Northern Beef repaid Daugaard-era loan
PIERRE — Northern Beef Packers received and then paid back a $3 million loan from state government last year, according to a spokesman for the governor.
The loan served as bridge funding for the now-defunct and bankrupt Aberdeen meatpacking project to temporarily cover operating costs.
South Dakota Development Corp., a quasi-state agency, provided the loan.
Gov. Dennis Daugaard authorized a $2 million grant from the Future Fund to SDDC on Dec. 30, 2011. SDDC used the grant and other available funds to make the loan.
Northern Beef Packers repaid the loan Sept. 26, 2012, according to Tony Venhuizen, a spokesman for the governor.
Venhuizen said the SDDC members placed stringent conditions on the loan.
As one example, a mortgage was placed against the Eden Prairie, Minn., home of Oshik Song, the general partner in the Northern Beef Packers project.
A register of deeds record from Hennepin County, Minn., shows that a mortgage was previously held against Song’s home by SDIF No. 6, one of the loan pools managed for EB-5 projects by the Aberdeen-based investor recruiting company, SDRC Inc.
Daugaard wasn’t aware at the time he approved the assistance for Northern Beef at the end of 2011 that there had been a redirection of $550,000 from a previous Future Fund grant of $1 million that was made to Northern Beef.
The previous grant was approved in December 2010 by then-Gov. Mike Rounds to reimburse Northern Beef for $1 million of construction and equipment costs.
Northern Beef redirected the $550,000 to SDRC Inc., the company that assembled $59 million in financing from immigrant investors for Northern Beef under the federal EB-5 visa program.
SDRC hired former Rounds administration official Richard Benda in 2011 to serve as loan monitor overseeing Northern Beef.
The $550,000 was used to pay Benda’s salary at SDRC for two years. A lawyer for Northern Beef said the money was placed in escrow to cover Benda’s annual salary of $225,000.
Benda was secretary of tourism and state development from 2006 until the end of the Rounds administration in early January of 2011.
While secretary, he signed state contracts with SDRC president Joop Bollen of Aberdeen in 2009 and 2010 giving SDRC the administration and management responsibilities for the EB-5 program in South Dakota.
Benda, during his final week of work for state government, arranged for the $1 million payment to be made to Northern Beef and hand-delivered the check the next week to the company after Daugaard had taken office.
State officials have concluded that Northern Beef didn’t violate state laws by paying $550,000 to SDRC.
“Most Future Fund payments, including the one to NBP, are issued on a reimbursement basis,” Venhuizen said in an email response to a reporter’s questions.
“Accordingly, proof of compliance with the conditions for payment — such as expenditure of funds by the grant recipient — must be provided before the funds were distributed.
“In the case of the $1,000,000 grant to NBP, proof of expenditure was provided to GOED before the grant was disbursed,” he said.
The state contract with SDRC was terminated in September of this year by Pat Costello, Daugaard’s commissioner of economic development.
That step came after state Attorney General Marty Jackley reported to the governor discovery of the $550,000 diversion.
The Benda matter hadn’t been uncovered yet in 2012 when the Legislature approved a law, at the Daugaard administration’s request, that might apply to such incidents in the future.
The law states: “Any person who knowingly makes any material false statement or report, or willfully overvalues any land, property or other security, for the purpose of influencing an action of the Board of Economic Development, the Economic Development Finance Authority, any other loan or grant administered by the Governor’s Office of Economic Development, the Value Added Finance Authority, the Department of Agriculture, the Department of Environment and Natural Resources, or any other agency, instrumentality, board, commission, or authority of or created by the State of South Dakota, upon any application for a loan, grant, or other financial assistance for a business or agricultural purpose, or the renewal, extension, or modification thereof, is guilty of a Class 6 felony.”
Jackley said Thursday night he couldn’t discuss the $550,000 matter any further, outside of public record material, because of a federal and state courts requirement generally known as Rule 6(e) that establishes secrecy for grand jury matters.
“I can only confirm my letter to the governor was carefully worded and accurate,” Jackley said. “I would also suggest any prosecutor in a financial investigation with any experience would obtain and review many bank records and then not discuss under 6(e).”
Jackley issued a general statement Friday that said, in part, “The fact that I did not violate state law or my ethical duties by revealing additional information does not mean, as has been suggested, that no investigation occurred or that state, local or federal prosecutors are not fulfilling their separate responsibilities.”
Jackley added that the facts, as presented in news reports published Friday about Benda’s involvement in the $550,000 diversion, “would not support further action by state authorities at taxpayer expense beyond assisting federal authorities that have jurisdiction over the federal EB-5 program.”
He said the state attorney general doesn’t have any authority over the EB-5 program but he and his office will continue to cooperate with federal authorities.
“As an elected official my skin is thick, but the prosecutors and investigators in this case and the public deserve better reporting from reputable news sources,” Jackley said.