State Has Five Years to Claim Unpaid Bank Franchise Tax from SDRC Inc.

The Dakota Free Press Guerrilla Legal Department offers the following pointers to the South Dakota Department of Revenue and South Dakota Attorney General to help them figure out under exactly which statutes they may investigate and prosecute Joop Bollen, EB-5 czar and admitted renegade banker.

SDCL 54-4-52: “No person may engage in the business of lending money without a license. A violation of this section is a Class 1 misdemeanor.”

Joop Bollen formed SDRC Inc. in January 2008. He engaged in the business of lending money through SDRC Inc. without a license. He committed a Class 1 misdemeanor.

SDCL 51A-1-9: “Concealment of bank transactions as misdemeanor. It is a Class 1 misdemeanor for an officer, director, employee or agent of a bank to conceal or endeavor to conceal any transaction of the bank from any officer, director or employee of the bank or any official or employee of the division to whom it should properly be disclosed.”

SDRC Inc. made loans to Dakota Provisions, Northern Beef Packers, and other projects from 2009 to 2013. It paid no bank franchise tax on those loans, which logically means it concealed those bank transactions from the Division of Banking.

SDCL 10-43-51: “Time for determination of tax on failure to file return or list income–Time of payment. If the secretary of revenue discovers from the examination of the return or otherwise that the income of the taxpayer, or any portion of the income, has not been listed in the return, or that no return was filed when one was due, the secretary may at any time within five years after the time when the return was due, determine the correct amount of the tax together with interest and penalty as provided in § 10-59-6. The tax, interest, and penalty shall be paid within ten days after the secretary of revenue has given notice of the tax, interest, and penalty to the taxpayer by registered or certified mail.”

The South Dakota Department of Revenue has said it needs to determine whether it can claim back taxes from SDRC Inc. SDCL 10-43-51 says clearly that it can, but the state needs to act now. The bank franchise tax is an annual tax. If it is due at the same time as federal income tax, then taxes for 2009 (a big enchilada year for SDRC Inc.) would have been due April 15, 2010.

Today is April 8, 2015. Banking Division, you’d better file your claim now.

SDCL 10-43-46: “False or fraudulent return or information with intent to evade legal requirements as misdemeanor–Civil penalty. Any person, corporation, or any officer or employee of a corporation, or member or employee of any partnership, who, with intent to evade any of the requirements of this chapter or any lawful requirements of the secretary of revenue pursuant to this chapter, makes a false or fraudulent return or statement or supplies false or fraudulent information is guilty of a Class 1 misdemeanor. In addition, the person, corporation, officer, employee, or member is liable for a civil penalty of not more than five thousand dollars, to be recovered by the attorney general, in the name of the state. The civil penalty is in addition to all other penalties in this chapter.”

The DFPGLD is not as sure about the application of this statute to Bollen’s situation. SDRC Inc. clearly evaded the requirements of the bank franchise tax chapter. However, it did not file a false or fraudulent return or information; it filed no return, no information. For the moment, we are willing to contend that in this case, providing no information constitutes an active falsehood and attempt to defraud the state.

SDCL 54-4-57: “Examination of records–Costs–Information–Forms–Application of other provisions. The division may annually, or as often as the director considers necessary, conduct an examination of business records and accounts of any licensee licensed under this chapter. The director may charge back to the licensee any cost associated with an on-site examination. The director may waive an on-site examination and only require an annual self-examination. If a licensee conducts a self-examination, the licensee shall provide any information requested under oath and on forms provided by the division by order or rule. The provisions of § 51A-2-35 apply to records and examination reports required under this chapter.”

During the state’s “investigation” of the EB-5 scandal, Bollen hid behind the pretense that the state cannot look at private business documents. The State of South Dakota far too casually acceded to that argument, even though Bollen clearly formed SDRC Inc. to skirt public oversight of the EB-5 activities he was charged as a public employee to conduct. Now that SDRC Inc. has a banking license, its records are subject to inspection by the banking division.

There’s likely much more in state law that we can apply to SDRC Inc’s shady banking and other practices. But if the State of South Dakota wants the money SDRC Inc. defrauded from the state in its EB-5 activities, these statutes make clear the first (and urgent!) points of legal action.


34 Responses to State Has Five Years to Claim Unpaid Bank Franchise Tax from SDRC Inc.

  1. Jeff Barth

    Not to make every effort to recover these monies would be dereliction of duty.

    For these past few years local government in Brown county has been forced to do without. Reduced road repair, reduced law enforcement along with higher taxes for county residents have been the result of.

    Let’s collect and correct this now.

  2. Any 2d-year law student could have made the case and prosecuted Bollen, et al. The AG’s willful blindness appears as a corrupted “see no evil”. . . . And the nearly absent SD media . . . so feckless.

  3. Why would the ever-frugal South Dakota state government ever leave any money on the table?

  4. mike from iowa

    Dereliction of duty happens when derelicts are elected to office. Cory,2 years ago Jackley said the state wasn’t going to attempt to retrieve money from the dead guy and last year they announced big plans to get that money back from the dead guy. Wet your index finger and hold it up to see which way the political winds are blowing. Listen to your wet finger,kola,it will tell you things.

  5. Nick Nemec

    There is still much to be learned about the SDRC Inc. and its relationship with the South Dakota power structure. South Dakotans are being cheated out of tax dollars rightfully owed and our leaders and law enforcement hierarchy don’t care. Why? Who is being protected?

  6. Who’s being protected? Whoever got the $2.4 million in bank franchise tax that was supposed to go to the Department of Revenue.

    Much to be learned—indeed. And if I were Governor, that new SDRC Inc. banking license would give me the ticket I need to learn all of it. I would ride my bike over to the Banking Division office and say, “I want to see every document you can get from SDRC Inc. under 54-4-57.” It would be that simple.

  7. Nick Nemec

    It is that simple Cory and the fact that our Governor and AG aren’t doing that makes this South Dakotan wonder why. Why is special deference being given to SDRC Inc? Is Mr. Bollen 100% owner of SDRC Inc? Does SDRC Inc have outstanding debt? I’m sure other smarter readers, have better, more insightful questions.

  8. mikeyc, that's me!

    Mr Barth-

    It’s the same thing credit unions do to our
    counties and school districts every day.

  9. Roger Cornelius

    If I were a betting man I’d say the state will let the statutes run out, it is a perfect excuse.

    By letting the statutes run out it would serve another purpose, keeping Bollen quiet. If the state should take Bollen’s “money” away from him do you think that he might start talking?

    At any rate, state government and the legislature will do whatever is necessary to protect and hush Bollen.

  10. Nick Nemec

    You’re absolutely right Roger, in this case, as far as the state officials with the authority to investigate are concerned, silence is golden.

  11. Troy Jones

    CH,

    I am not an attorney and not familiar directly with this law so take my comments in that light.

    I believe that if DOR is in settlement conversations the clock doesn’t expire. Before everyone goes ballistic, I can see two conflicting positions at the State:

    1) Getting maximum money which may require cooperation from Bollen. In exchange for voluntary forfeiture of maximum assets/money and not complicating things with bankruptcy court, they may have to compromise on criminal charges.

    2) Protecting maximum criminal options which may require some concessions on money because of double jeopardy rights.

    Personally, I go back and forth if this is the case. Somedays I’d prefer maximum criminal sanctions. Somedays I say just get the most money.

    My main point is it may be possible settlement conversations “freeze the clock” so we might not see something in the next week. My second is there is likely conflict between DOR (maximum money) and the AG’s office wanting maximum criminal options.

  12. larry kurtz

    Cory, i’m not a street sweeper but Troy reads like a GOPer shielding his governor from flying horse manure.

  13. Troy, at what point in the entire EB-5 investigation has the AG’s office indicated anything like zeal for maximum criminal options?

    O.K., with that out of my system, Troy raises a really interesting question. Do the aims of DOR and the AG have to be in conflict? Is Bollen really in a position to bargain (talking strictly legally here, never mind whatever nefarious scenarios we may cook up about who’s on the take, whose skeletons are buried in whose backyards and marked on Joop’s maps, etc.). If Bollen cheated on bank franchise tax, doesn’t DOR have a big stick it can walk into Joop’s office with and say, “Pay now”? Who needs voluntary forfeiture; they drag him into court, lay out the pretty clear-cut case, and clean him out. Then in comes the AG to do the same thing: show the laws Bollen broke, dump the documents, and rake him over the coals. Where’s the need for cooperation?

  14. I’d just as soon see the full federal EB5 prosecution of all involved, rather than this minute payback.

  15. Roger Cornelius

    Joop Bollen is probably counting on the state having conflicting positions on his tax evasion, it helps run down the clock.
    The conflicting positions the state has only helps to continue muddy the waters so hopefully no one will understand what is happening to South Dakota tax dollars.

  16. Deb Geelsdottir

    “mikeyc, that’s me! 2015-04-08 at 16:55
    Mr Barth-
    It’s the same thing credit unions do to our
    counties and school districts every day.”

    Ah, but credit unions offer a wonderful service to people of the community. I’ve had accounts at big banks and at credit unions. Credit unions pay higher interest and charge lower interest. They don’t pile fees on top of fees on top of fees. They aren’t trying to gouge the account holders to write big executive and stockholder checks.

    The money those account holders save goes right back into the community, rather than to stock holders around the country and CEO’s accounts in the Cayman Islands.

  17. Richard Schriever

    Oh come on guys – Joops a good ol’ boy.
    Why ya be’in so harsh??
    We don’t wanna make anybody mad now.

  18. Nick Nemec

    Troy, you mention bankruptcy court. Care to elaborate?

  19. Troy Jones

    CH & NN,

    Banks, other creditors, and taxing authorities get judgments in court with regard to what is owed. They then have to execute on that judgment which often gives the creditee an option of filing bankruptcy. As this is cumbersome and often drawn out, creditors/taxing authorities deem it better to settle whereby assets are turned over voluntarily because it is cheaper, they often get more money because the assets don’t atrit, and they get it sooner (time value of money).

    Plus you have the issue of the corporate shield where to the extent the assets are held personally (no longer in SDRC), the State has additional burden to get to personal assets (which compromise on criminal pursuit can solve).

    Finally, you have the issue of any charges of fraud. I heard it said fraud isn’t hard to prove but it is extremely time consuming as you have to prove intent which to large degree depends on building the case substantially on circumstantial evidence.

    Cory, you gave “hints” to the legal angles of pursuit but I think we do need to know if the 5 year window is a hardline or if the clock can be frozen. This isn’t Law & Order where cases get solved in an hour.

  20. Les, same there: is a rigorous federal prosecution mutually exclusive with state-level punishment?

  21. Troy, does the state have the authority to freeze a defendant’s assets pending prosecution for the crimes under discussion here?

  22. Troy, tax liabilities are not dischargable through bankruptcy. If we, the state, want want to bargain from a position of strength, we would certify the 2009 tax debt before next Wednesday, to preserve our claim on that money, and charge him with at least one misdemeanor whereby upon conviction, the tax debt could be ordered as restitution on the criminal sentence. That is also not dischargable through bankruptcy. If a person unlawfully takes or retains something, we generally don’t cast a blind eye out of fear they victim won’t be made whole. In this case we are not talking about a box of diapers from Walmart. We, the good people of South Dakota are the victim. Merely shrugging our shoulders on this is no longer acceptable. For starters, the DOR needs to certify the 2009 tax debt before April 15, 2015. If it doesn’t, we know the fix is in, and political capital as you put it, will have been expended so a select few can keep their pockets stuffed.

  23. Troy Jones

    Jim,

    I generally agree with you. And, something you infer and I’m vaguely aware of is for taxes piercing the shield is easier than for most creditors. And, while not dischargeable, bankruptcy can and will complicate actually executing on any judgment.

    I agree with you on filing before the deadline is critical if there isn’t a process of “freezing the clock” and removing the passed deadline as a defense. I don’t know if it applies in this situation but I do know there are a lot of situations where there is circumstances where the clock is frozen. If that is the case, it isn’t critical to file the claim before the deadline. As I said, I’m not competent to knew if it applies here. Do you?

  24. Troy Jones

    CH,

    I have no idea what rights the state has with regard to freezing assets. My guess is easier for felonies than misdemeanors but am just guessing. Filing a lien is likely easier but again just guessing.

  25. Nick Nemec

    Troy, I know what bankruptcy court is. When you brought it up it sounded as though you had some sort of inside information on SDRC and a potential bankruptcy filing. I asked you to elaborate, but I should have been more specific and asked:

    1) Are you aware of a pending bankruptcy filing by SDRC?

    2)Are you offering them advice on a possible tactic to slow down the process and avoid paying?

  26. mike from iowa

    Double Jeopardy is a reach. Yhis cast of Keystone Kop-like characters is South Dakota act like they are afraid to file charges against Bollen. No,they don’t want one trial let alone two.

  27. Troy Jones

    Nick, you read too much into things and jump to conclusions way to much. If I knew anything, it almost would be bound by some type of expectation of confidentiality and I wouldn’t say peep here. My talking is evidence I’m no more informed that every other John Q. Citizen.

    No I have absolutely no inkling, information, or even suspicion of bankruptcy. In fact, I hadn’t even given this issue even a thought for months. My comment was only because CH asserted there was a hard deadline and inferred the process was as easy as filing a claim. I wonder if there is a hard deadline in reality (asked question) and know resolution isn’t going to be easy. Why do you think prosecutions related to the 2008 meltdown are still trickling in?

    No, I’m not offering advice. I’m not a a lawyer and nothing that I’ve said would be a Eureka moment for even the most inexperienced lawyer.

    Further, I have no interest in giving them advice if they asked.

  28. Nick Nemec

    Just wondering Troy, I realize I’m not as savvy as other commenters here but for me your bankruptcy comment came out of the blue.

  29. Troy, people try to get around a statute of limitations when they have missed it. Right now the State hasn’t missed it for 2009 taxes due so it shouldn’t roll the dice thinking it may later find an exception to the five year window.

    SDCL 10-43-51 reads in part: “…the secretary may at any time within five years after the time when the return was due, determine the correct amount of the tax together with interest and penalty as provided in § 10-59-6. The tax, interest, and penalty shall be paid within ten days after the secretary of revenue has given notice of the tax, interest, and penalty to the taxpayer by registered or certified mail.”

    It doesn’t say ‘five years after the time the return was due, or five years after time the state realized the return was due.’

    I think it is pretty clear that if the state tries to collect after the 15th of this month, it is barred by statute from collecting on 2009. You could argue that only the calculation of what is owed has to be performed with five years, and not necessarily the notice of obligation. But then you would have to rely on a court to construct and interpret the statute in that manner. Why take the risk?

    If Joop obstructs the state’s clear authority to review records to calculate what is owed, you could may get a judge to extend the five-year time limit.

    Otherwise, demand inspection of 2009 records which is permitted by law (if the DOR hasn’t already), calculate what is owed, give Joop notice by registered or certified mail before the 15th, and by law he’s got 10 days to pay up. No reason the even let the five year limit become an issue. If they 15th passes with no registered or certified demand to Bollen, it just adds another layer of stench to whole thing, and someone should be held to answer as to why the calculation and notice was not provided prior to the 15th.

    Who knows, maybe Joop will get his letter today.

  30. Do we assume Dakota Free Press will get the TIPS reward on this potential windfall for SD?

  31. Holy cow, Les! I never thought of that! What’s my cut, Marty?

  32. Bankruptcy: we gaze into that mirror darkly. We have no information about SDRC Inc’s finances. We know they cleaned up on the EB-5 loans. We know they kept in their pockets millions that belong to the state. We do not know what Joop did with those millions, or whether those millions are easily recoverable, or whether SDRC Inc. has any remaining cash flow.

    I could walk over to Joop’s house and ask. I don’t think I would be well received.

  33. mike from iowa

    10% finder’s fee of all money reclaimed.

  34. mike from iowa

    I lied.

    South Dakota: Private Investigator Licenses not required. Statue of Limitations is 24 Months and Maximum Finder’s Fee is 25%