South Dakota lawmakers are reviewing what happened after an investigation revealed hundreds of thousands of state dollars went missing. Lawmakers spent 45 minutes with Attorney General Marty Jackley behind closed doors consulting about a possible legal situation. Otherwise Jackley and economic development leaders talked with legislators in an open meeting about the state and federal investigations.
Attorney General Marty Jackley begins the GO-AC meeting with a chronological rundown of an investigation by South Dakota’s Department of Criminal Investigation. He says it starts on December 2, 2010 when then-Secretary of Tourism and State Development Richard Benda talked with the South Dakota Regional Center about a new job related to the Northern Beef Packers plant.
"That essentially next week, on December 8, 2010, the South Dakota Department of Tourism agreed to issue payments on a reimbursement basis for construction or equipment costs not to exceed $1 million to Northern Beef," Jackley says.
Jackley says the investigation shows that, before the end of that month, Richard Benda – through the Department of Tourism – amended two Future Fund grants. He says the new agreements added $600,000 in state dollars. A draft criminal complaint, which was never issued, accuses Benda of diverting $550,000 of that increase to himself through his new employer, SDRC Inc.
The attorney general says his office called a grand jury in October to review evidence for charges of grand theft and embezzlement, but authorities never followed through. That’s because Benda died of a gunshot wound days before the grand jury. His death is ruled a suicide.
Federal investigators are looking into potential wrong-doing related to the EB-5 program. The nationwide immigration program vets foreign citizens willing to invest in American companies and create jobs…in exchange for the potential of a United States green card. The failed Northern Beef Packers plant relied heavily on funding through EB-5, and the state investigation shows the missing $550,000 went to Richard Benda for EB-5 loan monitoring services for Northern Beef.
Attorney General Marty Jackley says he’s turned over everything from DCI’s investigation to federal authorities, and he believes some EB-5 concerns are beyond South Dakota’s jurisdiction. He says that applies to matters of the approval process, loan monitoring fees and perjury issues.
"[That is] including the issue of whether or not there was $550,000 of that Future Fund grant used for loan monitoring and then a double-dip of private investors’ money used for that loan monitoring," Jackley says. "We don’t have the ability – and I don’t believe you have the statutory authority – to seek that documentation from federal authorities. I think that’s a matter of their sole jurisdiction."
But that doesn’t satisfy all lawmakers. Democratic State Representative Susan Wismer submits a dozen questions about EB-5.
Pat Costello is Commissioner of the Governor’s Office of Economic Development. Costello says the state now administers the EB-5 elements on its own, and South Dakota has a minimal role in connecting projects with the federal immigration opportunity.
"SDRC would not only certify to the USCIS that it fell within the industry classification and geographical area, but they were actively pooling the loan programs," Costello says. "They would be the general partner for the loan programs. They would solicit and they would do all those other things, the marketing pieces of it. We’re not doing that."
Costello says he can’t answer questions related to the reason South Dakota canceled its agreement with SDRC based on the threat of litigation. He says legal counsel doesn’t allow him to talk about the average pay for jobs created using EB-5, either.
The commissioner addresses the question of how many jobs EB-5 has created in South Dakota by explaining that the regional center claims more than 5,600 jobs since 2004.
"Inherently, some jobs of the jobs created may be in Minnesota, may be in Nebraska, may be outside of the state of South Dakota, so we don’t have any way of knowing or classifying whether those are South Dakota," Costello says. "Now clearly the direct jobs related to the projects, and you know the list of projects, and we know they have a significant number of South Dakota employees, but we believe that 5,658 number is an American number. It includes indirect jobs and so may be overstated from I think what the Representative’s question truly was asking for."
Costello says the GOED doesn’t track whether South Dakotans are getting jobs created through the EB-5 program or if workers from out of state land those positions. He says he can’t discuss business specifics about EB-5 funding at the turkey plant in Huron or how many foreign investors lose the money they put into South Dakota projects through EB-5.
South Dakota investigators looked into concerns that Richard Benda double-billed the state for some travel reimbursements. They aren’t pursuing criminal action on about $5,500 in duplicate receipts. Government agencies implemented recommendations from an audit to prevent paying the same reimbursements twice.
A resolution approved during the 2014 legislative sessions authorizes the Government Operations and Audit committee to explore results related to the office of economic development audits. Lawmakers can request information and question people through December 1st.