Various observers have raised concerns that South Dakota's use of the EB-5 visa investment program may have opened our doors to Chinese spies and mafia. Now, two years after Iowa Senator Charles Grassley started beating the drum about the possible national security risks posed by EB-5, ABC News goes to town and trumpets the evidence we've had for two years that EB-5 is rank with fraud and corruption:

But an ABC News investigation found that in addition to reaching wealthy foreign investors, the program has become a magnet for those seeking to sidestep the scrutiny of the traditional immigration process. In one case, immigration officials pushed through a visa application from Chinese investor in a Las Vegas hotel project despite an internal review that found the investor had previously been turned back at the border, and much of his visa application had likely been fabricated, immigration records show.

A Feb. 1, 2013 Homeland Security internal review obtained by ABC News also lays out in stark detail the breadth of the troubles afflicting some of the roughly 600 so-called regional centers -- private sector entities certified by Homeland Security to recruit foreign investors for specific business ventures that will qualify for EB-5 visas. The document summarizes 41 investigations, some open and some now closed, into allegations ranging from espionage to fraud to drug trafficking involving investors in various EB-5 investment projects [Brian Ross and Matthew Mosk, "Whistleblowers: US Gave Visas to Suspected Forgers, Fraudsters, Criminals," ABC News, 2015.02.03].

Ross and Mosk mention our own Senator Mike Rounds and his love of EB-5, though they fail to get into the details. They also mention well-placed Democrats Terry McAuliffe and Nevada Senator Harry Reid (whom this blog mentioned in connection with EB-5 last November) as having used EB-5 to do favors at the expense of national interests.

ABC News also mentions an EB-5 connection to Iranian terror networks (also reported on this blog in December 2013). ABC News says that EB-5 will come before the Senate Judiciary Committee, which Senator Grassley chairs, this year. Fortunately for us, Senator Mike Rounds is not on that committee. Maybe he'll be called to testify about why he gave such strong support to a program that appears to promoted crime, corruption, and possibly risks to American security in projects across the nation.

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South Dakota is one of the least corrupt states in America, says new research. Two profs analyzed the perceptions of 280 local reporters nationwide of how frequently government officials trade favors for endorsements, campaign contributions, or outright bribes.

When scores for both corruption measures were combined seven states — Alabama, Georgia, Illinois, Kentucky, New Jersey, New Mexico and Pennsylvania — rose to the top as most corrupt, as mapped above. Meanwhile, eight states were deemed least corrupt. (They were Idaho, Massachusetts, Michigan, North Dakota, Oregon, South Dakota, Vermont and Wyoming.) [Niraj Chokshi, "A State Guide to Political Corruption, According to the Reporters Who Cover It," Washington Post: GovBeat, 2014.12.08].

This research runs counter to other studies that have found South Dakota third in public corruption convictions (two separate analyses), second for risk of corruption, sixth worst in campaign finance integrity, and eighth most corrupt as measured by convictions and government spending patterns.

South Dakota officials will likely spend great time and effort promoting this new and anomalous low corruption ranking. I pre-emptively balance that effort by pointing out these weaknesses in the new study:

  1. South Dakota is one of ten states from which the researchers received "relatively few responses." Less data means greater margin of error.
  2. The responses came from a self-selecting pool of 280 reporters out of 1,000 contacted. Self-selecting pools give less accurate results than randomly selected pools. (Of course, this could go either way: pesky muckrakers may be more likely to respond and skew the results negative... but then South Dakota may be underrepresented by having a fewer pesky muckrakers.)
  3. The survey deals with perceptions, not objective data. We can find outside observers who think South Dakota is a black hole of corruption.

The authors do not tell us which reporters or reporter responded for South Dakota. They probably did not talk to Denise Ross, who wrote up South Dakota's weak safeguards against corruption in 2012 for the Center for Public Integrity. The authors gathered their data before GOAC published its ridiculous and insulting whitewash of the EB-5 affair. But that any reporter in South Dakota can look at the evidence of corruption in the Attorney General's office and say, "Nope, no corruption happening here!" should make us question the effectiveness of our journalistic watchdogs.

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David Newquist never makes for a cheerful read. But his blog posts make essential reading for anyone joining the Resistance to South Dakota's corrupt one-party rule. In his latest post, Newquist connects 9/11, Nazis, and the perversion of education into an employee-training program to support his argument that America has surrendered its conscience and critical thinking to propaganda and oppression.

And then he turns to South Dakota:

South Dakota is a prime case in point of a state that has deteriorated into intellectual dysfunction. It has been ruled by one political party which has withheld from the voter-taxpayers information about government transactions and the right to knowledge about what officials are doing. It has allowed education to be neglected in its funding and tampered with in its function. It has developed an uncurious and disinterested attitude toward government corruption. In an instance that is defined with documents and the testimony of participants, the Benda-Bollen-Rounds EB-5 scandal, it has chosen to dismiss hard evidence and embrace the mendacity of its deniers. It has lost the ability to function mentally and examine the evidence in a suspicious death, the misdealing in state funds, the vicious ripping off of foreign investors, and the incompetent, devious mismanagement of the Northern Beef Packers plant. Instead, the people endorsed the perpetrators of the fraud and overwhelming elected them to control the state. South Dakota has strongly defined itself as a corrupt state by the will of the people [David Newquist, "Why America Is Not the Greatest Nation in the World Anymore," Northern Valley Beacon, 2014.11.17].

Newquist is probably not optimistic enough to run for South Dakota Democratic Party chair. But our party leadership and we hopeful liberals in general should heed Newquist's warnings about the enormity of the regime and the political and cultural defects against which we must fight to restore effective democracy in South Dakota.

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Curmudgeon does not begin to plumb the depths of commentator David Newquist's disgust toward the corruption of South Dakota politics. In his latest blog post, Newquist examines the difficulty South Dakotans have in facing the corruption in their midst:

People in the state speak of being “South Dakota nice,” which is the façade of bonhomie which covers a resentful insularity toward people who don’t conform to and endorse the South Dakota attitude. The so-called EB-5 scandal, which should properly [be] called the South Dakota tradition of corruption, produces the response of many people that they are tired of hearing about it. Some simply do not want to face the fact that there is a huge blemish of corruption on that face of niceness. Others, a plurality, support, endorse, and enable those who practice the creed of greed, power, and corrupt relationships with their corporate gods. They cannot or will not face the looming fact that dominant culture in the state supports and enables corruption, nor can the plurality accept the fact their attitude bears final responsibility for promulgating and protecting the corruption. The corporate gods beam down on them through Mike Rounds’ smile [David Newquist, "The Seeds of Corruption Produce Bumper Crops in South Dakota," Northern Valley Beacon, 2014.10.27].

South Dakotans, do yourselves a favor and prove David Newquist wrong. Show that you can recognize and reject corruption when you see it. Vote accordingly.

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Rep. Kathy Tyler (D-4/Big Stone City) isn't taking the deceptive big-money PAC attacks lying down. She shows Democrats that when the negative ads come, you hit right back:

Rep. Kathy Tyler "Poked the Bear" advertisment, 2014.10.28

Rep. Tyler is referring to the big money a new PAC called "East River Concerned Citizens" is pouring into deceptive ads against her. The radio spots and postcards are less interested in accurately portraying her voting record on abortion (she's actually a bit conservative for my taste) and, from what I hear from sources and glean from who's contributing to ERCC, more interested in retaliating against Tyler for challenging the state's corrupt EB-5 economic development practices.

Certain big-money players have a great stake in South Dakota's endemic corruption (that's the second time this morning I've used that phrase and that link, and for good reason). Democrats like Rep. Kathy Tyler who speak the truth to that power can expect hard negative attacks to take them out. Fortunately, Rep. Tyler is not easily cowed by such attacks. Democrats, follow Kathy's lead. Poke that bear, and don't back down!

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Some of my readers think David Montgomery has sold out to the good-old-boys' network on whom he and his employer depend for access and advertising dollars.

If that were the case, I don't think that Sioux Falls paper would slap this headline on Montgomery's latest EB-5 report:

Rounds knew of Benda conflict in final days of term

This headline comes not from diligent investigative reporting but from Mike Rounds's own mouth. The Republican Senate candidate said in yesterday's live interview with 100 Eyes that he knew Richard Benda, his economic development chief, was going to work for an "investor" in Northern Beef Packers, the stalled economic development project toward which he directed $2.36 million in state grants during the last few weeks of his governorship.

Benda didn't identify which investor he would be working for, and Rounds said he didn't press. Benda went to work for SDRC Inc., a company managing EB-5 foreign investments for projects, including Northern Beef. On Tuesday, Rounds said he now feels Benda "misled" him by not disclosing where he was going.

At the time, though, Rounds didn't ask Benda for more details.

"I said 'Good, I'm glad to hear that he's going to be actively involved in the beef plant,'" Rounds said in a live interview on the Argus Leader's "100 Eyes" online show.

Rounds' focus at the time, he said, was on which of his Cabinet secretaries "should I meet with to find out if they need assistance in finding other opportunities" — not whether they were "leaving government with a conflict of interest," as Argus Leader managing editor Patrick Lalley asked Rounds. Benda already had lined up a job, so Rounds said he focused attention elsewhere [David Montgomery, "Rounds Knew of Benda Conflict in Final Days of Term," that Sioux Falls paper, 2014.10.22].

Permit me to paint a managerial scenario, and you tell me whether I'm viewing the situation with hindsight or South Dakota common sense:

  1. I'm an outgoing governor, tying up loose ends in the Capitol.
  2. Among the loose ends are various fiscal and policy decisions to keep one of my marquee legacy projects alive. It's running over two years late and way over budget.
  3. I'm taking a risk writing some pretty big checks to keep the legacy project alive.
  4. I can't afford any bad press dragging this precarious project down.
  5. I find out one of my cabinet members who's been key in saving that project is now going to work for that project.
  6. I say, "Wait a minute, Richard. What exactly are you going to be doing for the project?" I listen closely. If I sense any hedging, I say "Cut the crap" and get the full story.
  7. Whatever answers I get, I think ahead to appearances, if not legal questions, and I say to my cabinet member, "I think it's best that, for these last couple weeks, we put a big brick wall between you and any policy decisions affecting the folks you're going to work for."
  8. I review all of the checks and other papers I've signed over the past few weeks for the project and make sure everything looks kosher.
  9. And above all, I make sure my guy going to work for the project is not the guy who carries the million-dollar state check to that project.

Rounds gets to my step 5, then veers off the road of good management, saying, Rich has a job? Great! Now I can focus on helping all my other pals get golden parachutes.

Rounds said at Dakotafest in August that if he'd known what Benda had been up to with respect to Northern Beef Packers and EB-5, he'd have fired Benda. In yesterday's interview, Rounds said, "Richard Benda did some things in the last couple of weeks (of Rounds' term) that I did not know about, and that I'd like to ask him questions about." But when Benda was right in front of him, and the issues all hot on his plate, Governor Rounds chose not to ask.

And the day Mike Rounds didn't ask Richard Benda those questions at the end of 2010 may have been the day that Mike Rounds lost the election of 2014.

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Mike Rounds insists he wasn't involved in the "transactional details" of his EB-5 program. But he seems to have been keenly aware of one central transaction in the privatization of his EB-5 program: the issuance of a private no-bid contract to state employee Joop Bollen to continue running it.

Bob Mercer asked the former governor, now GOP Senate candidate, about his role in the privatization of EB-5 back in May. Rounds finally provided answers to Mercer this week:

[Mercer]: In 2009, Richard Benda as secretary of tourism and state development and Joop Bollen as SDRC president reached a contract that privatized South Dakota's EB-5 administration and other activities. The contract was drawn by Tim Engel of the May Adam Gerdes Thompson law firm, under a long-standing contract agreement, for the Department of Tourism and State Development, and Jeff Sveen on behalf of SDRC. Did you approve of the concept? What was your role in the contract? Did you inspect the 2009 contract before it was signed by Benda? Did you approve him to sign it?

[Rounds]: Not unlike the hundreds or thousands of state agency contracts, this transaction was handled at the department level and they utilized department counsel. I was aware of the desire to privatize the program in order to better compete with the 500 regional centers located around the country. I was advised that there were only two state government-managed regional centers and that privatization would help South Dakota compete at the national level. From a competitive standpoint, I agreed with the concept of privatization. I was not involved in the transactional details nor did I review the contract.

[Mercer]: Under what state legal authority was the contract formed in such a way that state government derived money from a portion of the fees charged by SDRC to EB-5 investors/lenders?

[Rounds]: I was not involved with the transactional details of the contract. It was handled by the state agency in consultation with their counsel [Bob Mercer, "Rounds Answers Reporter's Questions on EB-5 Scandal," Black Hills Pioneer, 2014.10.02].

If I take Rounds at his words, I get a picture of his economic development chief Richard Benda saying, "We need to privatize EB-5. Can we?" and Governor Rounds saying, "O.K., see you later."

Rounds's own description to Ben Dunsmoor indicates that his approval went further, from concept to execution, to approval of the executioner:

At one time Bollen, was a state employee working for the Board of Regents doing the same kind of work. But Rounds told KELOLAND News both the Board of Regents and Benda's office asked Rounds in 2009 if the state could privatize EB-5 to be more competitive with other offices recruiting foreign investors across the country.

"What I also asked was, 'So who's going to do this? Because there aren't a lot of people who understand the EB-5 program at the federal level.' And the response I received back was Mr. Bollen, who was working for the Board of Regents, has agreed to separate himself out and do this,” Rounds said [Ben Dunsmoor, "Rounds: I Was Told Bollen Was the Man to Run EB-5," KELOLand.com, 2014.10.02].

Rounds is saying that he knew Bollen was going to run EB-5 when it was fully privatized in 2009. That statement implies that he approved of issuing that contract to Bollen specifically.

But why? With the state's knowledge of Bollen's numerous misdeeds, why did Rounds reward Bollen with a no-bid contract instead of firing him? That fundamental character question cries for an answer.

Perhaps stunningly, Rounds appears to have answered it... and not in a way that wins any moral votes:

Rounds says the Board of Regents and the economic development office recommended Joop Bollen run the private firm simply because he knew how to navigate the complicated EB-5 program.

The recommendation came despite the fact that state officials knew Bollen had inappropriately filed legal documents in a lawsuit he got involved in with a California recruiting firm.

"We weren't worried about whether Mr. Bollen was privatizing or not. We were worried about whether or not the projects that needed this outside investment would have access to an office that knew what they were doing. It was not the time to go out and start somebody brand new and find out later on they didn't know what they were doing," Rounds said [Ben Dunsmoor, "Rounds on EB-5: 'There Is No Conspiracy'," KELOLand.com, 2014.10.02].

Rounds has previously said that the Board of Regents, not he personally as Governor, was responsible for Bollen's employ. But here, Rounds tells Dunsmoor that the Regents and his own office of economic development recommended giving Bollen the contract.

That language creates a very different picture: before Benda gets out the door, Governor Rounds asks, "Who's going to do this?"

Benda leans against the door frame, worried the jig is up. "Bollen."

"Bollen?!" Rounds shouts. "That meathead? Didn't he get us into that lawsuit and break all those rules? No way! Let's find someone else."

But as Rounds says here, he doesn't say that. He lets slip this golden opportunity for good management. He wasn't worried about whether the person in charge had broken any rules; he just wanted someone who knew how EB-5 worked. The state didn't have time to gamble on a new person. He thus overlooked Bollen's infractions and approved the plan with Bollen on top.

Mike Rounds answers the character question with Bosworthian clarity: if there's money at stake, Mike Rounds doesn't care if his people break the rules. Mike Rounds doesn't have time to go find honest dealers.

Voters, Mike Rounds just summarized all you really need to know to see why EB-5 means you have to cast your vote for someone other than Mike Rounds to get a Senator you can trust.

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I can understand why Mike Rounds has trouble keeping his story straight on his EB-5 scandal: even we voters have trouble keeping track of all the ways that he let Joop Bollen abuse South Dakota's regulations, trust, and good name.

Democratic gubernatorial candidate Susan Wismer fulfills the stateswomanly duty of a candidate to educate voters by offering her summary of what went wrong:

Over the past weeks, more information about EB-5 has been released. Most recently, the Rapid City Journal delivered the disconcerting news that Governor Rounds did not provide the entire truth in his written testimony.

There are many layers and moving parts to EB-5 and the controversy surrounding it. As I talk to people across the state, I receive many questions about what’s going on and why we should be worried. Here is my answer.

We’ve learned that Joop Bollen misrepresented himself to the state. While he was a state employee, he signed a contract with his own company, SDRC Inc., and had someone else sign as a director for his company. The contract assigned rights to conduct the EB-5 program on behalf of the state. The problem is that he had no authority to sign that contract on behalf of the state of South Dakota. He did not tell his superiors that he was signing a contract with his own company.

Starting in 2009, Bollen conducted the EB-5 program until Gov. Daugaard cancelled his contract last year. By our calculations, Bollen collected approximately $140 million in fees from foreign investors. In other words, foreign investors each invested $500,000 but then also paid a service fee of $35,000 and another type of fee of $50,000 plus an annual fee based on a percentage of the total investment. Those fees added up over time to $140 million.

From what we can tell, Bollen didn’t have permission from anyone to sign the contract. Governor Rounds, Governor Daugaard, and the Board of Regents have explicitly stated that many times. He just signed it, didn’t tell a soul, and then stayed on the state’s payroll.

To add to it, Bollen got into legal trouble. When he incorporated SDRC Inc., he also decided to exclude a party on the west coast from participating in investor recruitment. That party sued him, and he told them to sue the state of South Dakota instead. South Dakota was left with the mess and has been paying legal fees since 2009. Over the last 10 months alone, the legal bills have exceeded $250,000.

There is a great deal of work to be done to right these wrongs. Without a bipartisan effort, we won’t get far. I challenge my peers on GOAC to work with me and find the answers South Dakotans deserve [Rep. Susan Wismer, press release, 2014.10.02].

Notice that Rep. Wismer doesn't phrase this as a campaign speech. She doesn't conclude with a call to voters to throw the bums out. She doesn't attack the incumbent Governor Daugaard whom she's trying to unseat. She focuses on the violations that occurred and on fulfilling her current duty as a legislator on the Government Operations and Audit Committee to get answers for the public.

That focus is either admirable or crazy; a campaign manager would say the latter and tell Rep. Wismer that she needs to conclude every paragraph she utters for the next four weeks with, "...and that's why you vote for me for Governor."

Folks who look at the facts of South Dakota's EB-5 program understand that electing new leadership and restoring oversight and a true balance of power in Pierre is essential to preventing the corruption the EB-5 scandal epitomizes. Rep. Wismer effectively summarizes the facts we know so far, and should be reciting those facts to every group she speaks to for the next four weeks.

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