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Daugaard: No Foul on NBP Grant Diversion; State Wants Benda’s Travel Cash Back

Governor Dennis Daugaard spoke about South Dakota's troubled EB-5 visa investment program, the failed Northern Beef Packers slaughterhouse, and the federal investigations thereof in an interview with SDPB's Karl Gehrke yesterday. Gehrke opens the topic of Northern Beef Packers around 20:40 in the interview. Daugaard said the plant was a good idea, explained on the EB-5 program, then maintained the state's position that no one violated any state rules in the diversion of $550,000 from former Governor Mike Rounds's one-million-dollar Future Fund Grant #1434.

Here's my transcript of his relevant comments, starting at 24:00:

...the state made a million-dollar Future Fund grant contingent upon them proving that they had spent at least a million dollars on certain equipment that had been purchased and installed. Northern Beef Packers produced the receipts to prove yes they had spent the money on the equipment that had been purchased and installed, and so the million dollars was then paid to NBP [Governor Dennis Daugaard, interview with Karl Gehrke, Dakota Midday, South Dakota Public Broadcasting, 2014.01.16].

Pause: Did those receipts add up to one million dollars? Gubernatorial spokesman Tony Venhuizen confirmed to me after the Governor's interview that on January 5, 2011, Northern Beef Packers CEO David Palmer provided to the Governor's Office of Economic Development a set of bank statements, wire transfer records, and canceled checks showing that NBP had indeed spent over a million dollars on equipment and on construction costs qualifying it for the Future Fund #1434 payment. (Governor Daugaard only spoke of "equipment" in yesterday's interview, but FF grant #1434 includes language about "construction costs.") Here is that e-mail, redacted by the state to comply with "confidentiality laws relating to commercial and financial information provided by grant recipients, such as SDCL 1-27-1.6(4) and SDCL 1-16G-11":

Proof for FF Grant 1434 20110105

We don't get to see those receipts, but Venhuizen says the Governor's Office of Economic Development has them. Auditors, we look forward to your verification of those receipts.

Governor Daugaard explains what happened to that million-dollar grant and emphasizes that the state and Northern Beef Packers did nothing wrong with Future Fund grant #1434:

NBP then shortly after that spent 550K on a contract with SDRC, which employed a former state employee, Richard Benda, to oversee the loans that were made by the entities created by these EB-5 investors.

Now was that wrongful? I guess we won't know whether that was wrongful in the sense that there won't be, since Richard Benda has died, there won't be his testimony available and... I don't... if there was a federal investigation targeting him, certainly that part of their investigation will no longer be able to pursue him. So it's hard to know whether that was a misappropriation of the grant that was correctly awarded, because again, that equipment had been installed and the receipts were there. Now how NBP uses that million dollars once its theirs, its up to them to decide.

So, I think this is the controversy that first made people curious, you know, what is going on when this million dollars is followed very shortly by this commitment to SDRC to hire Richard Benda [Daugaard, 2014.01.16].

One small correction: The controversy that first made people curious was Richard Benda's unusual suicide, and the state's unusual delay in declaring it a suicide. People then got even more curious when the Governor's office announced the ongoing federal investigation into Benda, EB-5, and other grand-jury subpoenaed subjects about which we have not yet been told. The Attorney General's announcement of the Future Fund diversion and Richard Benda's travel-expense double-billing only fanned flames of curiosity that were already burning.

Daugaard then turns to that double-billing. He admits that feds, not the state, uncovered that activity, and tells us the state will try to get that money back:

Then the state also became aware through the federal investigation that there was double expensing, that Richard Benda had submitted some expense reimbursement requests for a trip in one group of receipts and that he'd submitted the same trip for reimbursement in another group and that he hadn't been caught, that he was double billing the state.

So that was clearly either a mistake or a wrongful intentional act, and the state is going to try and recover that money from Benda's estate [Daugaard, 2014.01.16].

The state continues to pass on the $550,000 diversion, but we may go after Benda's heirs for the $5,559,80 from GOED's travel budget.

Daugaard opens and closes his discourse on Northern Beef Packers by saying that the plant failed due to a "shortage of capital." He says NBP's planners underestimated how much it would take to get such a large operation running profitably. But if NBP's organizers were simply mistaken, then so was the state, and so were 160 EB-5 investors, who sunk money into a bad business plan that some would argue was destined to fail.


  1. Lanny V Stricherz 2014.01.17

    "We don't get to see those receipts, but Venhuizen says the Governor's Office of Economic Development has them. Auditors, we look forward to your verification of those receipts."

    I'll bet those auditors read Madville Times or for that matter any other blog or newspaper that questions the ethics of this whole matter. And that dear South Dakotans, is why we need a helluva lot tougher open records laws, that don't allow the wrongdoers to hide behind privacy needs.

    If the wrongful billing of the travel payment was uncovered by the Feds, are the auditors then reviewing all of the travel pay to see if there were any other double billings, or does State government just assume that it was an accidental overlook so we won't need to look to see if there were other "mistakes" made.

  2. mike from iowa 2014.01.17

    Does the Guv's mansion have a basement that operatives could be working out of-like the Raygun WH and disgraced Ollie North?

  3. Sam 2014.01.18

    Sounds like the Govonor is involved in the cover up also. Hard to believe Benda committed sucide with a bullet hole to the mid section when he wad phasent hunting. If we South Dakota voter re elect him we are crazy

  4. caheidelberger Post author | 2014.01.18

    Lanny, the Governor says his investigators are doing exactly that: reviewing all such GOED disbursements since 2009 to make sure other double-billing hasn't happened, plus tightening controls to make sure another Benda-esque double-dip can't happen again. But it seems it shouldn't have been that hard to catch Benda in the first place.

    Sam, we have numerous reasons not to re-elect Daugaard, Jackley, or anyone else currently the executive branch. We now need a slate of strong Demcoratic candidates to rise to the challenge of making that case and offering voters viable alternatives.

  5. barry freed 2014.01.20

    They are going after Benda's daughter, the one person they hide behind? That could get interesting.

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