Lawmaker defends failure to blame Bollen in EB-5 scandal

The lawmaker who led the legislative inquiry into South Dakota’s immigrant-investor scandal said Friday that his committee lacked information it would have needed to pin blame on the man who now faces criminal charges in the matter.

The lawmaker, state Sen. Larry Tidemann, R-Brookings, chaired the 2014 hearings conducted by the Government Operations and Audit Committee.

The suspect is Joop Bollen, who is charged with five felonies for allegedly transferring money out of an account his company shared with state government and using it for personal gain, including a purchase of an Egyptian artifact.

Tidemann said his legislative committee lacked information about that particular account, called Indemnification Fund 2.

“The audits we looked at did not identify anything from that indemnification fund,” Tidemann said. “We knew there was potential for something there, but that was not presented to us.”

The committee examined the operations of the Governor’s Office of Economic Development, including its dealings with SDRC Inc., a private company operated by Bollen that until 2013 had a state contract to recruit foreign investors using the federal EB-5 program. The program provides foreigners with a permanent-residency green card if they invest at least $500,000 in U.S. projects that create or retain at least 10 jobs.

In November 2014 the legislative committee issued a final report that pinned blame for the problems that prompted the hearings on Richard Benda, who committed suicide in 2013 while he was under investigation for allegedly stealing $550,000 in state grant money.

“As a result of its hearings,” said the report’s summary and conclusions section, “the GOAC believes the events that occurred concerning the GOED ... were the result of inappropriate actions taken by former state official Richard Benda.”

The summary and conclusions made no mention of Bollen, who in early 2011 hired Benda, who had served as secretary of tourism and state development, straight out of state government to work for SDRC.

The $550,000 in state grant money that Benda was accused of stealing was allegedly siphoned from a $1 million award to the fledgling Northern Beef Packers plant in Aberdeen, an EB-5 project that went bankrupt. The diverted money was allegedly intended to cover two years of Benda’s annual salary for SDRC.

Tidemann’s legislative committee sought information from Bollen during the 2014 hearings, but instead of issuing a subpoena to compel his attendance, the committee allowed him to respond in writing to written questions.

In his responses, Bollen criticized the “political and media insanity” surrounding him and his handling of the EB-5 program, which he labeled a “fabulous economic development tool.”

Little was heard from Bollen after that until Friday, when he had his initial court appearance in Brown County on five felony counts of unauthorized disposal of personal property subject to security interest. He resides in the Brown County seat of Aberdeen.

The complicated-sounding charge is a reference to Bollen’s alleged transfers from the indemnification fund. That fund, which was created by SDRC with a security interest granted to the state, was intended to hold the state harmless if it ever had to pay SDRC’s obligations.

The account was supposed to reach $1 million by 2011 but did not reach that amount until 2013, according to an investigator’s affidavit in the Bollen criminal case. The affidavit says Bollen made five transfers totaling about $1.2 million from the indemnification fund to his company’s account in 2012, and used the money to invest in bonds issued for the Northern Beef Packers project, to loan money to a business partner, to purchase an Egyptian artifact, and to wire money to an artifact collector. Bollen eventually replaced all but $166,606.89 of the money that he transferred out of the account, and the affidavit does not say how that unaccounted-for money was ultimately used.

Tidemann said the legislative committee that looked into the matter in 2014 lacked information on Indemnification Fund 2. According to disclosures in the Bollen criminal court documents, the eventual pursuit of that information by others in state government may have led to the charges against Bollen.

In October 2015, the state filed a lawsuit against SDRC, in part to compel disclosure of records about Indemnification Fund 2 and to force Bollen to fully fund the account. During the course of that litigation, according to the criminal affidavit filed this week, Bollen admitted to granting the state a security interest in Indemnification Fund 2. That's essentially a legal right to seize and use the money if needed to pay obligations on SDRC's behalf.

That admission by Bollen may have contributed to the December 2015 assignment of a state investigator to “conduct further investigation into the fate of state funds,” in the words of the affidavit in the Bollen criminal case.

Meanwhile, the legislative inquiry, while not pinning any blame on Bollen, did result in some legislation intended to help prevent similar scandals in the future. Democrats said Friday that the action taken so far has been insufficient.

“It appears Republicans are so entrenched in maintaining a system of patronage and cronyism, they refuse to acknowledge the obvious — South Dakota has a problem with conflict of interest and government corruption and we need to do something about it,” said a written statement from Suzanne Jones Pranger, executive director of the state Democratic Party.

Tidemann disagrees with that assessment.

“I think we’re taking a step-by-step approach,” he said. “It’s maybe not all perfected yet, but we’re making steps toward trying to solve that problem.”

http://rapidcityjournal.com/news/local/lawmaker-defends-failure-to-blame-bollen-in-eb--scandal/article_cf340fd1-1fb8-5039-9be6-607c7b217036.html

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