Rounds blames Benda in EB-5 scandal

PIERRE — In two letters released Monday answering questions from legislators, former Gov. Mike Rounds said former Cabinet member Richard Benda was the only state government official who acted illegally in the EB-5 foreign investment program established during his administration.

“I cannot speak to the singular actions of Mr. Benda,” Rounds wrote. “Sadly, we will never know what he did.

“What we do know is the attorney general had summoned a grand jury. The attorney general has stated that his investigation found no evidence of involvement from additional state officials. What occurred was an isolated incident with a single state employee — allegedly taking place before and after his employment with state government. The attorney general has clearly stated I was not a target of his investigation.”

Rounds’ two letters and additional pages of answers to questions will be discussed Wednesday by members of the Legislature’s Government Operations and Audit Committee.

Sen. Larry Tidemann, R-Brookings, the committee chairman, asked Rounds and Gov. Dennis Daugaard for written answers to questions rather than request they make personal appearances. Tidemann asked Joop Bollen, who ran the EB-5 program for state government, to testify, but Bollen offered to supply written answers instead.

U.S. Attorney Brendan Johnson, through an intermediary, declined the committee’s invitation to comment about whether a federal investigation was underway.

A subpoena from a federal grand jury in March 2013 sought eight sets of information from Daugaard’s administration, including Benda’s overseas trips involving EB-5 investor recruitment while he worked for Rounds. The subpoena triggered a state investigation.

Benda died Oct. 20, 2013, of what investigators determined was a self-inflicted shotgun wound to the abdomen. None of the information about the federal and state investigations or alleged criminal activity was known publicly until after his death.

The alleged criminal activity involving an EB-5 project happened at the end of Rounds’ administration in December 2010 and in January 2011 as Daugaard took office as governor. Daugaard was Rounds’ lieutenant governor.

State Attorney General Marty Jackley divulged on July 29 this year that he was ready to arrest Benda last October and had scheduled a state grand jury for later that month. Benda died before the grand jury could meet.

No one has been criminally charged.

Jackley, who was appointed by Rounds in 2009, investigated Benda at the request of Daugaard regarding billings for trips to China.

Jackley found two questionable financial transactions of greater significance. Benda allegedly increased the amount of a state grant by $550,000 that was eventually provided to Northern Beef Processors in Aberdeen. Meanwhile, Northern Beef acknowledged making a $550,000 payment to SDRC Inc. SDRC was the Aberdeen company run by Bollen that managed the EB-5 foreign investor program for state government starting in 2009. Benda signed the state contract with SDRC while he was state secretary of tourism and state developmentfor Rounds.

Benda went to work for SDRC in 2011 as a loan monitor on the Northern Beef project after Daugaard didn’t retain him in the new administration.

Rounds said in his responses this week to the legislative committee that he had “no knowledge” of the funds Benda allegedly diverted. Rounds further said he is “not aware” of any discussion between anyone in state government and Northern Beef concerning the $550,000 transaction.

Rounds signed a grant in December 2010 for $1 million to reimburse Northern Beef for expenses in its project.

According to Rory King, a lawyer for Northern Beef, the company was required under an agreement with SDRC to provide $550,000 to SDRC for a loan monitor. Northern Beef was receiving EB-5 financing through SDRC.

A second grant made by Rounds to the South Dakota Development Corporation in late 2010, meanwhile, was increased by $550,000. It hasn’t been publicly determined whether Benda acted alone in adding the $550,000. The development corporation, a quasi-government agency that makes business loans and grants to projects, then forwarded the grant to Northern Beef.

Rounds said in his answers to legislators that he wasn’t involved in the “specific transactional details” of the contract agreement reached between Benda and Bollen in 2009 for SDRC.

Private attorneys for Bollen and Benda assembled the contract. Jackley said the attorney general’s office wasn’t involved and generally hasn’t been allowed to participate in state economic-development matters under recent governors.

The five-year contract gave SDRC private management and administrative control of the EB-5 program for state government. The Daugaard administration terminated the SDRC contract last September after learning results from Jackley’s investigation.

EB-5 is a federally authorized program that allows foreign investors who loan or invest at least $500,000 apiece in job-creation projects to be considered for visas that allow them and their families to live anywhere in the United States.

The Daugaard administration isn’t seeking any new EB-5 projects.

Daugaard publicly released his answers to the committee’s questions late Monday afternoon. In many instances, he referred the questions to the Rounds administration or the attorney general.

Follow @pierremerceron Twitter.