Members of the Government Operations and Audit Committee have brought forward two bills that appear to target the gross conflicts of interest in South Dakota's EB-5 visa investment program. GOAC only glancingly acknowledged these violations of state law and policy and blamed what little it acknowledged on the dead Richard Benda while ignoring the violations committed by the very much alive and enriched EB-5 czar Joop Bollen.
One bill would make things better. One bill would make things worse. Guess which one GOAC members appear to prefer?
House Bill 1023 was the first Benda-Bollen bill submitted by Rep. G. Mark Mickelson (R-13/Sioux Falls) and six other 2014 GOAC members who returned to Pierre this session. It amends SDCL 5-18A-17 to extend an existing conflict-of-interest prohibition on state contracts (which already bans the kind of goofy contract Bollen signed with himself in January 2008) to cover state officials and employees for one year after they leave office (which would have banned Richard Benda's golden parachute with Bollen's state-contracted EB-5 management company SDRC Inc.). HB 1023 is short, simple, and sensible.
Rep. Mickelson threw his second Benda-Bollen bill, House Bill 1064, into the hopper just today. It has the same seven sponsors, plus Senator Deb Peters (R-9/Hartford). HB 1064 repeals the statute that HB 1023 amends, indicating this later Benda-Bollen bill is meant to replace the first. HB 1064 amends and expands SDCL 3-16 to ban self-dealing contracts as well as define exactly what kinds of "interests" the state will consider conflicts.
But check out the power Section 5 gives to the Governor and other executives to make exceptions:
A governing body may authorize an officer or employee whose responsibilities include approving, reviewing, or negotiating a contract on behalf of a state agency or supervising any employee who has these responsibilities to be a party to or derive direct benefits from a contract if:
- The governing body has reviewed the essential terms of the transaction or contract and the state officer's or employee's role in the contract or transaction; and
- The transaction and the terms of the contract are fair, reasonable, not contrary to the public interest, and fully disclosed in writing to the governing body.
The authorization, which may not be unreasonably withheld by the governing body, shall be in writing. The governing body may adopt a written plan to manage any perceived, potential, or real conflicts of interest associated with the state officer's or employee's role in a contract or transaction.
Any authorization given pursuant to this section is a public record. Each authorization shall be filed with the commissioner of the Bureau of Human Resources, who shall compile the authorizations and present them annually for review by the Government Operations and Audit Committee [House Bill 1064, Section 5, as published 2015.01.20].
House Bill 1064 defines conflicts of interest, extends the prohibitions against them, then grants the Governor, the Attorney General, and other Pierre potentates the power to pish-posh those prohibitions.
As an anti-bonus, Section 3 says the one-year post-employment extension only applies to contracts that would benefit the state official or employee in question to the tune of $100K or more. In other words, use your state job to write yourself a private contract that kicks in after you leave Pierre, and as long as you limit your pay to $99,999.99, you're in the clear.
Making sure we look out for our friends, Section 4 further dilutes the conflict-of-interest prohibitions by exempting state officers and employees whose ownership interest in a contracting entity is only 5% or less and by narrowing the definition of "direct benefit":
A state officer or employee does not derive a direct benefit from a contract based solely on the value associated with the officer's or employee's investments or holdings, or the investments or holdings of other adults with whom the state officer or employee lives and commingles assets, in an entity that is a party to the contract provided the officer or employee does not meet the requirement contained in subdivision (1) of this section [HB 1064, Section 4].
Call this the Skjonsberg Provision: last October, Lee Fang of The Nation discovered that Rob Skjonsberg, manager of the Rounds for Senate campaign, had cast a vote on the state Board of Economic Development to invest state dollars in Novita LLC, a company in which his investment company Lake Sharpe Investments had an interest. Skjonsberg said there was only a perception of conflict of interest, and state officials backed him up, saying Skjonsberg did not have a direct interest in Novita LLC. But the above passage of HB 1064 seems crafted to make explicit the fact that no, really, high rollers on the Board of Economic Development can keep voting money to projects in their indirect portfolios.
Both bills have been referred to ouse Judiciary, which Rep. Mickelson chairs. We'll see if he uses his position there to withdraw the simpler, stricter HB 1023 and promote the diluted, exemption-riddled HB 1064.