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.