. He said investors are required to sign I-526 forms, which identifies the commercial enterprise being funded, when they make their investments.
"If an investor's I-526 is denied, or they otherwise decide to invest their funds elsewhere, the investor would have to sign a new I-526 indicating the commercial enterprise in which their funds are being invested to receive consideration under the EB-5 program," Venhuizen said in a statement.
Gov. Daugaard said last month that an investigation was underway into the Office of Economic Development involving possible financial misconduct prior to his administration. Daugaard said there has also been a federal investigation, but declined to provide details of either.
Attorney General Marty Jackley has said that former Gov. Mike Rounds is not the subject of the state investigation.
In the case of Northern Beef, 21 investors who originally placed their money into a loan fund for the Iberdrola wind farm project known as Buffalo Ridge II received transfers, according to documents.
That project’s use of immigrant investor loans, under what’s known as the federal EB-5 program, was ultimately blocked by the U.S. Citizenship and Immigration Services agency, which administers the program and determines whether investors qualify for immigrant visas.
Six to nine more transfers to Northern Beef — the number varies in different parts of the records — were made by investors who originally placed their money into a loan pool for Dakota Provisions, the Huron-based turkey-processing plant.
A third loan pool for Dakota Provisions, known as SDIF LP 20, was organized two years ago. Its paperwork was filed with the South Dakota secretary of state on June 24, 2011, by Joop Bollen of Aberdeen.
The loan pools for all EB-5 immigrant investments in South Dakota projects during recent years were established by Bollen, president of the South Dakota Regional Center, or SDRC, an Aberdeen-based company organized in 2008.
Since that time he has organized at least 11 such loan pools using in each instance a combination of a limited partnership and limited liability company, with Bollen as the general partner for the limited partnership and the manager for the limited liability company.
Dakota Provisions was the object of the first loan pool organized by Bollen using this LP-LLC approach after the formation of his company.
SDRC held a state government contract with the Governor’s Office of Economic Development to administer the EB-5 program for South Dakota since 2010. SDRC performed the work in 2008 and 2009 as well.
Previously, Bollen worked at Northern State University where he operated the South Dakota International Business Institute and administered the EB-5 program for the Governor's Office of Economic Development, or GOED, through the institute.
For undisclosed reasons, GOED Commissioner Pat Costello terminated the state contract with SDRC in September. In October, Richard Benda was found dead, reportedly of a gunshot wound, on a brother-in-law’s farm near Lake Andes.
Benda was a member of then-Gov. Mike Rounds’ cabinet as secretary of tourism and state development from 2006 through the end of Rounds final term in 2010. Benda wasn’t retained when Gov. Dennis Daugaard took office in 2011.
Benda’s death remains under investigation, according to Jackley, who says said he is waiting for additional information before issuing his report. Jackley said he expects to release the report late this week or next week.
The day after Benda’s funeral at Watertown, Daugaard issued a statement that said he had become aware in April of alleged misconduct in GOED prior to his administration.
In that statement, Daugaard said he had ordered an internal review to assure the alleged misconduct wasn’t continuing in GOED and that he had made both Jackley and the U.S. Attorney's office aware of the situation.
The FBI, meanwhile, started conducting interviews in 2012 and continued to gather information this year regarding Northern Beef and, according to one of the people interviewed, Dakota Provisions.
Bollen, Aberdeen attorney Jeffrey Sveen and Los Angeles-based EB-5 lawyer James Park who worked with SDRC for the Hanul law firm headquartered in Seoul, South Korea, went to China in 2008 to seek immigrant investors for Dakota Provisions.
Sveen represents dozens of Hutterite colonies in South Dakota and the neighboring region. Dakota Provisions is a largely Hutterite-owned operation. Sveen is chairman of the board for Dakota Turkey Growers and manager of Dakota Gobblers, two of the companies that comprise Dakota Provisions, which did the following deals:
The first EB-5 solicitation for Dakota Provisions, known as LP 1 attracted 99 clients, according to an SDRC report to GOED. Sveen’s name is listed with that information. The report says the first loan totaling $40 million to Dakota Provisions was effective Oct. 27, 2009.
The second pool of EB-5 loans for Dakota Provisions brought 11 investors, according to the SDRC report. That loan, known as LP 4, likewise took effect Oct. 27, 2009, according to the report.
Sveen’s name appears on a filing with the secretary of state’s office for SDRC in 2009. The presidency of SDRC was shifted in 2009 from Bollen to Park, which was shown in a filing by Park with the secretary of state.
Later in 2009, Sveen filed amended incorporation paperwork for SDRC that created a board of directors and named Bollen as the only director. Months later a change was also filed returning Bollen to manager of Dakota Provisions LP 1.
The third pool of EB-5 loans for Dakota Provisions, known as SDIF LP 20, brought in 92 investors at $550,000 each for a total of $46 million, according to the report. How much, if any, money eventually reached Dakota Provisions isn’t clear.
SDRC’s administration of the program resulted in a variety of EB-5 investments in South Dakota since 2008. The SDRC report to GOED shows:
There were 65 EB-5 investors in LP 2 for the Deadwood Mountain Grand hotel, casino and events center complex.
There were 200 EB-5 investors initially in LP 3 for the Deer Creek generation station, a project of Basin Electric. A second offering known as LP 7 brought money from 10 more EB-5 investors.
There were 100 EB-5 investors in LP 5 for the Day County wind farm, a project of Florida Power and Light, also known as Next Era.
Mentions
- U.S. Citizenship and Immigration Services
- South Dakota International Business Institute (SDIBI)
- South Dakota Regional Center Inc.
- Joop Bollen
- H&H Law
- Northern Beef Packers II
- Deadwood Mountain Grand Hotel, Casino & Event Center
- Dakota Provisions
- FPL Day County Wind Farm
Litigation Cases
States
- South Dakota
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