NSU Counsel Testifies Bollen Ran EB-5 Under Governor’s Office, Not Regents

Last updated on 2014.10.20

One of the main responses Mike Rounds has offered to revelations of misconduct in the state's EB-5 visa investment program is that he didn't run EB-5; the Board of Regents did.

• "Mr. Bollen was an employee of the Board of Regents," Rounds told the Government Operations and Audit Committee in his September 22, 2014, written response to their questions about EB-5 and the contract EB-5 chief Joop Bollen signed with his own private company on January 15, 2008. "The contract was under the supervision of Northern State University and the Board of Regents...."
• "...[T]he program and the personnel were responsible to the South Dakota Board of Regents," Rounds told reporter Bob Mercer shortly after penning the above response to GOAC.

Testimony under oath from Northern State University counsel John Meyer on April 24, 2014, in a deposition for the Darley v. SDIBI arbitration contradicts Rounds's statements:

[Darley attorney Jennifer Elkayam]: Or what entity provides SDIBI with the authority to conduct foreign direct investment activities?

[Meyer]: In the State of South Dakota, that area is handled and funded through the Governor's Office of Economic Development, which is a subbranch of the South Dakota Department of Tourism and Development [John Meyer, deposition, Darley v. SDIBI, Los Angeles, California, 2014.04.24, p. 23].

Agreements between GOED and NSU authorizing SDIBI's work show budget items from NSU, but Meyer says those items included little cash:

[Elkayam]: Did SDIBI ever receive funding from NSU at any point in time?

[Meyer]: Well, I notice here it mentions a cooperative effort. That cooperative effort was limited on NSU's part. I have observed, in some of the documentation, that NSU's contribution was roughly $100,000 per annum. The remainder of the budget, which would be much larger, would have come directly from "GOED" or GOED. I should also add that the bulk of that $100,000 contribution would be in provision of office space, the general overhead support, utility support, communication support, et cetera. I believe the actual cash infusion from NSU would be negligible [Meyer, 2014.04.24, p. 25].

Bollen testified in his April 16, 2014, deposition in Darley v. SDIBI that he answered to NSU Dean of Business Clyde Arnold but that such answering was generally limited to cc-ing Dean Arnold on monthly updates e-mailed directly to the Governor's Office of Economic Development. Elkayam asks Meyer about the chain of command:

[Elkayam]: Do you know whether Mr. Bollen reported to Dr. Arnold between 2007 and 2009?

[Meyer]: Actually, he reported to the titular head of the Department of Tourism and State Development or GOED, and I believe that position was sort of a two-hatted division of the secretary of that department [Meyer, 2014.04.24, p. 28].

The titular head of GOED during the specified time frame was Richard Benda.

Meyer says any accountability Bollen had to NSU was on minor accounting matters, not the core operations of the EB-5 program or SDIBI in general:

[Elkayam]: Who did Mr. Bollen report to within NSU between 2007 and 2009?

[Meyer]: Well, we're looking at "Operations" down there at the bottom of this current exhibit, and I would have to say that for operational purposes, for those functions, he reported to whoever was the titular head of the Department of State of Tourism and Development or, as I said, who would also be heading the GOED operations.

[Elkayam]: So no one within NSU?

[Meyer]: Not for operations.

[Elkayam]: For any other purpose?

[Meyer]: What -- what would occur is reconciliation of payroll expenditures. For instance, we just looked at this previous exhibit that's identified as 1(8). Obviously there would be some accounting reconciliations concerning his salary, travel, et cetera [Meyer, 2014.04.24, p. 34].

Meyer says Bollen submitted his primary budgets (the accuracy of which Bollen himself called into question in his deposition) and accounting information to GOED:

[Elkayam]: Did he [Bollen] ever submit any type of budgets for approval to anyone within NSU?

[Meyer] I don't believe he did, to my knowledge. I believe he submitted his budget requests and his accounting of expenditures to GOED [Meyer, 2014.04.24, pp. 34–35].

Meyer states under oath that he does not believe Bollen obtained authorization from anyone at NSU or the Board of Regents for his January 2008 SDIBI–SDRC Inc. contract [p. 45]. He says that the functions described in that contract exceeded the parameters of the SDIBI mission statement approved by the Regents in 1994 [p. 48] as well as the operating authority granted to SDIBI by GOED and the U.S. Customs and Immigration Service [p. 51]. Meyer also says that Bollen and SDIBI received no Regental authorization for memoranda of understanding sent to EB-5 investors [pp. 57–58].

Operating thus outside the bounds of granted authority, as exhibited by SDIBI's off-book partnership with the Hanul law firm, prompted a meeting involving NSU's new president, Dr. James Smith, in 2009:

[Meyer]: ...there was a meeting that occurred at NSU between myself and Dr. Smith and Rich Benda and Joop Bollen and [V.P. finance and administration] Don Ehrlenbusch, and that meeting would have occurred in July of 2009.

[Elkayam]: And what did you talk about at that meeting?

[Meyer]: The -- you know, it's been five years now and the meeting was attended by myself, because I was asked to come, because there was a concern about the -- the employment of Hanul Law Firm. And there was also a concern at NSU about, shall I just say the activities that had been uncovered, and it was prompted by the transition between Dr. Laurie Nichols, who had been an interim president at Northern, and Dr. Smith's arrival, taking over her duties.

[Elkayam]: You said the employment of Hanul. Was that employment by SDIBI of Hanul?

[Meyer]: There was a concern that there had been no employment that any of us were aware of and that there should not have been [Meyer, 2014.04.24, pp. 56].

This July 2009 meeting fits the narrative that emerges from Bollen's deposition that NSU and the Regents may have been trying to shut SDIBI down and that only intervention from Benda and the Governor's Office of Economic Development kept Bollen and EB-5 going.

Meyer concludes that he does not believe that Bollen "was supervised by NSU in the sense that you would expect as an employee" [p. 73].