The EB-5 scandal is blowing up again in South Dakota. And this time the allegations are bigger and stranger.
The federal government agency that oversees the program has revealed it conducted a detailed investigation.
Among the probe’s findings:
• Three payments totaling $1.7 million inexplicably went to a holding company in Cyprus that owns Russian railway companies;
• More than $5.1 million was used to purchase a Hong Kong-based lender;
• That lender had previously provided $2.85 million as bridge financing at 29 percent interest for Northern Beef Packers in Aberdeen. The loan cost nearly $7.5 million before the purchase of the lender;
• Some $5 million can’t be found;
• Approximately $3.3 million was improperly spent on expenses;
• The outside contractor who previously managed the program for state government has continued to run a website identified as South Dakota Regional Center Inc.;
• Investor agreements sometimes appeared to have been altered;
• Investors sometimes complained they couldn’t get their money back after their visa applications were refused;
• Four South Dakota dairies involved with the program filed Chapter 11 bankruptcy; and
• The federal government received 1,002 immigrant petitions by alien entrepreneurs associated with 32 projects in South Dakota, with 705 approved to date.
Because of those actions, the intention of the U.S. Citizenship and Immigration Services now is to terminate South Dakota from further participation.
The thrust of the federal government’s allegations is state government hasn’t corrected the past problems.
The EB-5 program offers permanent visas to aliens who invest in U.S. projects. The USCIS allows regional centers such as the South Dakota office to pair investors and projects.
The federal agency on Sept. 28 sent notice of intent to terminate South Dakota’s regional center status to the Governor’s Office of Economic Development.
The 18-page notice contains many examples alleging improper conduct involving South Dakota’s EB-5 activities.
Gov. Dennis Daugaard’s administration hasn’t responded yet and is still analyzing the possible effects of a termination, according to his chief of staff, Tony Venhuizen.
South Dakota received 30 days to respond.
Still unclear are the possible effects from a termination on investors and projects that received financing through EB-5 since its 2004 start in South Dakota.
Also unknown yet is South Dakota’s future eligibility to participate again.
As of Oct. 5, the federal agency listed 754 regional centers currently approved.
South Dakota was unusual as a state government operating directly as a regional center.
Most regional centers are privately run.
Federal termination of a regional center isn’t common. USCIS lists 35 that have been terminated.
The USCIS allegations about South Dakota’s program are noted in passing in a lawsuit filed in state circuit Friday on behalf of state government by Paul Bachand. He is a special assistant attorney general hired by the Daugaard administration last year regarding EB-5 matters.
The lawsuit seeks financial records and money from Joop Bollen of Aberdeen.
Bollen ran South Dakota’s regional center, first as a state government employee at Northern State University and later as a private businessman operating SDRC Inc. from Aberdeen.
Bollen worked for years at the South Dakota International Business Institute at NSU in a post funded by the Governor’s Office of Economic Development. In 2004, at the direction of Gov. Mike Rounds’ administration, he petitioned USCIS for South Dakota to become a regional center for investor-visa purposes.
Bollen ran the regional center. Several expansion petitions followed. On Jan. 10, 2008, while still a state employee, Bollen incorporated SDRC Inc. He was the company’s registered agent and president. On May 8, 2008, he signed a memorandum of understanding between the regional center and SDRC Inc., placing SDRC Inc. into a management position for the regional center.
On Dec. 22, 2009, Bollen signed a consulting contract for SDRC Inc. with the state Department of Tourism and State Development. He resigned from his state job the same day. He signed an amended contract on June 4, 2010. Representing the state department in each instance was Richard Benda, the head of the department.
After Benda wasn’t retained in 2011 by the incoming administration of Daugaard, he went to work for SDRC Inc. as a loan monitor for the Northern Beef project.
In April 2013 the Daugaard administration secretly received notice of a federal investigation underway.
The governor secretly ordered a state investigation involving Benda, the Governor’s Office of Economic Development and SDRC Inc.
Benda died Oct. 20, 2013, while apparently hunting pheasants alone at a farm near Lake Andes. His death was ruled a suicide committed by using a stick to push the trigger on his shotgun, which fired into his abdomen.
On July 29, 2014, state Attorney General Marty Jackley disclosed to a legislative committee that before Benda’s death he already had an arrest warrant prepared for Benda and had scheduled a grand jury to meet.
Benda faced allegations of double-billing for airline tickets while a state employee and steering a state grant to Northern Beef in late 2010 that was used to pay his salary with SDRC Inc. starting in 2011.
State government had to defend Bollen last year in a California lawsuit brought be a businessman who had wanted his company to recruit EB-5 investors for South Dakota.
The state lawsuit now pending against Bollen alleges that SDRC Inc. didn’t fully fund a $350,000 indemnity account required under its state contract and hasn’t given state government access to a second indemnity account that is supposed to contain $1 million.
The lawsuit says state government has spent at least $175,000 in legal fees and associated costs regarding SDRC Inc. The lawsuit also alleges that Bollen hasn’t turned over all of its records and reports to state government.
Among the remedies requested in the complaint is that SDRC Inc. be ordered to cease and desist any representation that is connected to the regional center and state government.
Bollen has 30 days to respond to the lawsuit.
Mentions
- Joop Bollen
- U.S. Citizenship and Immigration Services
- South Dakota International Business Institute (SDIBI)
- South Dakota Regional Center Inc.
Litigation Cases
States
- South Dakota
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