Saturday, September 27, 2014

Time For A Special Prosecutor In This EB-5 Affair

     There is one unifying element in this entire Slaughterhouse EB-5 mess:  Everybody involved is/was working for the people of South Dakota either as an elected or appointed official.  Trying to sort this thing out has been a huge challenge, mainly because there is an inherent and self-defeating flaw in the process:  We're asking these people to investigate themselves.  I understand that there may or may not be a federal investigation looking into this complex mess, but to me that's another affair.  As a resident of South Dakota I think I'm on solid ground when I say that it's time for our state's authorities to have a look. An outsider with no political ties to the events or the players is probably the only realistic way to get the story.  That would call for a special prosecutor from outside the government with no possible political or personal conflicts of interest.
     True, there's been some lip- and pro forma-service on that score, but really, the efforts have been far less than conclusive--to the point of actually being laughable.  A few days ago, during a "hearing" on the matter,  the SD state legislature's Government Operations and Audit Committee held a one-day reading of written responses from Republican U.S. Senate Candidate Mike Rounds, who was governor when the mess congealed into a multi-million dollar fiasco between 2008-2010. Rounds didn't even appear in person, which made it impossible for committee members to get some contextual answers and a more complete picture of the situation.  GOAC is planning another hearing, after the November election, apparently not interested in ruffling any political feathers until then.
     That the committee neither subpoenaed nor requested written testimony from Joop Bollen, the state operative who turned the whole EB-5 program from a SD-run venture into a lucrative business for himself, says all you need to know about the legislature's lack of interest in finding out what actually happened.  Come this morning's Rapid City Journal, we learned that Bollen, the pivotal figure in this drama, sought an immunity deal from his bosses at the South Dakota Board Of Regents (note:  my sister-in-law Kathryn Johnson is a Regent, and we don't communicate regarding this matter).  The Regents oversaw his activites when EB-5 was a state university-run (from 1994-2008) entity.  Now the Regents are being sued by a California firm that was involved in recruiting international investors for South Dakota's EB-5 projects.  Bollen wanted immunity in the case.  The Regents, per the RCJ piece, did not grant Bollen's request, which compels two questions:  Why did he request immunity? Why didn't the Regents grant it?
     Meantime, there are issues of financial misappropriation, the bankruptcy of a centerpiece EB-5 deal, a suicide by a key state official involved in the imbroglio, and lots and lots and lots of unanswered questions that boil down to "who knew what, and when?"   Add to that the fact that the State of South Dakota appears to be out $120 million in fees racked up by EB-5 investors, and the sum of it all is that a complete investigation is called for at this point.  South Dakota State Attorney General Marty Jackley, an elected Republican, can't do this job, and shouldn't be expected to. About a year ago, when the state administration was asked to appoint a special prosecutor, Jackley refused and said there was "no legal or factual basis to do so."  The request came from the South Dakota Democratic Party.
     The request this time is coming from a registered Republican--me.  I can't speak to the legal basis, but it sure seems obvious that after a year of factual basis after factual basis after factual basis gets disclosed that South Dakotans deserve some answers.  If Governor Daugaard is committed to getting at the truth of this mess, then he'll overrule Jackley and get to the facts of the matter by appointing a special prosecutor.  My readers should feel free to forward this post to the relevant officials in Pierre.

11 comments:

  1. Name a truly independent lawyer in South Dakota, Mr. Tsitrian.

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  2. email Bill Ellingson in Flandreau: he might do it. I have that address.

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    1. I've got some names in mind too, both in and out of South Dakota.

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  3. John,

    Wanted to make sure you saw this - will get the letter in the comment section in pieces


    For Immediate Release: Friday, September 26, 2014
    Contacts: Rep. Bernie Hunhoff, 660-6357, bernie@iw.net

    Rep. Bernie Hunhoff requests all EB5 files from South Dakota Board of Regents

    Sioux Falls (September 26, 2014) — The South Dakota Board of Regents (SDBOR) must release all the files on record pertaining to the EB5 Darley litigation, says Rep. Bernie Hunhoff in a letter to SDBOR executive director Dr. Jack Warner.

    Dr. Warner and Rep. Hunhoff discussed the matter in a phone conversation early Friday morning after Hunhoff reviewed over five years of billing invoices provided to Rep. Kathy Tyler by SDBOR general counsel James Shekleton. The invoices revealed extensive involvement from the Governors Office of Economic Development and the Attorney General's office in this legal matter among other startling conclusions outlined in the letter.

    A copy of the letter is below & attached.





























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  4. Dear Dr. Warner:

    As we discussed by phone, I believe legislative leaders have a responsibility to search out the truth in the EB-5 mess. I am especially saddened that fingers are being pointed at the South Dakota Board of Regents.

    It is deeply troubling to learn how the Regents became entangled in the actions of Joop Bollen, especially in the six year legal dispute with Darley International.

    While it appears that Mr. Bollen deceived the Board and your predecessor from early 2008 through January 23, 2009, decisions after that date must have been made with knowledge of Bollen’s self-serving actions.

    I do appreciate that you and General Counsel James Shekleton provided my colleague Representative Tyler the legal services contracts and invoices from the California law firm that is defending the Board. That is a positive step toward transparency.

    Yet the information gleaned from that material is disconcerting, to say the least.

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  5. First, the South Dakota Attorney General’s office was aware of this matter as Assistant Attorney General Jeff Hallem was included on nearly all correspondence (101 documents) from February 4, 2009 through the end of June, 2010.

    Second, the Governor’s Office of Economic Development (GOED) was aware of this matter as Attorney Tim Engel was included on nearly all correspondence (84 documents) from July, 2009 through April, 2012 – and remains as I understand the attorney for GOED until the present day.

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  6. Third, it appears that the Board condoned and assisted Mr. Bollen in a move that looks simply fraudulent: From detailed billing invoices are notes from March 11, 2009: “Analyzed correspondence regarding J. Bollen resignation from SDRC, initial discussions between J. Bollen & J. Meyer”

    As you know, Mr. Bollen was the owner of SDRC, Inc. and he, as South Dakota International Business Institute (SDIBI) Director granted the contract to administer the EB-5 Regional Center to SDRC, Inc., the company that he owned.

    Shortly after the date of that note in the billing invoice, Hanul Professional Law Corporation (a co-defendant of the Board of Regents in the Darley litigation) filed a Statement of Change for SDRC, Inc. with then South Dakota Secretary of State Chris Nelson that removed Joop Bollen as the registered agent for SDRC, Inc. and replaced him with James Park, a partner/associate at Hanul Professional Law Corporation.

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  7. Less than two months later, after it was obvious that the Board was going to be successful in extricating itself from the federal court order, Jeffrey Sveen, a partner at Siegel Barnett and Schultz, LLP (a firm at which longtime Regent Harvey Jewett is a partner) filed Articles of Amendment that named Joop Bollen as the registered agent and Director of SDRC, Inc.

    One might assume from this that the Board and Northern State University, through their attorneys, seem to have participated in a scheme to deceive Darley International and make the SDRC, Inc. January 15, 2008 contract with SDIBI appear legal?

    Of course, I cannot imagine that the Regents would have either authorized Mr. Bollen to sign the January 15, 2008 or helped conceal this matter in federal court.

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  8. Fourth, it appears that someone was pressuring the Board to agree to forego claims against Mr. Bollen. Again from the detailed billing invoices dated September 3, 2010: … correspondence to J. Shekleton regarding J. Bollen wanting some commitment that Board of Regents will not pursue him for indemnity (.1) analyzed correspondence from J. Sveen regarding same (.1); and,

    From the detailed billing invoices dated September 14, 2010: … correspondence with J. Shekleton regarding whether Regents will forego claims against J. Bollen (.1)

    Fifth, it appears that the Board ultimately did forego any claims against Mr. Bollen. Again, from the detailed billing invoices dated August 6, 2013: … exchange correspondence with J. Sveen regarding proposed interview of J. Bollen and issue of indemnification and release (0.3); report to and confer with J. Shekleton regarding issues of indemnification and release and follow up regarding same (0.3)

    Shortly after the conference with General Counsel Shekleton, the Board filed a brief in the Superior Court of the State of California on August 27, 2013 that opposed the deposition of Joop Bollen and opposed the compelling of SDRC, Inc, to produce documents.

    I hope that I am reading these billing statements wrongly, and I certainly welcome and encourage any corrections or explanations. The Board of Regents and its fine educational institutions are critically important to our state’s citizens and the integrity of the board and staff is facing a great test.

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  9. As I noted at the outset of this letter, I believe legislative leadership has a responsibility to seek out the truth, to protect the taxpayers’ resources, to safeguard the public records and to seek reform measures to prevent wrongdoing in the future.

    In that spirit, I request that the Board produce all its work product, documents, exhibits, and memoranda from the California law firm within seven days (by October 2, 2014) so that interested lawmakers may have a chance to review the documents prior to the next Board meeting scheduled on the campus of Northern State University on October 7-9, 2014.

    I would suggest that you make the information available to all legislative leadership as well as the members of the Government Operations and Audit Committee (GOAC). GOAC ultimately has the power to subpoena said documents if the Board of Regents will not release them to the public. I would hope that you would provide ample agenda time at the October meeting to provide an explanation to the public and also entertain questions and testimony from the media and private citizens.

    While I do appreciate the Regental staff’s cooperation in producing the detailed billing invoices, now it is time for the Board – and Northern State University — to disclose all of the requested items. The good and honest citizens of South Dakota deserve to know the truth, wherever it may lead. I believe very strongly that you and all the universities’ leadership would wholeheartedly agree.

    Yours truly,

    Rep. Bernie Hunhoff

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