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Audit: Benda helped increase beef plant grant

Former state economic development director Rich Benda made last-minute increases to state grants given to Northern Beef Packers before he left his state job and went to work helping the beef plant in 2011, an audit found. (File photo)

By Dirk Lammers

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SIOUX FALLS (AP) — South Dakota's former economic development director used his public position to help his future private employer get a bigger grant for a struggling beef processing plant, according to a state audit released Thursday.

The Department of Legislative Audit report found that Richard Benda was working out a new job with SDRC Inc. in December 2010 while still leading the Department of Tourism and State Development. SDRC recruited foreign investors for the Northern Beef Packers plant in Aberdeen and other projects in the state.

Benda was on his way out the door when he amended two Future Fund grant agreements with the South Dakota Development Corporation to give Northern Beef an additional $600,000, the audit found. On Feb. 1, 2011, $1.2 million of the $2.05 million was given to Northern Beef, but $850,000 was returned to the Future Fund.

"They never used the increase that he authorized," said Tony Venhuizen, spokesman for Gov. Dennis Daugaard.

Benda was found dead Oct. 22 with a fatal shotgun wound. His death was ruled a suicide.

The audit declined to wade into Attorney General Marty Jackley's findings that $550,000 of a $1 million state grant given to Northern Beef for construction and equipment costs was improperly diverted to SDRC to pay EB-5 immigration loan monitoring fees. Jackley also found that Benda had double-billed the state for three flights.

The audit found a "material weakness in policies and procedures concerning potential conflict of interest" and suggested that the Governor's Office of Economic Development create a disclosure policy.

"Finally, we believe that the use of the $550,000 is a matter between private parties and consequently not within the scope of our audit." Auditor General Martin Guindon wrote in the report's cover letter.

In October, Daugaard announced an investigation into possible financial misconduct before his administration. The news came a day after Benda's funeral.

Benda had been informed in mid-November 2010 that he would not be retained when Daugaard took office. Benda accepted a loan monitor job with SDRC, a privately held Aberdeen company that recruited foreign investors for the failed Northern Beef Packers plant and other ventures in the state.

The Governor's Office of Economic Development for years contracted with SDRC to administer the federal EB-5 program, in which foreign investors can secure permanent residency for as little as $500,000. South Dakota has since canceled the contract.

No charges have been filed, but a federal investigation into the use of the EB-5 program in South Dakota is ongoing.

Northern Beef opened on a limited basis in 2012 after years of delays, but the company filed for bankruptcy protection in July because it lacked money to buy cattle for slaughter.

San Francisco-based investment banking firm White Oak Global Advisors submitted the winning $44.3 million credit-and-cash bid for the idled plant during a bankruptcy court auction in December. The sale closing is pending court approval.