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Bollen Brush-Off Less Than Truthful: State Audit Did Not Clear SDRC Inc.

Last updated on 2016.09.05

In the brush-off to the Legislature's Government Operations and Audit Committee that he pens for former state employee and EB-5 profiteer Joop Bollen, lawyer Jeffrey T. Sveen makes this claim about Bollen's EB-5 management company:

SDRC, Inc. has previously provided information to government authorities when requested to do so. As the Committee is aware, an audit by the State of South Dakota has shown that all funds administered by SDRC, Inc., were properly applied [Jeffrey T. Sveen, letter to Senator Larry Tidemann, 2014.09.08].

Really? Let's review what that state audit from February 12, 2014, said about SDRC Inc.:

Finding No. 2003-001:

The former Department of Tourism and State Development (DTSD) and the current Governor’s Office of Economic Development’s (GOED) policies and procedures were inadequate for the monitoring of the contract with the SDRC Inc.

  • ...Although the SDRC was providing to the DTSD a monthly e-mail containing a report and the balances in the two funds, the report was not sufficient to ascertain that the correct amounts were being collected and deposited and copies of bank statements did not accompany the e-mail to corroborate the balances being reported.
  • Documentation was not adequate to determine whether the DTSD or the GOED was receiving the books, records and reports that were required to be provided to the CIS by the SDRC.
  • 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 and the DSTD’s Administration Director. 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.
  • The DTSD and GOED did not report Indemnification Fund One and the Expense Fund in the State’s Comprehensive Annual Financial Reports for FY2010 through FY2012.

As a result, there existed a potential for the loss of assets and two funds were not properly reported in the State’s Comprehensive Annual Financial Report [Department of Legislative Audit, "Governmental Funds of the South Dakota Governor's Office of Economic Development: Audit Report," 2014.02.12].

As I noted in my February analysis of the audit, "loss of assets" is a brilliant euphemism for theft.

Auditor General Martin L. Guindon also emphasized in his report the audit transmittal letter that his office only reviewed the expense and indemnification funds SDRC Inc. managed for the state, not the entirety of money managed by SDRC Inc.

Sveen and Bollen's claim is thus false. The state audit did not show that "all funds administered by SDRC, Inc., were properly applied." The audit showed that Bollen told the state that its portion of SDRC Inc's business was being handled properly, but he did not provide sufficient evidence to prove that claim.

And in arrogantly rejecting Senator Larry Tidemann's invitation-not-subpoena to testify before the Government Operations and Audit Committee, Bollen is again refusing to provide that evidence and doing so by telling us... something less than the truth.

Chairman Tidemann, are you ready to issue that subpoena yet?


  1. 96Tears 2014.09.20

    Larry Tidemann sez: "Sure, Cory! We'll try to schedule that on November 5th!"

  2. Jim 2014.09.20

    I guess it depends on how you define properly applied. They knew they were going to pay themselves massive amounts in fees and that is why they sought privatization. Mike knew this too. Those fees may not have been illegally paid to joop and co. but that doesn't make the mess less dirty.

  3. 96Tears 2014.09.20

    Good point, Jim. This is the point that pro-Weiland ads and Rounds ads avoid. They purposely moved a state agency function and handed it (under the table) to a pal. Since then, they've been skimming huge amounts and God knows whose pockets are getting filled. No records. No accountability.

  4. mike from iowa 2014.09.20

    Didn't Senator Stonewall declare that written replies were held to the same standards as lying while under oath? Guess it is time to get out the big black pot and set it to boiling oil.

  5. Roger Cornelius 2014.09.20

    The other day it was reported that Karl Rove's PAC has $10 million to spread around across the country, we can probably assume that Rounds won't accept or allow this "conservative dark money" in his campaign.
    Will good old South Dakota common cents candidate reject Rove's attempt to purchase him?

  6. jerry 2014.09.20

    Oh Roger, you don't know our boy Rounds at all. Of course he will take it, that is his greed mantra. He laid claim to 9 million dollars to run his campaign with. Where did he get that loot? Who knows, but what we do know is that we have about 140 million that has been lost strayed or stolen along with some millions of South Dakota taxpayer money that has been looted. The little weasel also went to Israel, what on earth for? My guess is that he got more than a bagel for the trip and for his vote of support for the proxy wars.

    Nope, Rounds will not only accept the money, he will embrace it.

  7. Douglas Wiken 2014.09.20

    Republican money is obviously not the same as Democratic or independent money. It is like the difference between holy water and plain old drinking water. Some things are blessed with virtue and other things are not. It all fits together.

  8. Slynn 2014.09.21

    Having spent much of my career as a CFO, I would offer that in an audit report you looking for the auditor's "opinion". The most serious issues found by auditors are called material weaknesses. The second most serious issues found by auditors are called significant deficiencies. Note the auditor's opinion found in the DTSD/GOED audit:
    "However, as described in the accompanying “Current Audit Findings and Recommendations”, we identified certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies."

  9. lesliengland 2014.09.21

    so daugaard is having to revise the state's best accounting practices to remedy round's lack of oversite before SDRC went private?

    the fortune magazine article mentioned on the related thread talks about how chinese investors flock to photos of US politicians in china coupled with US and state government backing of the underlying projects.

  10. caheidelberger Post author | 2014.09.21

    Jim: agreed! "Properly applied" seems a tricky term.

    96: curse that clock! :-)

  11. caheidelberger Post author | 2014.09.21

    Not just before, Leslie, but after SDRC went private. Remember that Bollen switched on the private money machine in January 2008 with the SDIBI–SDRC contract. He continued to use state resources from his NSU office (secretary Cherri Brick, student employees, office supplies, etc.) to advance his private interests for almost two full years before officially leaving NSU on Dec. 21, 2009.

  12. Jane Smith 2014.09.21

    It seems that the Joopster did a bait and switch during the audit. Or was it a used car sales tactic? Oh kick the tires, no need for a test drive. The auditor should have seen a trail of money such as fees in the tune of millions, and where those fees were appropriated. To only see $67,000 of expenses is ludicrous. That's a guppy in murky waters. Find the whale!

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