Black Hills Knowledge Netowork

October 12, 2014

EB-5 Scandal

The EB-5 scandal that has emerged in South Dakota has made the 2014 Senate race closer thanks to the possible involvement of former governor and current Senate candidate Mike Rounds.  The scandal also involves a former Secretary of Tourism and State Development during the Rounds administration, Richard Benda, and former director of the South Dakota International Business Institute and current head of SDRC, Inc., Joop Bollen, and a failed beef processing plant in Aberdeen, SD.  While being investigated for allegedly misdirecting $550,000 of a state grant for EB-5 to his own salary, Benda committed suicide in 2013.  Currently, former governor and current Senate candidate Rounds is under investigation for statements and his revisions of those statement made regarding his knowledge of the state being served with papers from the government on investigations into the state's EB-5 program.

What is the EB-5 program?

The EB-5 program is a federal program that offers green cards to wealthy foreign investors in exchange for investing $500,000 in U.S. projects that create American jobs.  The program has been around for years, but Governor Rounds and Secretary of Tourism Benda embraced the program as a way to attract investment into South Dakota.

Brief History of the EB-5 Scandal

From 2004 to 2009, Governor Rounds and Secretary Benda hired Aberdeen resident Joop Bollen to run the EB-5 program through the South Dakota International Business Institute based out of Northern State University at the time.  At the end of 2009, Benda reached an agreement with Bollen's new company, SDRC, Inc., to have Bollen continue running the EB-5 program after NSU decided that the program did not fit at the university anymore.  State officials, however, claim that Bollen was not given permission to enter into a contract with the state at the time.  At the end of 2010, Benda joined SDRC, Inc. as a loan monitor.  However, when investigations started into the program, Benda was accused of siphoning off nearly $550,000 of EB-5 program money to cover his own monitoring fees.  Benda was found dead in October, 2013 as the investigation was continuing.  He was not formally charged with any crimes at the time and maintained his innocence.  The investigation into the investments and possible fraud of some of these investments were triggered when the most ambitious EB-5 project in the state, the Northern Beef Packing Plant in Aberdeen, went bankrupt within one year of opening after over $100 million was invested into the project.  

It was discovered that a possible suit against the state's EB-5 program came up in 2009 when a California company served litigation papers to the governor's office, which the Rounds office claimed it never received until proof showed up that his office had indeed been served the papers.  Rounds has retracted and amended his previous statement since.  Alleged mismanagement of EB-5 funds and possible cover-ups are now dogging the Senate candidate.

In February 2016, Joop Bollen accepted a plea deal in exchange for pleading guilty to one of five felony charges against him. Bollen was sentenced with two years probation and a $2,000 fine for mismanaging $1.2 million in state funds. 

Full Summary of the EB-5 Program and Scandal

Archived News of the EB-5 Scandal

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