In 2012, state took action to control spending by firm linked to foreign visas

By Bob Mercer Capitol Correspondent PIERRE -- A document released Tuesday shows the Governor's Office of Economic Development asserted control in 2012 over the bank deposit accounts of the company that was marketing and recruiting foreign EB-5 vi...

By Bob Mercer
Capitol Correspondent

PIERRE - A document released Tuesday shows the Governor’s Office of Economic Development asserted control in 2012 over the bank deposit accounts of the company that was marketing and recruiting foreign EB-5 visa investments in South Dakota projects.

The contract with the Aberdeen-based company, South Dakota Regional Center, was terminated Sept. 19 by Pat Costello, state commissioner of economic development.

The original 2009 contract required establishment of an expense fund and two indemnification funds that were intended to protect state government.

The money was to come from portions of proceeds SDRC earned from its work. SDRC also was required to obtain $3 million in insurance to protect state government.


That version of the contract required SDRC to file financial status reports, but it didn’t give GOED any control over the money in the three funds.

The original contract was signed by Richard Benda, who was secretary of tourism and state development for Gov. Mike Rounds.

After Gov. Dennis Daugaard took office in 2011, he split the department into different offices and didn’t retain Benda.

That, in turn, triggered the decision to strengthen GOED’s reach regarding the money in the three funds.

“In 2012, GOED leadership learned that no deposit control agreement was in place with SDRC and believed that this should have been done at the time the SDRC contract was entered into in 2009. They asked that SDRC sign these agreements as a consequence,” Daugaard spokesman Tony Venhuizen said Tuesday.

The changes prohibited the bank from releasing money from the accounts without written authorization from GOED.

The original contract also called for money in the funds to be returned to GOED if the contract was ended.

That clause was invoked by Costello in his Sept. 19 letter to SDRC President Joop Bollen, terminating the contract. Costello told Bollen all funds needed to be transferred to the state treasurer immediately.


Costello also told Bollen that SDRC had failed to provide the bank number for the second indemnity fund. Costello demanded that Bollen turn over the number to GOED.

The federal EB-5 program allows foreign investors to loan $500,000 to U.S. projects and, in return, to stay in the U.S. for two years. If the investment generates the required numbers of jobs, a 10-year visa can be granted and the investor can later apply for renewals of it.

The EB-5 investments are handled through federally approved regional centers. SDRC served as South Dakota’s regional center under the 2009 contract.

The contract called for negotiated portions of SDRC fees to be paid into the first indemnity account. In turn, that account was to be swept at GOED’s direction so that the expense account reached and maintained a balance of $350,000.

Further, the second indemnity account was to be funded at $1 million no later than Dec. 31, 2011, and a $1 million balance maintained in that account.

As of Tuesday evening, the Daugaard administration hadn’t yet responded to a reporter’s request made Monday for the financial data regarding the three accounts and the reports that SDRC was required to file with GOED.

In the termination letter, Costello directed Bollen to take down or modify any websites or other advertisement or promotional materials “to remove any reference to SDRC Inc., acting as operator or manager of the regional center or any other references to SDRC Inc.’s affiliation with the Governor’s Office of Economic Development or the state of South Dakota arising out of or related to the contract.”

Costello didn’t state in the letter a specific cause for terminating the contract, which was scheduled to run through June 30, 2014.


Benda, who originated the contract with Bollen in 2009, was found dead of a gunshot wound Oct. 22 on a farm near Lake Andes operated by his sister and brother-in-law.

The brother-in-law said Benda had been hunting while the couple was away for the weekend.

Authorities are investigating Benda’s death. Daugaard revealed last week that state and federal investigations had been under way regarding misconduct in the Governor’s Office of Economic Development prior to his administration. Daugaard also said he ordered an internal review at GOED.

Under the 2009 contract, SDRC was responsible for retaining “foreign agents, attorneys, accountants and other consultants” but needed GOED’s consent for them.

What To Read Next
Get Local


Must Reads