Hyperion: The EB-5 Project That Never Was?

Last updated on 2013.12.07

Pure speculation, Marty. Just skip this part.

The GOED/SDRC/EB-5 scandal is a mess. The press still hasn't settled on a name for this vast complex of financial shenanigans (one national observer calls the affair South Dakota's Watergate) that touches on the bankruptcies of Northern Beef Packers and the Veblen dairies, the Huron turkey plant, Hutterites, convoluted and secret offshore financing, Richard Benda's suspicious death, the South Dakota Future Fund, Marion Michael Rounds's Senate campaign, the Deadwood Mountain Grand Resort...

...so how about we add the failed Hyperion refinery proposal? Consider:

As Secretary of Tourism and Economic Development under Governor Mike Rounds from 2006 to 2010, Richard Benda was one of the masterminds of the EB-5 visa investment program.

In 2007, Richard Benda was deeply involved in secret negotiations for the mysterious "Gorilla Project" in Union County. He exhorted the public not to ask questions and let him and other state and local officials keep details of the project confidential until the deal was sealed. When Hyperion Resources of Dallas was ready to go public with its intentions, Benda was in Elk Point to make the big June 13, 2007 announcement:

"We believe this will be a great deal for South Dakota, but we are not there yet," said Richard Benda, secretary of the Department of Tourism and State Development. South Dakota would be the "epicenter of clean energy production" if the refinery were built in the state, he said ["Texas Firm Eyes Elk Point for Possible Oil Refinery," AP via Le Mars Daily Sentinel, 2007.06.14].

Benda lent the state's stamp of approval to Hyperion in subsequent press releases. According to one local source, Benda was in Union County once or twice a month from 2007 until the end of his tenure as state economic development chief.

My source got the above picture just before the county approved the rezoning that opened the door for Hyperion to build. My source says Benda and the others at the table quickly closed their folders and clammed up.

Hyperion remained clammed up about their funding sources. The Dallas dreamers needed $10 billion to build the Union County refinery. Where could that money have come from?

On November 8, 2007, five months after Benda announced the Hyperion refinery project, South Dakota's EB-5 visa program asked the U.S. Customs and Immigration Service for an amendment to its authority. Our EB-5 program received authority in 2004 to recruit EB-5 investment for dairy and heifer operations in first 12, then 33 eastern South Dakota counties. The November 2007 amendment request sought to expand the EB-5 program to the entire state and include eleven industries. USCIS approved expansion to seven industries, including Petroleum and Coal Products Manufacturing, with the explicit parenthetical clarification "Includes Oil Refineries."

That amendment also included a specification that jobs created by EB-5 investment would be calculated using certain job mulitpliers. The petroleum manufacturing jobs multiplier is 8.0073 per million dollars. The idea there is that for each direct job created, a refinery would also generate seven indirect new jobs.

So let's conservatively imagine the math that might have been running through Richard Benda's head:

• Each EB-5 investor in South Dakota kicks in $500K.
• Each investment must create ten jobs.
• Using the multiplier (and we'll even cut it in half, since the amendment speaks of that many jobs per million), one direct job actually means four total jobs.
• Hyperion would have created 4,500 construction jobs over four years, then 1,800 ongoing jobs.
• If USCIS counted just the ongoing jobs,* Hyperion could account for (1,800 x 4) 7,200 EB-5-created jobs.
• If each EB-5 investor must create ten jobs to win his/her green card, Hyperion offered room for Benda and his friends to recruit 720 EB-5 investors kicking in a total of $360 million.
• If Joop Bollen at SDRC Inc. was collecting fees of up to $50K per EB-5 investor, Hyperion could have sent $36 million into the pockets of Benda's EB-5 associates.

Richard Benda never got the chance to seal that deal. Hyperion never convinced investors to buy their shaky business case, and last year they gave up their land options in Union County.

But consider Benda's deep involvement in Hyperion. Consider the possible payoff. Consider the EB-5 amendment aimed specifically at refineries. Consider Joop Bollen's claim in 2008 before the Legislature that EB-5 investors weren't interested in small dairies any more and needed bigger projects to pique their financial interest. Consider all that, and you can easily imagine Benda and Bollen and Hyperion's guys saying, "Get China and Korea on the phone!"

Yeah, that's just speculation. But given all that we've learned about Benda, EB-5, and Hyperion, it's hard not to speculate.

*Update 2013.12.07 14:35 CST: This article on immigration law indicates that in 2009, USCIS loosened the job creation requirements to include construction jobs for "massive, expansive, and major" projects that would more than two years to build.