I have not had the chance to watch the video of Rep. Kathy Tyler's remarkable press conference today outlining the argument that...
- Joop Bollen violated Board of Regents policy and committed fraud by creating his own private company to do the job that the Regents were paying him a state paycheck to do;
- Bollen used his private SDRC Inc. to divert perhaps more than $140 million that the state could have earned to his and his cronies' pockets;
- Then-Governor, now U.S. Senate candidate Mike Rounds knew what was happening and let it happen.
$140 million—that's a lot of money. That's more money than the structural deficit of $127 million that Mike Rounds left for his successor and the 2011 Legislature to clean up. Think about that: all the fees Bollen and friends appropriated to themselves could have averted all of the budget cuts Governor Daugaard said we had to make in 2011.
While I eat supper and watch the video of Rep. Tyler's presentation, here is her prepared text, as released today by the South Dakota Democratic Party:
Good afternoon. I’m Representative Kathy Tyler, and I thank you so much for being here. What I want to do today is reveal documents proving that Joop Bollen and his associates have committed a potential $140 million fraud managing the state’s EB5 program, sometimes called the citizenship-for-sale program, in contracts between Northern State University & the Department of Tourism and State Development and in applications by the state of South Dakota with the United States Citizenship and Immigration Services. This was approved by Governor Mike Rounds and continues today.
Hopefully I will be able to answer how and why Joop Bollen and his associates pulled off a $140 million fraud against the state and how I arrived at the $140 million Bollen and his associates stole. It’s truly a tale as old as time: this is a simple story of massive fraud - the kind of fraud that occurs when money, greed, and absolute power corrupt absolutely.
Many reporters including KELOLAND reporter Ben Dunsmoor, Pierre correspondent Bob Mercer, Mitchell Daily Republic reporter Denise Ross, and Argus Leader reporters David Montgomery & Jonathon Ellis have done an excellent job tying threads together. I will be relying in part on their existing reporting and revealing new documents to supplement their work.
As Ben Dunsmoor reported*, on December 22nd, 2009, Governor Mike Rounds granted SDRC Inc a lucrative no-bid contract to fully administer the EB5 citizenship-for-sale program - but SDRC Inc's origin is almost two years earlier between a man and his mirror. This is the beginning of the $140 million fraud.
On January 10, 2008, the Secretary of State's office certified SDRC Inc, a company Joop Bollen formed, to operate in South Dakota. Five short days later on January 15, 2008, the South Dakota International Business Institute, based at Northern State University, signed a contract with SDRC Inc. This contract outlined in detail SDRC Inc’s role in the state’s EB-5 program: SDRC, Inc, in effect, took over the entire program. Signatories include Joop Bollen on behalf of the state & James Park of Hanul Law Corporation on behalf of SDRC Inc. This contract was the precursor to the no-bid contract approved by Governor Mike Rounds in December of 2009.
Okay, so what’s the big deal? The big deal is that at that time Joop Bollen was high ranking state official who signed a contract on behalf of the state with a company he owned. This bears repeating: On January 15, 2008, Joop Bollen, a state employee, granted SDRC Inc, a private company he formed on January 10, 2008, a contract to administer the EB5 program. A state employee formed a private company to manage the EB5 program. Then on behalf of the state, he gave his own company the contract to privately manage the this program – and with it lucrative EB5 fees that could have accrued to the state.
Contracting with SDRC Inc on the taxpayer dime to manage the EB5 program for private gain is a clear violation of Board of Regents Fraud Policy.
The Board of Regents Fraud policy states:
A. Fraud shall be defined to include the following for purposes of this policy:
1. Conduct within the scope of employment, or conduct apparently within the scope of employment, and representations to the Board, or any of the institutions governed by it or any affiliated organizations that constitutes:
a. Intentional or deliberate act to deprive the State of South Dakota, the Board, any of the institutions governed by it or any affiliated organizations or students of something of value (property, money, services, or opportunities).
b. Deception, false representation of fact by either conduct or other communication, or concealing what should have been disclosed, or made when the actor knew or should have known that the other party relied upon his or her representations, leading to injury of the State of South Dakota, the Board, any of the institutions governed by it or any affiliated organizations or students.
This was the opportunity of Joop Bollen's lifetime, and he repeatedly lied in official documents to pull off the fraud. Within the scope of his public employment, Joop Bollen and his partners intentionally deprived the Board of Regents something of value - over $140 million in EB5 fees that could have stayed with the state. Bollen fraudulently omitted SDRC, Inc.’s role managing the EB5 program in semi-annual contracts with Northern State University and the Department of Tourism and State Development. And Bollen misrepresented the relationship between the state and SDRC, Inc. to the United States Citizenship and Immigration Services in documents requesting EB-5 expansion and explaining SDRC, Inc.’s role in that expansion. And he committed these deceptions, while he was a highly paid and high ranking state employee.
Folks, the story is really that simple. Joop Bollen and his associates created a system to enrich themselves to the tune of $140 million at the expense of South Dakota taxpayers with the approval of Governor Mike Rounds – and Bollen repeatedly misrepresented himself and SDRC, Inc in official documents to do it.
Now, we can ask why would Governor Mike Rounds allow a state employee to sign a contract with himself? Who wrote, reviewed & approved this contract on behalf of the state with a five-day-old company? Why Governor Mike Rounds and Governor Dennis Daugaard have turned a blind eye to this clear case of ongoing fraud? And ultimately, what was the motivation for many players to allow this fraud to happen--to allow the state to throw away the potential for millions of dollars of income from the EB-5 program?
It all boils down to money and greed.
Okay, this is where the timeline of events becomes important. When South Dakota was looking for wealthy foreign investors for dairy projects across Northeast South Dakota, Joop Bollen couldn't find them all by himself from the Northern State University campus. He needed help. Enter James Park of Hanul Professional Law Corporation, who had the Korean rolodex to finance dairies in South Dakota. But as projects got bigger and more numerous, it soon became apparent that the foreign rolodex needed to be expanded. So they brought in a third party, Darley International LLC, an international recruitment agency with extensive contacts in Asia. As you can see in this never-before-released confidential contract, Hanul and SDIBI granted Darley exclusive recruiting rights in China and the former Soviet Union on the following terms for the recruiting agency:
EB5 Investment Fee Structure:
$30,000 Darley International LLC $20,000 Hanul in partnership with SDIBI $50,000 TOTAL recruitment fees per investor – paid by the immigrant investor With over 800 immigrant investors, we're talking big money - $40 million with a $24 mil to $28 million immediately going to Darley.
But large sums of unregulated money are often followed by immense greed. With investors increasingly coming from China, Bollen and Park would leave a lot of money on the table. If Bollen and Park wanted to cut Darley out of the picture, they had to concoct a workaround.
Enter SDRC Inc: Bollen forms SDRC Inc to outsource the lucrative EB5 franchise from public control to private control, so SDRC Inc can harvest the fees that would have gone to Darley.
Based on this exclusive recruitment contract and information from a court case, we know that Joop and his associates jammed Darley, so they could harvest the entire $50,000 recruitment fee per immigrant investor. With 800 immigrant investors after the formation of SDRC, Inc, the recruitment fees for Joop, SDRC, Inc., James Park, and Hanul Law Corporation total $40 million. According to exclusive court documents, Bollen was also taking a previously undisclosed 1% ownership equity position in EB5 investments for another $16 million.
But that’s just the beginning. In a November 6, 2013 Argus Leader article, David Montgomery shows that SDRC Inc., took a 1% “closing fee” on every loan, a $10,000 yearly fee per investor, and a $30,000 “administrative fee” on each loan in the EB5 loan pools. The 1% closing fee was $5,000 per immigrant investor ($4 million total) and the yearly $10,000 per immigrant investor fee resulted in $8 million annually for another cool $40 million over the last 5 years. Lastly, Joop and his associates would have been able to invest the harvested fees. If one assumes $80 million invested for 3 years at 8%, it comes to another $19.2 million. Thus, in total, the fraudulent scheme surpasses $140 million for Joop and his associates.
$50,000 recruitment fee per investor (800 immigrant investors) $40 million 1% closing fee per investor at $5,000 per investor $4 million $10,000 loan monitoring fee per investor for five years $40 million 1% equity ownership (assuming 80/20 equity to debt ratio at $2 billion capitalization) $16 million $30,000 one time administration fee on loans (800 immigrant investors) $24 million Return on Capital $19.2 million TOTAL THEFT $143.2 million Who in his right mind would let a state employee fraudulently give himself a contract worth $143 million then let him walk away with the money? There’s at least one person who knew what kind of scheme Bollen was setting up to enrich himself, and that’s Governor Mike Rounds.
The following comes from Mike Rounds in an interview with Mitchell Daily Republic reporter Denise Ross from April 2014:
For his part, Rounds says he was aware in general that SDRC Inc. would need to fund its operations. “We knew there had to be a way in place to fund the operation. We understood that,” Rounds says without elaborating.
“State program became for-profit before securing Northern Beef financing.” Denise Ross, AgWeek, 4.9.14
Mike Rounds knew Joop Bollen and partners were going to become immensely wealthy ripping of the state – and Mike Rounds approved the whole fraudulent scheme.
State leaders have a responsibility to investigate the extent of this $140 million fraud. We had a highly paid, high ranking state employee signing a lucrative contract with himself. Mike Rounds approved a no bid contract for work that could have been done through a state office and put millions into the state coffers. While Governor Dennis Daugaard is paying a private attorney $50,000 to recoup $550,000 from a futures fund grant, Joop Bollen and his associates are defrauding South Dakota taxpayers of over $140 million with the approval of Governor Mike Rounds. Where is all of the money? We know who lost in this fiasco; now we need to know who gained from this fraudulent scheme.
The legislature’s Executive Board has the power to instruct GOAC, to do just that, to do finish what they started, to make sure the intent of HCR 1010 is accomplished. Tomorrow, I will make a motion for the Executive Board to instruct GOAC to subpoena Joop Bollen and all his financial documents, Mike Rounds, Dennis Daugaard, Aberdeen attorney Jeff Sveen, and former Board of Regents President Harvey Jewett among others who are listed in the press packet**. I hope my counterparts will join me in finding answers for the people of South Dakota [links added; Rep. Kathy Tyler, prepared remarks, 2014.09.08].
We already know that Mike Rounds threw away $4.3 million of taxpayer money on his Northern Beef Packers money pit. But now, if Rep. Tyler's math is right, he shoved another $140 million off the taxpayers' table and into his pals' laps.
Mike Rounds will call that "South Dakota common sense." Rep. Tyler calls it "theft." Let's see which term voters choose.
*Actually, Bollen's Dec. 2009 no-bid contract for SDRC Inc. was reported first on this blog on Dec. 12, 2013, eight months before Dunsmoor's KELO report.
**Here is the complete list of individuals whom Rep. Tyler's press packet says should be subpoenaed:
- Mike Rounds, former Governor:
- Dennis Daugaard, Governor:
- Joop Bollen, former state employee
- Jeff Sveen, Aberdeen attorney for Bollen
- Harvey Jewett, former Board of Regents President
- Tad Perry, former Board of Regents Executive Director
- Patrick Schloss, former Northern State University President
- Dr. James Smith, current Northern State University President
- Neil Fulton, former Chief of Staff to Governor Mike Rounds
Holy shit! Oh, excuse me, . . . But Holy Shit!
Rounds & His Cronies did this to each of the people struggling in the little churches I served. They did this to schools that have been cutting programs and personnel. They did it to people trying to take care of their health. They did it to adults trying to figure out how they are going to care for their ailing parents at the same time as their own children. They did it to the farmers and ranchers who are trying to cope with blizzards and floods. They did it to mom and pop stores trying to get by.
Rounds & His Cronies see all those people as tools to be used up.
Rounds & His Cronies - Purely Shameful.
I say this is a righteous call for bigger government by Ms. Tyler. If the state gets back into E-B5, like she is advocating, in a big way, we could make $140,000,014.99 that we could be giving to good teachers in salary!!!
Now who could be against that?
I say this is a call to get our government back into E-B5 with a whole department to run it. With lots of open information of course. Complete lists of Chinese, etc. We could go really big and double that to $280,0029.98
Earth haters like Jacqueline Sly from Rapid City want to raise taxes on the poor to pay for teacher raises:
http://www.argusleader.com/story/news/education/2014/09/08/higher-teacher-pay-sales-tax-one-lawmakers-say-yes/15305917/
I think we should put Mmes. Sly and Tyler as co-heads of the new South Dakota E-B5 program to raise $280,0029.96 that we can give to Good Teachers and maybe a little for some bridge repair.
So, who had a motive to meet R. Benda in a shelterbelt and silence him last October? Does South Dakota have an Attorney General or a Division of Criminal Investigation?
Mr. Tears, I am not sure Mr. Benda would have met with people in a shelterbelt that far away from his home. So my guess is that the Chinese Mafia abducted him at his home and drove him there in the trunk of his own car.
I ask you, where is this car now? Brendan Johnson has it!
An alternate theory would be the Korean Mafia. But I don't know as much about the Korean Mafia and I don't think Mr. Benda drove a Hyundi.
Grudz-R U imbibing gravytaters from a martini glass? U sound like you are.
96, I would bet there are a number of high ranking republicans that have benefited from Mr Bendas inability to live with his burden.
Mr. Mike, from IA, do you really think a fellow like Mr. Benda would have driven a Hyundi?
When a fellow like I, insaner than some, can see the huge opportunity is Ms. Tyler's proposal, everybody should see it. I mean, here she is on a day that the fat-cat administrator types are wanting to increase taxes on the poor by 25% coming up with a proposal for government to get $140,000,014.95 and shooting down the need to tax the poor...
It's brilliant! And, if we did twice the work of this Joop fellow, say we created a whole division of E-B5 people we could easily double the output of any one Dutchman. That is how I get my $280,000,029.90. Easily. We might triple it, even for a Dutchman as prolific as Mr. Bollen.
We save the poor from being taxed more at the behest of the libbie fatcat administrator types, and we make boat loads of free money to give to GOOD teachers!!!
Brilliant, Ms. Tyler. Brilliant. Ms. Wismer will no doubt tomorrow be calling for the state to get deep into the E-B5 business. I would if I were her.
Grudz,I don't believe Benda killed hisownself. I think someone held him at gunpoint and fed him to death on gravytaters until his gut exploded. Know anyone that likes gravytaters?
O.K., now that Grudz has had his fun, let's address the main issues:
1. Bollen defrauded the Regents... and the Regents did nothing. What gives?
2. Bollen created a private company to do the job the state was paying him to do. What gives?
3. Mike Rounds knew this creative money-funneling was going on and did nothing to protect taxpayers from the loss. What gives?
4. Kathy Tyler accuses Mr. Rounds of costing tax payers $140,000,014.93. That means she thinks he should have kept it in house and had all that money (french math aside) coming into taxpayer coffers.
5. grudz asks: then we should be doing it now, only even bigger!!!! When the newspapers call Mr. grudz, expect the quote "You can't be against it now but for it then. I say, $280,000,029.86 more in money to give to GOOD teachers, and none of it comes off the backs of the SD poor!"
And they will call, oh yes. I have word a reporter is looking for me right now...
Notice the Rep. Tyler can follow this money without invoking any Benda-death-conspiracy hypotheses. She's talking real money, real policy, real documents, and real violations, no leaps of imagination required.
The very first thing I thought of when I watched Kathy's presser was that the Sept. 24 GOAC hearing can't get here fast enough.
I can already envision the "common sense" candidate strolling into the hearing room, placing his hand on the Bible and start telling South Dakotans what the hell happened. Anybody willing to make a token wager on whether he will show?
Kathy Tyler is to be commended for her professionalism in her presentation. She wasn't yelling about corrupt South Dakota politicians and making unfounded and speculative arguments, she went to the heart of the matter and stayed focused. Well done Ms. Tyler.
Another thing that occurred to me was, I can't wait to see Mike Rounds next FEC report, when will that be out? Did Rounds know these revelations would eventually come out and is that why he backed off his promise to become the $9 million candidate?
(Next FEC report is Q3, July 1–Sept. 30, due Oct. 15, followed by pre-election, covering Oct. 1–Oct. 15, due Oct. 23. See FEC filing calendar here: http://www.fec.gov/info/report_dates_2014.shtml)
Number 1 executive order to all state employees, Daugaard lackeys and state government parasites: You will allow nothing to occur that would endanger Gov. Daugaard's re-election. There will be reprisals for failure.
Number 2 executive order to all state employees, Daugaard lackeys and state government parasites: You will do all things necessary to elect Mike Rounds to the U.S. Senate. In case of failure, see Number 1.
The SDIBI raised questions among the university faculty throughout the system because it seemed to have no higher education function. The only people who seemed to be interested in the program was Harvey Jewett and the Regents.
Professor Norquist, is it possible that it was the Regents who dropped the ball on this? Wouldn't they be the ones to catch Bollen's self-contracting scheme? And the most logical office to press charges against him to get their paperwork back?
Newquist... Sorry. Spell check on my phone doesn't like your real last name David.
They should subpoena this Mr. Jewett fellow then too. And all of those Regent people. The are probably not at risk of flight to the Netherlands.
Kevin Schieffer: call Rich Benda.
does anybody know why Harvey Jewitt retired silently last year?
Mr. Jewett is probably relaxing in the sun, wearing shorts and leather Jesus sandals, smoking a pipe in New Mexico.
go on take the money and run.
Jewitt is holed up in an undisclosed location. Benda is what is known as a patsy in RICO slang. He was the perfect one too, all tied in to booze and gals. How convenient.
despite troy, grudz and hickey yelling "squirrel!!", this is turning out to be a mess for denny and marion. rick, susan-call the RACHEL MADDOW SHOW. it would be hilarious.
Here are the problems I have with Rounds is, its not me.
First and foremost, this proves that Joop is involved, prior to this it was all Benda's fault, (who just happens to be dead now).
2nd he loves to take credit for all the good it did.
Here are the facts, Benda was a GOPer who worked in Pierre for a long time, Rounds is from Pierre. They were from most accounts friends, he was HIS secretary of tourism, yet it was all a big surprise and he didn't know anything. Even allowed to walk out with a very large check.
Joop Bollen, a guy who Rounds knew (there are pictures)basically commits fraud from the state and board of regents. Tad Perry (a republican from guess where, Pierre), is in charge of the board of regents, yet guess what he doesn't know anything either.
A bunch of Pierre connections, Rounds is in the middle of all of it, yet he didn't know anything.
Now I'm from South Dakota, I've been to Pierre, don't tell me someone didn't know something.
"What did Rounds know and when did he know it" would be every comment I would make if I'm a democrat
Bill, the Regents were the instigators of SDIBI, and Bollen had access and privileges that made clear he was not a mere faculty member or academic administrator. The Regents ran NSU. The presidents took orders from them. They did not administer the university; they did what they were told. That was the major qualification for being a president.
Mr. Newquist,
Now that is as scary a notion I've ever heard. Are you suggesting that the Regents were in some way complicit with the fraud Kathy Tyler laid out today?
It would raise the question, at least for me, on whether or not NSU does indeed the missing files being reported.
By the time Mike Rounds privatized EB-5 by paying the Joopster $45,000 a year to take all of those millions of dollars of fees off of the state's hands, Mike Rounds and everybody else knew SDRC was the Joopster's company. Heck, Rounds authorized a go-around to the no-bid contract laws to allow the Joopster to privatize all those fees the state could have taken in.
What is even more telling is that the Rounds administration never required the Joopster to register SDRC as a bank and pay bank franchise fees to the state either. Not only did taxpayers get NOTHING out of this no-bid contract Rounds authorized, they actually paid the Joopster $45,000/year AND they poured $4.5 million in taxpayer money into SDRC projects including NBP. Now, all of these documents the Democrats are releasing were in the possession of the Daugaard administration and the Attorney General for years ... YEARS! They did nothing but swept it under the rug and hoped that nobody would do any digging. So Daugaard trots out his overpaid son-in-law to say, "Who knew?" They all knew. That's why they hired Dick Wad. Now we all know why they hired Dick Wad.
Somebody has to ask the question: What was in this for Mike Rounds? How much was he paid by Joop Bollen after he left office - directly or indirectly?
Roger, the changes in programs at NSU for about 15 years were dictated by the Regents. The presidents prior to Schloss are the ones who should be questioned. The current president, who found that academic funds going into SDIBI were wrongful and booted it and Bollen off the campus. He has rebuilt the university, although its programs are no where near equal to what the university once was.
If the $30,000 fees are per the contracts post privatization of the SDRC, bet you they were real prior. The fees were legitimized post, but collected unlawfully for the personal coffers of select parties,,,Joop Bollen, et al prior. A valid question is why a high ranking state employee is allowed to pocket fees from a state program? In most companies that is not allowed, and grounds for termination, as such fees would be the property of the company, not its employee.
Joop Bollen will not show, he will flee, his friends are preparing to help him run.
Privatizing was the Wingnut mantra under dumbass dubya. Remember they wanted to privatize all gubmint functions because the private,see pirate,sector could do the job cheaper and more efficiently than bumbling bureaucrats. They sure can raid the treasury more efficiently. Another prime example would be hiring mercs to fight our wars and payeach merc several times the rate of pay of military personnel.
There is so much lack of oversight to all this. Is this really the way SD govt is run? Will Joop ever be charged with anything?
U S has an extradition treaty in place/in force with the Netherlands,just in case.
Jane speculates that Joop may skip town and that his friends may help. Tyler may be helping us see why Joop would have friends helping him. He is the central witness in this case. He could tell us everything that happened, every conversation with Rounds, Daugaard, Sveen, and other well-connected players. He could tell us where skeletons are and where they aren't. His friends have a keen interest in making sure he does not turn state's witness #1 and tell those stories.
Speculation: The big money SDRC Inc. brought in for favored partners would explain why Bollen was allowed to do what he did. Now that we've taken away his SDRC Inc. contract, his knowledge continues to protect him.
A factor not acknowledged is the community that endorses the GOP and any scheme that makes money. A part of that community is the state press. The Aberdeen newspaper did not publish a word about the press conference at which the documents were revealed in today's print edition. At mid-morning, it put a very short AP story on its website.
The tolerance, even admiration, for corruption extends far into community.
David,
The same is true of the Rapid City Journal, while this breaking news has been going around since 1 pm yesterday, 42 minutes ago the Journal posted a simple AP story quoting the Argus.
A part of the story is looking at the print media advertisers, one of major advertisers on the Journal is Bob Fischer who owns a string of furniture stores, is an Evangelical Republican, and serves on their community editorial board (I think that's what they call it). I'm not saying that Fischer alone controls the Journal, but he does have influence and advances the GOP in Rapid City.
It is difficult to understand why the local media treats the EB-5 scandal as a mere sideshow.
Pretty hot off the press: our friend P&R, who has poo-pooed most of our claims that GOED/NBP/EB-5/Bendagate has legs, thinks the story of Bollen's contract with himself is worth investigating.
Did Rep. Tyler change the game?
"Will Joop ever be charged with anything?"
I don't think so, the system is set up to make corruption legal.
https://www.youtube.com/watch?v=xIFJLMyUwrg
Cory,
John Tristan thinks Kathy Tyler changed the game, I don't think he has fully digested all of Kathy's charges.
An in the meantime, the Powers to Be over on the dump site is celebrating that Kathy Tyler and South Dakota won't be hearing much at the GOAC hearing because she doesn't know how to follow Republican written rules.
Why do I always feel the need to wash my hands when I return from the dump?
In a follow up to my comment to David about the Rapid City Journal, they only posted the AP story about Kathy's press conference for about two hours on their homepage and then relegated it to old news.
I chewed them out about it and accused them of protecting Mike Rounds, surprisingly they moved the story back to the homepage with my comments included.
Roger,
The Aberdeen paper has left the AP story on its web site, but sort of had to as one of its main stories is the county commission asking for an investigation into whether Bollen acted as a bank.
Steve is right that the state has been set up to make corruption legal. The codified laws are full of escape clauses to prevent disclosure of official acts and to hide malfeasance and incompetence. That corruption is so ingrained in the state, that the GOP loyalist would vote for Bernie Madoff for president if he was on the ballot.
we need to find the chris christie-like email "time for some traffic problems in Ft. Lee, NJ". the one that told SDGOP players to put kathy on ice.
Ms. leslie, I really think most GOP people really had no idea who this young lady was. I say they should give her the job back and then really focus a microscope on her to keep track of all her operations. Amongst those operations from the other half dozen or so libbies in Pierre. That Mr. Wink fellow must be mighty afeared of this Ms. Tyler to banish her thusly. I cannot stop laughing at the entertainment yours keep providing me.