I’d love to write a novelization of the South Dakota EB-5 scandal, but I feel like I have to wait until every single strand of this sordid scheme unravels and is laid bare.
The latest strand wrenched from this corruption-soaked crony tapestry is the Deadwood Mountain Grand Casino. The conversion of the old Deadwood gold-mining slime plant (file under “Can’t Make This Up”) into a gambling and concert hall was the only West River project and the only tourism project funded by foreign investors (in this case, 65 Chinese investors buying their green cards for $500,000 a pop) in South Dakota. The casino, which opened in 2012 and whose ownership includes Mike Rounds crony Ron Wheeler, is cited by Rounds and Republicans as one of the great successes of the EB-5 program.
Apparently the Deadwood Mountain Grand Casino’s success now depends on getting out of paying back its EB-5 loans. According to AP’s James Nord, former EB-5 czar Joop Bollen, who still owns the shell corporations that issued hundreds of millions of dollars of loans to EB-5 projects on behalf of the state of South Dakota, is suing casino ownership group Tentexkota LLC and its members for reneging on their $32.5-million loan. Reading the federal civil complaint, Nord learns that the casino owners were supposed to pay back their loan by April 2015. Bollen extended their deadline to May 2016, when Tentexkota defaulted.
Tentexkota, which still includes Wheeler along with country singer W. Kenneth “Big Kenny” Alphin, are suing back, saying Bollen forced them to sign illegal personal guarantees of the EB-5 loans:
…A Deadwood Mountain Grand investment group known as Tentexkota LLC began seeking an EB-5 loan in 2009. The lawsuit alleges that Bollen “represented to Tentexkota that personal guarantees were required to receive and secure EB-5 funds.”
Members of Tentexkota subsequently signed personal guarantees, apparently unaware that EB-5 regulations require money invested in the program to be “at risk.” If a foreign investor is guaranteed a return, the money is not at risk and is not a qualifying EB-5 investment, the lawsuit says [Seth Tupper, “Deadwood Mountain Grand Investors Sue Former EB-5 Director Bollen,” Rapid City Journal, 2016.11.11].
Tupper reminds us that the Deadwood Mountain Grand also received a $1.7-million grant from the City of Deadwood Historic Preservation Commission in 2007 to begin construction.
The Deadwood Mountain Grand last month announced a plan to expand by building a 103-condo hotel on McGovern Hill. The new private hillside chalets, all with one-car garages, are supposed to attract (in the words of casino managing partner Marc Oswald) “a certain caliber of people… international people who can bring a lot of energy to this town.” Perhaps the original international EB-5 investors can get special discount rates.
McGovern Hill—that reminds me: both sides are being represented by prominent Democratic lawyers. Tentexkota has enlisted former legislator and 2010 gubernatorial candidate Scott Heidepriem to represent them. Representing Bollen is unsuccessful District 33 Legislative candidate Haven Stuck. (Ah ha! Now I get it—GOP corruption keeps Democrats from winning elections, because Democratic leading lights are too busy writing briefs for those corruption cases!)
Permit me one bit of wild speculation, a preview of how the Deadwood chapter figures into the great South Dakota EB-5 novelization:
- Like the Veblen Dairies and Northern Beef Packers, the Deadwood Mountain Grand Casino is an unsustainable project propped up by easy EB-5 money.
- The casino owners need to save money for expansion, so they decide to squeeze the most squeezable of their creditors, the scandal-hamstrung and friendless-in-Pierre Joop Bollen.
- The state encourages old pal Ron Wheeler and associates in this lawsuit, hoping to turn up the heat on Bollen.
- Bollen, now facing state criminal charges, civil lawsuit, and more lawyer bills, decides to squeeze back by suing the state’s pals in Deadwood (and Tennessee—sorry, Big Kenny!).
- The state gets the casino owners to respond by alleging EB-5 misconduct by Bollen in their countersuit, thus maybe reinforcing their case to USCIS that all the problems in EB-5 were Bollen’s fault and showing that the state had no part of the corruption (although that’s a weak line, serving more to reinforce USCIS’s contention that the folks in Pierre who should have been supervising EB-5 weren’t supervising and can’t be trusted to play with EB-5 money ever again).
EB-5 didn’t win us Democrats a single seat in 2014 or 2016, so I won’t predict that EB-5 will finally come a cropper for the Republican regime and allow Democrats to wrest power from the Friends of Mike. But three years after the suicide of Mike Rounds’s former economic development chief launched this scandal into popular awareness, EB-5 continues to reveal the depth of scummery in South Dakota’s economic development schemes.