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The state's role in financing the bankrupt Northern Beef Packers in Aberdeen will be an issue in the GOP primary campaign, candidates say. (File photo)

GOP candidates: Northern Beef/EB-5 will be campaign issue

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The finances and bankruptcy of Northern Beef Packers in Aberdeen will be an issue in South Dakota's crowded Republican U.S. Senate primary, the candidates say.

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Former Gov. Mike Rounds holds a commanding lead in early opinion polls and fundraising, and the four other Republican candidates say they will raise concerns about his leadership as it relates to the state's economic development efforts to support Northern Beef.

"He was either incompetent or he turned a blind eye to this," said state Rep. Stace Nelson, of Fulton, the most strident critic of Rounds’ and the state's involvement in financing Northern Beef.

The five candidates will debate for the first time at 10:30 a.m. Saturday at the Ramkota in Pierre as a part of the annual South Dakota Newspaper Association conference.

Rounds defends his decisions as governor and the federally sanctioned EB-5 program that funnels foreign investments to private projects. He calls the EB-5 program a good deal for South Dakota and said he approved state grants only after the operators of Northern Beef satisfied him that they would be a viable operation.

"It was private investment coming in to do it,” Rounds said. “If the beef folks have a business plan, and they're putting their money into it, we welcome that. We do that all the time. Lots of folks come in and say, 'We've got a project.’ ”

“Those facilities are going to be built someplace. Once that infrastructure is in place, it's really tough to move it. Once it's here, it's to the benefit of South Dakota and its citizens."

Nelson's concerns range from national security to economic development grants handing over taxpayer funds to for-profit companies.

“What is really bothersome is that during Mike Rounds' administration, he went out of his way to court the communist Chinese to come into South Dakota to run a major food processing plant, to a major South Dakota exporter of beef," Nelson said. "China is not our friend. If they (individuals) have money, it's because the communist Chinese government wants them to have money."

Under EB-5 ("employment-based" immigration fifth category), an organization approved by the federal government selects economic development projects to promote to foreign investors. Those investors can sink $500,000 into a project and get a U.S. visa granting themselves and family members residency in the United States.

Nelson goes on to compare Northern Beef to the failed Solyndra solar project that received financing aid from the Obama administration. He includes the EB-5 program, run by a for-profit company under a contract with the state, and economic development grants approved by Rounds.

"This is the unholy marriage of South Dakota taxpayer money with crony capitalism," Nelson said. "This isn't Republicanism. Republicanism is for limited government, for the free market. Having the state involved with slush funds, where bureaucrats and politicians can pick winners and losers in our economy, is the exact opposite of Republicanism."

Senate candidate Jason Ravnsborg said that, like Nelson, he is troubled by the concept of the EB-5 program, which has come under fire in other states and by some in Congress.  

"Our citizenship shouldn't be for sale," Ravnsborg said. "Taking money from the Chinese, a communist country -- they have an interest -- why are they sending money to the U.S.? They are definitely not our ally. I don't think we would take money from Iran, at least I hope not. Where the money comes from is important."

Senate candidate Annette Bosworth issued a written statement citing concerns raised outside of South Dakota about Iranian terrorists showing interest in the EB-5 program.

Bosworth wrote: "We need to take a serious look at the EB-5 program in light of Sen. Chuck Grassley's investigation where he found two primary problems after whistle-blowers came forward, the first is that the program is susceptible to political pressure and favoritism and the second is the possibility that the program could be abused by Iranian operatives with connections to terrorism wanting to infiltrate the United States."

Senate candidate Larry Rhoden said he, like Bosworth, is reluctant to "pile on" the criticism of Rounds, but he said the issue will be unavoidable as the primary race heats up.

"There was clearly a lack of oversight by the state, at a minimum. That's no small thing. It doesn't mean criminal activity or corruption, but it's no small thing," Rhoden said. "It remains to be seen whether it will be a small issue or great big issue, but it's safe to say it is an issue for Mike Rounds. "

Rhoden served in top leadership posts in the state Legislature during Rounds' governorship and said he was unaware of the EB-5 program, and that bothers him.

Rounds said he believes he made prudent decisions regarding Northern Beef.

He approved a $1 million Future Fund grant late in 2010 to Northern Beef, only after the plant had been constructed and looked to be ready to begin operations.

"I had indicated from day one that until such time as they were operational, they had their act together, we would be bystanders," Rounds said. "At that time it appeared they had their act together and that they were moving forward."

And, he said, he admonished the plant owners in person to pay their overdue local property taxes.

"I went and visited them because I wanted to see it. At that time, I told them I had just heard they had not paid their property taxes yet. I said, 'The one thing you will do, you need to pay your property taxes. Period, end of story,' " Rounds said. "They said, 'We will pay our property taxes.' I said, 'That's a condition I'm telling you face-to-face.' I didn't want them receiving a grant from me and then shorting a local unit of government."

Rounds said he remains bullish on prospects for Northern Beef Packers, which has been purchased by an investment group after bankruptcy, and on EB-5 as an economic development tool.

Rounds said as the Corn Belt moves north, ranchers will be looking for facilities to slaughter their cattle, and Northern Beef will fit the bill. More importantly, he said, cattle will be finished in South Dakota feed lots before slaughter, what he calls a "huge value-add" for the state's economy.

He said the slate of other successful projects funded in South Dakota by EB-5 money convinces him that it's an offer too good to refuse. He hopes the Daugaard administration resumes the program.

"I'm a proponent of the EB-5 thing because I saw the good projects that were successful in South Dakota," he said, citing a turkey processing plant in Huron and the Deadwood Mountain Grand casino-entertainment complex, among others.

He does not share the national security concerns of his opponents, saying the federal government treats EB-5 investors the same as other legal immigrants.  

"I was assured that they underwent the same security reviews as anyone applying for a green card to come into the United States, that they had to pass all the stringent security guidelines as anybody else," Rounds said.

Republican voters will choose a candidate for the November general election on the June 3 primary.

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