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Feds Investigate Governor’s Office of Economic Development

Last updated on 2013.10.31

Open the speculation floodgates....

Governor Dennis Daugaard announced today that Attorney General Marty Jackley and federal law enforcement have been investigating the Governor's Office of Economic Development for financial misconduct. Not his Office of Economic Development, Daugaard emphasizes, but someone else's:

Earlier this year, I became aware of alleged misconduct, prior to my administration, at the economic development office.... I asked the state Attorney General to investigate and provided all relevant materials to him. There has also been a federal investigation. I refer any further questions regarding the investigations to the Attorney General and the U.S. Attorney.

I take very seriously my responsibility as Governor to protect taxpayer dollars and to ensure the integrity of state economic development programs. I am confident in the integrity of those in my administration who work at GOED, and at my direction, GOED has initiated an independent review to verify that any alleged misconduct was an isolated incident [Governor Dennis Daugaard, quoted in "Governor: 'Misconduct in State Office under Investigation," Mitchell Daily Republic, 2013.10.30].

Governor Daugaard says he learned of the issue under investigation last spring. Attorney General Jackley confirms the state investigation continues. U.S. Attorney Brendan Johnson declines to confirm or deny the existence of the investigation that South Dakota's governor and attorney general say exists.

Daugaard and Jackley offer no dates or names, but they do say the misconduct took place prior to January 2011. Unless the alleged misconduct was really well hidden for over a decade, we are thus talking about possible misconduct under Governor Marion Michael Rounds.

You know, the guy running for U.S. Senate... and under whom Daugaard was Lieutenant.

And if we're talking misconduct under Rounds's GOED, there's a fair chance it could be connected to the cabinet sceretary who oversaw that GOED from 2006 to 2010, Richard L. Benda.

You know, the guy who was found shot dead in a grove of trees last week, whose cause of death remains under investigation, and whose funeral was yesterday, nine days after he died... and one day before Governor Daugaard chose to announce a problem he's known about for months.

And if the state and feds are investigating, we're not talking about someone walking home with a stapler. We're talking about someone in state government doing something wrong with money (probably a lot of money) connected to the federal government. What GOED program could that be?

How about the EB-5 visa program, the program where wealthy foreigners essentially buy their green cards by investing $500,000 in new American business ventures? The feds have looked into abuse of the EB-5 visa program in Texas. South Dakota, operating through the privately incorporated South Dakota Regional Center, has used EB-5 money to fund numerous projects: the Dakota Provisions turkey plant in Huron, the Deadwood Mountain Grand Casino, the Veblen megadairies, and Northern Beef Packers.

The last two were the biggest projects the SDRC funded during the Rounds Administration. And without the advocacy of Mike Rounds and the financial wizardry of Richard Benda, Northern Beef Packers in particular never would have happened. The Veblen megadairies and Northern Beef Packers both made millions of dollars of EB-5 money disappear in apparent mismanagement and bankruptcy.

If there was any place for anything to go wrong with big money, the EB-5 visa program and the bankrupt projects it funded seem like the first place to look.

That said, here are two quotes from David Montgomery's report that may echo in the coming weeks. First from the campaign trail:

Daugaard’s precessor as governor, Mike Rounds, acknowledged he “recently became aware” of the investigation but declined further comment via a spokesman for his U.S. Senate campaign.

“I believe it is appropriate that any further questions be directed to Attorney General Marty Jackley,” Rounds said in a statement.

Rounds’ spokesman, Mitch Krebs, declined to say whether Rounds had been interviewed by law enforcement [David Montgomery, "SD under Investigation Week after Official's Death," Political Smokeout, 2013.10.30].

Stace Nelson, Larry Rhoden, Annette Bosworth, turn on your radars.

And over at U.S. Attorney Johnson's office, Montgomery has one heck of a hypothetical conversation:

If Benda was related to the investigation, his death wouldn’t necessarily halt it. Speaking in general terms, Johnson said in some cases investigations continue even if the central figure dies during the process [Montgomery, 2013.10.30].

Remember how Brendan Johnson decided last spring not to run for Senate against Mike Rounds? Remember how he wanted to focus on his work at the U.S. Attorney's office? Perhaps we're about to see another big chunk of what that work has been.

There are a lot of dots here. Watch for connections.


  1. Jerry 2013.10.30

    Good work CAH, way to stay with it on all the stories that are related to this. I can only speculate in my mind, but my mind tells me that this is gonna get interesting as there are few hundred million that have been tossed around like confetti.

  2. hmr59 2013.10.30

    This is what happens in a one-party state. 'Bout time this stuff is exposed...

  3. Bill Dithmer 2013.10.30

    Does this sound familiar?

    Who knew it could happen here in good old South Dakota? Or did it? My guess is that we will never know the full story. I'm sure that by now Mike Rounds is as clean as a new test tube.

    This is starting to drive me a little crazy. Now stop that. I already know what most of you are thinking.

    Here goes. What is the name of the play that was about The Teapot Dome Scandal? I remember seeing it at the Black Hills Playhouse but cant remember the name.

    The Blindman

  4. Bill Dithmer 2013.10.30

    Wayne I can remember people skipping class at what was then BHSC to watch Days. I was not one of those people.

    The Blindman

  5. Roger Cornelius 2013.10.30

    Weren't there U.S. Marshals at the scene of Benda's death?

    This could explain their presence.

  6. FireBreathingDragon 2013.10.30

    Sounds like the makings of an Oliver Stone epic.

  7. Winston 2013.10.30

    According to Benda's obituary, Benda worked for the Governor's Office of Economic Development from 1998-2001 (under Janklow). If Benda's passing as anything to do with this, did the smoke could go beyond the Rounds's era?
    - and what needs to be proved in order to over come a potential statute of limitations burden?

    Benda's work as Secretary of Tourism and State Development rekindles memories of how secretive the Rounds administration was towards the release of corporate head names who attended the Governor's Hunts.... Gee, I wonder why?

    However, if this investigation does go beyond Rounds, then my first thought is.... What about the sale of the State Cement Plant in 2001?

    Lets follow the smoke then we will follow the money.....

  8. MJL 2013.10.30

    The AG's office is "handling" the situation. I wonder if they will establish a non-Republican investigator to avoid speculation that he is just sweeping it under the rug or in a public owned airplane once flown by a current candidate for US Senate.

  9. John 2013.10.30

    Kudos to the Daily Republic for their dogged pursuit of the truth.

    Additional questions include: what's the value-added (ROI) of the GOED? When's the last time the GOED received an independent 3rd party audit and what are those results? Why is a select office and tiny board allowed to pick winners to funnel millions in grants and forgivable loans? Why is there an apparent total and complete lack of legislative oversight over the GOED, after all, the office uses appropriated funds?

    Hopefully the resolution of these questions and the on-going investigation will put a temporary end to the crony capitalism that is apparently linked to the Rounds administration and Mr. Rounds' quest to likely do greater damage from the US Senate.

  10. Jessie 2013.10.31

    As we all should know, "follow the money" is the way to find out. And it will come down to "what did he know and when did he know it."

    And for my 3rd Watergate reference, I guess "the trick is not minding." My stockpile of outrage is sorely depleted, so I guess I can manage that one.

    I'll leave off before I quote the infamous sign in Colson's office. "When you've got them ..."

  11. Moving Forward 2013.10.31

    It looks like more than ever we need to increase the number of good qualified Democrat candidates in the state legislature to have more oversight over these Republicans. Enough of the secrecy, back room deals, cronyism and lack of being fiscally responsible.

  12. interested party 2013.10.31

    Where can I mail enough swords for everyone in Pierre to fall on?

  13. owen reitzel 2013.10.31

    AS of 8:22 this morning nothing on DWC and PP. Not shocking

  14. Robin Page 2013.10.31

    During my 2012 campaign for the SD state Legislature, I repeatedly raised issues with the Governor's Office of Economic Development. As a researcher, I found many questionable practices taking place in the GOED...prior to the Daugaard administration and during his administration. I sincerely hope that the investigation will look closely at all monies given out from this office and determine who has benefited from them. Great article, Cory! Hope to see a lot of follow up on this!

  15. Rorschach 2013.10.31

    I'm glad to see that federal law enforcement is investigating this. When it all comes out I will be very interested to hear the back story about whether the state law enforcement investigation was as thorough and aggressive as the federal investigation.

  16. caheidelberger Post author | 2013.10.31

    Thanks, Robin! If you have research that fills out the story on issues we've covered here or info on topics I haven't hit, send that stuff our way! I don't know if it's Oliver Stone scale, but there is an important story to be written here... one which, indeed, Owen, "South Dakota's #1 Political Web Site" is so far ignoring. I don't know what he's waiting for: our Republican Governor is the one who broke the story!

  17. lrads1 2013.10.31

    Oh but Owen, there are fresh entries over at DWC this morning. Didn't you see the reprint of the Nielsen poll results? The Happy Birthday Rep. Wick? ;)

  18. Rorschach 2013.10.31

    Besides NBP and visas, I also wonder whether the use of federal stimulus funds for work on the west side of the river in Pierre about the same time Mike Rounds was putting up his house and developing property in that vicinity might be a topic for investigation.

  19. caheidelberger Post author | 2013.10.31

    R, do we have some news stories on that stimulus project? I need to check!

  20. caheidelberger Post author | 2013.10.31

    ...which website tells me Fort Pierre saw stimulus work on Hwy 83, the school, an SD Muni League building, and energy efficiency... nothing overtly fishy there.

    On the Pierre side, I see, among other things, that the state got $435K to build a bike trail along 4th Street. Does Mike like bikes?

    By the way, says South Dakota received $1.4 billion in stimulus funding. This federal website makes it possible to account for every project and every dollar of the stimulus in South Dakota... quite unlike the SDRC EB-5 visa program website, which recently removed all links to project information from its home page.

  21. Rorschach 2013.10.31

    No news stories that I am aware of, Cory. Do we have any investigative reporters besides you in SD?

  22. Rorschach 2013.10.31

    I'm told there was canal work done ostensibly for drainage purposes on the Ft. Pierre side of the river that used federal funds. SD doesn't have a whistleblower protection law, so anybody in state government who might know anything about this would be subject to retaliation.

  23. interested party 2013.10.31

    Timing for the announcement of an investigation was altered by Benda's untimely death: this would explain some of Brendan Johnson's hesitance to get into a political race.

  24. interested party 2013.10.31

    Unless this thing blows over quickly Susan Wismer is a shoo-in for gov.

  25. caheidelberger Post author | 2013.10.31

    Investigative reporters: more than you might think, R. Read the signals the Mitchell paper, Montgomery, and even Mercer are sending. I get the impression they are digging.

    Mercer said this last week: " With its ties to a national immigration program for wealthy investors, and with investors jilted, workers dumped, a formidable candidate for Senate involved, and a prominent man now dead, this story could become a focus of national, international and financial reporters." What can you read in that signal?

  26. interested party 2013.10.31

    Or give SHS enough breathing room to enter a statewide race and let Wismer run for SOS.

  27. caheidelberger Post author | 2013.10.31

    Sue Wismer... doesn't she represent Veblen and a lot of folks who got hosed by Rick Millner's EB-5-funded dairy, and maybe even some livestock producers who dealt with NBP?

  28. Bill Dithmer 2013.10.31

    interested party
    2013.10.31 AT 10:00
    Or give SHS enough breathing room to enter a statewide race and let Wismer run for SOS.

    Yes now that's what i have been waiting for

    The Blindman

  29. caheidelberger Post author | 2013.10.31

    I checked—Veblen is in Marshall County! That's pretty solid Dem territory anyway, but I'll bet Rep. Wismer could get some good details on the dairy and EB-5 from her neighbors!

  30. Rorschach 2013.10.31

    Sometimes it seems reporters have to be spoon fed, Cory. But they are on this story. One thing's for sure though. Wherever it leads it can't be good for the SD Republican machine.

  31. Cranky Old Dude 2013.10.31

    Just another reason government needs it hands slapped any time it reaches out to tamper with the economy. "Economic Development?" It usually to be some sort of Pay For Play scheme or a way make tax dollars disappear ($152 Million!). What would that money have done for us if left in our pockets instead of being extorted by the state? Governments are by their very nature corrupt and criminal-all of them.

  32. Rick 2013.10.31

    Jamie Rounds, Mike Rounds' brother, was appointed to run GOED when Rounds took over. His tenure there was less than stellar. Then he got another state job at USD.

    I recall Mike Rounds went on a big fat junket to Europe for a week or so late in his second term and that Benda was along with the ag secretary. Who paid for that and why? How much money got spent while Rounds ran up a colossal debt which he dumped on Daugaard? Where did they go, who did they meet with and what was the mission of the junket (around Oktoberfest in Germany) if it involved official visits by our state's chief executive and his aides?

    Time to look at campaign finance reports for Rounds' campaigns, the Governor's Club, the pheasant hunts, and who bankrolled the $3 million governor mansion for Rounds. There are lots of rumors coming from the Rounds years, and in each case it involves carefully following the money to family members and pals.

    Pay for Play was the rule for a lot more than GOED. This is a gold mine for competent investigators and my guess is the merry-go-round reaches far beyond GOED and the Governor's Office. No matter how one hand washes the other in Pierre, lots of hands remain dirty.

  33. Coltar The Barbarian 2013.11.04

    Isn't some of the Rounds For Senate Campaign's inner-circle still in the GOED?

    No wonder Nesselhuff was crying foul last January when Rounds' former Chief of Staff was appointed to the GOED to dole out economic development money.

    Is the GOED a notorious revolving door?

  34. caheidelberger Post author | 2013.11.04

    Coltar, you're thinking of Rob Skjonsberg, chief of staff at Rounds's insurnace firm, former gubernatorial chief of staff while Rounds was in office, and current manager of his Senate campaign. Gov. Daugaard appointed Skjonsberg to the state Board of Economic Development on January 8 this year. Said Skjonsberg in Saturday's Mitchell Daily Republic:

    “We believe the investigation will have no impact whatsoever on the U.S. Senate race,” Skjonsberg said in a written statement given to The Daily Republic. “We believe that once the attorney general’s report and the governor’s review are made public, that speculation will end as the facts are established.

    “Meanwhile, we need to let the attorney general and the governor do their jobs. We are confident the reports will be released as soon as possible” [Luke Hagan and Seth Tupper, "Mike Rounds' Armor Pierced?" Mitchell Daily Republic, 2013.11.02].

    Nothing to see here. Move along, please.

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