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More info on GOED, EB-5 may come out at Friday hearing

South Dakota lawmakers will hold a hearing Friday on the controversial EB-5 economic development program and the troubled Northern Beef Packers plant in Aberdeen. (File photo)

PIERRE -- The legislative hearing set for Friday morning might be the only one that will be held regarding financial practices in the Governor's Office of Economic Development and its involvement in the federal EB-5 immigrant investor program.

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The Legislature's joint committee on government operations and audit -- known as GOAC -- will receive reports from two private audit firms and the state Department of Legislative Audit, followed by a briefing from Pat Costello, the governor's commissioner of economic development.

Costello contracted for the two reviews and the audit. The meeting comes one year after Gov. Dennis Daugaard's office reportedly received a subpoena from a federal grand jury seeking information.

The full scope of the subpoena remains a government secret, but it has been disclosed that information was sought about the travel of Richard Benda when he was state secretary of tourism and state development from 2006 through early 2011.

Benda was found dead at a rural Lake Andes farm Oct. 22 from a shotgun wound to his abdomen that authorities determined was suicide.

Benda was under investigation by state Attorney General Marty Jackley at the time of his death. A federal investigation was also under way into matters involving the Northern Beef Packers project at Aberdeen and the EB-5 visa program for foreign investors.

Benda was deeply involved in both Northern Beef and EB-5 while he was a Cabinet secretary in the Rounds administration and later as a private citizen after Daugaard didn't retain him.

Jackley isn't on the agenda for Friday. The legislative committee hasn't scheduled a second meeting.

The chairman, Sen. Larry Tidemann, said Wednesday he doesn't know if another meeting will be held.

"It will be up to the committee," Tidemann, R-Brookings, said.

The committee of five senators and five representatives will start work at 8 a.m. Friday, even though it's an off day for the full Legislature.

A public hearing is set for 10 a.m. but Tidemann said he has heard from nobody about testifying. The meeting is scheduled to finish at 11:30 a.m.

"This is addressing a very current and pressing issue," he said.

Tidemann said he's spoken with Jackley. "That's still open," Tidemann said about whether Jackley will be asked to testify at a later date. "We would have to have a court order."

Jackley said Wednesday he doesn't know why he isn't on the Friday agenda.

"As I have publically stated, I would be able to provide further information regarding the attorney general's investigation as long as a court order is obtained for any information outside the public record including grand jury material," Jackley said.

"Said order would preferably set forth the parameters and any limitations for any testimony or materials outside of the public record consistent with state law and the professional rules of ethics, similar to the order for disclosure to the Auditor General," he continued.

Tidemann said the auditing firms' reviews and the Auditor General's inspection of GOED's finances found many of the same matters that needed correction.

"There are 31 things that have been done that shouldn't have been done that way," Tidemann said.

Also missing from Friday's agenda are other individuals involved with SDRC Inc. The Aberdeen company held state contracts to manage and administer EB-5 activities and appears to have collected several millions of dollars in fees from investors.

Benda and SDRC president Joop Bollen signed the contracts in 2009 and 2010.

Bollen represented state government on EB-5 matters starting in 2003 while he was head of the publicly-funded South Dakota International Business Institute at Northern State University. He incorporated SDRC in 2008 and left SDIBI in 2009.

The EB-5 program operated largely out of public view for the past decade despite raising hundreds of millions of dollars from citizens of other nations for projects in South Dakota.

They included dairies, Dakota Provisions in Huron, Northern Beef, a generation plant for Basin Electric, the Day County II wind farm and the Deadwood Mountain Grand hotel and casino.

Money also was raised for a third round of financing for Dakota Provisions and for the Buffalo Ridge II wind farm, but the loan pools for those projects were disallowed by federal authorities.

Official correspondence from Bollen also shows the Hyperion oil refinery proposed for Union County was identified as a potential EB-5 recipient but the project didn't proceed.

After receiving the subpoena last March, the governor requested that the attorney general look into matters involving Benda. Jackley reported three instances of double-reimbursement for air travel including two trips to China.

Jackley also looked at grants made by then-Gov. Mike Rounds through Benda's office that ultimately were intended to benefit Northern Beef.

Jackley reported Northern Beef re-directed $550,000 from a $1 million Future Fund grant approved by Rounds in December 2010. The $550,000 went to an escrow account from which Benda's salary was paid by SDRC to be the EB-5 loan monitor for Northern Beef.

Legislative Audit reported that Benda increased by a total of $600,000 the amounts of two other grants from the Future Fund in December 2010. Those grants went to the South Dakota Development Corporation.

One grant went to Northern Beef. The other was used for housing related to the project.

State authorities looked at Benda's expense vouchers while he was secretary and found assorted instances of unusual billing. Legislative Audit identified expenses that should have been paid by SDRC rather than state government, as well as expenses that lacked documentation.

State Auditor Steve Barnett has proposed a rule change requiring that expense vouchers be submitted within 60 days. Barnett's office processes vouchers for payment. Barnett isn't on the Friday agenda.