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Rounds Claims Never Served in 2009 Darley-SDIBI Suit; Unlikely, Says BOR Brief

Last updated on 2014.09.22

On September 16, 2014, Senator Larry Tidemann sent former governor Mike Rounds a batch of supplemental questions concerning his awareness of and involvement in activities related to his Office of Economic Development's use of the EB-5 visa investment program. The last question was this complicated query:

When you were served legal matters of the Darley petition in July of 2009 to force South Dakota into arbitration because of Joop Bollen's actions, why didn't you fire Joop Bollen and why didn't you initiate legal action against SDRC, Inc. which had pledged to hold harmless and indemnify the state of South Dakota? [Senator Larry Lucas, included by Chairman Larry Tidemann, Government Operations and Audit Committee, letter to Michael Rounds, 2014.09.16]

On September 22, 2014, Rounds responded to that question thus:

The governor's office "was not served". The BOR was [M. Michael Rounds, letter to GOAC Chairman Larry Tidemann, 2014.09.22].

"BOR" stands for Board of Regents, which was in charge of the South Dakota International Business Institute, which was directed by Joop Bollen, who got South Dakota in trouble by pretending he was a lawyer and losing the case Darley brought against the state in federal court in July 2008 (not the one Senator Lucas asked about). The Board of Regents was able to argue its way out of that trouble by arguing, in part, that Darley failed to deliver service on the right officers of the state—i.e., the Governor and the Attorney General:

In order to commence an action against the SDIBI or the Board of Regents, Petitioner Darley International, LLC ("Darley") was required by South Dakota law to serve both South Dakota's Governor and Attorney General. There is no evidence on record that either has ever been served with process in this action; in fact, the South Dakota Attorney General has no record of such service [James Lynch for Board of Regents, Memorandum of Support, Darley v. SDIBI, 2009.03.20].

The Regents' March 2009 memorandum footnotes SDCL 15-6-4(d) and adds:

There is no State statute designating another person to accept service of process for the Board of Regents [Lynch/BOR, 2009].

The Regents' argument persuaded Darley to dismiss its own petition in June 2009. But one month later, in July 2009 (this is the one Senator Lucas is talking about), Darley filed a similar complaint against SDIBI in Los Angeles County Superior Court.

Pause. Put yourself in Darley's lawyers' shoes. The company has paid you beaucoup bucks to spend a year suing this weird little South Dakota Ponzi scheme, and you find out your suit is invalid because, among other things, you didn't serve the Governor and the Attorney General of South Dakota. Darley says, "We want to try again. File another suit, and don't screw this one up." What do you do?

You turn the Regents memorandum into a checklist of things not to screw up, and Item #1 is, "Serve Governor Mike Rounds and Attorney General Larry Long."

Mike Rounds says his office was not served in Darley's July 2009 suit. But the Board of Regents said in March 2009 that it could not be served. State law said the Governor had to be served. And Darley's retread lawsuit moved forward, suggesting Darley served the proper entities the second time around... and suggesting that either I've missed some simple and obvious detail or Mike Rounds has erred in his recollection of s significant fact.


  1. Tim 2014.09.23

    "Mike Rounds has erred in his recollection of a significant fact."
    Hummm, that's a polite way of putting it. Rounds has been lying out his teeth for months now, sure wish they would force him to testify under oath.

  2. Slynn 2014.09.23

    Cory, I hope you plan to follow up with Darley's attorney.

    I think the most important issue as far as implicating Rounds in the EB five matter, relates to understanding what the South Dakota EB 5 regional center is and who controls it. Although a topic for another post, I believe the South Dakota EB 5 Regional Ctr. is an entity unto itself, regardless of its name, of South Dakota government, although administered under the oversight of SDIBI/DTSD/GOED.

    If you look at the contract between DTSD and SDRC, Inc, the recitals state that DTSD is the EB 5 regional center for South Dakota. Further, the annual agreements between DTSD and SDIBI (I have seen 2005-2009) very specifically set forth the "foreign investment activities " DTSD directed the SDIBI to conduct each year. DTSD then paid SDIBI to conduct these activities. I think Rounds' attempt to hide behind the BOR is easily exposed.

  3. 96Tears 2014.09.23

    I noticed today Argus scribe Montgomery claimed "championed EB-5 as governor." Hmmmm, really? Did Rounds' scribe Mitch Krebs issue press releases crowing about Joop Bollen's operation? Don't remember seeing those. Pretty sure they kept it on the down low until Benda's mysterious and violent death kicked Rounds' racketeering scam wide open.

  4. Roger Cornelius 2014.09.23

    96 Tears,

    On the Rapid City Journal they are featuring two stories on the success of the EB-5 programs and who got the money and in what amounts.

    Although these are AP stories, it is the Journal's way of campaigning for Rounds.

  5. Roger Cornelius 2014.09.23

    Whether Mike Rounds was served the first time or the second time is precisely why Tidemann should have subpoenaed him.
    Simple enough for Rounds to say No to the first serving and not responding to when he was actually served.

  6. Francis Schaffer 2014.09.24

    I read an AP article about money invested and I believe it showed jobs created. It appears that1455 jobs where created by the Deer Creek Station project but Basin Electric reports 28 full time employees. Am I reading the article wrong?

  7. caheidelberger Post author | 2014.09.24

    No, Francis, you are reading that article correctly. Note that the information in that article is sourced to the Governor's Office of Economic Development—i.e., the Rounds/Daugaard people who are trying to persuade us they fart bunnies and rainbows but that the Board of Regents screwed everything up.

    You are absolutely right that 1,455 people do not work at the Deer Creek Station. I want know where in South Dakota those 5,000 jobs are.

    KELO's Ben Dunsmoor received the same data in a graphic produced by the Rounds team, linked here on Twitter. Expect that graphic in upcoming ads and press conferences. Note also that the jobs and investment data do not address the questions about shoddy oversight and illegal activity in South Dakota's EB-5 program; those data simply attempt to shout down those other concerns: "South Dakota got money and jobs! Don't ask how!"

  8. larry kurtz 2014.09.24

    "fart bunnies and rainbows:" you read it here first.

  9. larry kurtz 2014.09.24

    blowing CGI up our collective virtual recta.

  10. Francis Schaffer 2014.09.24

    I also read the article about the couple from Ireland coming to SD to start a diary. I thought I read that the investor's where paid back? Is that the way the EB5 visa program is suppose to work? I guess if I where investing I would want my principal with interest too!

  11. mike from iowa 2014.09.24

    Francis Schaffer-EB-5 funds are invested and considered "at risk" and if your investment is guaranteed a return it is not considered "at risk" and therefore not eligible for the EB-5 program. This might help explain(although "at risk" is not defined: here is no precise definition of “at risk” in the statute; the term is mentioned but not defined in the regulations. In the absence of any express, affirmative definition of the term, there is no authoritative guidance as to what the degree of risk must be to satisfy the “at risk” requirement. The general understanding of what is meant by “at risk” is that the funds must be committed with no guarantee of a return or redemption. When the evidence demonstrates that the investor faces both a risk of loss and a chance of gain, the investment is considered to be at risk.

    The Matter of Izummi is the source of the general definition of the “at risk” element, but notably discusses what “at risk” is not, rather than what it is. According to Matter of Izummi, if the immigrant investor is guaranteed the return of the capital investment or a portion thereof, or is guaranteed a rate of return on a portion of his or her investment, then that portion of the capital is not at risk. In Izummi, a partnership agreement permitted the investor to demand a return of capital or redeem some portion of the investment. Here, the EB-5 capital was not considered to be at risk because the investment was governed by a redemption agreement that protected against the risk of loss, and therefore, constituted an impermissible debt arrangement under 8 C.F.R. § 204.6(e). From this decision it is taken that the investor must face a risk of loss in order for their investment to qualify under the EB-5 program.

    That does not mean there won't be a return at some point.

  12. Nick Nemec 2014.09.25

    As any reporter checked into these claims of job creation and reported on their accuracy? On the face of them some seem wildly exaggerated.

  13. JeniW 2014.09.25

    There was an article in the Argus about what businesses benefited from EB-5, and the number of their employees, even with my eyeball math, the number of employees comes no where near the 5,000 that Rounds is claiming.

    Most of the businesses are Ag related.

    From just my eyeball math it is closer to what Cory had posted previously, unless of course, Rounds is using a different definition of "jobs created."

  14. caheidelberger Post author | 2014.09.25

    Nick, I'm urging Ben Dunsmoor to check the GOED numbers Rounds is peddling against my count of actual jobs in EB-5 counties listed by the Department of Labor. I believe the GOED/Rounds numbers are based on the same "indirect job creation" formulas that USCIS allows EB-5 regional centers to use to inflate their job claims by a factor of 2, 3, or 4. I want to see actual South Dakotans who are working now who would not have jobs if EB-5 hadn't propped up those dairies and other projects.

    And remember, the only jobs being created by Northern Beef Packers right now are jobs for lawyers and out-state corporate schemers.

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