Monday, September 22, 2014

What A Guy. Rounds Points His Finger At The South Dakota Board Of Regents. Too Chicken To Debate Out West . . . Too Chicken To Accept Responsibility, Statewide. What a guy.

     Seems to me the pivotal moment in the fiasco that has come to be known by me as Slaughterhouse EB-5 came in 2008.  A state employee named Joop Bollen had just created a company called SDRC, inc.  While serving as a state employee at Northern State University's International Business Institute, Bollen contracted with his self-created company to take over the administration of the EB-5 "cash for green cards" program that had up to then been handled by Bollen as a state employee.  Are you following me so far?  Bollen, working for the state and on behalf  of the state signed a contract between the state and a company he formed.  It's of no little coincidence that the deal diverted about $120 million of fees generated by EB-5 investments from the State of South Dakota to Bollen's SDRC, inc.  Having walked away from Northern State University shortly after signing the contract, all the files (15 years worth, apparently) regarding the EB-5 program in hand, Bollen was in possession of all the insights and information that led him to realize that doing this work privately, not for the state, could turn out to be a very lucrative deal.
     Unbelievable as it may seem, this actually did occur.  And it happened while Republican Senatorial candidate Mike Rounds was the governor of South Dakota.  Asked about it in writing this week, Rounds replied that it wasn't his job to know what was going on with Bollen and that contract.  You can follow the exchange here.  The written conversation occurred this week between the South Dakota Legislature's Government Operations and Audit Committee (GOAC), which is investigating this and other matters involving Slaughterhouse EB-5.  The questioners asked when Rounds approved the contract.  Rounds replied, "I did not approve this contract.  This contract was under the supervision of Northern State University and the Board of Regents."
     Before I go on I should note that Regent Kathryn Johnson is my sister-in-law and that I have no information or insights about this matter from her and don't intend to seek any.  That said, I think it's astounding that Rounds is passing off responsibility for having missed this glaring (some might say criminal) act of conflicting interest.  Rounds obviously has no time for  the executive dictum set forth by President Harry Truman:  "The buck stops here."    To him the buck stops with college administrators and the Board of Regents.  However, from the Regents own website, it's clear that all "fiscal, business and personnel practices of state entities also applies to the Board of Regents."  It's also clear (directly from the SD Constitution) that the Governor shall be responsible for the faithful execution of the law.  In short, whether the Governor likes it or not, the buck stops at his desk.
     No way do I think this lets the Regents off the hook.  I questioned their lack of oversight and apparent lack of follow-through in the piece I wrote for the Rapid City Journal a few days back and I'd still like some response.  How they stood by and let Bollen waltz out of Northern State with all those records seems like an appalling level of institutional indifference.  But when it comes to the final bulwark of responsibility for this mess, it stands at the Governor's door.  That Rounds is trying to deflect the blame is a weak attempt at evading responsibilility, an admission of incompetence . . . and genuinely raises questions, not necessarily accusations, but questions, of complicity.  $120 million bucks is a lot of money.  Where did it go?


  1. John

    Legislators and public officials have for years referred to the Board of Regents as the forth branch of government because of its separation from the partisanship of politics. That is both a good thing in that it protects universities from interference, and a bad thing because it isolates the Universities from the day to day oversight by the governor.

    In fact the only time the regents seem to be examined is during the budget cycle where they approach the legislative appropriations committee for expanded dollars with little to no oversight after they are appropriated. Again this can be positive or negative depending on the view of the examiner.

    With this knowledge and the organizational chart to the GOAC committee I count between 4 and 6 layers of supervision between the Governor’s office and Joop Bollen. As an industry leader you certainly recognize that a governor would not have been exposed to a contract signed within the Board of Regents.

    Should there be more oversight by state government, for years I have questioned the role of the State Auditor and the State Treasurer without pointing fingers at them. Their role was limited with the establishment of the Bureau of Finance and Management and autonomy of the Finance and Administration within the Board of Regents. But again the firewall protects the Universities and well as isolates them.

    I have read your blog since its inception, it was once insightful and caused me to stop and reexamine positions that I held. On occasion it changed my mind and in others it forced me to reinforce my beliefs with stronger facts.

    But lately you have spiraled down into name calling and prose that resembles a temper tantrum from a child that doesn’t get his way. Please return to the thoughtful discussion of ideas you demonstrated in the past.

    Mike Buckingham

    1. Thanks for calling me an "industry leader." Quite an accolade coming from you, Mr. Buckingham. If it indeed applies, my experience tells me that an affair of this magnitude ($120 million diverted from state to private sector coffers) operated under the administration of a governor who was involved enough in the program to repeatedly support and update us on the value of EB-5 investments should have been well within Rounds' range of interest and oversight. I stand by my opinion that he's passing the buck. I appreciate that you read my blog and regret that you don't like my prose style. Best wishes, John

    2. John

      I don't know where you get the 120 million the state investment was less than 5 million most of which was returned in the form of contractors excise taxes, property taxes and sales taxes to both state and local government. The 100 plus million was from the EB-5 investors who knew their investments were at risk and in fact the EB-5 program required that these investments were at risk.

      As far as Mike Rounds knowledge of the contract and the letter he approved. It was to request the government to approve the transfer of the responsibility to Joop Bollen and his new company. A contract that was worth less than $50,000 and should have been vetted and approved by the Board of Regents.

      Should we have an investigation, absolutely, certainly the train left the tracks and we need to determine where it derailed and where we should repair the process that is broken. Should the Board of Regents be more accountable to the Governor or the legislature? Should we restore more oversight to the state auditor and treasurer to review and approve contracts? It is not just the Board of Regents that have carte blanc authority after the budgets are approved but Game Fish and Parks also has a large pool of dollars that they control without much control, as just one other example of an independent board.

      My frustration is the partisanship and name calling in an effort to turn the election toward someone else’s agenda may ultimately derail any effort to complete an review and make recommendations on how to prevent the diversion of $500,000 into the pocket of a departing department head. That was the crime and indictments had been issued and I believe Richard Benda knew he was on the way to prison which is why he took his own life. The rest is just hyperbole and needs to be set aside to concentrate on the real issue that I stated above.

      And yes if a democrat was in the governor’s office I would be asking for an investigation, I don’t want this issue to go away but I want real change in the checks and balances within government. Just the way any major Private Corporation should have in place to prevent embezzlement.


    3. Mike, the $120 million represents fees from EB-5 investors over and above their $500 thousand units. Read the Center for Immigration Studies piece I cited above ( to see how it was calculated. That contract Bollen signed as an agent of the State of SD with his own company, SDRC, inc., was worth VASTLY more than $50k. VASTLY. How anybody could have presented it as a "small" contract that didn't meet the threshhold of oversight from authorities higher than the Board of Regents is total baloney. We South Dakotans got scammed, Mike. As to my being "partisan," sorry, but you're way off on that one. Finding out what's going on here doesn't have a political genesis.

    4. John

      I agree the contract was worth well over $50,000, just not diverted from the state to the private sector. Even if SDIBI was the pass through agency the money would have flowed through from the EB-5 investors to the beef processing plant. I doubt the state could have collected the additional fees that Joop collected by privatizing the enterprise.

      The state loss was less than $5 million most of which was returned through tax payments. The real question in my mind is how Joop was allowed to sign a contract on behalf of the state to a new enterprise of his ownership without any review and approval by Northern State University or the Board of Regents. Every contract in my workplace goes through a legal review and is signed by a cabinet member. No one is allowed to draft an agreement and then sign it period.

      As stated above what has happened to the checks and balances in state government and what role should the state auditor and state treasurer have in the oversight of state agencies, including the Board of Regents?

      I would like to sit down for coffee someday, and I will continue to read your blog and newspaper editorials because of the thought provoking prose. On this issue I think we are both interested in a complete disclosure and some changes in policy to prevent a reoccurrence. I just can't see the blame reaching the governor’s office. That too me is just politics and in a non-election year I believe we would see much more cooperation in problem solving then we are getting this year.


    5. Mike, please take the time to read the CIS analysis that I posted above, which will help you and others understand that the $120 million came from fees paid to processors/facilitators/managers, whatever, of the EB-5 program, OVER AND ABOVE their underlying $500 thousand investment units. That $500k went to the beef plant (or whatever project was being developed). The fees--that $120 million--stayed with the program administrator. This should have been money retained by the State of South Dakota, but was instead diverted to Bollen's SDRC when he signed that infamous contract between himself (as the State of South Dakota) and himself (as SDRC,inc). As Wayne Gilbert notes below, Rounds must have tacitly approved the contract when he wrote that letter to immigration authorities asking them to approve the transition of EB-5 facilitation from the State of South Dakota to SDRC. Could Rounds possibly have not known the terms and the implications of a contract of such magnitude? $120 million? C'mon.

    6. John

      I did read the report, it is a restatement of Representative Tyler's press conference where she provided numbers that have not been confirmed by an independent source. As I understand David Montgomery's reporting in the Argus Leader the investors paid an additional $50,000 each for administrative costs which total around $4 million but until we get access to Joop Bollens books we will never know.

      The whole point of my thread is that the election politics have the state chasing snakes in an attempt to deny Mike Rounds the election. At least 3 audits of the state accounting system plus an investigation by the Attorney General have found that no other state employees were implicated in wrong doing. So unless you want to accuse Marty Jackley of a conspiracy with Rounds there is no fire. The focus should be placed on Joop Bollen and his employment at Northern State University. Crimes were committed so let’s focus on the facts and policy and determine if any additional charges should be brought if any and what oversight from other state agencies or the legislature should be established.


    7. The facts of Tyler's information and the CIS report's conclusions have never been disputed. You can characterize the process of ferreting out the circumstances of how this scheme came about as electioneering, but you can not change the facts. You can also wish away the fact that the focus is on Rounds instead of where you would like it to be, but your wish will never materialize. It's in the hopper, Mike, and you can't get it out. Take the last word.

    8. Nothing more to add. The invitation for coffee still stands.

  2. In his cover letter to GOAC enclosing his answers, Candidate Rounds says: "If elected to the U.S. Senate, I would support and lead a proactive effort to review all aspects of the federal EB-5 program, with a specific emphasis on federal regulatory oversight." He doesn't see this as a serious investigation, he sees it as a campaign opportunity. I respectfully disagree with Mr. Buckingham's characterization of a blog which raises reasonable questions about this mess as name-calling and temper tantrums. The questions raised here may make some people uncomfortable, but they are reasonable questions. People often get uncomfortable during oversight investigations and public scrutiny. Finally, it should be noted that recent news articles, which ran in the Argus and the Journal, report that then-Governor Rounds did write a letter to Federal Immigration authorities asking them to approve the transition to SDRC, and in that sense he did in fact "approve" the contract. He says he didn't know that SDRC was Joop Bollen. Why didn't he ask who or what SDRC was? We're waiting to see what Mr. Bollen has to say.


  4. I want to add to my rejoinder to Mr. Buckingham: there is no question in my mind that if the Democrats were in power when this happened, the same questions should be asked. Those questions would probably make me uncomfortable and resentful enough that I might think of them as name-calling. Thank goodness we could count on Mr. Tsitrian to ask them under those, purely hypothetical :), circumstances.