South Dakota wants to keep its EB-5 authority
The Daugaard administration is trying to overturn the federal decision to strip South Dakota state government of its status as an EB-5 immigrant investor center.
A law firm representing Gov. Dennis Daugaard filed the state's response Monday to the U.S. Citizenship and Immigration Services.
The thrust of the state's response is it shouldn't be penalized for the previous management.
The EB-5 program began a decade ago under South Dakota's previous governor, now-U.S. Sen. Mike Rounds.
The federal notice of termination in 2015 reflected actions of the Aberdeen-based private contractor, SDRC Inc., and its president, Joop Bollen who ran EB-5 for South Dakota.
Bollen initially developed the South Dakota program as a state employee for the Rounds administration and then formed the company that became its private manager in 2009.
Rounds's final term as governor ended in January 2011. The Daugaard administration notified SDRC Inc. in September 2013 that its contract was terminated.
One month later Richard Benda, a member of Rounds cabinet who signed the contract with Bollen, was found dead of what was determined to be a self-inflicted shotgun blast.
The public later learned Benda was under investigation for double billing on trips he took while a state employee.
Benda went to work for SDRC Inc. in 2011 after Daugaard didn't retain him in the new administration. Benda had been Rounds' secretary of tourism and state development.
State government is battling with Bollen and SDRC Inc. in state court over money and records that weren't provided after the 2013 break-up.
State Attorney General Marty Jackley filed criminal charges against Bollen for personally using money that was supposed to be preserved for state government under the contract.
Investors from foreign countries placed $500,000 apiece plus fees to participate in the South Dakota EB-5 projects.
In turn, the federal program put them and their immediate families in line for U.S. citizenship.
The contract signed by Bollen and Benda in 2009, and its amended version from 2010, called for a portion of the investors' money to be set aside in a special fund to protect state government.
One reason for the federal termination was the manner in which the investors' fees were spun off for other purposes by SDRC Inc.
An example involved a private financial organization called Epoch Star, based in the British Virgin Islands, which made a $30 million bridge loan for the Northern Beef Packers project at Aberdeen.
SDRC Inc. operated several EB-5 loan pools for the Northern Beef project. SDRC Inc. later bought Epoch Star.
"There is no evidence that GOED directed, authorized, or knew of such diversion," the state's appeal argues.
"Joop Bollen, President of SDRC, Inc., apparently had a different view of what constituted appropriate EB-5 expenditures, but GOED will make clear going forward that Mr. Bollen's view is not acceptable and ensure that diversions will not happen again."
Further, the appeal states, "In addition, SDRC, Inc.'s acts of mismanagement exceeded the scope of its agency authority."
A state court hearing is set for October in state government's separate lawsuit against Bollen and SDRC Inc. The criminal case against Bollen is pending.
- South Dakota
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