Legislature’s management board says no need for EB-5 probe yet

By Bob Mercer

State Capitol Bureau

PIERRE – Its Executive Board decided Monday there’s no need at this time for the Legislature to open an investigation of South Dakota’s involvement in the EB-5 immigrant investor program.

On a voice vote, board members removed the EB-5 topic from their agenda. Lawmakers said they want to see the results from other state and federal probes under way.

Rep. Kathy Tyler, D-Big Stone City, tried last month to get EB-5 added to the board’s agenda. The board said no.

Two weeks ago, Tyler attempted to convince legislators to call themselves into a special session for Dec. 30-31 to authorize an investigation.

She fell far short of the two-thirds majorities needed in both chambers.

EB-5 was on the board’s agenda Monday at Tyler’s request, until Rep. Betty Olson, R-Prairie City, and Rep. Lance Carson, R-Mitchell, formally called for its removal.

Carson said the request for a separate legislative investigation is “very premature.”

Tyler replied the rejection was “unfathomable… absolutely ridiculous.”

Four other Republican legislators – Sen. Phyllis Heineman of Sioux Falls, Sen. Craig Tieszen of Rapid City, Rep. Isaac Latterell of Sioux Falls and Sen. Corey Brown of Gettysburg – said the Legislature should wait to see what the current investigations find.

Tieszen said the most important role for the Legislature might be deciding “how we need to protect ourselves from future incidents.”

Sen. Larry Lucas, D-Mission, said $550,000 of state funds went for “the wrong purpose” and the Legislature should try to get back the money.

Said Brown: “When the time is appropriate, the Legislature will get engaged.”

Rep. Brian Gosch, R-Rapid City, called on Tyler to bring new information to the board if she has it.

The vote to remove the EB-5 item was conducted by voice. Tyler tried too late to seek a roll call.

The $550,000 diversion was from a $1 million state grant approved by then-Gov. Mike Rounds in 2010 to Northern Beef Packers.

It was discovered in a probe conducted this year by state Attorney General Marty Jackley at the request of Gov. Dennis Daugaard.

Daugaard asked for the investigation after state government received a subpoena from a federal grand jury in March.

Discovery of the diversion in turn prompted three sets of audits – two by outside firms and one by the state’s watchdog agency – now under way at the Governor’s Office of Economic Development.

All three are expected to be finished in the next six weeks. The state Department of Legislative Audit, which is controlled by the Legislature, has a target date of Jan. 24 to complete its work.

The $550,000 was paid by Northern Beef Packers to one of the EB-5 loan pools operated by SDRC Inc. of Aberdeen.

The $550,000 was to cover two years of salary at $225,000 annually for Richard Benda to be SDRC’s loan monitor for Northern Beef. EB-5 loans provided $59 million for the Northern Beef project.

Benda was secretary of tourism and state development in the Rounds administration from 2006 through its final days in early 2011.

Benda signed state contracts with SDRC president Joop Bollen in 2009 and 2010 giving SDRC the management and administrative authority over EB-5 investments in South Dakota.

Benda arranged for the $1 million check during his last full week of work and delivered it to Northern Beef in Aberdeen during Daugaard’s first week in office as governor.

The EB-5 program is supervised by the U.S. Citizenship and Immigration Services, an agency in the federal Department of Homeland Security.

EB-5 allows foreign investors to make loans or investments of at least $500,000 in federally-approved type of U.S. businesses. If enough jobs are created, an immigrant investor and family can qualify for permanent U.S. visas allowing them to live anywhere in the United States.

Use of EB-5 skyrocketed in South Dakota during the years when Benda was in the Rounds cabinet.

Daugaard had Costello terminate state government’s agreement with SDRC in September.

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