There are eager readers, and there are really eager readers. A friend of the blog cogitates on the GOED/EB-5/NBP scandal and decides to place the affair in recent historical context. In this essay, our friend reminds us that South Dakota has trouble holding its political favorites accountable and must rely on the diligence of outsiders to bring friends of the powerful to justice.
The Republican Senate darling in South Dakota is stuck in a scam. People close to him and whom he trusted are found to have scammed millions right under his nose.
Months drag on, details leak out, and the South Dakota Attorney General still won’t act.
He stonewalls. He minimizes the allegations. He sees no reason to act. Meanwhile, the paid-for GOP blogs bang the drum to knock down the scam, attack the news media, attack the whistleblowers and deflect attention and blame.
Concerned citizens look outside South Dakota for justice … for a prosecutor who wouldn’t shirk his or her duties to investigate. Sound very familiar?
It should. We lived through it, starting in late 2004 when complaints could no longer be contained in South Dakota and Iowa about Sioux Falls car dealer and Sen. John Thune’s best friend and former campaign organizer Dan Nelson and his company, Dan Nelson Automotive Centers.
The John Thune-Dan Nelson alliance goes back to Thune’s entry to South Dakota politics. They were very close friends. Dan told the New York Times during the summer of 2004 that he and John were “best friends.” John was running against Sen. Tom Daschle and Dan’s paying gig was his chain of used car dealerships in South Dakota and Iowa. And his credit business. They were an influential team.
- John hired Dan in 1995 to be his campaign manager for the 1996 elections. They won the primary against Lt. Gov. Carole Hillard and went on to win the general election for the U.S. House of Representatives.
- John and Dan’s friendship and comradeship continued through John’s re-elections to the House for two more terms, and again when John ran and lost by just 524 votes to incumbent Sen. Tim Johnson in 2002. Dan, John and a circle of close male friends hung out together frequently, shot hoops and had some great laughs over the years, according to GOP insiders at the time. Dan reportedly gave John’s 2004 campaign $9,000.
- Dan leased part of his corporation’s building as John Thune’s Senate campaign headquarters in Sioux Falls. He leased cars to the campaign. He provided advice to the candidate and his campaign team. He gave and raised money for John. John paid Dan $84,189.87 for office rent in the 2004 campaign against Senate Leader Tom Daschle.
- John’s business dealings before the Daschle challenge included lobbying and sitting on the Audit Committee and Board of Directors of what would soon become known as MetaBank. He reportedly was paid about $35,750 to sit on the board, starting soon after the 2002 campaign ended. He remained on the Board of Directors until Nov. 18, 2004, after he won the Senate election. This was great news for Dan Nelson, who claimed to be close pals with MetaBank’s top officer.
- While John served on the bank board and on its Audit Committee, Dan obtained millions in loans for his corporation, “formerly known as South Dakota Auto Group, Inc., d/b/a Dan Nelson Finance Super Center, J.D. Byrider Sales, and Dan Nelson Auto Network. The corporation headquarters was at 2900 W. 12th St., Sioux Falls, SD,” according to legal documents. When Dan declared bankruptcy in mid 2005, he owed more than $28 million, about $10 million of it to MetaBank.
During 2004, while John shared Dan’s office space and ran for the U.S. Senate, complaints stacked up in South Dakota and Iowa against Dan Nelson Finance Super Center and his auto network. An investigation started in mid-2004 in Iowa, but not in South Dakota.
By September 2004, Dan became aware of the Iowa investigation. Questions arose about what Dan and his business partner Chris Tapken did with all the money they owed. On Jan. 7, 2005, Iowa Attorney General Tom Miller announced he filed a lawsuit alleging consumer fraud violations by Dan Nelson and the Dan Nelson Automotive Group, Inc. During the same week, John Thune had taken the oath of office to become a U.S. Senator.
South Dakota’s blogosphere was afire. Republican paid-for blogs accused the Iowa Attorney General, a Democrat, of playing politics. Democratic bloggers countered with evidence gleaned from public records detailing the Thune-Nelson business relationship and friendship and pointing to Thune’s role on a bank board doling out so many millions to his best friend and former campaign manager. What, they asked, was John Thune doing on MetaBank’s Audit Committee while his best friend was bilking millions from the bank?
Finally, in the summer of 2005, South Dakota news reporters started to pay attention to the Iowa Attorney General’s lawsuit for fraud and the ocean of complaints in Iowa and South Dakota. Cornered by Keloland reporter Don Jorgenson on July 8, Thune denied being aware of Nelson’s activities, saying he only sat on a board and didn’t have access to those details. Thune’s press aide was outraged. (So, what does an audit committee do?)
Having seen the same information, South Dakota Attorney General Larry Long made it clear he had no intention to do anything other than the most cursory look-see. That’s not how others in South Dakota’s law community saw things. From Sioux Falls attorney Harry Enberg to Keloland: "With Dan Nelson, you would think that FDIC had been watching this file, and if they had seen a $30 million loan and only $10 million or $6 million in assets, they would have ordered the bank to do something, whether it's foreclose or force into bankruptcy.” Not even the news that Dan Nelson had sold the business to Chris Tapken for just 50 bucks could get Long to move.
- July 12, Keloland asks “why hasn’t South Dakota filed suit against Dan Nelson Automotive?” Long answered that South Dakota doesn’t have the same laws on its books as Iowa to protect against fraud. Other than that, he had nothing actionable: “I would say this: I would say his business conduct is no better or no worse than any other auto dealer we deal with.”
- July 13, another bombshell hits. Keloland asks why the “SD Acting US Attorney Wouldn't Investigate Nelson Case.” Turns out Thune’s preferred Acting U.S. Attorney is the mother of Dan Nelson’s business partner, Chris Tapken. “Now their family ties will affect how the justice system handles any investigations into the bankrupt car dealership. Michelle Tapken has been an assistant U.S. attorney in Sioux Falls since 1990. He had owned 25% of Dan Nelson Automotive. Then shortly after Nelson filed for bankruptcy, Tapken became the majority owner of the company when he bought it from Nelson for $50. Since then, Metabank has gained control of the business. The Tapken connection means that the U.S. Attorney's Office won't be involved in any legal proceedings.”
- July 20, Attorney General Larry Long still thinks this is just a lot of hoopla. The Iowa Attorney General had received 450 complaints while Long claimed he had only 22. Part of the reason is 75 percent of Nelson’s dealings were in Iowa and because Iowa actually has a credible consumer protection agency with a reputation of going after the bad guys.
- August 25, Iowa Attorney General Tom Miller wins relief for 1,400 victims of Dan Nelson’s swindles. He and MetaBank – now free of John Thune – agreed to improved terms for Nelson car buyers who got stuck with artificially inflated interest rates and inflated prices by Nelson’s South Dakota Acceptance Corporation.
- September 20, the Argus Leader profiles the rise and fall of John Thune’s best friend, Dan Nelson. “He's impressed governors, senators and Capitol Hill gofers, then soared to success as a car dealer whose work ethic and broad smile made him a poster child as one of Sioux Falls' young millionaires. At age 37, he spans generations of Republican leadership as a businessman whose story, under other circumstances, would be Exhibit A in the party's message about risks and rewards in a free society. But now the luster is gone. It vanished in the summer heat of a consumer-fraud lawsuit in Iowa and the subsequent bankruptcy of the Dan Nelson Automotive Group in South Dakota.” In the article, reporter Jon Walker identifies Dan Nelson’s exceptional GOP DNA: “In reality, Nelson is so well connected that his ties to Thune might be only a footnote in the network of South Dakota relationships. Nelson's wife, Jill, is the former wife of Kevin Schieffer, who worked with Nelson for Sen. Larry Pressler in Washington. His partner in the car business has been Chris Tapken, whose mother, Michelle Tapken, once was expected to be Thune's choice for U.S. attorney. His friends include Russell Janklow and Mark Mickelson, both Sioux Falls lawyers and sons of governors.”
- November 20, the Argus Leader reports “a lengthy indictment filed Wednesday in an Iowa federal court accuses the politically connected ex-car dealer Dan Nelson and business partner Chris Tapken of defrauding several banks, causing an estimated $21 million in losses. The 28-count indictment alleges Nelson and Tapken routinely created false reports, which gave MetaBank and other participating banks undue confidence in the health of their subprime car loan businesses.” And here’s the kicker: “The conspiracy began in 1997 when Nelson and Dan Paulson — who is not named as a defendant — submitted fraudulent reports to MetaBank, the complaint states; Tapken later joined the conspiracy.”
The veil was now lifted. South Dakota’s Attorney General played a valuable role as the chief law enforcement officer in John Thune’s home state. By failing to get involved, he controlled the bleeding in the Rushmore State. After all, all politics is local. He moved up the ladder when Gov. Mike Rounds appointed him to the Sioux Falls Circuit Court bench.
As for Dan Nelson and Chris Tapken, it wasn’t until November 2008 that Nelson was charged with 28 counts of bank fraud, wire fraud and mail fraud. Nelson claimed another close, personal friend of his at MetaBank was its president, whom he claimed had approved every report involving his transactions. He and Tapken opted for a plea bargain agreement.
And it wasn’t until after New Year’s Day in 2011 that Dan Nelson was sentenced to two and half years and Chris Tapken was sentenced to one and a half years in federal prison. They were ordered to pay back $7 million in restitution to nine banks, including $3.3 million to the MetaBank in Sioux Falls. A third participant, Daniel W. Paulson, “an accountant, served as the chief financial officer of the various Nelson corporations from the 1990s until the corporations became defunct after June of 2005,” pled guilty to a conspiracy to make false entries in bank reports and was sentenced in April 2011 to a year in prison. Unlike Nelson and Tapken, he didn’t personally profit from the swindle, other than keeping his job in Sioux Falls.
Larry Long resigned his post as Attorney General and accepted Gov. Mike Rounds’ appointment to the Circuit Court bench in Sioux Falls.
John Thune is the third most powerful Republican in the U.S. Senate. But what about his presidential aspirations? The press in Iowa is not too keen about his well documented role in the MetaBank swindle. He would get thrashed in the always white hotly contested Iowa Caucuses. John’s going to retire in the U.S. Senate. The Democrats in 2010 let him run uncontested, despite a mountain of ammunition. Maybe that ammo will still be dry in 2016, but whether the SDDP is up to the fight remains to be seen.
* * *
The GOED Scam in Pierre is still in its early stages. The MetaBank swindle teaches us that justice rolls slowly and deliberately, but when you see a trail of evidence of unethical and lawless behavior, be patient and diligent. Only this week, we finally see that Virginia’s ex-governor Bob McDonnell and his wife were charged in federal court with “14 felony counts, including wire fraud, conspiracy to commit wire fraud, obtaining property under color of their official office and conspiring to the do the same.” In New Jersey, where the heavy hand of Gov. Chris Christie’s influence was misused, the investigation is only starting and will probably take months to dig to the bottom of Christie's abuses of power.
In Mike Rounds’ Governor’s Office of Economic Development case, we see a key official’s mysterious death by gunshot which opened the public’s eyes to years of very suspicious handling of millions — and lost records of what happened to that money and who did what. Dots are easy to connect. Records will eventually surface.
No matter how many people have been involved, all the roads lead to Gov. Mike Rounds. Rounds hand-picked the Attorney General who now appears to be bending over backward to shelter Rounds from the mess in the Rounds/Daugaard Governor’s Office of Economic Development. They’re running out the clock in this election, hoping the public will forget in November.
—Reader submission, 2014.01.22
(The author of this essay prefers to remain anonymous. I vouch here for the author's knowledge and integrity. I also note that, to the best of my knowledge, the author is not running for any office, against Rounds, Jackley, or anyone else. But anyone who is running against South Dakota's potentates should read this author's essay.)