Guest column: Media distorts EB-5 facts
This guest column was written by Rory King, an attorney at Bantz, Gosch & Cremer in Aberdeen.
There have seen so many misstatements reflected in the media regarding the EB-5 program and Joop Bollen I felt it necessary to speak out. The tragic suicide of Richard Benda, former Secretary of Economic Development, has turned the situation into a media feeding frenzy, driven by a definite agenda which has little to do with the truth and much to do with sensationalism.
I was the attorney for Northern Beef Packers from its inception, and have knowledge of the underlying facts. I write this letter, however, not as Northern Beef’s attorney, but as a private citizen concerned for the truth.
Let’s start with the fact that it is very difficult to attract investment capital to rural South Dakota for the purpose of value-added agriculture. Despite the potential obstacles, a local cattleman – who knew Aberdeen was one of the biggest cattle marketing sites in the country and that the cattle in this area are the highest quality in the world – was convinced that a beef-packing plant in Aberdeen, close to the producers, would be successful, especially in view of the expanding Asian market for quality meats. Then came the 2008 banking crisis, and obtaining financing became even more difficult.
Enter the EB-5 immigration program, a federal program, enjoying bipartisan support, designed specifically to fill this financing void. It offers permanent visa status to foreign investors and their families if they will invest a certain minimum amount, in certain industries, in certain parts of the country. It would have been the height of foolishness for South Dakota not to participate in this program. Originally, it was administered by Bollen, on behalf of the International Business Institute of Northern State University. This required Bollen to evaluate applications for financing, to assure that they complied with federal regional center requirements and guidelines, and to supervise the effort to obtain investors for the project. Because of the risks associated with this kind of an effort, and because all, except one, of the other states participating in the program had private companies administering the program under contract with the states, it was decided that South Dakota should follow suit. A private company was formed and entered into a contract with the state of South Dakota, the same procedure followed by every other state involved in the program, except for one.
Bollen and his company have been successful in attracting over $400 million for the benefit of South Dakota businesses, financing that probably would not have been otherwise available – and money which would not have been raised, in my opinion, had a state bureaucrat been running the program. South Dakota’s program was administered in exactly the same fashion – by private contractor under an agreement with the state – as that of all but one of the other states participating in the program.
One of the projects for which the program raised money was Northern Beef. Due to Bollen’s efforts, some $90 million was raised and spent in Aberdeen. As a result, Aberdeen has a state-of-the-art beef packing plant which, when market conditions for beef processing become more favorable, will come back into operation, for the financial benefit of the entire region.
It was the foresight and drive of Mike Rounds and his administration which brought well over $400 million into South Dakota, resulting in the creation, directly or indirectly, of over 8,000 jobs. It is unfortunate that Northern Beef could not make it first time around. Because of changed conditions, the company was just unable to raise the operating capital needed to sustain its operations. That wasn’t the fault of Mike Rounds. Aberdeen will have a thriving beef processing facility in the near future, providing tremendous benefits to the entire region, and the state has attracted millions of dollars of investment capital for other businesses, because the Rounds administration had the foresight to support the federal EB-5 program.
I am also very concerned by the media misrepresentation of the “missing $500,000.” There simply is no “missing $500,000.” Northern Beef’s loan agreement with its lender – Bollen’ s company – required it to reimburse the company for the lender’s hiring of a “loan monitor,” for a period of two years, to make sure that the lender’s loan funds were spent according to the loan contract. That is a common, necessary provision in any loan contract. Northern Beef was also required to reimburse its prior lender, in a similar amount. Northern Beef, in compliance with its contractual obligation, made the $500,000 payment to its lender which used it to pay the loan monitor – Richard Benda – and Benda spent virtually all of his time in the plant, monitoring the expenditure of loan funds, to make sure loan funds were used as budgeted by Northern Beef as set forth in the loan agreement, until the construction was final and the operating loan from White Oak was closed.
There are no missing funds. There are no secret payments. This payment was made in simple discharge of a contractual obligation of Northern Beef to its lender.