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SD taxpayers on hook for “millions of dollars of potential liability” from EB5 scandal

For Immediate Release: Wednesday, September 10th, 2014
Contacts: Zach Crago

NEW DOCUMENTS REVEAL
South Dakota taxpayers on hook for “millions of dollars of potential liability” from EB5 scandal

Governor Mike Rounds, Governor Dennis Daugaard, SD Board of Regents, former Attorney General Judge Larry Long and Attorney General Marty Jackley knew and didn’t disclose to legislators, press or public

Sioux Falls (September 10, 2014) — South Dakota taxpayers are facing “millions of dollars of potential liability” from an ongoing lawsuit in a California court about the state’s administration of the EB5 citizenship-for-sale program, according to previously unreleased court documents filed by the state of South Dakota.

EB5 Citizenship-for-sale  Kings Joop Bollen & Mike Rounds

EB5 Citizenship-for-sale Kings Joop Bollen & Mike Rounds

These documents further reveal that top state leaders including Governor Mike Rounds, Attorneys General Larry Long and Marty Jackley, former Board of Regents Executive Director Tad Perry, and Governor Dennis Daugaard knew about this lawsuit, concealed the potential liability from state legislators, and have since withheld the truth from the press and the people of South Dakota.

Prepared statements:

Thank you all for coming to this press conference and dialing in on the conference call. My name is Zach Crago, and I’m the executive director of the South Dakota Democratic Party.

I’ve called for this press conference today to reveal explosive new documents filed by the state of South Dakota from lawsuits in a California state and federal court about the Rounds-Daugaard administration’s management of the EB5 citizenship-for-sale program.
These court documents filed on behalf of the state of South Dakota reveal the following:

1) South Dakota taxpayers are on the hook for “millions of dollars of potential liability” from the “general fund of the state of South Dakota” as a result of Rounds employee Joop Bollen’s $140 million fraudulent EB5 scheme.

[Exhibit 6: Memorandum of Points; Exhibit 12: Perry declaration]

2) Rounds employee Joop Bollen “willfully kept the existence of this action” from the state, filed legal documents on behalf of the State without permission, and later hired his EB5 co-conspirators at Hanul Law Corporation to represent the state in federal court “in violation of South Dakota law.”

[Exhibit 6: Memorandum of points; Exhibit 2b: Opposition brief]

3) South Dakota leaders including Governor Mike Rounds, Attorneys General Larry Long and Marty Jackley, Governor Dennis Daugaard, South Dakota Board of Regents executive directors Tad Perry and Jack Warner and former President Harvey Jewett, and Northern State University President Dr. James Smith knew the substance of these federal and state lawsuits, concealed the potential liability from state legislators, and have ever since withheld the truth from the press and the people of South Dakota.

[Exhibit 6: Memorandum of points; Exhibit 7 AG Larry Long declaration; Exhibit 9 NSU attorney John Meyer declaration; Exhibit 10 SDBOR General Counsel James Shekleton declaration; Exhibit 12 SDBOR executive director Tad Perry declaration; Exhibit 17 AG Marty Jackley’s declaration, SDBOR executive director Jack Warner]

These conclusions are clear after over six years of legal wrangling between the state of South Dakota and Darley International LLC, the EB5 immigrant investor recruitment company that the state of South Dakota employed in a confidential exclusive contract to recruit Chinese investors in October of 2007. And that’s where the timeline of this story starts.

Darley-Hanul-SDIBI arbitration timeline

What do we know from the legal action?

1) South Dakota taxpayers are on the hook for “millions of dollars of potential liability” from the “general fund of the state of South Dakota” as a result of Rounds employee Joop Bollen’s $140 million fraudulent EB5 scheme.

In South Dakota’s Memorandum of Points dated April 13, 2009, James Lynch, the $300 an hour California attorney hired by South Dakota, states:

“By this motion, the South Dakota Board of Regents seeks to be relieved from the effects of this Court’s October 7, 2008, order compelling the South Dakota International Business Institute to participate in an arbitration in which it faces millions of dollars of potential liability.” [Exhibit 6]

By April of 2009, South Dakota already knows it may be on the hook for potential liability. But where was this millions of dollars supposed to come from? Board of Regents Executive Director Tad Perry said in his declaration signed under penalty of perjury.

“Were a court to permit a suit against the SDIBI in its own name and a money judgment were to be entered against the SDIBI, such judgment would be paid out of the funds of the state of South Dakota.” [Exhibit 12]

In fact, attorney James Lynch continued,

“Any money judgment or arbitration award against the SDIBI for this or any other matter, would be paid out of the general fund of the State of South Dakota.” [Exhibit 6]

That’s South Dakota taxpayer dollars – money that would go to education, healthcare, and economic development.

2) Rounds employee Joop Bollen “willfully kept the existence of this action” from the state, filed documents as if he were an attorney on behalf of the state without proper authority, and later hired his EB5 co-conspirator at Hanul Law Corporation to represent the state in federal court “in violation of South Dakota law.”

Again, in South Dakota’s Memorandum of Points dated April 13, 2009, attorney James Lynch states that Joop Bollen and Austin Su Ki Kim of the Hanul Law Corporation,

“… willfully kept the existence of this action from the persons with such legal authority until the end of January 2009.” [Exhibit 6]

Former Attorney General Larry Long was one person with such authority. In fact, in his declaration filed in federal court under penalty of perjury, he states:

“Mr. Bollen has never been authorized by me or an authorized representative of my office to accept service of process, defend, or to appear in litigation for, the State of South Dakota… Mr. Kim has never been authorized by me or an authorized representative of my office to accept service of process, defend, or to appear in litigation for, the State of South Dakota.” [Exhibit 7. Also, see Exhibit 2b]

In fact, James Lynch went so far as to suggest that Joop Bollen had broken the law when he retained his EB5 co-conspirators at Hanul Law Corporation to arbitrate on behalf of the state:

“Mr. Bollen was clearly mistaken in his belief that he could retain legal counsel in violation of South Dakota law.” [Exhibit 6]

In other words, Rounds employee Joop Bollen messed up big time. He dragged South Dakota into a legal morass, concealed the lawsuits from the state, and only informed the state when he had exhausted every other option. But once word got out, news travelled fast around Pierre.

3) South Dakota leaders including Governor Mike Rounds, Attorneys General Larry Long and Marty Jackley, Governor Dennis Daugaard, South Dakota Board of Regents executive directors Tad Perry and Jack Warner and former President Harvey Jewett, and Northern State University President Dr. James Smith knew the substance of these federal and state lawsuits, concealed the potential liability from state legislators, and have ever since withheld the truth from the press and the people of South Dakota.

In declaration after declaration for federal and state courts under penalty of perjury, state leaders said they knew the facts about this EB5 scandal.

NSU attorney John Meyer knew when Joop Bollen finally disclosed legal action in January of 2009. [Exhibit 9].

SDBOR general counsel James Shekleton knew when NSU attorney John Meyer disclosed this information in January of 2009 after which Shekleton immediately started looking for California counsel. [Exhibit 10]

SDBOR executive director Tad Perry knew when James Shekleton informed him in late January, and he declared that Joop Bollen and Hanul Law Corporation did not have the right to represent the State of South Dakota in court. [Exhibit 12]

Attorney General Larry Long knew, and in fact he authorized the hiring of California attorney James Lynch at $300 an hour to represent the State of South Dakota in California court. [Exhibit 7]

As the issue moved from federal to state court over four years, SDBOR executive director Jack Warner knew and Attorney General Marty Jackley knew nearly all the details about Joop Bollen’s fraudulent scheme. [Exhibit 17]

Governor Dennis Daugaard knew because Daugaard asked the Attorney General to investigate the Eb5 scheme, and Attorney General Marty Jackley must have provided the Governor all the specific details.

And of course, Governor Mike Rounds knew as the state invoked the Seal of South Dakota in federal court to protect Joop Bollen and more importantly the valuable stream of EB5 money that was funding his top political priorities like South Dakota Certified Beef and the Northern Beef Packing Plant.

Each step along the way, the Board of Regents, Governor Mike Rounds, and Governor Dennis Daugaard had a duty to disclose potential liability to state legislators just like state leaders do when accidents involving Department of Transportation vehicles lead to costly lawsuits or when issues arising from the corrections department lead to litigation. Legislators are routinely forewarned about potential liability involving the state and taxpayer money.

Each step along the way, Governor Mike Rounds and other state leaders also concealed the potential liability from the press – a concealment which continues today. In fact, when Argus Leader reporter David Montgomery called some of these state leaders after Rep. Kathy Tyler’s press conference on Monday, all of them pleaded ignorance when in fact Joop Bollen’s creation of SDRC Inc to push out Darley from EB5 recruitment was a prime subject of the Darley litigation!

Here’s a question I would ask Governor Mike Rounds and Governor Dennis Daugaard if I were in your shoes: Did you know about these lawsuits?

Folks, it breaks my heart to say that our state leaders have not told the whole truth and nothing but the truth to the people of South Dakota.

At the Dakotafest Debate in Mitchell, Mike Rounds pointed the finger at his late cabinet secretary Richard Benda. He said, “If I would have known what he did when I was Governor, I would have fired him.” What about his EB5 confidante Joop Bollen?

Fact of the matter is Mike Rounds and many others knew Joop Bollen had perpetrated a huge fraud managing the EB5 program. Mike Rounds knew Bollen’s fraud had put South Dakota into a legal morass. And Mike Rounds knew South Dakota taxpayers are on the hook to pay millions of dollars in potential damages.

Yet this much is clear: Mike Rounds didn’t fire Joop Bollen. He didn’t even discipline him even though South Dakota’s hired attorneys claimed he broke the law.

Folks there’s no way any South Dakotan still has a job after messing up this badly. But Mike Rounds didn’t reprimand Bollen at all. Instead, Mike Rounds protected Joop Bollen in the court of law and rewarded his confidante with an updated sweetheart EB5 no-bid contract in December of 2009.

At this time I’d welcome questions from members of the press.