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Rounds Projects, Refuses to Own Economic Development Corruption and Failure

Mike Rounds, Dick Wadhams, and Pat Powers are projecting. They say Rick Weiland and I and anyone else who reports the facts about Mike Rounds's economic development policies are telling big desperate lies, when in fact the big desperate deception comes from those trying to help Mike Rounds win a U.S. Senate seat. As is the case with deficit spending and government intrusion in the doctor-patient relationship, Republicans accuse Democrats most loudly of the sins Republicans themselves commit.

Rick Weiland encapsulated the corruption of Mike Rounds's administration in the neat and direct 30-second "Auction" ad released yesterday, accusing Rounds of selling U.S. residency to wealthy foreigners through the EB-5 visa investment program so his cronies could make millions. The attack stung enough to provoke immediate and voluminous responses from Rounds, including a swiftly produced video summarizing Rounds's evasions and absurdity.

As usual, Rounds says EB-5 is a federal program. "Mike didn't create EB-5, didn't run it," says the Rounds response. The former is true; the latter is either false or damning. But the federal provenance of EB-5 is far less important than how Mike Rounds used and abused it:

  • Through his Governor's Office of Economic Development, Mike Rounds authorized state employee Joop Bollen to seek EB-5 investment for projects that apparently couldn't stand on their own in the South Dakota market.
  • Mike Rounds allowed his cronies Joop Bollen and Richard Benda to privatize this portion of the Governor's Office of Economic Development's portfolio, for no apparent reason other than sheer greed.
  • Mike Rounds allowed his cronies to create a bank that appears to have violated South Dakota law and cheated the state of millions in bank franchise tax.
  • Mike Rounds signed off on $2.36 million in lame-duck handouts to subsidize his delayed and doomed centerpiece EB-5-financed economic development project, Northern Beef Packers.
  • Mike Rounds hired and admired a GOED chief, Richard Benda, who used his EB-5 travel expenditures as his personal slush fund.

Rounds responding to concerns about bad policy choices, corruption, and mismanagement in the Governor's Office of Economic Development by shouting "EB-5 is federal!" is like the kid we nab running with scissors shouting, "But these scissors were made in China!"

In further evasion, Rounds repeats his absurd semantic stretch that "the state did not lose money" in Rounds's/GOED's/Joop Bollen's/Richard Benda's (yes, this is complicated) exploitation of the EB-5 program. Even under the most generous yet documentable reading, the state poured $4.3 million in tax dollars into the EB-5-dependent Northern Beef Packers, which generated $3 million in sales, use, and contractors excise tax. That's a loss. And even that $3 million came at the cost of one local contractor being stiffed $2.1 million and other contractors and suppliers losing big money when the plant went bankrupt after just nine months of operation.

The newest Rounds ad then goes for the big enchilada, saying EB-5 "creates thousands of jobs across South Dakota. If Rick Weiland had his way, thousands of South Dakotans would be unemployed today."

Hogwash. EB-5 job creation numbers are mathematical fictions, not real bodies at new work. Fortune agrees:

First, the government is exceedingly generous in its employment tally. It gives EB-5 investors credit for all the jobs theoretically spawned by a project even when EB-5 money represents only a sliver of its financing. Second, for many mainstream ventures, EB-5 money isn’t really creating jobs—it’s merely saving developers money for projects that would be financed anyway. (Indeed, those big companies are actually “hijacking” money from worthy smaller investments in hard-hit areas, argues Michael Gibson, a financial adviser who vets EB-5 investments.) [Peter Elkind and Marty Jones, "The Dark, Disturbing World of the Visa-for-Sale Program," Fortune, 2014.07.24]

Homeland Security says EB-5 projects provide no evidence that they have created new jobs. The Brookings-Rockefeller Project on State and Metropolitan Innovations says "there is a dearth of reliable and publically available data that would enable better monitoring and evaluation of the economic impacts of regional center investments."

In other words, Mike Rounds is talking out his backside. Show us, Mike, the "thousands" of people at work in South Dakota right now who would not be working if you had not included EB-5 investment in your Governor's Office of Economic Development strategies. Where are they, Mike? Are they the Korean contractors brought in to drag Northern Beef Packers to completion? Are they the hundreds of Aberdeen workers who got stiffed paychecks by Northern Beef Packers when it collapsed in July 2013? I don't see them, Mike. Where are these mighty and prosperous thousands whom you say Rick would turn to paupers?

Mike Rounds is lying. He's making stuff up. He's kicking up dust to keep voters from seeing that Mike Rounds owns his bad policy choices and his sloppy management of his economic development policies.

27 Comments

  1. Tim 2014.09.05

    Rounds is doing what republicans have done here for years, the really sad thing Cory, a lot of voters here will buy it lock, stock and barrel.

  2. Dana P 2014.09.05

    Mike and Denny D need to get on the same sheet of music. If the state didn't lose any money, why is Gov D seeking ways to get the money back?

    And Tim is correct (unfortunately). Many South Dakotans just want to put their heads in the sand and not send these politicians a message.

  3. Bill Fleming 2014.09.05

    Good point Dana. Like Kurtz likes to say, "Pick a lane guys." And it's a great question. How much EB-5 related money DO we need to try to claw back anyway? The Benda/Bollen bucks sound like they may be just the tip of the iceberg, no?

  4. Steve Sibson 2014.09.05

    "Republicans accuse Democrats most loudly of the sins Republicans themselves commit."

    I agree, and also Democrats accuse Republicans most loudly of the sins Democrats themselves commit.

  5. larry kurtz 2014.09.05

    They can't help it, Bill: they were born with silver hoofs in their mouths.

    Sibby: you've got me praying for The Rapture.

  6. Bill Fleming 2014.09.05

    And Sibby accuses everyone (and everyone they know) most loudly of the sins he himself commits.

  7. Steve Sibson 2014.09.05

    Mr. Fleming, you can change Sibby to Bill and say that into a mirror. Example: arguing with yourself.

  8. Joe Loveland 2014.09.05

    His ad uses bizarre logic: I didn't create EB-5. I don't have jurisdiction over EB-5. I didn't run EB-5. And I created jobs with EB-5!

    Huh?

    He needs to decide whether he is going to own it, or disown it, because he looks silly trying to to both things in the same breath.

  9. JeniW 2014.09.05

    David this is what I received from the link:

    "This content is currently unavailable" ---- Is that an intentional shot at the SDGOP? If so, thank you for the laugh of the day. :)

  10. mike from iowa 2014.09.05

    Mr Fleming,you can change Sibby to Bill... You can? Can you get me a pony?

  11. mike from iowa 2014.09.05

    That was funny and totally accurate, David. Like JeniW,I couldn't get the other link to work.

  12. Brother Beaker 2014.09.05

    I am not a fan of EB-5 and I do not pretend to know how well MR conducted his portion of running it, but I think two points deserve mention:

    1. The Weiland ad conveys the clear impression the MR had control over the basic premise of EB-5, "selling citizenship." That is emphatically not true and deserves criticism.

    2. All government claims of job creation should be viewed with extreme skepticism, not just those touted by those we like least. I will put $10 and a beer (and I have not peeked!) that I could go back on this very blog and find citations to the "stimulus" job creation without any of the qualifications and provisos contained above.

    Just sayin'.

  13. mike from iowa 2014.09.05

    Brother B-can you flesh out your 1 claim. While it is true green cards don't convey citizenship,they are a necessary step towards gaining citizenship and they were for sale through the EB-5 program. Most any immigrant can obtain a green card w/o purchasing it,but it takes much longer to obtain citizenship through the usual channels.

  14. 96 Tears 2014.09.05

    The criminality of Mike Rounds' administration is easier to document and explain than "what is EB-5," as is Rounds' culpibility. He hired Benda. Benda set up a racket, turning a state agency into a secret, possibly illegal bank, and left state government to fill his pockets, starting with a $1 million check from Rounds that he picked up on his way out the door. And there's the secret accounts in the Caymen and Virgin Islands.

    That should be simple to explain in a 30- or even a 15-second ad.

  15. Bill Fleming 2014.09.05

    Pretty good script, 96T. Needs a fact check, storyboard, music track $150 grand in media money and you're good to go.

  16. Roger Cornelius 2014.09.05

    /

    Every time I hear Mike Rounds or anyone else claim that Eb-5 is a federal program, I think of the kid that got caught stealing Oreo's from the cookie jar and than blamed his mom for putting them in the jar in the first place.

  17. Roger Cornelius 2014.09.05

    If ever given the opportunity to ask Mike Rounds one question, which I'll never have, it would be this:

    Mike, NBP had an infusion of nearly $167 million in investor capital and another $4.3 from the state's Future Fund and other sources, given that kind of start up capital, would NBP have been successful if Benda, Bollen, lawyers and consultants not ripped off the working capital?

  18. Brother Beaker 2014.09.05

    Mike, the "selling citizenship" (which is what makes me queasy about EB-5 in the first instance) is an immutable part of the federal program, that exists no matter who is running the program or how well. The ad certainly attempts to lay that at MR's feet, admittedly by implication, but the implication is strong.

  19. Roger Cornelius 2014.09.05

    Brother Beaker
    South Dakota's independent and self proclaimed true Republican candidate for the senate, Gordon Howie, also calls EB-5 a citizenship for sale scam.
    Multiple reports from various sources emphatically state the stimulus was a success and needed at the time.
    The stimulus has nothing to do with the Republican corruption of EB-5. It did help Rounds balance the state budget while at the same time condemning the stimulus. You know, just as he is doing now with Obamacare.

  20. Deb Geelsdottir 2014.09.05

    Great find, Dr. Newquist. That cartoon nails it. Thanks for the new link to it.

  21. Sam 2 2014.09.05

    How many people are employed by the beef plant? Last time I checked it was still closed

  22. Lynn 2014.09.05

    Sam it is still closed and the new manager says it will open in 2015. I'll believe it when I see it. It could be a move by the owners to have some good news to help Rounds and DD win re-election.

  23. Donald Pay 2014.09.05

    Cory said, "Mike Rounds is lying. He's making stuff up. He's kicking up dust to keep voters from seeing that Mike Rounds owns his bad policy choices and his sloppy management of his economic development policies."

    I can agree with most of this statement, but "sloppy management" seems to understate Rounds' involvement. Mike Rounds is extremely meticulous about business dealings. It would be completely out of character for Rounds to not know the fine details of this stuff, and not be "managing" the EB-5 investments exactly in the way he thought they should be managed. Rounds knew what was going on every step of the way, and he had no problem with it. It was greed and graft, no "sloppy management."

  24. caheidelberger Post author | 2014.09.06

    But Brother Beaker, the use of EB-5 in South Dakota is at Rounds's feet. He endorsed the use of EB-5 by his GOED in South Dakota. Had he not approved that move, GOED would not have done it, South Dakota would not have relied on money from wealthy people jumping the immigration queue, and Rounds would be running happy ads showing him playing with his grandkids instead of dispatching his spinsters to stretch and lie about these questions.

    Mike Rounds owns EB-5 as much as he owns Northern Beef Packers. He had the state use it. He leant the state's good name to the recruiting effort. He poured state money into it and sacrificed additional revenue that rightfully belonged to the state before he let a state employee privatize his own job. How does anyone look at all that and say, "Good job, Mike"?

  25. Sam 2 2014.09.06

    One can only speculate on how much Mike got under the table.

    He knew exactly what he was doing. Just wanted to help his cronies get richer at the expense of South Dakota tax payers.

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