Policy: Immigration

Trying to pick winners, South Dakota comes up a loser in new EB-5 scandal

Watchdog,Immigration,Waste and Fraud,South Dakota

Bankruptcies and an FBI investigation have cast a pall over foreign investment ventures in South Dakota.

The state legislature voted last week to launch hearings into five EB-5 investor-visa projects as the controversial immigration program appears at the center of another scandal.

Previously, EB-5 boondoggles figured prominently in Virginia's heated 2013 gubernatorial race between former Republican Attorney General Ken Cuccinelli and the eventual winner, Democrat Terry McAuliffe.

The South Dakota investigation is focusing on five projects: Dakota Provisions of Huron, Northern Beef Packers of Aberdeen, NextEra Energy’s Day County 2 Wind Farm, Basin Electric’s Deer Creek generation plant at Elkton, and the Deadwood Mountain Grand hotel and casino.

Lawmakers acted after the FBI began investigating the EB-5 dealings of the South Dakota Regional Center, which collects $500,000-plus investments from foreign nationals seeking U.S. green cards.

The SDRC and the Governor’s Office of Economic Development used the federal investor-visa program to pump millions of dollars into the now-bankrupt Northern Beef Packers plant.

“[Q]uestions relate to what happened to tens of millions in EB-5-funding,” said David North, a policy analyst with the Center for Immigration Studies.

The $100 million slaughterhouse, funded largely by Asian EB-5 investors, was auctioned off for $4.8 million in cash and $39.5 million in the cancellation of what North called a “somewhat murky debt."

Richard Benda, a former state economic development secretary and one-time financial monitor of the bankrupt packing plant, was found shot to death in October. His death has been ruled a suicide by South Dakota authorities.

The South Dakota state government plays a large role in the federal investor-visa program. Joop Bollen of Aberdeen formed SDRC in 2008 to serve as administrator and manager for the EB-5 program for the state government.

The failed beef plant is only the tip of the iceberg of South Dakota’s questionable EB-5 ventures.

The state has favored mega-dairies with EB-5 cash at the expense of small local dairies, asserted Cory Allen Heidelberger, a political blogger with the Madville Times.

“One of the largest dairies supported by EB-5 money, the Veblen mega-dairy, went bankrupt in 2009,” Heidelberger said.

Lora Hubbel, a Republican gubernatorial candidate, said Huron's EB-5-funded turkey farm has employed migrant workers from Mexico. Investments in the EB-5 program are supposed to generate jobs for U.S. citizens.

As for the packing-plant flop, a recent state audit threw dirt on the deceased Benda.

Benda amended two grant agreements to give Northern Beef an additional $600,000 in state money, the Associated Press reported.

Overall, the audit concluded that the Governor’s Office of Economic Development didn’t adequately monitor the EB-5 program as run by SDRC.

Hubbel calls that an understatement.

“Government should not be in the business of picking winners and losers,” she told Watchdog. “It should not be in the game of buying businesses and building industries that fail and leave the taxpayers and foreign investors on the hook.”

Kenric Ward is a reporter, which is affiliated with the Franklin Center for Government and Public Integrity.
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