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EB-5: Bollen and Sveen Selling Securities Without SEC Registration?

Last updated on 2014.01.04

What might we find if Rep. Kathy Tyler (D-4/Big Stone City) succeeds in her push to convene a special session and order a forensic audit of the Governor's Office of Economic Development and South Dakota's EB-5 visa investment program? How about securities fraud?

Consider: SDRC Inc. director Joop Bollen and SDRC lawyer Jeffrey T. Sveen have recruited foreign investors eager to buy their way into America for $500,000. Bollen and Sveen pool that money in a series of limited partnerships and other legal fictions and turn it into loans to outfits like the bankrupt Veblen dairies, the bankrupt Northern Beef Packers in Aberdeen, the Deadwood Mountain Grand Resort, and the Dakota Provisions turkey plant in Huron.

A friend with a good legal eye says Bollen and Sveen's financial activities look more like offering a security than conducting direct EB-5 investment: the visa buyers are putting their money directly not into job-creating activity but into Bollen and Sveen's money machine. They are practically buying stock in South Dakota companies.

Federal law defines "security" thus:

The term “security” means any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security”, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing [15 U.S.C. Sec. 77b(a)(1)].

If these EB-5 investments are securities, Bollen and Sveen should be registering their securities with the Securities and Exchange Commission. Bollen and Sveen should be offering memoranda or prospecti describing their investments. They should be providing Uncle Sam with financial statements certified by independent accountants.

Securities fraud may not sound like the sexiest monkeyshines in the GOED/EB-5 scandal... but remember: we put Al Capone away on tax evasion.

Update 2014.01.04 09:35 CST: An eager reader forwards this June 2013 article contending that EB-5 offerings are subject to securities laws.


  1. wal 2013.12.04

    Perhaps it goes deeper, SDRC making investments in "other" financial platforms with the promise of further financial gains which went pear shaped.

  2. Troy Jones 2013.12.04

    There are significant exemptions in securities laws, many of which apply to quasi-government entities and mechanisms.

    I don't know if there is such an exemption here but unless you "expert" knows one way or another, this is just another example of throwing mud hoping something sticks.

    ps: my statement is not a defense of anything. Just looking for facts of a crime and not all the suppositions not grounded in fact.

  3. Jim 2013.12.04

    Troy, you comment further supports the need for a more sweeping audit. Also, the can't have it both ways - a quasi gov entity for certain purposes, and private company for others. Would you at least agree this whole fiasco has severely impacted SD's ability to attract both foreign and domestic investment?

  4. caheidelberger Post author | 2013.12.04

    Troy! I knew a good financial post would invite you in.

    SDRC (through its numerous subsidiary SDIF LLPs) makes loans, but SDRC doesn't register with the state for a banking license. SDRC markets investment opportunities, but it doesn't sign up with the SEC to sell securities. If those are both legitimate non-filings, then just what is SDRC?

  5. Jim 2013.12.04

    SDRC is a financial hydra, born of greed in the back rooms of the people' capital. Each head needs to be leashed.

  6. Rick 2013.12.04

    Invest in South Dakota: We'll take your money on a wild ride!

  7. Troy Jones 2013.12.04

    There are exemptions for what I will call "private activities" (not to be confused with a legal definition of private activity bonds issued by public entities like TIF's) to facilitate raising capital from accredited investors. The consolidated capital can then be invested in usually single purpose companies as loans or equity. Both state and national securities laws and the bank franchise tax law purposely exempts these transactions/vehicles in an effort to facilitate capital to smaller endeavors which couldn't afford the hundreds of thousands or millions of additional registration costs.

    Based on what I have seen from a capital raising perspective, there doesn't appear to be anything blatantly illegal and likely not even morally questionable. That said, there may have been non-kosher actions contrary to EB-5 regulations (I don't know the rules) which may be the extent of the federal investigation. And, if so, I support appropriate consequences for any wrong-doing but don't know what they may be and haven't seen anything in particular what may have been done improperly. We really should be awaiting that investigation to run its course before jumping to conclusions.

  8. Elizabeth 2013.12.04

    Did Benda really kill himself? how does anybody know? Who can be trusted to find out?

  9. Bill Dithmer 2013.12.04

    So here is an analogy of what is happening here in good old South Dakota. Now remember, we are all about transparency, individual rights, and the letter of the law.

    Our story begins with a couple of people that worked for the DCI right here is SD. They weren't so good at their jobs but knew that was the kind of work that they wanted to do to make "the real money." They also knew that with the contacts and certain practices that they had brought with them in their short time at the DCI they were sure to make lots of cash fast so they quit their jobs, or were asked to leave.

    And so it was that the two business men started a company called JJ INC registered right here in SD Now JJ INC needed start up capitol to get off the ground and the two men knew just exactly where to get it. They had previously vacationed and spent time in Mexico working for their former employer the DCI and at times another company called the DEA and had met and made friends with a couple of people from Juarez that they knew wanted to expand their business operations into the states.

    For the sum of half a million bucks a piece, JJ INC would make it possible for the Mexican people to bring their product into the country without going through the usual channels. It was a good deal all around and no matter what, JJ INC got a percentage of the action whether the investors made a profit or not.

    Part of JJ INC 's business plan called for the money that they got from investors to be used to form "a series of limited partnerships" with the right people. These people had to be in financial distress and easily managed. They would be in charge of the transportation of the product that was being made in Mexico and shipped to South Dakota.

    Everything went along pretty good for about a month until the limited partners cars and pickups started breaking down and they had to sell some of the product along the way to pay expenses to continue down the road.

    In just a little while the Mexicans found out that they weren't going to get paid for their product. The people that had financial problems that had been put in charge of transportation found out they were never getting paid no matter what and were going to end up just as broke as they had been before doing all that work.

    But good old JJ INC was going to end up OK because they were paid up front and didn't have to depend on the uncertainty of production or distribution.

    Not everybody in South Dakota however were happy with JJ INC'a business practices. Some one talked to the wrong people and it got back to their former employer, the DCI. JJ INC was charged with certain crimes, convicted, and sent to prison. No money was ever recovered from their transactions but the state of South Dakota got some bad ass business people of the roads of the state.

    Here is the moral of the story.

    If this had been about reproductive rights we would have been all over it.

    If it had been about the rights of people to love whoever they want to however they want to we would have been all over it.

    If it had been about drugs we would have seen all kinds of action by now. The investigations would have been in depth and complete.

    Unfortunately this was a white collar crime that goes to the top levels of state government. We'll be lucky to hear crickets when the party is over.

    WTF Marty do your job.

    The Blindman

  10. Elizabeth 2013.12.04

    Look at Denny Sanford. Holy god! What about Bill killer tornado disaster Janklow. Who's who in this state and why is why? Who is investigating who? Scary spooky stuff.

  11. Bree S. 2013.12.04

    We should just build "China City" in the Black Hills.

  12. rollin potter 2013.12.04


  13. Elizabeth 2013.12.04

    Maybe this has something to do w an unlicensed attorney out of TX? I don't know anything about anything. Maybe I don't want to.

  14. Jim 2013.12.05

    Sveen shouldn't be allowed to participate in NBP's bankruptcy as an attorney bc he is a witness. Right now he represents two of Joop's shell companies. Trustee should remove him. Doubt it will happen in the clouded over sunshine state.

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