Democrats Unveil New Trove of EB-5 Documents to Committee

PIERRE, S.D. -- Democrats presented a thick black binder of what they say is new evidence in the ongoing EB-5 scandal Wednesday at the South Dakota Legislature’s Government Operations Committee.

For the last 10 months, the EB-5 visa foreign investment program’s administration under the Mike Rounds’ and Dennis Daugaard’s governorships has been under various state and federal investigations.

The scandal has been a major issue in the U.S. Senate race where Rounds is the frontrunner in a four-person race and the governor’s office, and the governor’s race, where Daugaard is running for re-election and is also the frontrunner.

State Rep. Susan Wismer, the Democratic candidate for governor and a GOAC member, Wednesday produced documents in the new trove showing that outside legal counsel has billed over a quarter of a million dollars in legal fees to the state in 2014 in dealing with lawsuits in California arising from the EB-5 program.

From responses from committee members, it appears that legislators had no knowledge of the extent of the billing.

Earlier in the hearing, Republican members of the committee noted that state lawyers had assured them that there was a low likelihood of liability arising out of the litigation. It was filed in California by a number of Chinese nationals who invested into the EB-5 program for a failed beef plant in Aberdeen. The matter is now in arbitration.

State Sen. Larry Lucas, of Pickstown, said his calculation of the state’s exposure in the case was at least four times that of the state’s, at $4 million in attorneys fees, expenses and any awards.

The committee spent a couple of hours reading, verbatim, the questions and responses from former Gov. Mike Rounds and current Gov. Dennis Daugaard. Wismer also read from some emails from their new binder of documents that they acquired from court filings and other documents.

The committee struggled with the scope of their authority to look into the actions of Joop Bollen, the former director of the South Dakota International Business institute, then his own company that processed EB-5 related loans, SDRC, Inc.

They are also looking into the role that the late Richard Benda, Rounds’ secretary of tourism and economic development, had in giving Northern Beef Packers and the state an authorized check for $1 million from the state’s Future Fund. He is also accused of then pocketing over half a million dollars thereafter as an “advance” for future work processing EB-5 funds and loans.

Committee members, including state Sen. Larry Tideman, of Brookings, said on several occasions that they do not have authority to investigate any criminal matters. Democrats on the committee have pushed to expand the scope of the inquiry while Republicans have tried to limit it to what they think the committee is authorized to investigate.

Only two members of the public testified. Independent candidate for governor Mike Myers sparked a heated exchange with state Rep. Melissa Magstadt, of Watertown.

“If you’re not investigators,” the retired law professor asked the committee, “what are you?”

“We’re not investigators!” Magstadt said. “Maybe you should look at what GOAC does before you run for governor.”

Myers then exclaimed, “Your just a bunch of Republicans!” to which committee members requested that Myers’ testimony end and he was called out of order.

Brown County Commissioner Tom Fischbach also briefly addressed the committee and presented a resolution from the commission asking the state banking commission to look into the loss of bank franchise taxes to the county. The commission alleges SDRC was acting as a bank in South Dakota and should have been licensed and paying the tax. Tideman said it probably wasn’t the committee’s purview to look into that.

“A lot of people didn’t get paid,” Fischbach said about the failed Northern Beef Packers plant in Aberdeen that was largely funded through EB-5 funds. “We had road problems. We are looking for ways to recoup our losses.”

The committee did pass a motion for Lucas and Tideman to whittle down Lucas’ proposed 70 questions for Bollen to answer in writing down to a more manageable number.

Before adjourning, the committee did unanimously pass two pieces of draft legislation that would address state employee self-dealing in contracts with the state.

As of press time, there are no additional GOAC meetings scheduled but the sense from the committee was that there would like be at least another meeting. The committee has a Dec. 1 deadline to present its report to the full legislature and any proposed legislation.