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Audit Finds Bollen Not Reporting, Benda Not Documenting, Rounds Not Supervising

Last updated on 2016.09.14

"The plot has become much thicker," writes journalist Bob Mercer on reading the audit report on the Governor's Office of Economic Development. Indeed, the Department of Legislative Audit finds significantly more GOED/EB-5 mischief conducted under the Rounds administration (and carried over into the Daugaard era) than Attorney General Marty Jackley noticed or admitted following his "investigation."

The DLA's audit paints a Governor's Office of Economic Development that has allowed sloppy financial oversight and unchecked conflict of interest. The audit report confirms what we have suspected since the first announcement of a federal investigation into GOED's activities: that GOED's problems revolve around the EB-5 visa investment program run by Joop Bollen, promoted by Richard Benda, and launched to its greatest heights by Governor Mike Rounds.

The audit finds that GOED did not adequately monitor the EB-5 program as run by SDRC Inc., the private firm Joop Bollen spun out of his state job on the NSU campus:

  • Bollen sent GOED monthly e-mails reporting balances in the indemnification funds and the expense fund his December 2009 contract established, but he provided no bank statements or other documentation to prove those balances were correct or that he was reporting all of the money he and Benda touched in the course of business.
  • DLA couldn't find the documentation Bollen was supposed to submit to GOED to show that he was doing his contractual and legal duty to provide the EB-5 books, records, and reports to the U.S. Customs and Immigration Service.
  • SDRC's expense fund was a bucket with big holes:

Inadequate internal controls existed over the payment of expenses from the Expense Fund. Five disbursements were made from the Expense Fund totaling $67,259.97. The invoices were signed by the former Secretary of the DTSD [Richard Benda] and the DSTD’s Administration Director [I believe that's Marty Davis]. The invoices identified the expenses as being for meals, lodging and transportation. Other than the information contained in the invoices, there was no supporting documentation retained to evidence that the expenses were incurred, who incurred the expenses, or the purpose of the expenses [Department of Legislative Audit, "Governmental Funds of the South Dakota Governor's Office of Economic Development: Audit Report," 2014.02.12].

  • GOED left the state funds managed by SDRC off the books for three years, until FY 2013.

DLA says this lack of oversight created "a potential for the loss of assets." That's a brilliant euphemism for theft.

Governor Dennis Daugaard took the surest corrective action to these problems last September, when he terminated Bollen's SDRC contract. Bollen surrendered the $28,240 left in the expense fund to the state on January 30. Per the GOED-SDRC contract, Bollen hangs onto the $989,946 left in SDRC's Indemnification Fund One until November 2019. The audit report says GOED intends to audit that fund "if and when the funds were reverted to the State."

DLA mentions a second SDRC indemnification fund that reverts to the shareholders of SDRC, who from SDRC's 2014 annual report appear to be no one other than Joop Bollen and his mysterious pal from Georgia Pyush Patel. You know, I don't think SDRC is done fleecing us or the EB-5 investors yet.

Who allowed this mismanagement to take place? The man who wants to be your next Senator, Mike Rounds.

In its second finding, the audit report says that GOED allowed Richard Benda to use his state position to set himself up for personal enrichment:

On December 2, 2010 Secretary Benda discussed a draft employment contract between Secretary Benda and the SDRC Inc. or a related entity for providing loan monitoring services related to NBP. On December 23, 2010, Secretary Benda amended two Future Fund grant agreements with the South Dakota Development Corporation (SDDC) for the purpose of making loans to Northern Beef Packers LP (NBP) which increased the aggregate total of the two agreements by $600,000 (from $1,450,000 to $2,050,000). On February 1, 2011, $1,200,000 of these funds was disbursed to NBP by the SDDC. $850,000 was returned to the Future Fund.

Secretary Benda’s employment with the State of South Dakota ended on January 8, 2011. On January 13, 2011, subsequent to his employment by state government, Mr. Benda was notified by e-mail that he could pick up a check written by the State of South Dakota to NBP for payment of a $1,000,000 grant to NBP for reimbursement of construction costs. This check was deposited by NBP on January 26, 2011 [DLA, 2014.02.12].

Who wrote the checks to underwrite Benda's conflict of interest? Mike Rounds.

In its third finding, the DLA says Benda's $5,559.80 double dip on plane ticket reimbursements was not an isolated incident. DLA finds Benda submitted six invoices totaling $14,700 for "translation services." This money supposedly covered writing up EB-5 pitch materials in other languages. Ping, ping, ping goes the scam radar:

All six invoices indicated that the payment on the invoice was to be made in cash. Five of the payments totaling $13,500.00 were associated with invoices from an individual that had handwritten on them “only invoice available” and the instruction on the invoice was to “pay by cash when next trip”. One invoice for $1,200.00 was on the letterhead of a Philippine hotel and had handwritten on it four names, “USD Cash $1,200.00”, “translation and interpretation”, and “only invoice available”. No receipts were included with the travel vouchers to support that payment was tendered for the services provided on the invoices. As a result, $14,700.00 in expenditures paid from the General Fund was not properly supported [DLA, 2014.02.12].

Cash only, for services at a Philippine hotel, recorded only on a handwritten note... and wait: how many investors did SDRC and GOED recruit from the Philippines? My translation: Richard Benda is toast.

Who let those expenses fly? Mike Rounds.

In its fourth finding, DLA confirms what Rep. Peggy Gibson learned a year and a half ago: GOED does a poor job of following up on the Future Fund money it hands out to businesses. In its fifth finding, DLA says GOED has been violating state law by not depositing receipts greater than $500 within one day.

Who allowed this poor oversight to be the status quo? Mike Rounds.

The audit doesn't mention the $550,000 Benda and Bollen diverted from from Future Fund Grant #1434 to SDRC Inc. ($450,000 of which went to Richard Benda's pocket; the remainder has not yet been fully accounted for). Auditor General Marty Guindon says in his cover letter to the audit that the diversion did not violate state law. But Guindon's conclusion on this matter isn't exactly exonerative:

Based on the evidence gathered during our audit, we did not determine that there was any noncompliance with state law on the part of DTSD in the issuance of this grant or noncompliance on the part of DTSD or NBP with the terms of the grant. Our audit does not provide a legal determination regarding this matter. Any criminal findings that may be associated with this matter are the purview of the state and federal criminal investigations being conducted and are not within the scope of our audit responsibilities. We do report a material weakness in policies and procedures concerning potential conflict of interest related to this matter in the audit finding on page 35 of the report. Finally, we believe that the use of the $550,000 is a matter between private parties and consequently not within the scope of our audit [DLA, 2014.02.12].

These findings tie Richard Benda to more suspiciously used tax dollars. Add the bankruptcy of Northern Beef Packers and the failure of his gamble on the Hyperion refinery, and we start to see a much bigger picture about the stress that Governor Daugaard says drove Richard Benda to kill himself. We also see why Joop Bollen has taken the Fifth in the press since November.

But more importantly, we see a much larger picture of a state economic development program run like a lemonade stand, without rigorous control of state finances. We see mistakes and abuses that reflect more than two employees' machinations. They reflect an institutional sloppiness and corruption that lie at the feet of the man in charge.

The man in charge of the Governor's Office of Economic Development is the man with the apostrophe s, the Governor.

The DLA Audit report raises a lot more questions for Richard Benda's friend and Governor, Mike Rounds.


  1. Lanny V Stricherz 2014.02.14

    Corey, Jerry posted this morning on this thread from yesterday, "FEB 13 2014 Benda, Bollen Saw Hyperion Refinery as EB-5 Prospect" That It appears that B Johnson is not going to let us know of any findings on his EB-5 investigation prior to the June primaries. I also spoke on the phone to Connie Larson in Mr Johnson's office and she said she could not comment on whether or not they would release any information prior to the election, as I had mentioned would be important to the State's voter. Have you been able to find anything out on this issue? Thanks, Lanny

  2. mhs 2014.02.14

    So, audit procedures were insufficient to prevent an employee from stealing. I work in the most audited, regulated, cash control-freaked business in the world: banking. In every single institution I've worked for, an employee I've personally worked with and known has stolen.

    It's humanity, unfortunately. While nanny-staters think we need to eliminate all risk in society, I think the occasional problem is far better than a hyper system of controls that criminals will find ways around anyway.

    I said on Pat's blog: So a lame duck public official on the way out gave preferential treatment to a potential employer: delete "Benda" and insert "Congress".

  3. caheidelberger Post author | 2014.02.14

    Lanny, I have not heard anything on those lines. I'll keep my ears open!

    MHS, then instead of shrugging at human fallibility, let's not send Rounds to Congress to make things worse.

  4. Lanny V Stricherz 2014.02.14

    MHS, you can ignore it by turning your head, but when it is rotten, the stench will still get your attention.

  5. advocate 2014.02.14

    mhs: maybe I don't understand your would we want to put someone with a predisposition for corruption in a larger position of power?

    And more importantly, why do you hate the State (or the people that support government sponsored services distributed in an equitable manner - ie, the nannystaters), but seemingly support a politician either too inept to prevent governmental corruption or simply guilty of it.

    That doesn't make any sense.

  6. vikingobsessed 2014.02.14

    If I remember correctly, didn't he have a girlfriend in the Phillipines? Or was the Bollen? Or am I just getting old?

  7. Jim 2014.02.14

    Can we call the audit conducted by the Department of Legislative Audit an audit? Troy?

  8. Robin Page 2014.02.14

    Honesty and integrity are in short supply in many branches of our state government. The EB-5 scandal is just one example of corrupt and self-serving people raiding the coffers of state and federal funding sources. In a year, this incident will probably all be forgotten and the individual who oversaw it all, Mike Rounds, will be our newly elected Senator. In Washington D.C., he and his friends will continue to milk the American public!

  9. Paladn 2014.02.14

    I fail to understand why the "free and public" media is not following this story and keeping the public aware? Of course, that makes the assumption that we have a system of open media other than MT. Oh yes, I forgot, that would require the publishing of information in which editors could pass the tests of politically owned media.

  10. mike from iowa 2014.02.14

    Sloppy financial oversight and unchecked conflicts of interest seem to be inherent flawed character traits of today's rethuglican party. It clearly comes with the R behind the name because it is prevalent in virtually every state where wingnuts are the majority.

  11. AnnieTee 2014.02.14

    Where was the State Auditor, the "taxpayers' watchdog", in all of this? The average, rank-and-file state employees routinely have their travel reimbursement requests rejected for more documentation over the minutest of detail. Routine invoices get picked apart, but they allowed requests for payments of hundreds of thousands of dollars go through with questionable or little documentation???!

  12. Rick 2014.02.14

    Huddling in fear of Mike Rounds' state gag law?

    Great suggestion, AnnieTee. Eliminate this useless office and its staff. Merge the function with the State Treasurer, and also place School & Public Lands under State Treasurer. These boobs are just collecting paychecks and filling their pockets with our taxes.

  13. Sid 2014.02.14

    Obviously, one key is that a Phillipine connection keeps turning up as to both Benda and Bollen. Since the Phillipines are notorious throughout the world as a place where labor "brokers" obtain people to meet demand, then this is a connection which should not be overlooked, except that there are likely very few in South Dakota who understand this "market" well enough to obtain information, much less evidence, which might very well lead right back to the doorsteps of certain South Dakota actors and businesses. When it comes to human trafficking, the largest market is not in the sex trade, but in the trade for "ordinary" laborers.

  14. Winston 2014.02.14

    I still want someone from the Rounds/Daugaard crowd to explain to us why the SDIBI still had an active website until October of 2013 (roughly four years after the SDRC supposedly replaced the SDIBI), and the SDIBI homepage was a Daugaard era GOED homepage. It seems to me what we really have here is a "Speakeasy" scandal and these audits so far have only audited the storefront. Perhaps, if they pushed the bookcases, which hold the accounting books, a little harder, it might open up to a whole new world….?

  15. Troy 2014.02.14


    As I said in the earlier discussion, an audit was coming. Which is wholly different from the forensic accounting done previously (yet a rational precursor). And, is standard practice, they are often done separately and by separate firms. I can imagine the conspiracy nuts here howling if Leg. Audit had done both functions (or vice versa).

  16. Lanny V Stricherz 2014.02.14

    This all makes me wonder if I am/was barking up the wrong tree in contacting Brendan Johnson's office. Come to think of it any fraud over 10k goes to the Secret service and is also investigated as money laundering as well. (this from my days investigating fraud on credit cards at Citibank.)

    On another note, the human trafficking angle brings to mind the motel, somewhere west of the Mighty Mo along I-90 that had people working as slaves, (no pay) and very harshly treated. I wonder if that had anything to do with EB-5. I was so amazed traveling out there in October, not having been out on I-90 for some time to see so many Holiday Inns and major chains in some of the smaller towns that never had a motel before and I also wonder if they were/are part of EB-5

  17. interested party 2014.02.14

    How does one get a Filipina prostitute when in Pierre for the session?

  18. Jenny 2014.02.14

    IP, now that is just rude and demeaning. Is that supposed to be some sort of slam on Stace Nelson b/c he has a Filipino wife? You make strange comments on here all the time, and personally it's getting old. Please try to stay on topic.

  19. Doreen Creed 2014.02.14

    The deeper the dig - the dirtier it gets. Don't stop.

  20. interested party 2014.02.14

    Rep. Nelson is off limits to me until after the primary, Jenny. The elephant in the room is that prostitution thrives during the session and Troy took a shot at those of us who know it. Brendan Johnson didn't run for statewide office because he is preparing to time the release of his findings at the perfect time for our party to flush Pierre.

  21. Jenny 2014.02.14

    Do you mean to tell me that the party that rules Pierre, the party that claims "morality" and "family values" is servicing prostitutes? Do the wives know what these nasty men are doing?

  22. Donald Pay 2014.02.14

    When the Technical Information Project was uncovering the sewage ash scam, we researched how organized crime operates, because that's what the sewage scam was. There are two necessary components to organized crime--(1) an organized criminal syndicate with several separate but overlapping enterprises, at least one of which violates the law to make money, and (2) a corrupted, complicit or incompetent government unable or unwilling to hold the illegal activities of the criminal syndicate in check.

    South Dakota has a big problem with this type of organized crime, and an inability to prevent it. The reason is simple. What goes for "business as usual" in South Dakota (lack of a regulatory structure that is independent of the political structure) is exactly what is required for organized crime to succeed.

    South Dakota is a corrupt state, and one of its problems is that it thinks it isn't. It thinks there are a few "bad apples" from time to time. As long as that mindset continues, nothing will change. The type of business corrupting the state will change, but the next disaster is just around the corner. Maybe it's the uranium mine.

    Folks like mhs prefer the way things are, even though this stuff will continue. Folks like mhs run the state. This stuff will continue, unless people like mhs don't run the state anymore.

  23. Roger Cornelius 2014.02.14

    Yes we had the discussion on audits, we all understand the difference and hopefully won't have that distraction again.

    Some on Madville can get all tinfolilly at times, but that is what happens when government doesn't answer questions or gives you answers you don't want to hear.

    Cory's reporting, and Mercer's too, have been solid throughout this scandal. Remember that they can't report information the state doesn't provide, except if they want to hand their life savings over to the state.

    There has been nothing in Cory's reporting that leads me to believe he is conspiracy theorist. Like the rest of us, he has to speculate at times, just like you do. He probably has a good idea of how this will all play out, but he really doesn't know.

    With the audits being released, there seems to be a lot of Republicans saying that Benda was the only one to rob from the sate and investors and rejoicing at the fact that these two governors were just reckless and careless and have no criminal responsibility.

    What caught my attention in the above report is that apparently Bollen still has control of SDRC Indemnification Fund One accounts in the amount of $989,946 until Nov. 2019. Why is that? Shouldn't that money have been returned to state upon cancellation of their contract?

    Sid also got my attention with the Phillipine Connection, what comes to mind is what was Benda doing in the Phillipines, recruiting EB-5 investors? Is there any proof of EB-5 investors from the Phillipines? If not, Sid raises a valid point.

  24. Rick 2014.02.14

    Knowing what you now know … let’s not forget what kind of quagmire awaited you in Mike Rounds’ ridiculous $10 billion “Gorilla Project,” the so-called green oil refinery Hyperion in central Union County.

    This was a disaster from the get-go. It was fraught with red flags for any investor who had at least an ounce of common sense. Now, mix in what we’ve learned about Rounds’ scandal-ridden Governor’s Office of Economic Development.

    But let’s start near the beginning. Let’s see the characters who Mike set up our state with, all under the cover of secrecy so landowners wouldn’t know who or why they were being strong-armed into giving away options to buy. Not a relationship made in Heaven:

  25. G-Man 2014.02.14

    More interesting developments, Corey. Thanks for keeping us continually updated on this!

  26. Jana 2014.02.14

    Drip. Drip. Drip.

  27. caheidelberger Post author | 2014.02.14

    Lanny, interesting court case... and perhaps the only time in the last decade that "peonage" has appeared in a press release. Note the Farrells, who ran the slave-staffed Comfort Inn in Oacoma, were arrested in spring 2007 and convicted in November 2007. The Farrells' criminal activity thus took place before Benda announced Hyperion and before Bollen and Benda pitched the expansion of EB-5 to include oil refineries, casinos, and other industries. At the time of the Oacoma infractions, EB-5 was nothing but dairy in South Dakota.

  28. wal 2014.02.15

    over 3 decades I have done business in the Philippines and never required a translators are on staff of hotels, or can be hired and are paid by the word generally and yes can be expensive particularly if they are legal translators. MOST translation services are businesses with tax id numbers, VAT numbers, and take payment by bank wire, Western Union, not in the form of cash. It would be curious to find the name of said hotel and see what their business office says about the services that it performs for its business clients.

  29. Lanny V Stricherz 2014.02.15

    Sid, The following website appears to show another EB-5 food processing operation, that from what I have been told is going to be in the Gayville Volin area.

    from their website. Run your cursor over the information below. It should then come up chinese.

  30. caheidelberger Post author | 2014.02.15

    That's right, Sid! The SDIBI/DEDR scope change a couple times. The 2008 application made the big change to encompass refineries, casinos, etc.

  31. caheidelberger Post author | 2014.02.15

    Dakota Natural Meats—that's the outfit former State Senator Eldon Nygaard was promoting in China last August, just a month before Daugaard cancelled SDRC's contract. I wonder if anyone is still promoting EB-5 investments for that project....

  32. caheidelberger Post author | 2014.02.15

    Wal, you ask very good questions. Time for a phone call to DLA to see some documents....

  33. Jim 2014.02.15

    He probably just had to connect in the Philippines...drumroll please.

  34. mike from iowa 2014.02.15

    Charisse Bollen used to work at Resorts World Manilla. Anyone ever heard of it?

  35. Jim 2014.02.15

    People also often incur huge translator fees while bird watching in Thailand. With no printers in the forest, invoices can be difficult to obtain.

  36. Jerry 2014.02.15

    I think we may find the translators to be those kinds of folks that work under the lights, the red lights. The Philippines have had an American presence since the Spanish-American War. Finding someone to speak English there is not difficult, at least it was not difficult during the Vietnam War.

  37. Susan 2014.02.15


  38. Nick Nemec 2014.02.15

    Is there any indication of what languages were being "translated"? According to Wikipedia English is one of two official languages in the Philippines the other is Filipino.

  39. Jerry 2014.02.15

    Spanish is also a main language in the Philippines as the Philippines were part of the Spanish empire just like South, Central and even South Dakota was at one time.

  40. John 2014.02.16

    It certainly appears the Jackley "investigation" was wishful thinking, at best. Yet even the DLA audit appears to, perhaps, willfully ignored the lawful duty of care and fiduciary duties of the GOED board members. Morally the board should follow-up on their "investments" to learn the return on investment for the taxpayers. The fact that the GOED never publishes an ROI speak volumes and promotes the best case for folding the GOED and permanently defunding these Ponsi-like economic development scams. It appears the GOED board members at the time of this scandal should also swing from the yardarm.

  41. Nick Nemec 2014.02.16

    Are there any actual official documents in existence to prove something was translated? Why weren't they translated prior to the trip out of country so they could be vetted by GOED or corporate lawyers? Why the Philippines? Have any EB-5 investors come from the Philippines?

    Until these questions are answered the most likely scenario remaining is that this money was used for illegal purposes, probably prostitutes and drugs.

  42. Thomas Kelly 2014.02.17

    The current administration is quick to point out that this did not happen on their watch but what have they did or doing to prevent this from happening again?

    Were are the administrative rules changes that require better documentation or what they can and cannot claim?

    State employees have a strict outline while the State administrators only have to sign their name and say only copy available.

  43. Wayne Pauli 2014.02.17

    As a state employee there are times when I have gone well into the 2nd credit card statement before I have gotten "approval" from the state auditors so that the business office can reimburse my travel...or so I am told... I cringe when I have to travel due to the excessive wait. But I guess after things like this we are all guilty until proven innocent instead of the other way around.

    On my trip to China we also hired an interpreter who traveled with us. It was all negotiated and approved before we left campus. Meals, hotels, transportation and a fee for the 11 days we were guests in China. Very easy to document.

  44. Lanny V Stricherz 2014.02.17

    Guess that is what you get for being an employee of the State and not a politician, Mr Pauli.

  45. Wayne Pauli 2014.02.17

    Excellent point...I had not thought of it that way :-)

Comments are closed.