Great job, Bob Mercer, and most appreciated. Mercer is the independent reporter/blogger based in Pierre whose twitter coverage of today's hearings in the state capitol on the Slaughterhouse EB-5 fiasco has been fast and clear. I'm writing this during the hearing's midday break. The session is being held by the South Dakota Legislature's Government Operations and Audit Committee, which wants to know how the U.S. Citizenship and Immigration Service's EB-5 investment program, designed to induce foreigners to invest a minimum of $500 thousand in American enterprises in exchange for obtaining American visas, wound up creating a bankrupt beef packing plant in Aberdeen, SD, that lost $159 million. Given the time, effort and outright grants that the State of South Dakota and the City of Aberdeen put into the project, it's still unclear to me how much South Dakotans lost to this endeavor, but it looks like it could amount to millions. Eventually we'll find out.
And just how will we find out? Maybe the surprise announcement at today's hearings that 3 more federal authorities/agencies (HUD, the Treasury Department and the Energy Department) have joined in the investigation with the U.S. Attorney and the FBI will scare some solid financial information out of the story. As of now the numbers have yet to be toted up, and this morning's segment of the hearings hasn't yielded much information, other than a vague comment by Pat Costello, who heads up the Governor's Office of Economic Development--the agency under whose auspices all of this occurred--that the state has received tax receipts from the project that could offset much of the money put into it. The financial dust has yet to settle before reaching that conclusion, because a lot of indirect costs have yet to be accounted for. There are easily overlooked costs in broad-ranging financial disasters like this one. For examples, how much did the state pay in unemployment benefits to the laid off workers of the plant, how much of the Governor's economic development budget was used up by promoting the endeavor, and, on the private sector front, how much did it cost South Dakota contractors who were stiffed by the bankruptcy and so on.
The hearing itself has disclosed some operational and oversight blunders that were surprising in their magnitude. The private entity, SDRC, Inc., that contracted with the state to handle EB-5 investment programs failed to submit monthly financial records as required by its contract. Who on earth was responsible for letting that pass? You can twitter @pierremercer to get a complete and timely report of the proceedings to learn more about these mishandled details. The word "wrongdoing" shows up at the hearing several times--whether or not that's code for "potentially criminal" is a decision that's above my pay grade.
Pat Costello, and apparently Governor Daugaard, are still relentlessly optimistic about the packing plant's prospects, which turned out to be another surprise at the hearing. Costello believes that in two years, Northern Beef Packers at Aberdeen will be a functioning and profitable operation. Having been in the cattle business myself, I know one of the necessary traits of operating in that business is unabashed optimism, but in this case I think it's misplaced. The plant was designed to kill 1500 head of cattle every day in order to make money, but they were never able to secure more than about 200 a day during its few months of operation. The explanation at the time was that the operation was short of cash, but I think it had more to do with a shortage of cattle. If anything, cattle numbers now are shorter than they were a couple of years ago when the plant went bust. I can't see the situation improving. Nor can I see the outcome of these investigations into what happened turning up anything better than incompetence and poor management, from the Governor's office on down. The "wrongdoing" part may have to be taken up a bit later.