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Small Victory for Rounds and South Dakota: Darley Loses SDIBI/EB-5 Case

Last updated on 2017.03.15

The only good news Mike Rounds gets today is that a California arbitrator has rejected Darley International's attempt to make the state pay for breaching a contract for EB-5 recruitment. The Board of Regents, which technically operated the EB-5 visa investment program through the South Dakota International Business Institute on the NSU campus through 2009, issues this sigh of relief:

A California arbitrator’s decision has vindicated the South Dakota Board of Regents and the state of South Dakota in a breach of contract case involving the federal EB-5 immigrant visa program. The decision, announced today, denied all claims and counter-claims in a case brought by Darley Commercial LLC against Hanul Professional Law Corp. and the South Dakota International Business Institute. SDIBI is located at Northern State University.

“We are very pleased with this outcome,” said Jack Warner, the regents’ executive director and CEO. “This has been a long arbitration and we had been optimistic all along about its resolution. It is good to see that the arbitrator’s decision has validated our expectation of a positive resolution to this case.”

Arbitrator Robert A. Baines found that the International Business Institute had the power to legally terminate its use of the Hanul law firm as an unofficial exclusive marketer for EB-5 projects, and there was no breach of contract when SDIBI ended that arrangement in January 2008. Baines further found that the non-compete clauses that Darley Commercial extracted from Hanul were unenforceable under California law, which therefore cut off claims made against SDIBI.

The arbitrator’s decision, JAMS Arbitration Case No. 1100054680, can be found online at [].

[South Dakota Board of Regents, press release, 2014.10.07].

Hey, maybe Joop can come back from the Philippines now!

* * *

Tasty morsels from the Judge Baines's arbitration ruling:

Funding for [Bollen's] position came from both NSU and the Governor's Office. He received administrative support through the School of Business, and although he reported to both the University and the Governor's Office, it appears that he operated without significant supervision from either [Robert A. Baines, JAMS Arbitration Case #1100054680, 2014.10.07, p. 7]. early November of 2007, Bollen submitted to USCIS a formal request to amend the Regional Center's charter so as to... have the Regional Center contract with a private corporation with a similar sounding name ("SDRC Inc.") to run the Regional Center's operations. For this last item, Bollen submitted to USCIS a proposed Memorandum of Understanding ("M.O.U.") between SDIBI-DEDR and this private corporation, SDRC, Inc. In his submittal, he did not reveal that SDRC, Inc. was to be his own corporation; rather, he told USCIS that SDRC, Inc. "will be controlled by Hanul Professional Law Corporation."

Without waiting for USCIS approval, Bollen his plans into effect at the beginning of 2008 [pp. 8–9].


  1. 96Tears 2014.10.07

    I read the ruling and if it's a victory, it is a pretty shallow one. As you've pointed out, the arbiter was painfully impressed with the fast and loose oversight by Rounds and the Board of Regents. All it means is they are off the hook on this case. It's a drop in a growing bucket. Joop might want to wait until pheasant season is over to return.

  2. JeniW 2014.10.07

    It is a victory for the Regents. That does not mean that there was not some wrongdoings.

  3. Bill Fleming 2014.10.07

    I really don't see why this would be a victory for Mike Rounds at all. According to him, he never had anything at all to do with any of this. Never had a clue it was even happening. Even his brother who was handling the case never mentined it to him. Is that the "Rounds" you're talking about, Cory?LOL.

  4. caheidelberger Post author | 2014.10.07

    Victory for Rounds: he avoids the posting of financial liability four weeks before the election and knocks one leg out from under the argument that EB-5 dooms his candidacy.

    Of course, the argument that EB-5 dooms his candidacy is a millipede....

  5. wal 2014.10.07

    96 Tears........I like your comment on pheasant season. In the south they celebrate Thanksgiving with Turducken (chicken stuffed into a duck then into a turkey) Perhaps there could be a new SD dish..........a Boophucken? (chicken stuffed into a pheasant and then into Boolen)

  6. lesliengland 2014.10.07

    will the state/regents/insurer recoup unnecessary defense legal fees and costs from joop for his ultra vires (unsanctioned) acts, for the little people of SD?

  7. lesliengland 2014.10.07

    wonder how this happened to settle 4 weeks before the election, troy?

  8. Jeff Endrizzi 2014.10.07

    This resolve wasn't "settled", a California arbitrator made the decision.

  9. Joseph.Voigt 2014.10.07

    still only cost the state $400K plus.... thats in the ball park of what Benda was accused of taking.

  10. wal 2014.10.07

    how many teachers would that hire?

  11. Roger Cornelius 2014.10.07

    This is in no way for a Rounds vindication for the Republican corruption of EB-5.
    Dump Site and Rounds will now attempt to close the book on Rounds role in his involvement with EB-5.

  12. lesliengland 2014.10.07

    jeff, you think the regents, the AG, Daugaard's offices, lawyers, dennis duagaard, Rounds' direct and indirect influence ($9 mill.)and the California defense lawyers had nothing to do with this timing, letting it wrap up now so the arbitrator could rule now?

  13. caheidelberger Post author | 2014.10.07

    Leslie, in terms of recouping any losses, don't bet on it. Arbitrator Baines recommends at the end of his ruling that the parties agree to just drop it and eat their own losses. That seems to signal that he doesn't really feel either party is entitled to take fees out of the other's hide.

    Roger, you are right that this ruling does not in any way vindicate Mike Rounds. It removes a few million in potential liability. But it does not refute any of Bollen's numerous violations, Rounds's bogus statements, or any of the major signs of corruption in state government.

  14. caheidelberger Post author | 2014.10.07

    Leslie, I don't think there's a there there. Darley has no interest in wrapping things up to suit South Dakota's needs. Darley wanted our heads. They wouldn't play ball to make Mike Rounds happy. If they had wanted a settlement, they'd have negotiated a settlement and dropped everything before rolling the dice on an arbitrator's ruling.

    On the state side, if they had any timing at work, they'd have sped things up to defuse this aspect of the scandal well before the 2014 primary, or they'd have found a way to delay until after the November election instead of risking an arbitrator's ruling in October.

    Plus, even while protecting South Dakota from Darley's damage claim, the arbitrator's words don't make Rounds don't look much better.

  15. lesliengland 2014.10.07

    likely the state or its insurers paid a 1/2 mill or more in fees/costs and will want it out of joop's hide. can't indemnify bad acts. am spitballing

  16. wal 2014.10.07

    Cory in reading the JAMS doc, on the bottom of page 10 and 11 refers to the switch and bait activity I have been concerned with. Find investors for one thing, then say the slots are full and we want to stick you in this pool over here.

  17. John Tsitrian 2014.10.07

    This is a minor issue in context. The State of South Dakota seems to have lost out on $120-$140 million in EB-5 investor fees. How that kind of money was allowed to slip through the fingers of our public officials is the scandal.

  18. 96Tears 2014.10.07

    wal, having had T-Day down south several times, I must say there is no better place to find some crazy assed foods to delight the senses and overfill the belly a few belt notches. I agree with everyone here that this document is a milepost and nobody's victory on a very long and expensive journey. Had Mike Rounds had enough "South Dakota Common Sense" to just say no to privatizing this slush account and remove any transparency from the movement of massive amounts of money to high risk (DOA) projects, he might be able to talk about his record as governor and possibly win this race.

    Of course, I would be shocked if Rounds scribe Montgomery won't use his powers of political fiction writing to paint this as the equivalent of winning the Super Bowl for Team Rounds. Maybe Mike's looking for an assistant Chief of Staff who knows how to ignore the obvious and just follow orders.

    "Gee Mr. Krebs, aren't you done editing that copy yet???"

  19. 96Tears 2014.10.07

    Rounds' Argus scribe strikes again:

    'The Board of Regents retorted that the Darley case was unlikely to cost the state significant money, because the "claim of damages is speculative and the underlying claims are uncertain." Now, in an embarrassment for Democrats, the liability they spent a month warning about has turned out to be nothing.'

  20. Roger Cornelius 2014.10.07

    96 Tears,

    Even the normally conservative Rapid City Journal is saying there were not winners with this court decision.

    Guess again, there were winners. The crony Republican defending the lawsuit against BOR and South Dakota made about $400,000 in taxpayer money for the Rounds and Bollen mistake.

  21. caheidelberger Post author | 2014.10.07

    Mike Rounds offers the lie of the day in this campaign statement:

    “Today’s decision proves what I’ve been saying all along—that everything my opponents have been saying about EB-5 are lies, innuendo, and nonsense misinformation,” said Gov. Mike Rounds. “My opponents used this issue to distract from talking about the issues that matter to the people of South Dakota and the failed policies of President Obama that he said were on the ballot this fall—but the people of South Dakota saw this for what it was—dirty politics aimed at character assassination” [emphasis mine; Mike Rounds, press release, 2014.10.07].

    We now need to be ready to stay on message and clarify that this ruling did not refute any of the statements I have made about EB-5, any of the documents I've presented, or any of the conclusions I have drawn.

    At no point have Democrats lied. Democrats said that the Darley case could result in millions of dollars of damages. It turned out the arbitrator ruled in the state's favor. The Democrats didn't lie; they pointed out a real possibility, just like saying the Royals could win the World Series.

  22. Bill Fleming 2014.10.07

    I don't see any reason for embarrassment.

    It was a potential liability for our state until it wasn't.

    Nobody knew how this would turn out including the BOR, Mike Rounds and especially Montgomery.

    Plus it cost the state almost a half a million dollars to find out. Not exactly chump change.

    Besides, would it really have been better if no one had ever said a word about it?

    Come on, Monty.

  23. Jana 2014.10.07

    96Tears, I saw that as well and was thinking that poor David Montgomery was looking to be all things to all people.

    Personal note to David Montgomery...seriously? Seriously? This is all you thought the GOED/Northern Beef/EB-5 scandal was about?

    This isn't still an embarrassment for all of the people involved from Rounds to the Regents to Daugaard to the GOP legislature?


    David, get back to us on what false equivalency means.

  24. mike from iowa 2014.10.07

    Excellent show of leadership qualities. Deny any and all knowledge and then be the first to claim you were totally exonerated of something you claimed not to have anything to do with. Somewhere dumbass dubya is smirking up a storm.

  25. Roger Cornelius 2014.10.07

    As some of you know, I have often compared the Watergate scandal to Mike Rounds EB-5 scandal.

    At this point in Watergate, Republicans felt vindicated by Vice President's Spiro Agnew unrelated resignation for corruption. There was only a pause from public opinion and the media.

    The Darly decision and Mike Rounds statement are momentary, the public will see this current hiccup.

  26. Francis Schaffer 2014.10.07

    Okay all this being said when I read the agreement between Hanul and Darley unless I have a fictitious document why would SDIBI be mentioned in it and that Hanul has 'unofficial exclusive rights to promote and process from SDIBI? Where is the agreement between Hanul and SDIBI'? Of course maybe the document means nothing. Read for yourself.

  27. owen reitzel 2014.10.07

    When Dunsmoor asked Rounds if there should there have been more supervision for what Bollen was doing in administering this program? This is what Rounds told KELOLAND News.

    "I think what the judge was trying to say was that he found no liability on the part of the state. And he went to the inception of the program in the 1990's and he found that there was no liability from the state and that everything we have been accused of in this has been wrong," Rounds said in response."

    Rounds sidestepped the question and Rounds has not been vindicated. At the very least Rounds is incompetent. He doesn't belong in Washington.

  28. Lanny V Stricherz 2014.10.07

    The embarrassment will be for the whole State, and the Republican party in particular, if Rounds and Daugaard are elected, as it now appears will be the case. If the Feds come down like stink on poop after the election and find that there was plenty of wrong doing and that there are some folks who will need to go to prison, what does that say about us?

    How can we have had this mess in front of us for more than 6 months, and still elect these two bozos back into office?

  29. Jana 2014.10.07

    It appears that David Montgomery and the Argus have done a rewrite...hmmm.

    Mike Rounds check must not have cleared...or they found David's reporting of this is good for Mike, Michael or Marion and an embarrassment for Democrats was just a little off of journalistic integrity.

    Don't get discouraged David, just remember that Rounds is the bastard who made the Argus spend serious money on FIOA filings that could have gone to the salaries of good reporters.

    Makes finding out why Mike thought his guest list for the taxpayer funded Valhalla should be a secret only he could have...hmmmm.

    Go get him kid!

  30. mike from iowa 2014.10.08

    This was not a criminal proceeding so whether Gomer claims he did nothing wrong is irrelevant.

  31. caheidelberger Post author | 2014.10.08

    Francis, you are right about that Hanul-Darley contract. It makes clear that Hanul has no authority to grant Darley any exclusive rights and that, basically, the agreement can disappear at the snap of Joop's fingers. Frankly, I think Darley was stupid to sign this contract.

  32. Francis Schaffer 2014.10.08

    Whose promise for unofficial exclusive rights to Hanul? Where is the agreement between Hanul and SDIBI? That is the document that needs to come to light. The BOR should be able to produce it.

  33. caheidelberger Post author | 2014.10.08

    That's the thing, Francis: there appears to be no such agreement. Bollen and his pal James Park at Hanul may have been doing all this on a wink and a handshake. But let me look....

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