A Scandal Unfolds

Nov 13, 2013

By Cory Allen Heidelberger

On October 30, Governor Dennis Daugaard stopped the presses by announcing that state and federal investigators are looking into "financial misconduct" in the Governor's Office of Economic Development.

The presses have fired up and churned out all sorts of background and discussion and speculation on GOED, EB-5 visas, Northern Beef Packers, and other angles of this very complicated story.

U.S. Marshals haven't perp-walked any South Dakota suits down Phillips Avenue to the federal courthouse in Sioux Falls. But whether the ongoing investigations drag anyone before a judge, South Dakotans need to pay attention to the GOED/EB-5 scandal, on multiple levels:

Misguided Agricultural Economic Development. Throughout the Mike Rounds and Dennis Daugaard administrations, South Dakota has followed the Earl Butz ag philosophy of "Get big or get out." South Dakota has favored mega-dairies, in part with EB-5 visa investments, at the expense of small local dairies. One of the largest dairies supported by EB-5 money, the Veblen mega-dairy, went bankrupt in 2009. The Rounds Administration ignored local investors interested in starting a manageably-sized beef packing plant in northeastern South Dakota and instead favored the gigantic Northern Beef Packers plant with $80 million of EB-5 visa money, plus millions more in other forms of assistance. That money all went poof: the plant never reached the production levels necessary to pay the bills and went bankrupt after less than a year.

A local entrepreneur responds to the investigation of the GOED's EB-5 program and suggests we could get better bang for our economic development buck focusing on smaller local start-up businesses. South Dakotans should spend the coming legislative session discussing that redirection of economic development policy with lawmakers.

Accountability. In the Veblen and NBP bankruptcies, we perhaps see the pitfalls of recruiting investors who are more interested in buying their green cards than in keeping an eye on how the businesses in which they invest use their money. But we also see the state making it hard for us to keep an eye out for foxes in our henhouse. After a review by a legislative committee in 2008, the state contracted its EB-5 program to a private company created by program coordinator Joop Bollen. The Rounds and Daugaard administration exerted little oversight, and Bollen used his private status to resist inquiries about EB-5 recruitment and investment. The Daugaard Administration tightened the financial reins in 2012 and finally got fed up and cancelled Bollen's contract in 2013, but for years, the state let this program fly without sufficient public accountability. The EB-5 program epitomizes the difficulty South Dakotans have in finding out what their government is doing.

Richard Benda. The former commissioner of Governor Rounds's Office of Economic Development was found dead in a grove of trees last month near a brother-in-law's home outside Lake Andes.

Governor Daugaard himself announced Benda's death on October 22. The day after Benda's funeral, the Governor announced the GOED investigation, which the Governor said he'd known about since spring. Three weeks later, the state has released no information on preliminary autopsy results. This official silence is deafening, especially when confirming one of the obvious explanations, suicide or hunting accident, would quash rampant speculation.

Anyone who thinks these events are not somehow connected has an unhealthy commitment to agnosticism.

Marion Michael Rounds. At the bottom of an already overwhelming newspile, we have the fact that Mike Rounds is running for U.S. Senate. Rounds was Governor when South Dakota's EB-5 program really got going. Rounds promoted EB-5 beneficiary Northern Beef Packers as an integral part of his failed South Dakota Certified Beef initiative. Rounds hired Richard Benda and sent him and Joop Bollen and others to China to get more EB-5 investors.

And now the feds are investigating his office's use of the EB-5 program.

There's no way that comes out good for Team Rounds. The question for him, his challengers, his donors, and the voters is how bad it comes out, and how bad it still sounds on June 3, 2014, and maybe (a maybe distinctly louder than it was last month) on November 4.

The campaign implications may be the least of our concerns. But this is a big story with a lot of players and a lot of connections to a lot of issues in our state. South Dakotans, please, keep paying attention.

Editor's Note: Cory Heidelberger is our political columnist from the left. For a right-wing perspective on politics, please look for columns by Dr. Ken Blanchard every other Monday on this site.

Cory Allen Heidelberger writes the Madville Times political blog. He grew up on the shores of Lake Herman. He studied math and history at SDSU and information systems at DSU, and has taught math, English, speech, and French at high schools East and West River.