Rep. Susan Wismer got the Government Operations and Audit Committee to add the GOED/EB-5/SDRC scandal to its agenda at the last minute last week. The conversation centered around whether the committee should subpoena Joop Bollen, the head of SDRC Inc., the private firm that Bollen spun off from the public agency he ran for the state to manage EB-5 visa investments in South Dakota.

GOAC Chairman Senator Larry Tidemann (R-7/Brookings) is trying to find out whether Bollen is worth subpoenaing:

Tidemann, R-Brookings, said he met Tuesday with state Attorney General Marty Jackley.

Tidemann said he has asked Jackley to present a subpoena template to the Legislature’s committee on government operations and audit.

That could happen at the committee’s next meeting July 29.

...Tidemann said the goal of a briefing by Jackley will be to explain to the committee whether Bollen would provide any useful testimony if a subpoena is issued [Bob Mercer, "Legislative Inquiry on EB-5 Might Seek Subpoena," Rapid City Journal, 2014.06.21].

Joop Bollen in China, April 2009. Downloaded from Facebook 2014.06.23

Joop Bollen in China, April 2009. Downloaded from Facebook 2014.06.23

That Senator Tidemann would turn to Attorney General Jackley to tell the committee whether Bollen has any information worth hearing indicates some two key assumptions:

  1. AG Jackley has information from and about Bollen that he hasn't shared with the rest of us.
  2. AG Jackley has asked Bollen all the relevant questions and looked for all the relevant documents that would help the public understand what he and Richard Benda were up to as they tried to get EB-5 dollars for huge projects like Northern Beef Packers, the Hyperion refinery, and the Keystone XL pipeline.

#1 is quite possible. #2 seems far less likely. AG Jackley has demonstrated his less-than-keen interest in investigating Bollen's management of the EB-5 program, claiming that he has no business inquiring about a fundamentally federal program.

Chairman Tidemann and the Legislature should not feel bound by the Attorney General's lack of curiosity. Bollen was the central figure in the GOED/EB-5/SDRC scandal. If anyone can tell us what happened, he can. Even if he would appear under protest and plead the Fifth to every question Chairman Tidemann, Rep. Wismer, and the other members might pose, Bollen needs to get the message that he worked for the state and that he must answer to the state. GOAC and the public have a right to look Bollen in the eye, ask "What the heck were you and Benda doing?" and hear his response, for the record.

Don't wait for the translation, Larry: issue the subpoena.

16 comments

Gordon Howie starts our week off right by airing Part 2 of our conversation about the EB-5 scandal, wherein we discuss the state documents Joop Bollen took AWOL and other details of the public–private transition of the EB-5 program:

You can view Part 1 here.

5 comments

Jonathan Ellis has a treasure trove of documents from the U.S. Customs and Immigrations Service exposing the corruption in South Dakota's EB-5 visa investment program. Last week Ellis found the connection between EB-5 and Keystone XL. Yesterday, Ellis revealed similar EB-5 abuses related to Iberdrola's South Dakota wind farm.

SDRC Inc., the private company the Rounds and Daugaard Administrations contracted to run EB-5 in South Dakota from 2009 to 2013, wanted to turn Iberdrola's Buffalo Ridge II project in Brookings and Deuel counties into their next big money-making project. SDRC Inc. exec Joop Bollen and state economic development chief Richard Benda had lined up 200 Chinese investors. But Iberdrola completed the project by 2010, without any EB-5 money. Bollen and Benda were trying to get EB-5 money as a reimbursement for Iberdrola, showing that, much like with TransCanada and Keystone XL, Bollen and Benda weren't using their authority to promote new economic development; they were simply looking for ways to draw big commissions for themselves and their pals by making EB-5 investments happen, regardless of necessity.

Ellis reports that USCIS sensibly rejected the EB-5 request for Iberdrola's finished project. But Bollen kept pressing for his profit... and he got South Dakota's biggest politicos, Republican and Demcorat, to back him:

When U.S. Citizenship and Immigration Services delayed its decision on whether the project would qualify, SDRC's founder, Joop Bollen, appealed to the state's highest elected leaders to intervene. The offices of Sens. Tim Johnson, John Thune, Rep. Kristi Noem and Daugaard responded with a letter signed by all of them asking the federal agency to review the denials it had rendered to the green-card-seeking investors.

Meanwhile, Bollen sent a memo to the investors of the project begging them not to withdraw their money, telling them repeatedly that South Dakota's "political powers" were working on their behalf.

"I can assure you," Bollen's memo said, "that the SDRC and your attorneys, together with the state of South Dakota's governor and its senators will press for and succeed in overcoming the USCIS' erroneous denial and achieve the desired approval of all your cases."

Bollen's memo badly overstated the situation. U.S. Citizenship and Immigration Services did not reverse its denial. Many of the investors in the project withdrew their money or were redirected to other EB-5 projects sponsored by SDRC. About two dozen of them moved their money to the Northern Beef Packers project, where they lost their investments after the plant declared bankruptcy last year [Jonathan Ellis, "S.D. Political Muscle Was Tapped to Intercede for EB-5," that Sioux Falls paper, 2014.04.27].

We have Bollen trading on the authority of South Dakota's elected officials to cling to his profit-making scheme. And we have our Governor, our Congresswoman, and both of our Senators playing along.

Senator Johnson is already stepping down. Senator Thune doesn't face the voters until 2016. But we have the opportunity to fire Rep. Noem and Governor Daugaard for their complicity in the EB-5 abuse of power right now.

*   *   *

Your investment is safe, your achieving the green card is within reach, and the joint efforts of SDRC, Hanul Professional Law, the state of South Dakota, and its political delegation in Washington, D.C. are being marshaled to achieve victory and success on your behalf [Joop Bollen, memo to Iberdrola investors, quoted in Ellis, 2014.04.27].

14 comments

I had a long drive yesterday, with plenty of time to think about Joop Bollen, Richard Benda, and their scheme to get rich funneling EB-5 money to TransCanada's Keystone XL pipeline. But it only took me about ten minutes out of the driveway to realize that the EB-5/KXL overreach was an outright violation of Bollen's contract with the state and the whole purpose of the state economic development office.

Recall the terms of Bollen's contract with the Governor's Office of Economic Development (the contract inked while Benda was GOED/DTSD chief, the contract that took Bollen's EB-5 operations private as SDRC, Inc., and out from under more strict state scrutiny):

A. DTSD is an agency and instrumentality of the State of South Dakota empowered and directed to promote economic development in South Dakota and to enter into public-private partnerships for the purpose of promoting economic development in South Dakota.

...D. DTSD desires to contract with SDRC for the pirpose of having SDRC administer the Regional Center and the EB5 Program and to market the EB5 Program for the benefit of South Dakota, all in conformity with applicable statutes and regulations [Department of Tourism and State Development, contract with SDRC, Inc., 2009.12.22].

Bollen and Benda sought to expand SDRC beyond South Dakota's borders in order to solicit EB-5 funds for stretches of the Keystone XL pipeline and pumping stations in Montana and Nebraska. The state contract allowed Bollen to work on EB-5 "within the Regional Center's territory," but the above text, GOED's mission statement, state law, and common sense make clear that South Dakota's state economic development authority is supposed to promote economic development in South Dakota. Let's look at the statute establishing GOED's purpose:

The Governor's Office of Economic Development shall forge a private-public partnership among state government, local communities, higher education, and the private sector to create jobs that create goods and services for use within the state and for export outside the state, which results in the creation of new wealth [SDCL 1-53-3].

Funding Bollen and Benda's EB-5 promotion to lay pipe in Montana and Nebraska would not "create jobs that create goods and services for use within" South Dakota.

Remember also the basic tenet of government promotion of economic development: we spend tax dollars to make things happen that wouldn't happen without government help. TransCanada has said it needs no government assistance to build Keystone XL. TransCanada is an oil company. They are stinking rich. They've planned to fund the pipeline out of cash flow. And they've planned to build Keystone XL through South Dakota all along.

TransCanada didn't need any government incentive or crutch to choose a pipeline route through South Dakota. Bollen and Benda's desire to divert EB-5 money to TransCanada would not have created a single job or cranked out a single dollar of tax revenue that TransCanada didn't already plan to plow into South Dakota. The only unique benefit of connecting EB-5 investment with Keystone XL would have been more money in the pockets of Joop Bollen, Richard Benda, and their friends in the EB-5 money machine.

48 comments

The GOED/EB-5/Benda scandal has connections to Northern Beef Packers, mega-dairies, Hutterites, Hyperion, the Philippines, and Mike Rounds. Now we add Keystone XL.

Jonathan Ellis fills our Easter baskets with the revelation that Rounds pals Joop Bollen and Richard Benda were scheming to connect their money-making EB-5 visa program to TransCanada's tar sands oil pipeline:

Joop Bollen, SDRC’s founder, applied to the United States Citizenship and Immigration Services — which administers the federal EB-5 program — for permission to add TransCanada as a qualifying business under the program, which enables wealthy foreigners to get green cards for investing as little as $500,000 in qualifying projects.

Besides trying to help Trans-Canada, the same application asked to dramatically expand SDRC’s geographic area of coverage. Bollen sought federal permission to expand SDRC to Montana and Nebraska in a bid to provide financing to the Keystone XL pipeline from the Canadian border to Nebraska’s southern border. SDRC’s contract with South Dakota to run the EB-5 program was supposed to be “for the benefit of South Dakota,” according to the contract’s language [Jonathan Ellis, "Documents Link State-Sponsored Company, Keystone XL," that Sioux Falls paper, 2014.04.19].

Bollen applied to include Keystone XL in May 2011. Governor Dennis Daugaard knew nothing about it... which is what we would expect when Mike Rounds let his pals take the EB-5 program private and hide their work from public oversight.

The EB-5–Keystone XL connection makes perfect sense. Recruit Chinese investors to pour money into a pipeline that will bring North American oil to their homeland. Send a 10% commission to Bollen, Benda, and other friends of Rounds and Daugaard, who cheerlead the pipeline and do nothing to block TransCanada's eminent-domain predations on South Dakota landowners.

Ellis reports the cost of Keystone XL in South Dakota alone may be $920 million. That would have allowed Bollen and Benda to recruit up to 1,840 EB-5 investors at $500,000 a pop. Recruiting investors for a huge industrial project that's received oodles of global press and is guaranteed to make money would have been much easier than selling the merits of some local beef plant or a Deadwood casino that no one outside South Dakota has ever heard of. And those investors would have paid Bollen, Benda, and SDRC's lawyers $45,000 each, for a possible take of $82.8 million.

TransCanada, to their credit, said no thanks. As with Hyperion, Bollen and Benda just couldn't strike oil with their visa investment scheme. But the EB-5 story keeps on growing. Stay tuned.

5 comments

If South Dakota won't go after corruption in the EB-5 visa investment program, maybe the private sector will. Scott Waltman reports that California firm Darley Commercial is subpoenaing the crap out of South Dakota's EB-5 program. Two rounds of EB-5 funding for the bankrupt Northern Beef Packers in Aberdeen, three rounds of EB-5 funding for the Dakota Provisions turkey plant in Huron, EB-5 money for the Deadwood Mountain Grand Casino and a handful of other favored projects—Darley wants pretty much every scrap of paper that Joop Bollen and the Hanul Law Firm of California can come up with.

Plus, Darley wants to depose Bollen, who ran South Dakota's EB-5 program through NSU's SDIBI and then through his own private corporation SDRC Inc. and several shell partnerships until the state yanked his contract last September amidst a federal investigation of financial misconduct in the program. That's a deposition I'd love to witness... although I expect there will be a lot of brief answers using the word "Fifth".

Waltman can't tell what Darley is after. Darley has been on Bollen's case for a few years. As reported last November, the California company worked for SDIBI through Hanul to recruit Chinese investors for EB-5 projects in South Dakota. When SDIBI failed to follow through on a fish farm project that Darley promoted to potential EB-5 investors, Darley pressed for payment. Bollen cleverly shifted operations to the private corporate umbrella of SDRC Inc. and got a California judge to rule in 2011 that Bollen as SDRC Inc. chief did not have to submit to arbitration to answer for violations of contract he may have committed as SDIBI chief. One might speculate that Darley is still pressing its case, trying to establish the simple fact that someone must still be around to answer for whatever monkey business went on in South Dakota's EB-5 program.

Darley, I hope you get a full response to your subpoena. And I hope you'll share that response with the thousands of South Dakotans who would like to know who's been profiting on this questionable federal intrusion into the free market.

25 comments

John Tsitrian offers the best blogospheric summary of yesterday's noteworthy Legislative hearing on the Governor's Office of Economic Development and South Dakota's use of the EB-5 visa investment program. Tsitrian catches the two big bits of news to come from the the Government Operations and Audit Committee's four hours of testimony and questions:

  1. Three other federal agencies—the Treasury Department, the Department of Energy, and the Department of Housing and Urban Development—have joined the Department of Justice and FBI in investigating GOED's activities. Hmmm... is investigating too harsh a word? GOED chief Pat Costello says those departments have submitted "informational requests."
  2. The Daugaard Administration continues to preach irrational optimism with respect to Northern Beef Packers. Costello averred before the committee yesterday that the bankrupt EB-5 project is bound to bounce back, producing "a lot of jobs" and tax revenue within two years. Costello says the state has already recouped much of its $3.5-million investment in NBP through taxes on NBP construction, equipment, and operations.

Costello also continued the state's logical strategy of making dead and disgraced Richard Benda the fall guy for all that was ill and unholy in the GOED/EB-5 mess. (Cathy, are you sure you want to keep collaborating with a state to which Richard Benda is now nothing but easily exploitable damage control?)

The main policy response discussed yesterday, tightening the rules for state employees submitting vouchers for reimbursement, specifically targets Richard Benda's questionable voucher practices. The other, background checks for state employees, won't weed out decent guys who get into state government and then start misusing their power.

Rep. Kathy Tyler (D-4/Big Stone City) isn't on the operations and audit committee. But she says the committee and the rest of state government lack the will to get to the bottom of the GOED/EB-5 affair:

The big audit by the Department of Legislative Audit summarized major issues with SDRC, Inc, the EB-5 contractor, but nothing will be done.  The committee was lead to believe that the state can’t look into SDRC, Inc.’s records, but according to their contract, it can. Also, the rules that the regional center must abide by are listed in a document that was not presented to the committee.  It states that the regional center (our state) has oversight responsibilities for any project.

It’s a huge, horrible mess that I don’t think anyone in charge really wants to dig into, and that’s too bad. It’s a black mark on our state. The losers are the citizens of South Dakota and small business that lost in the bankruptcy; the winners are the managers and friends of SDRC, Inc., who have garnered millions of dollars from various aspects of the program and off the backs of hard working South Dakotans [Rep. Kathy Tyler, "Legislative Session #89, Week Eight," Kathy's Corner, 2014.03.08].

Rep. Tyler's pessimism finds support in the premature agnosticism of assistant majority leader and committee member Rep. Justin Cronin (R-23/Gettysburg), who says everything's fine, nobody's hiding anything, and we know all there is to know:

Republican State Representative Justin Cronin says any efforts by the committee to dig even deeper won’t result in new information.

“We haven’t started to correct the problems that were identified.   And, I don’t know that we can dig far enough find a problem that is going to require us to call all these folks back and basically chew them out, which is some of the feelings I’m getting here today.   That we have something that they’re hiding, and I don’t think anything that has been hidden here,” says Cronin [Charles Michael Ray, "State Government Committee Probes EB-5, GOED Audits," SDPB Radio, 2014.03.07].

Rep. Cronin evidently was not paying attention to his own committee hearing: Tweet-reporting live from the hearing, David Montgomery said that the Department of Legislative Audit looked at "third-party documents" in its investigation of GOED and EB-5 but signed confidentiality agreements, which by definition means somebody is hiding something.

The Government Operations and Audit Committee declined to set a date for another meeting. But Senator Larry Lucas (D-26/Mission) said he'd like to hear from big EB-5 player Joop Bollen. Sen. Larry Tidemann (R-7/Brookings) said eliciting testimony from Bollen "may require a little bit more than a letter of invitation." Let us hope we get at least one more hearing to test Bollen's willingess to speak.

*   *   *

§ 2-6-6. Refusal to testify or produce evidence before Legislature as misdemeanor.

Any person who, being present before either house of the Legislature or any committee thereof authorized to summon witnesses, willfully refuses to be sworn or affirmed, or to answer any material and proper question, or to produce upon reasonable notice any material or proper books, papers, or documents in his possession or under his control, is guilty of a Class 2 misdemeanor [South Dakota Legislature, Joint Rules, Eighty-Ninth Legislative Session, downloaded 2014.03.08].

30 comments

More EB-5 alphabet soup...

When South Dakota began dabbling in the EB-5 visa investor program in 2004, the U.S. Customs and Immigration Service assigned the authority to administer that program to the South Dakota International Business Institute, a subentity of the Board of Regents operating on the campus of Northern State University. But by 2013, the program was run by SDRC, Inc., a private company created by SDIBI director Joop Bollen in 2008. How'd that change happen, and was it legal?

Among the great piles of documents the Legislature's Government Operations and Audit Committee will begin reading in their opening EB-5/GOED hearing on Friday is a Memorandum of Understanding (MOU), dated Janaury 15, 2008. I present images of that MOU's five pages here:

MOU-SDIBI-SDRC 20080115 p1 MOU-SDIBI-SDRC 20080115 p2 MOU-SDIBI-SDRC 20080115 p3 MOU-SDIBI-SDRC 20080115 p4 MOU-SDIBI-SDRC 20080115 p5

This Memorandum of Understanding is a creative legal fiction in which Joop Bollen talks to himself. The MOU shows James Park, lawyer for the Hanul Professional Law Corporation of California and South Korea, signing as the director of SDRC Inc. However, the only person mentioned on SDRC Inc.'s articles of incorporation on January 10, 2008, and on SDRC Inc.'s December 30, 2008, annual report is Joop Bollen. Park was made the registered agent of SDRC Inc on April 7, 2009, but a June 2009 corporate amendment names Bollen as the only director. Park's name appears on no subsequent SDRC Inc. corporate document in the Secretary of State's public corporate database.

Park did collaborate with Bollen in recruiting and processing EB-5 investors for South Dakota. But having Park sign this MOU appears to be a convenient way to make Bollen's shell corporation look, in the USCIS's eyes, like a separate entity. And as we've seen, creating SDRC Inc. gave Bollen cover from legal liabilities incurred by the SDIBI.

But if courts can buy the argument that pieces of paper like this memorandum can make Joop Bollen into two separate legal persons who are not responsible for each other's actions, then let's look closely at the language of this piece of paper. The memorandum reminds us that SDIBI was an approved and designated EB-5 Regional Center. As far as I've seen, SDIBI is the only South Dakota entity ever so recognized by Customs and Immigration and Homeland Security. The MOU says the SDRC Inc. was "organized for the purpose of creating an EB-5 Alien Entrepreneur Investment Project within SDIBI" [emphasis here and subsequently mine]. The MOU says SDIBI's director will have amongst his/her principal duties and responsibilities the ongoing coordination, oversight and liaison" for EB-5 recruitment. The MOU says SDRC Inc. will provide "assistance" to the EB-5 project "within" SDIBI.

This language suggests that SDRC Inc. was to operate as a subsidiary of SDIBI. Paragraph 6 does declare that SDRC Inc. "will act in an independent capacity and not as officers or employees of SDIBI/DEDR or the State of South Dakota," language intended to shield Bollen and the state from scrutiny and liability. But the overall language of the MOU makes clear that SDRC can engage in EB-5 activities not by dint of its own designation as a Regional Center but only in its subsidiary relationship to the Regional Center of record, SDIBI.

Here's the problem: SDRC Inc. continued to do EB-5 business under the Rounds and Daugaard Administrations even after SDIBI ceased to exist. Joop Bollen quit his job as SDIBI director on December 21, 2009. He took nearly all of SDIBI's EB-5 records. The next day, the Department of Tourism and State Development contracted directly with SDRC Inc. to conduct EB-5 activities for the state. In that contract, signed by Bollen (not Park) and DTSD Secretary Richard Benda (there he is!), the Department erroneously claimed unto itself the Regional Center designation that USCIS issued specifically and solely to SDIBI.

And in 2010, the Board of Regents axed the SDIBI director from its budget, ending the functional existence of SDIBI and leaving no one in South Dakota authorized by USCIS to do EB-5.

It thus appears that SDRC Inc. engaged in EB-5 activities without legal authorization. The contract under which SDRC Inc. operated from December 22, 2009, to September 19, 2013, came from a state agency that did not have the authority to grant it.

51 comments

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