Rounds knew of Benda conflict in final days of term

U.S. Senate candidate Mike Rounds as governor knew his Cabinet secretary, Richard Benda, was going to work for an investor in the Northern Beef Packers plant about the time Benda approved a proposal to give the plant more state aid — or found out immediately afterwards but was not alarmed.

Benda, then the Secretary of Tourism and State Development, authorized an extra $600,000 in loans to Northern Beef on Dec. 23, 2010. That was a little more than two weeks before both he and Rounds left office.

A state audit later found Benda didn't "disclose his future employment plans" and should have been required to "remove himself from involvement in subsequent matters relating to (Northern Beef.)"

But Rounds said Tuesday he knew before leaving office that Benda was going to work in connection with the beef plant.

"My staff told me that when he was leaving state government, he was going to work for an investor in the beef plant," Rounds said.

UPDATE: This story has been changed to reflect Rounds' assertion Wednesday that he didn't approve the extra $600,000 in loans.

Rounds said he didn't recall when exactly he learned Benda would be going to work for a Northern Beef investor, making it impossible to say whether Rounds learned of Benda's future employment before Benda approved the Northern Beef money or immediately afterward.

Benda didn't identify which investor he would be working for, and Rounds said he didn't press. Benda went to work for SDRC Inc., a company managing EB-5 foreign investments for projects, including Northern Beef. On Tuesday, Rounds said he now feels Benda "misled" him by not disclosing where he was going.

At the time, though, Rounds didn't ask Benda for more details.

"I said 'Good, I'm glad to hear that he's going to be actively involved in the beef plant,'" Rounds said in a live interview on the Argus Leader's "100 Eyes" online show.

Rounds' focus at the time, he said, was on which of his Cabinet secretaries "should I meet with to find out if they need assistance in finding other opportunities" — not whether they were "leaving government with a conflict of interest," as Argus Leader managing editor Patrick Lalley asked Rounds. Benda already had lined up a job, so Rounds said he focuapprsed attention elsewhere.

Benda didn't break South Dakota law by not disclosing this conflict and not removing himself from questions related to Northern Beef. The state audit found the Department of Tourism and State Development lacked even "a formal written policy... regarding ethics and conflicts of interest." The Governor's Office of Economic Development implemented such a policy this year after the audit's recommendations.

Rounds is in a close four-way race for U.S. Senate against independent Gordon Howie and Larry Pressler and Democrat Rick Weiland. He's been dogged by criticism of how he managed EB-5, a federal program he championed as governor to recruit foreign investors to South Dakota projects.

EB-5 provided most of the funding for Northern Beef. SDRC Inc. was given the contract to manage South Dakota's EB-5 program in December 2009, a year before Benda went to work for it as a loan monitor.

Rounds had championed Northern Beef as the cornerstone of his South Dakota Certified Beef initiative. He pitched it as a way to get more money for South Dakota by processing cattle in Aberdeen instead of in other states. Northern Beef got millions of dollars in state support, and Benda traveled to East Asia to try to recruit foreign investors for it.

On Tuesday, Rounds refused to second-guess his handling of EB-5.

He said it brought a lot of investment and benefit to South Dakota. And when asked if he regretted "not questioning this more deeply" when he was governor, Rounds declined. The only thing he'd have done differently, Rounds said, was pay more attention so he could better explain EB-5 today.

"If someone said, 'By the way, four years from now or five years from now... they're going to ask you a question on this'... yeah, let me go ahead," Rounds said. "But I'm not a prophet. I don't know what questions are going to be asked in (2014) about an activity that was occurring back in (2009)."

The EB-5 program, Rounds said Tuesday, "wasn't raising red flags anywhere for us."

"It was a proven, successful program for financing during a... major recession," he said.

Benda died by suicide in October 2013. At the time he was facing indictment for allegedly pressuring beef plant officials to redirect a state grant to pay his salary, though Benda was maintaining his innocence.

Rounds has said he'd have fired Benda if he knew what his cabinet secretary was doing. On Tuesday, he said he didn't know about any wrongdoing.

"Richard Benda did some things in the last couple of weeks (of Rounds' term) that I did not know about, and that I'd like to ask him questions about," Rounds said.