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.