Senator Mike Rounds may be afraid to lobby to save South Dakota’s access to the EB-5 visa investment program that went corrupt on his watch, but the State of South Dakota is fighting to keep EB-5 alive here. The Governor’s Office of Economic Development has responded to USCIS’s Notice of Intent to Terminate the Regional Center status that allows us to recruit EB-5 immigrant investors with 113 pages of argument and exhibits, the central claim of which is, “We didn’t screw up: Joop Bollen did!”
Among the key points in the state’s October 29, 2015, response to USCIS:
1. GOED has hired Tennessee lawyer Robert C. Divine to navigate South Dakota to EB-5 salvation. President George W. Bush appointed Divine chief counsel for USCIS from July 2004 to November 2006; Divine briefly served as USCIS Acting Director. He is also vice-president of EB-5 Regional Center “industry trade association” IIUSA. Remember, EB-5 isn’t just an immigration program; it’s big business.
2. The state has filed two lawsuits against Joop Bollen this year. On January 16, 2015, the state engaged Pierre attorney Tim Engel to file suit against SDRC Inc., the corporation Bollen formed in January 2008 to privatize his state job, to recover $521,338.91 in legal costs incurred defending the state from the Darley lawsuit that Bollen caused and concealed from the state. The January complaint says that SDRC Inc. didn’t pay one cent to help the state litigate Darley. The state tried for nine months to negotiate a settlement with Bollen and his Aberdeen lawyer, Jeffrey T. Sveen. On October 13, the state gave up:
The state filed its second lawsuit against Bollen’s SDRC Inc. on October 16, expanding its claim to demand EB-5-related documents along with the disputed legal fees.
3. The Daugaard Administration has not forsaken EB-5 investment. South Dakota wants to get back in the EB-5 game. However, since canceling SDRC Inc.’s contract to run EB-5 in September 2013, GOED contends to USCIS that it “has focused its resources on resolving issues arising from prior activity and SDRC’s Inc.’s [sic] administration of the regional center.” In other words, the state’s official position is that it has to clean up Joop Bollen’s mess before it resume recruiting EB-5 investors.
4. GOED claims that some of USCIS’s findings on diversion of EB-5 money to non-job-creating activities is news to GOED. Consider GOED’s response to USCIS’s finding that EB-5 money was diverted to Ultracare Holdings, a Cyprus-based entity owned by a Russian rail company:
GOED’s claim here is bogus: the strange transfers of cash from Northern Beef Packers to offshore accounts in 2007 and 2008 received press attention on November 14, 2013. It is also important to note that those offshore transfers occurred not only prior to the termination of SDRC Inc’s contract with GOED but prior to the existence of that contract, which was not inked until December 22, 2009.
5. GOED is willing to blow smoke for the other major unexplained diversion of EB-5 funds, the mysterious Epoch Star bridge loan. GOED frowns on the Ultracare offshore transfer, but it offers this game defense of the $30 million dollar loan that USCIS cited as another example of EB-5 money used for something other than job creation:
Recall the convolutions here: Doomed EB-5 project Northern Beef Packers signed for a $30 million loan in 2010 from Hong-Kong-based Epoch Star, a small group of investors who insisted they were not a bank to avoid South Dakota banking regulations. NBP took out less than $3 million in principal, paid more than that to Epoch Star and Maverick Spade in interest and fees, then bought Epoch Star a few months later. USCIS doesn’t think the Epoch Star loan was about job creation. I think it was about moving money into some lucky pals’ pockets.
6. GOED contends that terminating South Dakota’s Regional Center status will hurt the EB-5 program nationwide. If USCIS terminates our Regional Center, 274 EB-5 investors stand to lose their visa. Writes GOED’s Aaron Schiebe:
Terminating the South Dakota Regional Center and the resulting denials would in fact scare investors away from all regional center investments under the program nationwide for fear that some unrelated misdeeds of the regional center entity or its contracted manager could result in denial of all the immigration benefits of all investors sponsored by the center [Schiebe/GOED to USCIS, 2015.10.28, p. 8].
Translation: if EB-5 Regional Centers behave corruptly, you don’t dare hold them accountable in any public fashion, because you’ll scare away investors.
7. The state’s October lawsuit did get Bollen to wipe from his SDRC Inc. website the text and images that USCIS said gave the impression that SDRC Inc. was still authorized to do EB-5 business for South Dakota. GOED demanded such a wipe back in September 2014. SDRC Inc. responded to that demand with an e-mail suggesting that, remarkably, SDRC still had staff:
SDRC Inc. isn’t working for the state any more, but apparently they were doing enough business to have an accountant/office manager and an “IT person.”
South Dakota is begging USCIS for more time and a second chance. The state insists that it is USCIS’s friend and that Bollen is the recalcitrant perp. Bollen responds vigorously via Sveen to the state’s charges; evidently he and Bollen are as ready to pile all blame back on the state as the state is to place all blame on Bollen. You can read Sveen’s responses and exhibits in the second half of the document sent by GOED to USCIS; I’ll have my summary of Bollen’s defense in a subsequent post!