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NBP Gobbled $95 Million in EB-5 Capital; Rounds Strangely Uncurious

Last updated on 2014.04.08

Think EB-5 will just roll off Mike Rounds's back? Oh, the primary has just begun....

First, after lengthy research, Joe O'Sullivan writes up South Dakota's most spectacular EB-5 failure, the bankrupt Northern Beef Packers plant in Aberdeen. O'Sullivan's reports that the last 50 Chinese EB-5 investors may have gotten completely hosed by NBP and SDRC Inc., the private agency South Dakota unleashed to coordinate the EB-5 visa investment program in 2009. They each invested $500,000 in NBP, paid another $45,000 in fees to SDRC Inc. and the lawyers handling their cases (because if you have a mark who's willing to throw a half-million dollars at some beef plant in a state she never plans to visit, you've got someone you can convince throw another $45K at Joop Bollen and Jeff Sveen to do, you know, stuff). They bought in in 2012; NBP went bankrupt in 2013, before the end of the two-year prove-up period for EB-5 visa investors. That means they don't get their money back and they don't get their visas.

O'Sullivan's research also reveals that we were apparently short on our count of how much EB-5 money NBP made go poof. Previously, I've cited two rounds of EB-5 investment: first the 70 Koreans who took over NBP early in its absurdly long construction period, then 90 Chinese investors. That's 160 EB-5 visas total bringing $80 million to NBP. But digging in the bankruptcy documents, O'Sullivan comes up with three rounds of investment: first the 70 Koreans, then 70 Chinese in SDRC Inc.'s loan fund LP 6, then the last 50 EB-5 investors in loan fund LP 9. That's 190 EB-5 visas totaling $95 million. If I'm reading Joe right, brings the amount of money that went bye-bye in one of Mike Rounds's worst investments ever to $167 million.

$167 million sunk into Northern Beef Packers, and White Oak Global acquired it last week for just $4.8 million in additional cash. That purchase price is now down to 2.8 cents on the dollar. Yes, you may use the word steal.

Now hot off the press comes Denise Ross's first entry into the great alphabet soup of EB-5, NBP, and SDRC Inc. Amidst the weeds of explaining all those letters, Ross asks Rounds why he let EB-5 coordinator Joop Bollen turn the state program into a private, for-profit enterprise. Rounds's profound logic: everybody else was doing it, so why shouldn't we?

Former Gov. Mike Rounds approved the switch, and he told The Daily Republic the move brought practices in South Dakota in line with similar economic development offices throughout the nation.

"It's pretty simple," Rounds said. "At that time we had about 500 competitors. The vast majority of them were not connected with state agencies. I think we were one of only two in the entire nation. The other ones could offer different services than we could, and they could be more involved in coordinating loans for different projects" [Denise Ross, "Before Northern Beef Built, Key State Program Turned For-Profit," Mitchell Daily Republic, 2014.04.08].

Rounds further justifies turning his pal Bollen loose for unsupervised profit as a move to appease foreign investors:

Rounds said that standing apart as a state-run entity had caused potential investors to question the structure of South Dakota's EB-5 regional center.

"When it came to competing with the rest of them as well, since they were independent and separate, people would look at it and say, 'Why are you different from the rest of them? Why are they independent and you're part of a state operation?'" Rounds said. "It appeared to be an appropriate move to follow what the rest of them were doing" [Ross, 2014.04.08].

Hmm... South Dakota citizens ask Pierre to answer questions and enforce state laws, and they get stonewalled. Foreigners wave thousands of dollars, and Mike Rounds hops, skips, and jumps to answer their concerns.

Ross reports that the Legislature's Government Operations and Audit Committee will hold its second hearing on EB-5 visa investment and Northern Beef Packers on May 7. But as far as Mike Rounds is concerned, there's nothing legislators or anyone else should fuss about:

Rounds said he hasn't learned anything since Northern Beef's bankruptcy about SDRC Inc.'s operations that concerns him.

"I don't have any other questions right now," Rounds said of SDRC Inc [Ross, 2014.04.08].

I don't have any other questions... It's a Jedi mind trick! Mike is just saying what he wants Denise and all of us to say.

Since NBP's bankruptcy in July, we've learned that the feds are investigating South Dakota's EB-5 program, NBP had crazy offshore finances, the Governor canceled SDRC Inc.'s contract, and Rounds's economic development chief double-billed the state for airfare and diverted even more cash from one of Mike Rounds's last economic development grants while doing the bidding of SDRC Inc. To learn all those things and not have questions suggests either an immense lack of curiosity or access to information to which the general public has not yet been made privy. It would sure be nice if Rounds would share that information with us to put our minds at ease.

And that's exactly what Mike Rounds will have the opportunity to do on Saturday in Pierre in front of a whole bunch of newspaper-people who know how to ask good questions. Go ahead, candidate Rounds, enlighten us.


  1. Rorschach 2014.04.09

    The EB-5 program being affiliated with state government was a selling point to investors. A selling point! It inspired faith in the program that most other EB-5 programs didn't have. This one had government backing. An investor, particularly in China's government intensive system would think, "How could it fail with government backing it? That's where I want to put my money."

    When Rounds uncoupled state government from the EB-5 program he eliminated a major selling point for investors. And now he spins it just the opposite? Makes me wonder how much money Rounds and/or his family was making off of Joop's deals.

  2. jerry 2014.04.09

    And, don't forget, we got a major player in this corruption, very dead in a cornfield, how convenient. Yep, nothing to see here.

  3. rick 2014.04.09

    The SDPA is a pack of self-important softies who very, very rarely toss out anything but softball questions, especially to candidates who've been Teflon-coated and received the stamp of approval by The Establishment. You will find harder questions in a Miss South Dakota contest.

    Other than that, Cory, excellent wrap up on the recent Rounds Scam news. Nobody reading South Dakota's largest daily newspaper will know any of this is coming to light.

  4. Bree S. 2014.04.09

    Every smart Republican would work to take Rounds down in the primary, before he tarnishes other good Republicans in and out of state.

  5. Lanny V Stricherz 2014.04.09

    As I read Cory's post, those were my thoughts exactly, Rorschach. Why wouldn't an investor trust an institution that had state backing more than another without the same backing?

  6. Tim 2014.04.09

    If ALL paper connected to the program isn't released, and any corruption investigated, we may never know the truth. They won't admit to anything, or let Rounds give any real answers as long as they don't have to. We may get our best info from the subpoenas and court case in California, they don't care about SD republicans or SD politics.

  7. caheidelberger Post author | 2014.04.09

    Jerry, was Benda found in a cornfield? I thought he was found out back in a farm yard. Remember, there was at least one tree nearby.

  8. caheidelberger Post author | 2014.04.09

    R, Lanny, exactly! Rounds gave up a great differentiator for our program just when we needed it! For the first couple years that South Dakota did EB-5, we enjoyed an advantage by being one of the few states really pushing it. Differentiation by being first is good. Then the EB-5 floodgates opened, and we faced competition from hundreds of other operators. Having the program under direct state operation differentiated us from other programs. Remember that, as of now, only Vermont runs EB-5 as a state program. If investors in 2008 were questioning why South Dakota's EB-5 program wasn't a private for-profit operation (really, Mike? Were they asking that question? Did they give a rip compared to asking about the viability of the business projects?), the proper response was not to privatize the program. The proper response was to say, "Yeah, unlike almost everyone else, we run the program with direct state supervision and on a non-profit basis. Our state won't fleece you for those exorbitant lawyer fees that those private operators will take from you. You keep more money in your pocket, and the extra fees you do pay go straight into the state coffers to keep this program the best in the nation. Now sign here...."

    Rounds is rationalizing after the fact to keep from saying what really happened: "My buddies Joop and Richard and Jeff wanted to get richer, so I handed them this complicated state program that no one was paying attention to."

  9. mike from iowa 2014.04.09

    The last three wingnut Potii were all anti-intellectually curious. Must be a recessive gene in RNA(rino nucleic acis) as opposed to intellectually stimulated DNA(democratic nucleic acid). Current South Dakota pols all seem to have this affliction.

  10. Les 2014.04.09

    Why has Epoch Star been forgotten? Who was on their board or their owners? What did NBP gain by purchasing them for the 30Mil +/-? Where did that money go? How is White Oak connected, other than a loan? When or where will the next body be found, or the next messenger be prosecuted/persecuted?

  11. Disgusted Dakotan 2014.04.09

    Was it North Korean or South Korean investors?

  12. Rod Hall 2014.04.09

    I am glad Mitchell's Daily Republic ran Denise Ross' article. Perhaps the other newspapers in SD will take the hint or better yet, someone should give the hint to them. A man was murdered(by his hand) or by a gangster group. Many
    $millions are lining someone's pockets and buying votes for corrupt politicians.

  13. Lanny V Stricherz 2014.04.09

    It is amazing. Benda's death was widely covered at the time, and even though it is only a little over 6 months ago, one person says it was in a cornfield, Cory questions that because the gun was put against a tree, and my memory was that it was in a shelterbelt. But I cannot find one article that says where it happened.

  14. Nick Nemec 2014.04.09

    My memory is also that it was in a shelterbelt.

  15. larry kurtz 2014.04.09

    The Journal's parent company, whose CEO just got a big bonus for forcing reporters like Woster and Garrigan to leave, will silence Joe if he gets too close to GOP foibles: my guess is the pressure is on him already.

  16. mike from iowa 2014.04.09

    Argus Leader,at the time, said he was found in a shelterbelt near Lake Andes. Cornfields can be next to shelterbelts and he was supposedly hunting pheasants,from what I read about it.

  17. jerry 2014.04.09

    At this point, I am not even sure if it was indeed Benda that was found someplace (could be a shelter belt?? I think that I may need an autopsy to confirm anything.

  18. Roger Cornelius 2014.04.09

    I didn't see any total dollar amounts that the state provided NBP or Joop in the form of grants or loans. Wouldn't that make the amount of $167 million more like $170 million plus?

  19. Roger Cornelius 2014.04.09

    If anyone on Madville could ask Rounds three very well crafted questions, what would they be?

  20. caheidelberger Post author | 2014.04.09

    Thanks for that link, Mike. Here's the text establishing the sylvan place where the body was found:

    "According to Ray Johanneson, Jim’s older brother, Benda’s body was found in Charles Mix County’s West Goose Lake Township in a grove of trees near an abandoned farmstead about 1.5 miles north of Jim Johanneson’s house" [Luke Hagen, "Brother-in-law describes finding Benda's body," Mitchell Daily Republic, 2014.10.24].

  21. mike from iowa 2014.04.09

    DD- The following countries are considered excluded from the EB-5 program or may make the process substantially more difficult for exiting citizens:

    North Korea
    Chances are no N Koreans were involved in EB-5

  22. Les 2014.04.09

    ""It was a hunting accident. That’s the only thing it could be. I don’t know what the big deal is. It looks to me like it was just a hunting accident. Everybody is making is such a big deal of it.”"" Yup! That's probably what I'd say if I found one of my brothers law dead in my shelter belt out by my cornfield with a stick in his hand six feet from his gun leaning against a tree. Of course it would have to be the right brother in law to fit that scenario.

  23. jerry 2014.04.09

    In the movies, when there is this much unaccounted for dirty money, the corrupt mobsters that want to keep their enterprise a quiet part of the family sometimes order a "hit". Far be it for me to make that declaration as I am just a humble movie goer, but it does seem to fit a movie plot like "Good Fellas". Our state seems quite content to allow the misplacement of millions and the looking the other way at other fraudulent practices, as long as it is in the family. Who would the Joe Pesci character be?

  24. Bree S. 2014.04.09

    Lol, Les. What do you think of think of the voting problems in Sioux Falls?

  25. Bree S. 2014.04.09

    Were there any fundraisers scheduled before the AG said it was a suicide? Lol.

  26. Les 2014.04.09

    You just can't make this stuff up. Unfortunately for SD's, we continue to look like we suffer mentality sufficient to a monkey. I wouldn't give us quite that much of a break on our votes though. Even a monkey will pull the right lever half the time.
    I believe our system has some protections naturally built in for stupidity but corruption is another case. I wait in anticipation for the next body to surface, hoping it's not one of us for speaking.

  27. Lanny V Stricherz 2014.04.09

    Jerry, It would be Daugaard, except he is too tall and the Pecci character is too smart to be Daugaard, so who knows, maybe Bollen since most of us know so little about him.

  28. Dave 2014.04.09

    “Why am I not writing about it? Well, what is there to write that hasn’t been written? They discovered something they were concerned about, they turned it over to the authorities, and they’re conducting an independent review.”

    -- Pat Powers, South Dakota War College, Oct. 31, 2013.

  29. Lanny V Stricherz 2014.04.09

    Roger, My three questions:
    1.Did all of those air miles that you logged as Governor, have anything to do with the EB-5 program?
    2.As US Senator, why would we as citizens not expect you to do the same with Federal dollars that you have with wasting State dollars on failed economic development plans.?
    3.With all of the money you are raising out of State, when you get to the US Senate, why should we think that you will be representing South Dakota?

  30. Bree S. 2014.04.09

    Lol, Dave.

  31. rollin potter 2014.04.09

    i was glad to see jeff sveen's name finally connected to joop Bollen in the EB-5 scandal!!

  32. Lora Hubbel 2014.04.09

    Denise Ross's article had one error...I know because I talked to Joop...he said the state did not let his contract was cancelled "without cause". He tld me Pat Costello just told him he had made enough money already and that they would be cancelling it....illegally Joop thought. Joop is probably right if he did have a solid contract in place with the state.

  33. caheidelberger Post author | 2014.04.09

    Whoa—that's a new wrinkle, Lora! Is Joop planning to sue the state?

  34. Roger Cornelius 2014.04.09

    My three questions for Mike Rounds would be:

    1. How much has your campaign benefited either directly or indirectly from the GOED/EB-5/NBP investor money?

    2. How much was paid for the "hit" on Richard Benda?

    3. Who pocketed the $167 million?

  35. Tara Volesky 2014.04.09

    There is no way the NBP cost 167 million to build. Maybe half that amount. So who pocketed the rest of eighty million dollars. Shouldn't there be an audit as to what was spend building the plant. The Turkey plant in Huron cost $45 million to build. The Daugaard and Round's cronies made a killing. How much of that money went back into their campaign war chests?

  36. caheidelberger Post author | 2014.04.12

    Lora, Joop is blowing smoke. Review Clause 17 from the December 22, 2009, DTSD–SDRC agreement:

    "The term of this Agreement shall commence December 22, 2009, and end June 30, 2014. This Agreement may be terminated at any time by either party for cause, including but not limited to any breach of this Agreement or the lack of good faith compliance by either party with the terms of the Agreement."

    "including but not limited to any breach of this Agreement" leaves a lot of room to run. The September 19, 2013, termination letter says the contract was terminated for cause. If I recall, the state has said SDRC Inc. had been working on projects the state hadn't approved, a violation of Clause 5 of the contract. Shady finances that trigger a federal investigation could easily support the charge that SDRC Inc. wasn't operating in "good faith," more cause for GOED to ax the deal.

    But I welcome Joop's efforts to take GOED to court and air his grievances.

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