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House Approves HCR 1010 to Hold Legislative Hearings on GOED, EB-5

As expected, the reviews Governor Daugaard ordered of his Office of Economic Development's internal policies and practices found no major problems. Perhaps the most important statement in the released results is this disclaimer from Stulken, Petersen, Lingle, Walti, and Jones LLP:

We were not engaged to, and did not, conduct an audit....

We're still waiting for the Department of Legislative Audit to provide its survey of GOED's books. But that report won't close the books on this story. The Legislature is finally ready to have a serious discussion about the Governor's Office of Economic Development and the EB-5 visa investment program. Yesterday the House voted 51 to 18 in favor of HCR 1010, a resolution that calls for the Legislature's Government Operations and Audit Committee to hold hearings on GOED's activities.

The votes against these hearings came from a mix of Republicans. Interestingly, Rep. Stace Nelson (R-19/Fulton), who has proposed legislation to block South Dakota's participation in the EB-5 program, voted against this investigation, saying that state government should simply stay out of economic development. The politically scared and suspicious might have expected Rep. Nelson to vote aye and Republican leaders to vote nay, as the mainstream GOP might have a keen interest in keeping the GOED/EB-5 issue off folks' minds during the election season. But the GOP leadership introduced and supported this resolution right alongside their Democratic counterparts, guaranteeing that we will have a spotlight on GOED and EB-5 right when we need it most, in the heat of an election year when voters will be paying attention.

The Government Operations and Audit Committee will have a chance to revisit GOED's use of the EB-5 program, six years after the committee last heard from EB-5 administrator Joop Bollen that EB-5 needed to invest in big projects like the failed and fishy Northern Beef Packers. We can only hope the committee will invite Bollen and the other players in the EB-5 scandal to come to Pierre and tell us all what they were up to.

66 Comments

  1. wal 2014.02.05

    can we make the invitation list?

  2. owen reitzel 2014.02.05

    "Interestingly, Rep. Stace Nelson (R-19/Fulton), who has proposed legislation to block South Dakota's participation in the EB-5 program, voted against this investigation, saying that state government should simply stay out of economic development."

    I guess economic development trumps finding out if people in the government illegally used the taxpayers money. Hmmmm

  3. Roger Cornelius 2014.02.05

    Stace is right, the state should stay out of economic development, that is a nice sentiment but it does not negate the fact that the state is involved in economic development. Putting your head under a pillow hoping it will all go away is not a solution nor is it responsible for a state law maker.

    More and more, Stace is appearing to be a mass of contradictions.

    His response and vote on HCR1010 is similar to the response he gave me when I asked him directly whether Medicare was a socialist program, he went off on a rant about liberty, freedom, government intrusion, etc. You know, the tea party answer when you don't have an answer.

  4. David Newquist 2014.02.05

    As has been the case in the past, the hearings will consist of carefully selected testimony from witnesses who will obey the majority party's intention of appearing interested in investigation while controlling any information that can bring blame or embarrassment to the party.

    The only thing that will produce full information would be an investigation by the press. Two things make that unlikely: 1. Any members of the press who press for a thorough revealing of the facts will insure no cooperation from the majority members and, therefore, no stories in the future. 2. Given proliferation of laws that give officials discretion over what information to release and the absence of any freedom of information laws, the press has no means to obtain correspondence, internal reports, and data.

    As has been apparent in what the press has come up with so far, any information released will be designed for the administration to evade any complicity and make Richard Benda a scapegoat.

  5. Troy 2014.02.05

    Cory,

    There is no significance in Stulken Peterson's statement. Accountants make that general disclaimer every time they issue anything that isn't an audit because too often people think anything issued by an accounting firm is an audit.

    Unlike in the general vernacular, the word audit has very specific meaning. In short, it is an examination of an entities financial statements (income statement, balance sheet, cash flow statement) to insure that its representations materially reflect the financial condition and performance of the entity.

    I can absolutely assure you that an audit (using the term properly) would have disclosed nothing in this matter and been a waste of money. If Stulken had used the word and not used this disclaimer would likely have caused them significant problems with their standing as an accounting firm with the Accountancy Board.

    The Future Fund (the entity they engaged to review) and its financial condition is not the question, and is already reviewed and incorporated into the Comprehensive Financial Statement of state government.

    At the end of the day, the process to get a comprehensive review is going in the proper linear order. First, you gather the information (done by Eide, Stulken, Leg. Audit) and then GOAC reviews it from a control/procedure point of view which it looks like the problems are diminimus and then look at the big picture/policy view which GOAC is going to do.

    At the end of the day, I have a pretty guess how this will end. You will be disappointed because it won't be scandalous.

  6. Roger Elgersma 2014.02.05

    Anything that makes government more open makes it more risky to do corruption.

  7. Nick Nemec 2014.02.05

    If it's not scandalous, then we must conclude the Republicans who run State government are simply phenomenally bad at deciding which business ventures are capable of succeeding.

  8. Roger Cornelius 2014.02.05

    "I can absolutely assure you that an audit would have disclosed nothing in this matter and been a waste of money".

    This sounds like Mr. Jones has access to information that the rest of South Dakotans don't, in fact it sounds as though Mr. Jones may have conducted his own "audit" to have made that statement.

    Granted there is a difference between review and audit, but why just review when clearly a complete forensic audit from A to Z is what is needed.

    It is easy to hide behind a review, it is somewhat more difficult to hide from an audit.

    If what Mr. Jones said is true, the real waste of money would be a review.

  9. Anne 2014.02.05

    Don't forget that Mr. Jones was once a part of the state's economic development efforts and is a cohort of The South Dakota War College. That gives a good indication of how to interpret his posts on a progressive blog.

  10. grudznick 2014.02.05

    I thought they were doing an audit. That is what everybody has been clamoring for. Why did they not do an audit? A crawl-up-your-bung sort of audit? I only ask because I thought everybody was demanding audits.

  11. Troy 2014.02.05

    Stulken was not engaged to do an audit. Thus, they said this is not an audit. ir a "review" in the technical usage in accounting circles. I shouldn't have said review either. Mabye examination.

    I'm not trying to defend anything. All I am saying is that there is nothing telling in Stulken's statement above. I have no inside information and have only read the reports and the press.

    Gruda, they are performing an examination and investigation using accounting standards. All I'm objecting to is what we think of an audit in the common vernacular is not an audit because of the precision of what an audit means to an accounting firm which is making a statement about the financial condition of an entity. An audit (as specific accounting language) will disclose nothing as it isn't called for in this situation.

    Further, nothing I'm saying is to suggest we shouldn't have a complete investigation. And, we are getting the initial portions necessary to move to get to the heart of the matter. Again, my comments is only about the precise use of the word audit in the industry and not what it appears you people are expecting, which is coming.

  12. Steve Bulle 2014.02.05

    "We can only hope the committee will invite Bollen and the other players in the EB-5 scandal to come to Pierre and tell us all what they were up to."

    Cory,

    I guess an invitation would be the polite way to go about it, but if that doesn't work, how about a good, old-fashioned, bipartisan citizen's posse with a few horses and stout ropes to drag them kickin' and screamin' to Pierre, if that's what it takes to get to the truth!

    As for any "review" process that Daugaard's administration puts into place, we've witnessed first hand how well that worked with WMI's review of GF&P. The result was a foregone conclusion that I could have written before the review was even started (based on my own personal experiences with and knowledge of the corruption that still exists in that agency).

    The final report (cost - $131,050)was something like "All is well in la la land except for a few little things that could be tweaked here and there to improve the process..."

    I hate to say it, but I expect the results of this "review" to be a very similar conclusion.

  13. Jenny 2014.02.05

    You just commented that nothing scandalous is going to come from the audit, Troy. That most certainly sounds like to me that you're defending the EB-5 mess, and trying to brush it off as "di minimus".

  14. John Tsitrian 2014.02.05

    Daugaard should explain why he ordered a "review" and not an "audit." The guys in the green eyeshades don't verify every entry when reviewing, just mainly compare one year's books with another's, then get answers if major differences occur. Pretty limited level of assurance, as I understand the distinction, and claiming there are "no major problems" is pretty much a useless conclusion.

  15. Troy 2014.02.05

    John,

    Please quit confusing what people use in common discussion vs. the specific words used by CPA's. Reviews and Audits are examinations for the presentation of financial statements (income statement, balance sheet, and cash flow). What has been done is an examination using forensic accounting standards. This gets what everyone has in their mind what an "audit" is.

    I will say it one more time. The precise accounting word "audit" is not what you people think it is. You are really exposing your ignorance of basic accounting.

  16. Roger Cornelius 2014.02.05

    I don't always agree with Mr. Tristan, but to call him ignorant of basic accounting terminology would be considered a new high in low.

    It appears to me what Mr. Jones is attempting to do is justify Daugaard's giving the public a pacifier when what was expected was an audit.

    A full forensic audit should be required regardless of what a review produces.

  17. grudznick 2014.02.05

    Not just a forensic audit, but the most forensic of audits. A really really forensic audit.

  18. Troy 2014.02.05

    John,

    Exactly. An audit is more rigorous than a review and a review more rigorous than a compilation. And in all cases they measure whether the financial statements (income statement, balance sheet, and cash flow statement) fairly represent the financial condition of the entity.

    That is all irrelevant to discovering any malfeasance, while audits do sometimes discover fraud or weakness of controls/procedures but in most cases it is almost accidental.

    Nobody is questioning the financial condition of any of the GOED entities as they are already audited.

    Instead, what the Governor commissioned from Stulken was a detailed examination and investigation of whether or not policies were followed and if the policies/controls are adequate. THIS is not an audit. It is more focused and specific to the issues at hand.

    Let me say it differently. An audit is less likely to discover malfeasance or weak policies/controls because that is not an audits primary focus. It is to assess whether the financial statements accurately present the financial condition of the entity during the period measured.

    Thus to my original point, the fact Stulken didn't do an audit was because they were not engaged to present the financial statements but look at policies and if they were followed and discover malfeasance. Thus, there is no conclusion to be reached that Stulken didn't do an audit.

  19. David Newquist 2014.02.05

    Thank you, Mr. Tsitrian. It does not take someone with an MBA in voodoo financing to know the meanings of commonly used terms. It does take excesses of gall, or perhaps desperation, to dismiss so many people as illiterate.

  20. Troy 2014.02.05

    Roger,

    What is appropriate is a full forensic examination and investigation. While common vernacular is to call that an audit. But, according to accountant vernacular, what Stulken did was not an audit. Thus, the disclaimer.

    Those who are misusing terms ignorantly and then reaching inaccurate conclusions are being ignorant. Ignorance can be rectified by education. People who obstinately refuse to be educated are willfully ignorant. Just a fact.

  21. Roger Cornelius 2014.02.05

    Troy,

    You can continue to parse words if you choose, I think most reading this blog understand and comprehend the difference between an audit and a review.

    The fact remains that citizens thought they were getting an audit and instead got this costly review.

    For your information audits do produce tangible evidence of criminal activity. Accidental discovery may reveal malfeasance but I do not discount an auditor that knows what and where to look to discover financial abuse.

  22. grudznick 2014.02.05

    Not just an audit. A really forensic one. I'm hoping that's what this legislative forensic audit is. Then everybody can move on to bigger issues like guns and texting. And commemorations. I know Mr. Nelson is hugely effective on those, and I bet there are a bunch on the way.

  23. Roger Cornelius 2014.02.05

    Mr. grudz seems to represent the sentiments of those that expected more from Gov. Daugaard than we got.

    i'm sensing Mr. grudz's basic questions are , where'd the money go, who got the money, and who gets to prison?

    Mr. grudz's deserves answers.

  24. John 2014.02.05

    It appears we may have 18 Uncle Tom's go-alongs-to-get-alongs in the House. Hey, I'm all for water boarding those in the GOED, its board members, and those associated and affiliated with this quasi-criminal debacle. (After all the republican's taught us that water boarding isn't torture, right?) Yet I resignedly agree with David that no hearings are preferable to show hearings or public displays of contrition lacking accountability, or Troy's call for a full forensic examination and investigation.

  25. Jim 2014.02.05

    Troy, not everybody knows as much as you. Not Grudz, not PP, not Sibby, and not nobody. We are just trying to figure out what went so horribly wrong with EB-5.

  26. caheidelberger Post author | 2014.02.05

    Let's be hopeful, Steve: HCR 1010 does mention the Legislature's subpoena power.

  27. mike from iowa 2014.02.06

    Fake noise exists in an alternate fairy tale,where up is down,black is white,yes is no. In reality they think not,therefore they are not.

  28. interested party 2014.02.06

    Here we go again. @SDGOED withholding documents and citing SoDak's ridiculously weak open record laws in doing so.— Jonathan Ellis (@argusjellis) February 6, 2014

  29. Jim 2014.02.06

    I wonder if the hearings will commence prior to the June primary? Will the findings be made prior to the November general. The end of the resolution contains this language: "Within thirty days of the final hearings and before December 1, 2014, GOAC is requested to make a report of its findings..."

    The GOAC is "requested". I read that to mean it doesn't have to make a report of its findings, and even if it does, it doesn't have to come before the November election. If the resolution wanted to have some teeth, it would read the GOAC "shall" report its findings prior to November 1, 2014.

    If the final hearing on the matter is on or before September 1, the GOAC is "requested" to report findings within 30 days. Watch for the team Rounds to maneuver the final hearing to about mid-September, that way it won't have to deal with any potential nastiness breaking right before the election.

  30. Troy 2014.02.06

    Jim,

    I agree we need to figure out what and how it happened for two reasons: Accountability if there was wrongdoing and to prevent it from occurring again. This takes information, of which the last cog will be the work of Legislative Audit. After all the information is gathered GOAC can investigate the qualitative questions of were there ill-motives, bad acts, poor business judgment or adverse circumstances that all start-up businesses might face.

    As much as some might hope (either for good or bad political answers), I don't think ANYONE has enough information to truly make an even remotely informed discernment.

    While I said the last cog is the work of Legislative Audit, I'm not sure that GOAC will be able to meet the requested timeline if they are to issue something definitive as they need information related to the federal investigation of the matters under federal jurisdiction, which has been made more difficult because one of the parties is no longer here to either defend himself or shed light on what occurred.

    Unlike what happens on police TV shows where the crime is solved in an hour, discerning what occurred is significantly more complex, especially with regard to white crime because bad judgment, adverse circumstances and nefarious acts aren't easily distinguished without significant analysis of the dots and seeing if they truly connect.

  31. John Tsitrian 2014.02.06

    Troy, re: your last reply to me. I don't think Daugaard or anyone else should order an audit or review in order to, in your words, "look at policies and if they were followed and discover malfeasance." I understand that this review was ordered to find out if GOED practices conformed with policies, not to search for malfeasance. At this level of examination, ledger entries are accepted without question. I believe that isn't a deep enough examination of South Dakota's principal economic development engine, especially in light of what we already know. The challenge I posed in my opening comment is still relevant and unmet: Daugaard owes an explanation as to why he is satisfied with the limited assurances of a "review" instead of seeking the highest level of financial assurance provided by an audit. I understand that in your view this is overkill, but in my view there is still room for doubt about the validity of GOED's records. Daugaard owes it to South Dakotans to erase as much doubt as possible. For all we know, this could be a public sector equivalent of Enron. You can have the last word--and I hope the followers of this exchange are getting some value out of it.

  32. Steve Bulle 2014.02.06

    John Tsitrian, I agree wholeheartedly that Daugaard owes it to South Dakotans to erase as much doubt as possible, but I can't make myself believe that doing so is on the top of his priority list.

    Call me a cynic, but I believe the only way we will over know the whole truth (or at least most of the truth) is if the Legislature puts aside politics and uses their subpoena power to the fullest extent of the law.

    I'd pay good money for a ticket to the proceedings.

  33. Les 2014.02.06

    A firm will always have loyalty to the person in charge of hiring them.
    .
    There is a commonly used term of soft language. Used by those with leverage, not in approval of the findings or of finding.
    .
    I trust no state individual, whether it be executive or legislative to hold themselves to the pain invited by challenging the darkness of some Political agenda in Pierre.
    .
    I await SD's rising star and his Federal opinion.

  34. Troy 2014.02.06

    John,

    An audit will be fruitless and what was done was not a review. An audit is a process to assess that the financial statements materially present the financial condition of the entity. I don't know how many times I have to say that.

    What the Governor has ordered is a more rigorous and focused investigation and examination than an audit.

    It is obvious you have not read the work that was done by the two firms (Eide Bailly and Stulken Peterson). They are the initial building blocks to discovering whether there was malfeasance and how it occurred.

    First, you assess whether policies were followed, then assess whether there weaknesses in the policies which would allow malfeasance.

    Then, you look at the decisions made and connect dots to see if they indicate malfeasance.

    If you were to read what was done is they looked at 100% of the transactions in the programs associated with NBP. Not just the NBP transactions but all of them. This is substantially more rigorous than would have been done with your "Audit" which would have analyzed just a sampling of transactions.

    Proof you didn't read what was done is not a single ledger entry was accepted. 100% were looked at, compared against polices, and the back-up documentation/request for disbursement was analyzed. They looked at the control procedures to insure that checks and balances were appropriate for the entire programs in question.

    So, your statement that the Governor is accepting something inadequately rigorous is unfounded. What he ordered was more rigorous than an audit because every transaction was looked at.

    From the beginning, my only comment has been related to the statement that there is something telling that Stulken's report wasn't an audit meant anything. Stulken's report was restricted to analyzing disbursements from the Future Fund and is actually a small component at issue. Eide Bailly's was a broader look at GOED. Their investigation was "The services provided in this matter adhere to the applicable American Institute of Certified Public Accountants’ Statement on Standards for Consulting Services (Bates No. 137-139) and the applicable Certified Fraud Examiner Code of Professional Standards established by the Association of Certified Fraud Examiners (Bates No. 140-163)." This is the first heavy lifting in this process.

    This is significantly more rigorous than ANYTHING that would be done in an audit. While a Review (using the term in its technical vs. vernacular usage) is as you said most accepting the ledger entries with little testing and and Audit includes additional and more rigorous testing, they are neither as rigorous as what occurred.

    The lead person who did this heavy lifting at Eide Bailly is the Director of Forensic Accounting (not not Auditing because it isn't an audit as they have to do with financial statement representation) and Investigative Services.

    Their engagement letter specifically said their work will be done in conformance with "forensic accounting and internal control techniques." They provided the Standards of their profession for forensic accounting and fraud detection with the last document that says that if they fail to use all of these standards and techniques when making an investigation, they can lose their designation and right to practice their profession.

    Bottom line: Read what was done (especially by Eide Bailly) and then ask if you can re-assert your statement that the Governor asked for and has accepted something would not detect fraud using the established procedures and techniques of forensic accounting.

  35. mike from iowa 2014.02.06

    So what happened to all of the investigations and audits Daugaard was talking about on Jan 12th? The results were supposed to be released by the end of January.

  36. Roger Cornelius 2014.02.06

    Troy is beginning to sound more and more like the defense council for Daugaard/Rounds.

    Defense attorney's love to muddy up the water in hopes no one will comprehend what really happened.

  37. Troy 2014.02.06

    Roger,

    Maybe what i've said is confusing but that isn't my intent. I've tried to be clarifying.

    That said, if you can find a single comment I'vce made privately or publicly that would indicate I didn't want a full investigation, I'll eat my hat.

    The fact that people think this can be investigated like cop shows is ludicrous and indicates ones lack of understanding how hard it is to unearth white collar crime. If it occurred, I want it exposed regardless of where the chips might fall. And, because of it, I want a thorough and methodical examination of the information, proper and appropriate interviews with involved people (many of whom will have superbly done their job with honor and integrity) who have bits of information which added to other information will illuminate if any malfeasance occurred.

    Since you are quick to attribute to me nefarious motives, I ask what are your motives? Do you want the truth or only want the truth if it splashes on Republican elected officials?

    If it is the former, you'll patiently allow this complex and difficult examination and investigation to run its course. If it is the latter, maybe you should just call for a stop to the investigation and burn people at the stake, literally or figuratively.

  38. mike from iowa 2014.02.06

    How can anyone have confidence in this investigation when there is no daylight. Seems like the ones that are afraid of people's opinions about these investigations,are the ones keeping everyone in the dark about them. Wasn't the guv himself the one that declared these investigations would back his contention that nothing untoward happened? Like I asked before,how can the guv be so sure these findings were in his favpr unless he has some idea beforehand that they would clear him? This whole case begs for outside,unbiased investigation.

  39. Troy 2014.02.06

    Mike,

    How much more outside and unbiased can you expect than a major independent accounting firm? Read the procedures and processes that Eide Bailly undertook with regard to forensic accounting, internal controls, and fraud detection? Have you read the findings? Have you asked a CPA if they think what was done was outside of standard accounting standards?

    How much more sunshine do you want than a release of the examination?

    Regarding the Governor's expectation nothing untoward regarding current state employees would be found, you have to understand they had done an initial internal investigation prior to the commissioning of these outside accounting firms or initiation of the work of Legislative Audit. And since it found nothing, it is reasonable for the Governor to believe that would be the final conclusion. Yet, his belief was based on the internal review and prudence would dictate an external investigation which he ordered.

    Here is the letter the Governor issued which mentions his expectations. http://www.hubcityradio.com/pages/17825461.php

  40. Roger Cornelius 2014.02.06

    Troy,

    It would be ludicrous to say anyone posting on this topic doesn't have political motivation, including you and I.

    I also doubt that anyone believes, like you have stated, the GOED scandal can be solved in the span of hour television show. People on this blog are very intelligent, whether I agree with them or not, and to suggest such simplicity is demeaning.

    As I understand it Troy, you do or have had a vested interest in this case as a former state employee. That in itself raises an alarm bell.

    Why do you continually argue with us when we all want the same thing? We have a right to ask for and get complete transparency and disclosure of this investigation.

    This should not be a war of words, it needs to be an investigation. I doubt that anyone on Madvilles Times is going to go away because we may or may not understand accounting jargon.

  41. Troy 2014.02.06

    Roger,

    I worked for GOED over 20 years ago. during the Mickelson term and left within three months of the crash. Except for conversations the first year or two after I left when I was asked for information/background, I haven't had a single conversation with a GOED employee since except for "how are you, etc." and I know of one person who is still with GOED when I worked there. Why you think I have a vested interest in this case except believing GOED is a force for improving the economy in this state, I have no idea.

    My only argument is that Cory mistakenly began this post by inferring there was something significant because Stulken said they didn't perform an audit. This is standard language when the engagement is not an audit because people assume everything issued is an audit. Their engagement was specifically not an audit (which has a precise accounting meaning). They were engaged to look at one program to assess whether or not each disbursement had a proper file, authorization for disbursement, and proper documentation supporting disbursement.

    Rich Benda was one I played softball with when in Pierre over 20 years ago. While I only saw him maybe 2-3 times after I left Pierre, I consider him a friend. If he did wrong, then I'm greatly and gravely disappointed. If he exercised bad judgment but did no wrong, he is human and I want his name and reputation cleared. In both cases, I want a thorough investigation for the truth is the truth. And, it might give me insight into why my friend did what he did.

    So maybe if I'm a bit defensive, it is personal. Rich has been demonized without being here to defend himself and without real evidence being presented. Just supposition. While I think out of respect for the dead and his family discretion is called for, I might be a lot of things but I want to be a loyal friend.

  42. Les 2014.02.06

    That Dick Benda was not investigated, was a great disservice to both the citizens of our state and Benda himself. He could possibly be with us today. If I was Dick's friend, I would be very upset about the timeline of this event.

  43. Roger Cornelius 2014.02.06

    Troy,
    First of all thank you non-combative response.

    In defense of Cory and those of us that are lay people, when the average citizen sees that sentence, "We were not engaged to, and did not conduct an audit......" what conclusion would you draw, particularly if you were led to believe that is exactly what the governor requested?

    Your defense of Richard Benda is admirable, many people would quickly dismiss a friend that was accused of financial wrong doing. It is sad that your friend has been subjected to such an array of speculation.

    For many of us on the outside looking in, it maybe too easy to draw some conclusions about Benda's death and the GOED/EB-5 scandal. At the same time however, when the public isn't provided information and the attorney general by all appearances is engaged in a cover up, it is easy to come to those conclusions.

    I think you might understand my the skepticism of a Republican Legislature investigating Republican administrations

    Personally, I am expecting nothing less than a carnival act with the clowns in charge of the circus.

  44. Jana 2014.02.07

    Very nice Troy and Roger.

    My fear is that in a state dominated by one party and a very tight clique of power that there is not an in-state firm that would risk its business by uncovering wrong doing.

    Jackley is a partisan at best. The legislature carries the water for the Governor. Virtually everyone in Pierre that is elected or appointed is owned by the power brokers and the governor. Those that aren't are toothless against the outcome.

    Bring in an out of state firm to do what will clearly lay out what happened, who was involved, how taxpayers can get their money back and who bears the ultimate responsibility and put this to bed.

    Give them access to any ongoing Federal investigation and let us know what and where the chips may fall.

    Does anyone know if anyone from Eide Bailly or Stultken has business, social or political ties to either Rounds or Daugaard? I think we know the answer. They should recuse themselves.

  45. mike from iowa 2014.02.07

    Troy-the letter from the guv is not dated,it could have been written at any time. Neither of the "forensic accountings" provided any info as to what happened with NBP. Both basically dealt with handbooks and rules and suggestions to tighten up rules. I now know the names and addresses of virtually all management positions in these programs,not any suggestions of who do what and when. Since these weren't audits,where are the audits the guv spoke about? This is not adversarial.

  46. Jim 2014.02.07

    I haven't read these reports, but will over the weekend. If mike/Dennis admin is going to CYA, the first thing they need is finding that "policies and procedures" were followed. Then they can try and hang any wrong doing that may be revealed on individuals. It does beg question: how sound are these "policies and procedures". Maybe these hearings can shed some light on this. Troy, if you want to honor your friendship with mr. Brenda, you won't let this pin more on him then is due. I think what people want to know is where did all this money go, and who got grossly fat in the process, not just whether their actions comported with "policy". Just because a contract may be legal, doesn't mean it is consistent with good public policy.

  47. Troy 2014.02.07

    Roger,

    Rather than rashly assuming something was amiss, and make a charge I'd gather information put it in context to the separate charge given to Eide Bailly, and then make an assessment.

    Regarding the charge the public has been given any information, in the linear and ordered fashion these types of investigations (has anyone every asked and accountant to do things outside of procedure and you'd know it isn't going to happen) are conducted, the public has been provided the information as it becomes available. After the Leg. Audit report and probably the feds complete their investigation, more information will be available. The expectation it all falls from the sky as we are still within 6 months of this coming to light is unrealistic.

    Jana,

    Combining your accusation that the Attorney General would violate both his professional oath and oath as Chief Law Enforcement officer with the charge that the Eide Bailly forensic accounting team (6-7 people) based in Fargo would violate their ethical standards and risk their very careers belies a willingness to only believe what serves one's purpose a lack of intellectual integrity.

    Mike,

    That letter was dated October 30th after the internal investigation was completed and the Governor decided to engage the outside accounting firms.

    You are correct this doesn't yet get into the details you are looking for. In an investigation of this type (potential financial irregularities), a process must be followed. Primarily the Eide Bailly work is the first part. Then, you will have the work being done by Legislative Audit. All of this investigation/analysis/information will be available to GOAC (matter of the above HCR 1010.

    Professionally, I wonder whether GOAC can really do their work prior to the feds completing their investigation on the matter under their jurisdiction.

    I am sure some on here will think this is just further evidence of a coverup but as many point out the EB5 is the most likely place wrong-doing occurred (if it did). But, my gut is GOAC will mostly spin its wheels and not be able to anything definitive until they get information from the feds investigation.

    Everybody wants answers, everybody wishes we had that today. I just don't think that is realistic and honest desire for the truth will allow this complex investigation to take its course.

    Les,

    Because I don't think anything done was worth the loss of a life (I oppose the death penalty :) ), the greatest tragedy is that Rich is no longer with us. Any disservice pales in comparison to that tragedy. That said, I don't know what your are trying to say regarding the timeline. Rich died by suicide that timeline sucks.

    P.S. I said in an early post my only conversations with GOED personnel was "how are you, etc." After I said that, I remembered I have run into Costello mostly when we were at things where his kids and my grandkids were and gave my ideas on economic development (I am opinionated as you know), Ihave no idea if he acted on anything I suggested, and we have never discussed NBP or this matter as I don't think I've seen him since this blew up.

  48. Les 2014.02.07

    Good morning Troy! We are still blessed to be living in what's left of the the greatest country in history.
    .
    The timeline of DD understanding the basis(double billing on tickets) of the Federal investigation back in March and ordering an investigation which did not include an interview with Benda, the main character of that investigation.
    .
    That is my contention of problems within the timeline the governor and his attorney general presented us. Approximately six months of opportunity to interview Mr Benda. If the suicide indeed bears up to future scrutiny, I think we can all be reasonably assured, it wasn't over a $5,000 double ticketing event.

  49. Troy 2014.02.07

    Les,

    If Rich had engaged an attorney, it is understandable the interview hadn't occurred yet. Plus investigators probably would want info before hand. More importantly, death by suicide is such an irrational event that speculation on what pushed him over the edge is futile.

  50. Troy 2014.02.07

    Futile and certainly not a basis to impugn others.

  51. Jim 2014.02.07

    "If Benda had employed an attorney..." Who is speculating now, Troy? I don't recall any statement by Marty or Dennis that attempts to interview Mr. Benda were delayed or otherwise thwarted by an attorney.

  52. Les 2014.02.07

    I guess, when the facts are held from the table, speculation will naturally occur, Troy. While this isn't JFK, at least we weren't given a 35 year window on discovery only to have it taken away.
    .
    There is absolutely no reason other than an ongoing investigation to withhold the facts on his death, and that may certainly be the case. But, it wasn't presented that way, rather a convoluted legal reasoning that would be thrown out of court if challenged.
    .
    His life actions were on the edge enough, suicide as a final action was not that surprising.
    .
    Did you attend Benda's funeral Troy?

  53. Troy 2014.02.07

    Les,

    I tried to arrange my schedule that day to go but couldn't make either the wake or the funeral. A couple of my fellow softball teammates who also played with Rich were there so I felt represented and said my prayers for him.

    Jim,

    I have no idea if he had engaged an attorney but if he hadn't, it is probably because he hadn't been asked to meet with investigators yet only because I assume/speculate that most people wouldn't meet with law enforcement without an attorney. I know I wouldn't, even if I had nothing to hide.

  54. Jana 2014.02.07

    Troy, my point is that there are factors including money, power and friendship that can influence those people you defend. I didn't say it would happen, my point was it could happen. And yes, if exposed it would destroy their reputation, but they may find the reverse possible as well.

    Say, did you hear what happened to that accounting firm that worked with Enron? See what I'm saying, something gave them the incentive to destroy a global Big 4 accounting firm. Can an AG slow walk something he doesn't want to confront? That's never happened...right?

  55. Les 2014.02.07

    Much larger firms the the above two, commonly soft talk or no talk. Almost takes forensics to get the details out of them. There are more ways to skirt duty than to do the job right, and who's going to prove you wrong but another team coming in behind you. It's all about keeping the business coming!
    .
    Relationships Jana? Darn right there are. I've seen those relationships color the audit and get away with it through as Troy described, their disclaimers. They usually will come to the table if pressed, though it is more the fear of losing the business than doing what is morally and professionally right.

  56. Roger Cornelius 2014.02.07

    Troy,

    We can all guess where a legislative hearing is heading given the partisan politics in Pierre.

    We also understand the concept of the audit/non-audit being discussed here and the use of money from Future Fund and other state programs.

    Now here is the question that has been on idle and in need of an independent investigation. The numbers being thrown out there are between 60 to 100 million dollars of EB-5 investment dollars into Northern Beef Packers.

    Are these investors sitting on their hands and saying, "oh well, I lost $500,000 and perhaps my green card"?

    Have all the money from EB/5 investors been accounted for? Were those dollars actually used for their intended purposes?

    How much of the investors money was used to pay different, but related, corporate fees and service charges and to whom were they paid?

    From my perspective, Future Fund money, GOED money, or other state grants and loans are relatively minor. They may well show that Benda was indeed a bad guy and stole money with that story ending there.

    The story here should be that $60 to $100 million. If that much money can simply disappear, it was not caused by just a bad business plan

  57. Troy 2014.02.07

    Roger,

    I believe approximately $60mm was invested in NBP via the EB-5 program.

    I believe this is the primary matter of the federal investigation as this is their jurisdiction.

    Since the EB-5 investors have been foreclosed out via the bankruptcy, they have no choice but to lick their wounds. Its what happens when businesses fail.

    The money didn't disappear. It went into building a $150mm beef packing plant that is now sitting idle. It paid contractors who built the building and installed equipment, equipment manufacturers, cattle sellers, and labor.

    Take out the malfeasance issues for a second. People who make investments in businesses take a risk, businesses fail and they lose their money. They got that money because prior investments were successful. To only expect the upside and not the downside is living in a dream world. Frankly, Idon't have sympathy for anyone (myself included) who lose money in a bad investment. Nobody made them do it, they are expected to do their due diligence, and if they deemed the potential risk was worth the potential reward and lose their money, its the life of an investor.

    On a side note, I saw I think in the Wall Street Journal that the federal EB-5 program is being re-vampted by being transferred from the Immigration and Naturalization Service (crazy it was even there because what is the expertise of INS to administer a business investment program?) to the Commerce Department with regulation/oversight by the Securities and Exchange Commission.

    This is a good move and might have not only prevented this fiasco but the others around the country.

  58. Les 2014.02.07

    There is the issue of the loan from White Oak to NBP and the following purchase with 30ishMillion for the Epoch Star. Where did those dollars end up?

  59. Jim 2014.02.07

    Thank you Troy for referring to it as a fiasco. Baby steps:)

  60. Troy 2014.02.07

    Everyhting went into assets to build and outfit and run the plant.

  61. Les 2014.02.07

    Why would funds used to purchase Epoch Star come back into NBP?

  62. Roger Cornelius 2014.02.07

    Troy,

    Do you know for fact that "Everything went into to build and outfit and run the plant"? Do you know for fact that none of the EB-5 investor money were redirected for any other expenses not related directly to the business?

    I understand investments and the risks, been there, done that. Sometimes they work sometimes they don't. If you knocked down, up get back up. But there always the questions when all is said and done.

    It seems likely that EB-5 investors would likely have some pretty hard questions, it is only logical, we have yet heard from any of them. Granted, they maybe ashamed for making a poor investment, but again, it seems logical that they would want to know precisely what happened.

    Troy, do know the status of the investors EB-5 visa green card status?

    If the SEC does take over the EB-5, I don't expect there to be that much change. After all GOED worked closely with NBP and look what happened?

    Apparently GOED couldn't manage any better than INS.

  63. Jim 2014.02.07

    Troy, just as you are left to "assume/speculate", can't others do the same? I guess we could talk about Noem press releases instead, but isn't this more interesting and compelling?

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