Letter laid out EB-5 privatization plans in 2007
South Dakota officials were closely involved with plans to bring in a private company to help run the state's EB-5 program in 2007, two years before the economic development effort was fully privatized.
But former Gov. Mike Rounds says he wasn't informed of the specifics, including EB-5 program leader Joop Bollen's role as the founder of that private company.
"I was not aware that he was signing items on his behalf," said Rounds, who was governor at the time and is in the spotlight as a candidate for U.S. Senate.
Rounds said he was briefed several times in 2007 on plans to reshape South Dakota's EB-5 program, including that there would be private companies involved. At the time, EB-5, which solicited investments from would-be immigrants, was run by the South Dakota International Business Institute, an arm of the South Dakota Board of Regents but under contracts with the Governor's Office of Economic Development.
"What they could not do at the current level through the Board of Regents office was ... set up a separate program where they could offer these partnerships," Rounds said. "The idea was to look more like a regular regional center (like the ones) that they were competing with."
That plan was implemented in January 2008, when Bollen, as director of SDIBI, signed a deal with SDRC Inc., a private company, to help run the EB-5 program. James Park of Hanul Professional Law Corp. signed for SDRC as its "director" — though Bollen himself had founded SDRC five days earlier.
Bollen didn't disclose his connections to SDRC, and officials last week said they hadn't known at the time. But Bollen had been up front about the rest of his plans for SDRC Inc., and wrote them down in a Nov. 8, 2007, letter to the federal United States Citizenship and Immigration Services.
"SDRC Inc, a separate corporation ... is currently being created to screen SDIBI recommended projects for final selection before investors are sourced, and to monitor funded projects for compliance purposes," Bollen wrote. "SDRC Inc will also function as the general partner in each of the project specific limited partnerships for which it receives a token ownership of 1 percent."
His letter said Hanul would control SDRC.
It's unclear what role Hanul played in the EB-5 company, and what role was exercised by Bollen himself. Two years later, when South Dakota gave SDRC full control of its EB-5 program on Dec. 22, 2009, Bollen signed for SDRC as its president. He had quit his state job that same day.
Democrats have tried to make EB-5 a political issue as they hope to beat Rounds and Gov. Dennis Daugaard in the November general election. The 2007 USCIS application and the 2008 memorandum of understanding both were included in a packet of EB-5 documents Democrats distributed last week at a news conference.
EB-5 is a federal program allowing immigrants to get green cards in return for $500,000 investments in U.S. projects. South Dakota was one of the pioneers in EB-5 financing under Bollen and former Cabinet secretary Richard Benda. But in recent years, South Dakota's EB-5 program has been investigated by state and federal authorities, and Benda died in a suicide last year as state officials prepared criminal charges.
The true tale of EB-5 in South Dakota has come from audits, interviews and lawsuits since Benda's October 2013 death. Much of the focus has been on the latter years of the program, after South Dakota fully privatized its EB-5 program and first Bollen and then Benda left state employment to work on EB-5 for SDRC Inc., the private company.
Recent documents have shed light on the earlier years of the EB-5 program, when it was run by a state office but SDRC played an increasingly large role in running the program.
Rounds said the emphasis in 2007 briefings he received was how South Dakota needed to change its EB-5 program to compete with other programs around the country.
"When we discussed it, I wanted to know if we would be competitive with the other regional companies," Rounds said Tuesday in an interview with Argus Leader Media. "The discussions we had was, we have to be in the market. We have to be similar to the other ones. Otherwise if our costs are not competitive, they'll simply go to the other regional centers and make investments (there)."
People involved in those discussions included Bollen, development secretary Richard Benda and business leaders who hoped to benefit from EB-5 investment.
To restructure South Dakota's EB-5 program, Bollen needed approval from USCIS. In addition to bringing in a private company, Bollen wanted to allow EB-5 investments in western South Dakota and expand the number of industries it could recruit EB-5 investments for.
Rounds wrote a letter to USCIS in support of the revision, certifying that the western counties qualified as "rural" under federal law.