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.