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Final Darley Ruling: State “Unduly Protracted” EB-5 Fight, Gets No Legal Fees

The South Dakota Board of Regents has declined to release further documents pertaining to the EB-5-related Darley v. SDIBI litigation. At least one apologist has suggested that the Regents' and even Mike Rounds's opaqueness on EB-5 is wise, given that the state has been pursuing pursuing legal fees from California company Darley International.

That excuse is now gone. California arbitrator Robert A. Baines issued his final ruling today and followed through with what he suggested pretty clearly in his initial ruling on October 7: nobody gets anything, so go home.

Judge Baines does declare the Regents, here in the guise of the South Dakota International Business Institute that ran EB-5 technically under Regental aegis from 2004 to 2009, and SDIBI partner Hanul Professional Law Corporation the prevailing parties. The Regents got out of several million dollars in damages, while Darley merely escaped SDIBI's and Hanul's "modest" defensive counter-claims. But Baines declines to reward the prevailers any legal fees, based on actions by Hanul and the Regents that "unduly protracted" the litigation:

Once SDIBI's two-year efffort to avoid participation in this arbitration proved unsuccessful, both Hanul and SDIBI devoted significant time and effort attempting to avoid a hearing on the merits, including seeking to revisit the issue of SDIBI's involvement in the Agreement and raising a disfavored plea in abatement, i.e., Darley's temporary loss of its corporate powers. As noted in the undersigned's Order Regarding Request to Dismiss, dated December 4, 2013, there is a "strong public policy disfavoring pleas in abatement," and this issue could have been waived by Hanul and SDIBI if they truly were desirous of concluding this matter expeditiously.... Further, Hanul's unseemly effort to prevent Darley's corporate reinstatement in California (by reserving with the Secretary of State the very corporate name that Darley had already selected) was indicative of Respondents' tactics in this matter.

Also, certain of the defenses raised by the Board of Regents unduly protracted this matter. For example, despite the rulings of the Los Angeles Superior Court, the Board of Regents continued to claim that it (and NSU) essentially were unaware of SDIBI's acivities, and thus could not be held liable for SDIBI's actions. However, the evidence revealed that NSU was well aware of SDIBI's EB-5 operations and of the Hanul law firm's involvement at the forefront of those operations. For example, the President of NSU signed annual or semi-annual contracts with the Governor's Office for the running of SDIBI, and these contracts described SDIBI's activities, including its employment of the Hanul law firm: "SDIBI will continue to work exclusively with Hanul Professional Law Corporation for submission of the I-526 petitions and management of the regional center;" "SDIBI will identify additional relationships in South America for dairy projects and additional relationships in China for better foreign investor recruitment. This work will be done by Hanul;" and "SDIBI, with Hanul, will further develop a website to recruit investors worldwide for our EB-5 projects" [Judge Robert A. Baines, Final Award, JAMS Arbitration Case #1100054680, 2014.10.30, p. 24].

Judge Baines concludes that Hanul and the Regents "should not be rewarded for their conduct, both in the underlying transaction" (letting SDIBI director Joop Bollen essentially write his own ticket, usurp the NSU president's contract authority, and conceal his activities with Hanul) "and in this arbitration proceeding."

Judge Baines doesn't go here, but I would suggest that his incredulity at the Regents' claims of ignorance of SDIBI's EB-5 activities could apply as forcefully to then-Govenror Mike Rounds's claims of ignorance of what was happening in his own EB-5 program. NSU President Patrick Schloss signed those SDIBI agreements; so did Jim Hagen, Marty Davis, and Richard Benda in the Governor's Office of Economic Development. The Governor's Office.

If the Governor's Office had been watching Joop Bollen's activities a little more closely, it might have avoided the whole Darley mess. The Regents might have avoided a half-million dollars in lawyer fees. And Mike Rounds definitely would have avoided having to avoid all these awkward questions about his incredible ignorance of what was happening in his EB-5 program.


  1. john tsitrian 2014.10.30

    I doubt the Regents will be dishing out much information now that the FBI is "actively" investigating the mess.

  2. 96Tears 2014.10.30

    The State of South Dakota lost. And the SDGOP puts criminals and sociopaths in office.

  3. jerry 2014.10.30

    So then, all is well here in South Dakota. It makes me wonder if there could not be a class action suit though. Is that possible that the investors could legitimately claim fraud or was that killed in this ruling, anyone know?

  4. Roger Cornelius 2014.10.30

    From what Cory has been diligently reporting for the past year we know a lot of what has happened with EB-5, there are aspects that we don't know yet and won't know until the DOJ starts releasing information.
    There has been an active investigation going on by the FBI since Nov. 2013, what we don't know is if there is a seated grand jury hearing any evidence.
    Republicans are saying that Rounds will be cleared of any involvement, I don't know how they know that, in fact they don't, unless Marty Jackley has been feeding them information.
    Once the investigation is revealed, we can count on the rats deserting the sinking ship and singing like canaries, making plea deals, and in some cases still lying, covering up and being in a state of denial.
    We have a lot to look forward to in the coming months, whether Rounds or loses his scandal will not leave him, he'll be toxic in D.C.
    We're getting close I believe, how long will it take to get closer, maybe a Rounds victory will get us there sooner than later.
    The one thing I'm pretty sure of, this isn't the "trash talk", Mike Rounds hopes it is.

  5. Jane 2014.10.30

    "I don't know" seems to be a common tool with these guys. Was everyone out to lunch when Bollen and Hanuls James Park went to town duping everyone? I hope this tool is not accepted by the Federal Bureau of investigations!

  6. mike from iowa 2014.10.31

    El Judgo essentially claimed the Regents lied to the court.

    For example, despite the rulings of the Los Angeles Superior Court, the Board of Regents continued to claim that it (and NSU) essentially were unaware of SDIBI's acivities, and thus could not be held liable for SDIBI's actions.

    Isn't lying to the court a no-no?

  7. caheidelberger Post author | 2014.10.31

    Mike, I wouldn't call it "lying." I would call it making an argument that the judge found incredible. And actually, Harvey Jewett may have used his position on the Board to keep the Regents from really looking into the details of what Joop Bollen was doing for his friends in Aberdeen and Pierre.

  8. mike from iowa 2014.10.31

    Cory,can we agree that the $510,000 dollars wasted in attorneys fees is 500 gand more the state has lost to EB-5,even though Rounds claims the state lost no money? :)

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