The state is vigorously challenging the United States Citizenship and Immigration Service’s intent to terminate South Dakota’s participation in the EB-5 visa investment program. John Tsitrian observes that this effort to keep South Dakota in EB-5 seems to run counter to Governor Dennis Daugaard’s recent statement that South Dakota doesn’t need EB-5.
The week before the state filed its response to USCIS, Governor Daugaard told KCCR Radio that his administration would pursue reinstatement of EB-5 in South Dakota:
I don’t see in my administration a time when we are going to need investment capital from foreign sources. If anything, there’s lots of invesmtent capital that’s sitting on the sidelines right here in America. So to the extent that investment capital is needed for projects here, I think that can be found without the use of this kind of program [Governor Dennis Daugaard, transcribed from audio, “Governor Reacts to EB-5 Program End,” KCCR Radio, 2015.10.23].
Governor Daugaard may not see a need for foreign capital, but his Governor’s Office of Economic Development is still evaluating that proposition. Five days after that report aired, the Governor’s Office of Economic Development wrote this statement to USCIS:
GOED is evaluating whether to continue to sponsor EB-5 projects and if so how to perform the necessary oversight and diligence required for participating projects, whether through state employees (as is done by the State of Vermont) or through contracted parties (as is done successfully by several local governments elsewhere in the United States) [Aaron Scheibe, Governor’s Office of Economic Development, letter to USCIS, 2015.10.28, p. 6].
GOED says that nixing South Dakota’s EB-5 program would be bad for economic development in South Dakota. Governor Daugaard’s statement on the radio seems to contradict that assertion. John Tsitrian puzzles over that disconnect:
…[A] mere 7 days after Daugaard dismissed the EB-5 program as an unnecessary source of investment capital, officials in Pierre were aggressively responding to the Notice of Intent and putting everything they had into a refutation that takes up 113 pages of arguments and exhibits. They want this program back. If you scan it, you’ll probably have as many doubts as I do that the compilation was prepared in the week between Daugaard’s kiss-off of EB-5 and the response cooked up by his officials (who pretty much pin all the inadequacies on the contractor, SDRC, inc.). Even if they did get it done on such short notice, it’s hard to believe that Governor Daugaard didn’t know it was in the hopper. After all, it is the GOVERNOR’S Office of Economic Development. Was Daugaard lying when he told KCCR that we don’t need investment capital from foreign sources, which is what EB-5 is all about? Or was he just clueless about the frenetic activity going on in his own Office of Economic Development? I doubt that he was lying, so I conclude that he was just clueless. It would be nice to get an explanation from the Governor’s office [John Tsitrian, “Is Governor Daugaard Clueless? Last Week He Was Blowing Off EB-5. This Week He’s Determined To Get Back In,” The Constant Commoner, 2015.11.02].
Whatever the cause of the disconnect, Governor Daugaard’s statement could torpedo the state’s response to USCIS. The only reason to allow a state to EB-5 activities is to promote economic development. If Governor Daugaard says South Dakota doesn’t need foreign capital, why should USCIS keep foreign capital flowing here? Why shouldn’t USCIS redirect that limited cash stream (USCIS caps EB-5 visas at 10,000 per year) to places that need the money?
If the state doesn’t need the money, its only reason for South Dakota to hang on to EB-5 Regional Center status is to keep 274 foreign investors (see Scheibe to USCIS, 2015.01.22, p. 101 of GOED response to USCIS 2015.10.29) still waiting for their EB-5 investments to prove up from losing their green cards. That’s the main argument former federal and South Dakota EB-5 exec Maurice Berez makes… but that take me back to the question of why South Dakota cares so much about those foreign investors? South Dakota did nothing to make whole the Korean and Chinese investors who lost their shirts on the Veblen Dairies and Northern Beef Packers. What skin does South Dakota have left in their game?