Knecht Statement on Hobby Lobby Decision

“This decision means your boss has the power to make healthcare decisions for you based on his own personal beliefs. That’s wrong"  

Read More »

Hobby Lobby

2014 SDDP State Convention

Democrats from across South Dakota converged on Yankton for the 2014 State Convention! 

View Photos »

Convention Selfie

Susan Wismer Picks Susy Blake as Running Mate

Blake brings passion, principles, and experience to the Democratic ticket.  

Read More »

Wismer Blake

6 same sex couples sue South Dakota for right to marry

It's official. Nancy, Jennie and two other couples filed a lawsuit challenging South Dakota's gay marriage ban. 

Read More »

Nancy & Jennie

Latest News & Blog

The Lucas Report on EB5 scandal

For Immediate Release: Wednesday, September 24th, 2014
Contacts: Sen. Larry Lucas

DOCUMENT:
The Lucas Report from GOAC hearing on EB5 scandal

Sioux Falls (September 24, 2014) — Today, Sen. Larry Lucas submitted a report to the Government Operations & Audit Committee on the state’s management of the EB5 program under Governor Mike Rounds and Governor Dennis Daugaard. The report can be downloaded at the following link:

The Lucas Report for GOAC on EB5 scandal

The report, along with all the supporting exhibits, will be posted online by the Legislative Research Council. An appendix of the document follows the executive summary.

The executive summary of the report is below:

Executive Summary

The information from this report, along with the attached exhibits, will show that Governor Mike Rounds, Governor Dennis Daugaard, and other state leaders knew about Joop Bollen’s contract with a company he owned to manage the EB5 program. Any competent public official briefed on the basic facts about the Darley litigation would have understood that the core controversy of the litigation is Joop Bollen’s creation of SDRC, Inc.

State employee Joop Bollen set up SDRC, Inc. to deceive anyone following his work, willfully concealed the Darley litigation from the state, and repeatedly violated South Dakota law in the process. Yet Governor Mike Rounds and the Board of Regents protected Bollen in court instead of firing him for his unethical and potentially illegal behavior.

The state is liable for $4 million in potential liability claimed – not including attorney fees and pre-judgment interest – from the Darley litigation. This is 4 times more than reported by the Auditor General’s report in 2010 and 2011, and this ongoing liability hasn’t been reported since even though South Dakota taxpayers have already spent over $500,000 defending the state in the Darley arbitration. In fact, this liability was not disclosed in the 2009 Auditor General’s report, and was no longer disclosed after the 2011 Auditor General’s report – even though the Darley litigation remains open today.

In addition, this report estimates that South Dakota taxpayers spent nearly $500,000 for Joop Bollen’s office over the nearly two years that he had already privatized the EB5 program on January 15, 2008. Since the privatization of the program, Joop Bollen and his associates have harvested over $100 million in EB5 franchise fees.

The conclusions of this report reinforce a few simple unanswered questions:

· Who authorized Rounds employee Joop Bollen to sign a contract with himself to administer the EB5 program?
· If Bollen didn’t have authority, why isn’t anyone pursuing legal action against Joop Bollen to recover the EB5 franchise fees he and his associates have harvested?
· Why didn’t Governor Mike Rounds and the Board of Regents fire Joop Bollen after he dragged South Dakota into this lawsuit?
· Why did the Board of Regents continue to protect Joop Bollen from depositions and the production of documents in an August 2013 legal brief long after his unethical and illegal behavior was well known?

The appendix of documents is below:

Ex. A Darley Motion to Compel Arb 31July2008
Ex. B Bollen opposition to Darley Arb Dermand 22Aug2008
Ex. C SDRC, Inc. Articles
Ex. D MOU SDIBI SDRCInc
Ex. E SD Brief to Vacate Federal Order
Ex. F DarleyHanul Confidential contract 18Oct2007
Ex. G California Court rules against SD on Motion to Quash 14Oct2009
Ex. H CA Court rules SD must Arbitrate
Ex. I SD request to USCIS for Amendment
Ex. J Loan Pools formed by Joop Bollen
Ex. K USCIS Memo
Ex. L Joop Bollen Decl CA 11August2009
Ex. M LarryLongDeclaration
Ex. N Jackley Decl CA 23April2010
Ex. O PerryDeclaration
Ex. P Jack Warner Decl 23April2010
Ex. Q Fed Court Order to Arbitrate
Ex. R John Meyer Decl CA 23April2010
Ex. S Shekleton Decl CA 23April2010
Ex. T SD Motion to Quash 13August2009
Ex. U darley refiles arbitration petition in CA Court
Ex. V Board of Regents Brief in CA Court 21May2010
Ex. W SD Memo of points in response to Darley 14Sept2009
Ex. X CA Court on Motion to Quash 14Oct2009
Ex. Y CA Court Orders South Dakota to Arb 2June2010
Ex. Z Millions in EB-5 liability hidden 17Sept2014
Ex. AA EB-5 Investment recruiter took cut of EB-5 money
Ex. BB SD BOR Fraud Policy 4-37
Ex. CC EB-5 Investment recruiter took cut of EB-5 money
Ex. DD Darley Confidential overseas recruitment contract for EB5 investors dated Oct 2007
Ex. EE Lynch Legal Contracts
Ex. FF SDIBI 6 contract 1Jan2008 thru 30June2008
Ex. GG SDIBI 7 contract 1July2008 thru 30June2009
Ex. HH SDIBI opposes deposition of joop

###

The undisputed facts in the EB5 scandal:

1) As Governor, Mike Rounds championed the EB5 program, which gives green cards to wealthy foreign individuals who make investments of at least $500,000 in local projects.

2) The Rounds employee in charge of the program dragged South Dakota into an ongoing six year lawsuit, violated South Dakota law, and left South Dakota on the hook for “millions of dollars of potential liability,” according to South Dakota’s own attorneys.

3) Governor Mike Rounds knew about his employee’s actions, and Mike Rounds didn’t fire him. Mike Rounds protected his employee in court, and then Mike Rounds rewarded his employee with a no-bid contract now worth over $100 million that belongs to the people of South Dakota.

Read more posts in Blog, Press Releases • Permalink • No comments: Say Something! »

What’s Sen. Larry Tidemann trying to hide on EB5 scandal?

“I have no plans to issue subpoenas” – Sen. Larry Tidemann (R-Brookings), Aberdeen American News, “No Plans for Subpoenas in EB5 investigation” 

The EB5 scandal is making news across the state – and Republicans are stonewalling questions from legislators, the press, and the public. 

Case in point: GOP Sen. Larry Tidemann, who has been tasked to investigate the EB5 scandal, refuses to subpoena law breaking state employees and public leaders like Gov. Mike Rounds & Gov. Dennis Daugaard for questioning at a legislative panel on Sept. 24th. 

So here’s what we’re going to do: With your contribution, we’re going to publish this newspaper ad in the Brookings Register leading up to the 24th so every single voter in Tidemann’s district knows that he is stonewalling a full investigation into the EB5 scandal. 

What’s Tidemann Trying to Hide on EB5 scandal? Screen Shot 2014-09-15 at 2.57.59 PM We need to raise $2000 by Friday to run this ad in the Brookings Register for a week – and we’ll keep running the ad if we raise more. Will you make a contribution of $500, $250, $100, $50, $20 or whatever you can afford today? 

Thank you for holding your GOP officials accountable.

Zach Crago

Read more posts in Blog • Permalink • No comments: Say Something! »

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.

 

Read more posts in Blog, Press Releases • Tagged as • Permalink • No comments: Say Something! »

Mike Rounds employee Joop Bollen committed $140 mil fraud managing EB5 program

For Immediate Release: Monday, September 8th, 2014

Rep. Kathy Tyler:
State employee Joop Bollen committed over $140 million fraud managing EB5 program with approval of Gov. Mike Rounds

Legislative Executive Board must direct GOAC to issue subpoenas

Sioux Falls (September 8, 2014) — Joop Bollen committed an act of fraud under Board of Regents Fraud policy that has earned him and his partners over $140 million managing the EB5 citizenship-for-sale program with the approval of Governor Mike Rounds, according to sources unveiled by Rep. Kathy Tyler (D-Big Stone City).

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

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

As a result, Rep. Kathy Tyler will demand that the executive board direct GOAC to subpoena Joop Bollen and all his financial documents, Mike Rounds, Dennis Daugaard, Aberdeen attorney Jeff Sveen, and former Board of Regents President Harvey Jewett on Tuesday, September 9th, in Pierre.

Joop Bollen and Mike Rounds duped the South Dakota taxpayers, says Rep. Kathy Tyler: “Within the scope of his public employment, Joop Bollen and his partners intentionally deprived the Board of Regents something of value – over $140 million in EB5 fees that could have stayed with the state – and Governor Mike Rounds approved the entire fraudulent scheme.”

The South Dakota Board of Regents Fraud policy states:
A. Fraud shall be defined to include the following for purposes of this policy:
1. Conduct within the scope of employment, or conduct apparently within the scope of employment, and representations to the Board, or any of the institutions governed by it or any affiliated organizations that constitutes:
a. Intentional or deliberate act to deprive the State of South Dakota, the Board, any of the institutions governed by it or any affiliated organizations or students of something of value (property, money, services, or opportunities).

b. Deception, false representation of fact by either conduct or other communication, or concealing what should have been disclosed, or made when the actor knew or should have known that the other party relied upon his or her representations, leading to injury of the State of South Dakota, the Board, any of the institutions governed by it or any affiliated organizations or students.

South Dakota Board of Regents Fraud policy is very clear, says Rep. Kathy Tyler: “State employee Joop Bollen granted SDRC Inc, a private company he formed on January 10, 2008, the exclusive contract to administer the EB5 program on January 15, 2008. SDRC Inc has deprived South Dakota taxpayers of $140 million in ill-gotten EB5 gains. It’s a simple case of massive fraud with the approval of Governor Mike Rounds.”

Mike Rounds himself said knew how much money SDRC Inc stood to take from the state when he privatized the program with a no-bid contract in December of 2009, according to an interview with Mitchell Daily Republic reporter Denise Ross:

For his part, Rounds says he was aware in general that SDRC Inc. would need to fund it’s operations. “We knew there had to be a way in place to fund the operation. We understood that,” Rounds says without elaborating.
“State program became for-profit before securing Northern Beef financing.” Denise Ross, AgWeek, 4.9.14

The $140 million fraud figure comes from existing research by Argus Leader reporter David Montgomery and a confidential EB5 immigrant investor recruitment contract between the South Dakota International Business Institute in collaboration with Korean EB5 recruiter Hanul Law Corporation and Darley International LLC that has previously never been released.

Based on the Darley-SDIBI-Hanul exclusive recruitment contract, we know that Joop and his confederates jammed Darley, so they could harvest all of the $50,000 per immigrant investor fees. With 800 immigrant investors after the formation of SDRC, Inc, the recruitment fees for SDRC, Inc are a cool $40 million.

According to an Argus Leader report on November 6, 2013, we know that Joop Bollen, SDRC, Inc., and Siegel Barnett, Shultz split up a 1% origination fee and a $10,000 yearly fee per investor, a 1% equity kicker in the projects financed by the loan pools, and a $30,000 administrative fee on each loan in the EB5 loan pools. The 1% origination fee was $5,000 per immigrant investor ($4 million total) and the yearly $10,000 per immigrant investor fee resulted in $8 million annually or another cool $40 million over the last 5 years. Added to that is the equity kicker of 1%. If one assume an 80/20 equity to debt capitalization, the $400 million loan pools are the debt portion of a $2 billion capitalization. The equity portion would represent $1.6 billion. The 1% equity kicker is thus $16 million. Lastly, Joop and his confederates would have been able to invest the harvested fees. If one assumes $80 million invested for 3 years at 8%, it comes to $19.2 million.

Thus, in total, the fraudulent scheme totals over $140 million.

$50,000 recruitment fee per investor (800 immigrant investors) = $40 million
1% origination fee per investor at $5,000 per investor = $4 million
$10,000 loan monitoring fee per investor for five years = $40 million
1% equity ownership (assuming 80/20 equity to debt ratio at $2 billion capitalization) = $16 million
800 immigrant investors at $30,000 one time administration fee on loans = $24 million
Return on Capital = $19.2 million
TOTAL THEFT: $143.2 million

The EB5 scandal is a simple tale as old as time, says Rep. Kathy Tyler. “This EB5 scandal is about money, greed, and absolute power that corrupts absolutely. Joop Bollen and his partners committed fraud against the state to capture the lucrative EB5 fees. Mike Rounds sealed the deal with a no-bid contract to a state employee. Who is going to hold these folks accountable?”

As a result of the revelations, Rep. Kathy Tyler will make a motion for the State Legislature’s Executive Board meeting on Tuesday, September 9th, 2014, to direct the Government Operations & Audit Committee to subpoena Joop Bollen and his financial records, Mike Rounds, Dennis Daugaard, Aberdeen attorney Jeff Sveen, and Board of Regents President Harvey Jewett as well as all SDRC Inc’s financial records.

State leaders have a responsibility to end the $140 million fraud, says Tyler. “While Governor Dennis Daugaard is paying a private attorney $50,000 to recoup $550,000 from a futures fund grant, Joop Bollen and his partners are defrauding South Dakota taxpayers of nearly $140 million. The legislature’s executive board can put an end to this on Tuesday. It’s a $140 million fraud. I hope my counterparts will join me in this effort for the people of South Dakota.”

The list of individuals who should be subpoenaed to testify about their knowledge of this fraud include:

Mike Rounds, former Governor:
Dennis Daugaard, Governor:
Joop Bollen, former state employee
Jeff Sveen, Aberdeen attorney for Bollen
Harvey Jewett, former Board of Regents President
Tad Perry, former Board of Regents Executive Director
Patrick Schloss, former Northern State University President
Dr. James Smith, current Northern State University President
Neil Fulton, former Chief of Staff to Governor Mike Rounds

The list of documents that need to be subpoenaed:

SDRC Inc: All bank records and tax returns
Joop Bollen’s personal bank records and tax returns

Rep. Kathy Tyler’s prepared remarks follow:

September 8, 2014

Good afternoon. I’m Representative Kathy Tyler, and I thank you so much for being here. What I want to do today is reveal documents proving that Joop Bollen and his associates have committed a potential $140 million fraud managing the state’s EB5 program, sometimes called the citizenship-for-sale program, in contracts between Northern State University & the Department of Tourism and State Development and in applications by the state of South Dakota with the United States Citizenship and Immigration Services. This was approved by Governor Mike Rounds and continues today.

Hopefully I will be able to answer how and why Joop Bollen and his associates pulled off a $140 million fraud against the state and how I arrived at the $140 million Bollen and his associates stole. It’s truly a tale as old as time: this is a simple story of massive fraud – the kind of fraud that occurs when money, greed, and absolute power corrupt absolutely.

Many reporters including KELOLAND reporter Ben Dunsmoor, Pierre correspondent Bob Mercer, Mitchell Daily Republic reporter Denise Ross, and Argus Leader reporters David Montgomery & Jonathon Ellis have done an excellent job tying threads together. I will be relying in part on their existing reporting and revealing new documents to supplement their work.

As Ben Dunsmoor reported, on December 22nd, 2009, Governor Mike Rounds granted SDRC Inc a lucrative no-bid contract to fully administer the EB5 citizenship-for-sale program – but SDRC Inc’s origin is almost two years earlier between a man and his mirror. This is the beginning of the $140 million fraud.

On January 10, 2008, the Secretary of State’s office certified SDRC Inc, a company Joop Bollen formed, to operate in South Dakota. Five short days later on January 15, 2008, the South Dakota International Business Institute, based at Northern State University, signed a contract with SDRC Inc. This contract outlined in detail SDRC Inc’s role in the state’s EB-5 program: SDRC, Inc, in effect, took over the entire program. Signatories include Joop Bollen on behalf of the state & James Park of Hanul Law Corporation on behalf of SDRC Inc. This contract was the precursor to the no-bid contract approved by Governor Mike Rounds in December of 2009.

Okay, so what’s the big deal? The big deal is that at that time Joop Bollen was high ranking state official who signed a contract on behalf of the state with a company he owned. This bears repeating: On January 15, 2008, Joop Bollen, a state employee, granted SDRC Inc, a private company he formed on January 10, 2008, a contract to administer the EB5 program. A state employee formed a private company to manage the EB5 program. Then on behalf of the state, he gave his own company the contract to privately manage the this program – and with it lucrative EB5 fees that could have accrued to the state.

Contracting with SDRC Inc on the taxpayer dime to manage the EB5 program for private gain is a clear violation of Board of Regents Fraud Policy.

The Board of Regents Fraud policy states:
A. Fraud shall be defined to include the following for purposes of this policy:
1. Conduct within the scope of employment, or conduct apparently within the scope of employment, and representations to the Board, or any of the institutions governed by it or any affiliated organizations that constitutes:
a. Intentional or deliberate act to deprive the State of South Dakota, the Board, any of the institutions governed by it or any affiliated organizations or students of something of value (property, money, services, or opportunities).

b. Deception, false representation of fact by either conduct or other communication, or concealing what should have been disclosed, or made when the actor knew or should have known that the other party relied upon his or her representations, leading to injury of the State of South Dakota, the Board, any of the institutions governed by it or any affiliated organizations or students.

This was the opportunity of Joop Bollen’s lifetime, and he repeatedly lied in official documents to pull off the fraud. Within the scope of his public employment, Joop Bollen and his partners intentionally deprived the Board of Regents something of value – over $140 million in EB5 fees that could have stayed with the state. Bollen fraudulently omitted SDRC, Inc.’s role managing the EB5 program in semi-annual contracts with Northern State University and the Department of Tourism and State Development. And Bollen misrepresented the relationship between the state and SDRC, Inc. to the United States Citizenship and Immigration Services in documents requesting EB-5 expansion and explaining SDRC, Inc.’s role in that expansion. And he committed these deceptions, while he was a highly paid and high ranking state employee.

Folks, the story is really that simple. Joop Bollen and his associates created a system to enrich themselves to the tune of $140 million at the expense of South Dakota taxpayers with the approval of Governor Mike Rounds – and Bollen repeatedly misrepresented himself and SDRC, Inc in official documents to do it.

Now, we can ask why would Governor Mike Rounds allow a state employee to sign a contract with himself? Who wrote, reviewed & approved this contract on behalf of the state with a five-day-old company? Why Governor Mike Rounds and Governor Dennis Daugaard have turned a blind eye to this clear case of ongoing fraud? And ultimately, what was the motivation for many players to allow this fraud to happen–to allow the state to throw away the potential for millions of dollars of income from the EB-5 program?

It all boils down to money and greed.

Okay, this is where the timeline of events becomes important. When South Dakota was looking for wealthy foreign investors for dairy projects across Northeast South Dakota, Joop Bollen couldn’t find them all by himself from the Northern State University campus. He needed help. Enter James Park of Hanul Professional Law Corporation, who had the Korean rolodex to finance dairies in South Dakota. But as projects got bigger and more numerous, it soon became apparent that the foreign rolodex needed to be expanded. So they brought in a third party, Darley International LLC, an international recruitment agency with extensive contacts in Asia. As you can see in this never-before-released confidential contract, Hanul and SDIBI granted Darley exclusive recruiting rights in China and the former Soviet Union on the following terms for the recruiting agency:
EB5 Investment Fee Structure:
$30,000
Darley International LLC
$20,000
Hanul in partnership with SDIBI
$50,000
TOTAL recruitment fees per investor – paid by the immigrant investor

With over 800 immigrant investors, we’re talking big money – $40 million with a $24 mil to $28 million immediately going to Darley.

But large sums of unregulated money are often followed by immense greed. With investors increasingly coming from China, Bollen and Park would leave a lot of money on the table. If Bollen and Park wanted to cut Darley out of the picture, they had to concoct a workaround.

Enter SDRC Inc: Bollen forms SDRC Inc to outsource the lucrative EB5 franchise from public control to private control, so SDRC Inc can harvest the fees that would have gone to Darley.

Based on this exclusive recruitment contract and information from a court case, we know that Joop and his associates jammed Darley, so they could harvest the entire $50,000 recruitment fee per immigrant investor. With 800 immigrant investors after the formation of SDRC, Inc, the recruitment fees for Joop, SDRC, Inc., James Park, and Hanul Law Corporation total $40 million. According to exclusive court documents, Bollen was also taking a previously undisclosed 1% ownership equity position in EB5 investments for another $16 million.

But that’s just the beginning. In a November 6, 2013 Argus Leader article, David Montgomery shows that SDRC Inc., took a 1% “closing fee” on every loan, a $10,000 yearly fee per investor, and a $30,000 “administrative fee” on each loan in the EB5 loan pools. The 1% closing fee was $5,000 per immigrant investor ($4 million total) and the yearly $10,000 per immigrant investor fee resulted in $8 million annually for another cool $40 million over the last 5 years. Lastly, Joop and his associates would have been able to invest the harvested fees. If one assumes $80 million invested for 3 years at 8%, it comes to another $19.2 million. Thus, in total, the fraudulent scheme surpasses $140 million for Joop and his associates.

$50,000 recruitment fee per investor (800 immigrant investors)
$40 million
1% closing fee per investor at $5,000 per investor
$4 million
$10,000 loan monitoring fee per investor for five years
$40 million
1% equity ownership (assuming 80/20 equity to debt ratio at $2 billion capitalization)
$16 million
$30,000 one time administration fee on loans (800 immigrant investors)
$24 million
Return on Capital
$19.2 million
TOTAL THEFT
$143.2 million

Who in his right mind would let a state employee fraudulently give himself a contract worth $143 million then let him walk away with the money? There’s at least one person who knew what kind of scheme Bollen was setting up to enrich himself, and that’s Governor Mike Rounds.

The following comes from Mike Rounds In an interview with Mitchell Daily Republic reporter Denise Ross from April 2014

For his part, Rounds says he was aware in general that SDRC Inc. would need to fund its operations. “We knew there had to be a way in place to fund the operation. We understood that,” Rounds says without elaborating.
“State program became for-profit before securing Northern Beef financing.” Denise Ross, AgWeek, 4.9.14

Mike Rounds knew Joop Bollen and partners were going to become immensely wealthy ripping of the state – and Mike Rounds approved the whole fraudulent scheme.

State leaders have a responsibility to investigate the extent of this $140 million fraud. We had a highly paid, high ranking state employee signing a lucrative contract with himself. Mike Rounds approved a no bid contract for work that could have been done through a state office and put millions into the state coffers. While Governor Dennis Daugaard is paying a private attorney $50,000 to recoup $550,000 from a futures fund grant, Joop Bollen and his associates are defrauding South Dakota taxpayers of over $140 million with the approval of Governor Mike Rounds. Where is all of the money? We know who lost in this fiasco; now we need to know who gained from this fraudulent scheme.

The legislature’s Executive Board has the power to instruct GOAC, to do just that, to do finish what they started, to make sure the intent of HCR 1010 is accomplished. Tomorrow, I will make a motion for the Executive Board to instruct GOAC to subpoena Joop Bollen and all his financial documents, Mike Rounds, Dennis Daugaard, Aberdeen attorney Jeff Sveen, and former Board of Regents President Harvey Jewett among others who are listed in the press packet. I hope my counterparts will join me in finding answers for the people of South Dakota.

###

EB5 documents for Rep. Kathy Tyler Sept 8 Press conference

Read more posts in Blog, Press Releases • Permalink • No comments: Say Something! »

SDDP Statement: On EB5 scandal, Mike Rounds is only kidding himself

For Immediate Release: Friday, September 5, 2014

SDDP statement on “Rounds for Senate” EB5 ad:
On EB5 scandal, Mike Rounds is only kidding himself 

Mike Rounds recruits EB5 investor

Mike Rounds recruits EB5 investor

Sioux Falls, SD (September 5) — Mike Rounds is only kidding himself when it comes to the EB5 citizenship-for-sale scandal, says Zach Crago, Executive Director with the South Dakota Democratic Party. Crago released the following statement after Mike Rounds tried defending his indefensible position on the EB5 scandal in a new ad:

“Who is Mike Rounds kidding on the EB5 scandal? Governor Mike Rounds made EB5 a key component of his economic development strategy. A state employee administered the EB5 program. Mike Rounds privatized the EB5 program with a no-bid contract to his state employee. And when the EB5 investments went belly up, South Dakota taxpayers lost millions of dollars, South Dakota businesses never got paid, and South Dakota workers lost their jobs.

“Maybe Mike Rounds hasn’t read the 8 different South Dakota editorials calling the EB5 program under Mike Rounds a “scandal,” “controversy,” and a “black mark on South Dakota and state leadership. Or maybe Mike Rounds forgot that his administration is under state and federal investigations for its bungled mismanagement of the EB5 program.

“When it comes to the EB5 scandal, Mike Rounds is only kidding himself.”

Investigative blogger Cory Heidelberger rebutted the Rounds ad point for point in the following article:

MadvilleTimes.com
Rounds Projects, Refuses to Own Economic Development Corruption and Failure
Posted by caheidelberger, 9.5.2014

Mike Rounds, Dick Wadhams, and Pat Powers are projecting. They say Rick Weiland and I and anyone else who reports the facts about Mike Rounds’s economic development policies are telling big desperate lies, when in fact the big desperate deception comes from those trying to help Mike Rounds win a U.S. Senate seat. As is the case with deficit spending and government intrusion in the doctor-patient relationship, Republicans accuse Democrats most loudly of the sins Republicans themselves commit.

Rick Weiland encapsulated the corruption of Mike Rounds’s administration in the neat and direct 30-second “Auction” ad released yesterday, accusing Rounds of selling U.S. residency to wealthy foreigners through the EB-5 visa investment program so his cronies could make millions. The attack stung enough to provoke immediate and voluminous responses from Rounds, including a swiftly produced video summarizing Rounds’s evasions and absurdity.

As usual, Rounds says EB-5 is a federal program. “Mike didn’t create EB-5, didn’t run it,” says the Rounds response. The former is true; the latter is either false or damning. But the federal provenance of EB-5 is far less important than how Mike Rounds used and abused it:

·         Through his Governor’s Office of Economic Development, Mike Rounds authorized state employee Joop Bollen to seek EB-5 investment for projects that apparently couldn’t stand on their own in the South Dakota market.

·         Mike Rounds allowed his cronies Joop Bollen and Richard Benda to privatize this portion of the Governor’s Office of Economic Development’s portfolio, for no apparent reason other than sheer greed.

·         Mike Rounds allowed his cronies to create a bank that appears to have violated South Dakota law and cheated the state of millions in bank franchise tax.

·         Mike Rounds signed off on $2.36 million in lame-duck handoutsto subsidize his delayed and doomed centerpiece EB-5-financed economic development project, Northern Beef Packers.

·         Mike Rounds hired and admired a GOED chief, Richard Benda, who used his EB-5 travel expenditures as his personal slush fund.

Rounds responding to concerns about bad policy choices, corruption, and mismanagement in the Governor’s Office of Economic Development by shouting “EB-5 is federal!” is like the kid we nab running with scissors shouting, “But these scissors were made in China!”

In further evasion, Rounds repeats his absurd semantic stretch that “the state did not lose money” in Rounds’s/GOED’s/Joop Bollen’s/Richard Benda’s (yes, this is complicated) exploitation of the EB-5 program. Even under the most generous yet documentable reading, the state poured $4.3 million in tax dollars into the EB-5-dependent Northern Beef Packers, which generated $3 million in sales, use, and contractors excise tax. That’s a loss. And even that $3 million came at the cost of one local contractor being stiffed $2.1 million and other contractors and suppliers losing big money when the plant went bankrupt after just nine months of operation.

The newest Rounds ad then goes for the big enchilada, saying EB-5 “creates thousands of jobs across South Dakota. If Rick Weiland had his way, thousands of South Dakotans would be unemployed today.”

Hogwash. EB-5 job creation numbers are mathematical fictions, not real bodies at new work. Fortune agrees:

First, the government is exceedingly generous in its employment tally. It gives EB-5 investors credit for all the jobs theoretically spawned by a project even when EB-5 money represents only a sliver of its financing. Second, for many mainstream ventures, EB-5 money isn’t really creating jobs—it’s merely saving developers money for projects that would be financed anyway. (Indeed, those big companies are actually “hijacking” money from worthy smaller investments in hard-hit areas, argues Michael Gibson, a financial adviser who vets EB-5 investments.) [Peter Elkind and Marty Jones, "The Dark, Disturbing World of the Visa-for-Sale Program," Fortune, 2014.07.24]

Homeland Security says EB-5 projects provide no evidence that they have created new jobs. The Brookings-Rockefeller Project on State and Metropolitan Innovations says “there is a dearth of reliable and publically available data that would enable better monitoring and evaluation of the economic impacts of regional center investments.”

In other words, Mike Rounds is talking out his backside. Show us, Mike, the “thousands” of people at work in South Dakota right now who would not be working if you had not included EB-5 investment in your Governor’s Office of Economic Development strategies. Where are they, Mike? Are they the Korean contractors brought in to drag Northern Beef Packers to completion? Are they the hundreds of Aberdeen workers who got stiffed paychecks by Northern Beef Packers when it collapsed in July 2013? I don’t see them, Mike. Where are these mighty and prosperous thousands whom you say Rick would turn to paupers?

Mike Rounds is lying. He’s making stuff up. He’s kicking up dust to keep voters from seeing that Mike Rounds owns his bad policy choices and his sloppy management of his economic development policies.

Read more posts in Blog, Press Releases • Permalink • 1 comment

Join Us on Facebook!

Latest Tweet

2263 followers

Photo Gallery

View more photos »

Posts by Category:

Monthly Archive