WASHINGTON, Sept. 17, 2014 – To gain a majority in the U.S. Senate, Republicans need to net six seats in November and at least three - in South Dakota, Montana, and West Virginia - are looking like pretty sure bets, according to recent polling data.

However, South Dakota Democrats are trying to make the race involving GOP candidate and former governor Mike Rounds more competitive, by calling for a new investigation into a controversial federal program that allows wealthy foreigners to get green cards for investing in U.S. projects, in this case, a state-of-the-art beef plant that is now bankrupt.

Sen. Chuck Grassley, R-Iowa, agrees that more oversight and reform is needed for the federal Immigrant Investor program, EB-5, which grants green cards for foreigners who make an investment of $1 million (or $500,000 in a high unemployment or rural area) in a commercial enterprise that will employ at least 10 full-time US workers.

“I’m not against the EB-5 program, but it’s got problems,” Grassley told Agri-Pulse. “One of the problems is, the FBI, I believe, has been raising some concerns about whether or not it’s not a cover for people possibly coming to this country that may not have the best interest of the U.S. at heart, maybe the interest of some other country....so there’s a national security issue.

“The other thing is, does it create the jobs? Is there enough oversight to make sure it creates the jobs?” Grassley asks. “Some people believe that it’s unconscionable that you can buy a green card with a half a million dollar investment, particularly when you aren’t creating the jobs that are supposed to be created. That’s more of a philosophical point.  But, at the very least, we’ve got to look at this program and we’ve got to get some reforms in it.”

In the meantime, South Dakota lawmakers are conducting an investigation of their own, but it’s not limited to EB-5, which was used – among other things – to help lure a much-needed beef processor for the South Dakota Certified Beef program. When enacted by the legislature in 2005, officials envisioned a grand program that allowed a consumer to enter a code from a package of steak, for example, and trace the meat’s path from baby calf to feedlot and eventually to processing. The program required electric ear tags, meticulous sale records, and dietary conditions for processing.

Having the inventory was never the issue: South Dakota had more than 3.6 million head of cattle and calves as of the beginning of 2014, according to USDA. What the state lacked at the time was a processing facility that could keep up with what officials hoped would be the beef program’s ambitious output.

The Northern Beef Packers (NBP) processing plant in Aberdeen was thought to be the answer to that program because of its processing capacity of about 1,500 animals a day. Now, the plant has gone bankrupt and sits idle, forcing the program to rely on smaller mom-and-pop locker plants. Without adequate processing capacity, the state Agriculture Department asked USDA to suspend the certified beef program. In March, before the suspension was requested, 54 producers had registered 1,525 head of cattle in the program.

The NBP plant opened in October 2012 and remained operational until July 2013, when it closed after bankruptcy filings. In the nine months it was open, it never operated at maximum capacity. In an email to Agri-Pulse, Aaron Scheibe, with the Governor’s Office of Economic Development, said the plant was processing about 125 head per day in December 2012 and may have approached 200 head per day a month later. The plant also fell short of employment goals. Scheibe said the facility had a planned employment of 566, but employed only 427.

To facilitate the plant’s construction, estimated to cost about $100 million, Chinese investors were sought through the EB-5 program. Richard Benda was secretary of tourism and state development under former Republican Governor Mike Rounds at a time when many of the EB-5 investments were collected. He died in October in what was ruled a suicide. Although no formal charges were filed, Benda was suspected of diverting $550,000 in grant money meant for the beef plant to the South Dakota Regional Center (SDRC).

The SDRC is a private contractor that was approved by the federal government to monitor the EB-5 program. SDRC also used the EB-5 program to entice European dairy farmers to move to the state. At the same time Benda allegedly diverted the money to SDRC, he left his government position and took a job with the agency to monitor the EB-5 program, essentially, some say, putting state money in his own pocket. State Attorney General Marty Jackley said in July that Benda’s death came just six days before a grand jury could formally consider charges.

A state Legislature’s Government Audit and Operations Committee (GOAC) is now investigating the use of the EB-5 program in South Dakota to see if Benda was acting alone. The panel will hold a hearing Sept. 24 to further dig into the issue, but Republican Sen. Larry Tiedemann, the panel’s chairman, said the scope of the hearing will be limited because EB-5 is a federal program.

The legislature passed a resolution in February calling on GOAC to “conduct hearings relating to the operations of the Governor’s Office of Economic Development.” Since then, several hearings have been held, the state Attorney General’s office is investigating, and two private investigators have been hired by current Governor Dennis Daugaard to look into the matter.

At the beginning of August, Democratic lawmakers began publically calling for subpoenas to be issued for Daugaard and former Governor Rounds, both of whom are Republicans, and for Joop Bollen, the former director of SDRC, to testify before the GOAC.

Since Rounds is currently running for the U.S. Senate seat being vacated by retiring Democrat Tim Johnson, and Daugaard is running for re-election, Tiedemann questions the timing of the call for subpoenas. Tiedemann eventually asked the officials to submit testimony for the Sept. 24 hearing. And he invited U.S. Attorney Brendan Johnson, the son of Sen. Johnson, to testify about the results of his investigation into the matter.

“I want answers to the questions, I do not necessarily want it to become a political debate,” Tiedemann said, adding that he has not heard from Bollen.

 “The audits were heard . . . March 7th. We directed things to be done and we asked for a report on that at our June meeting,” Tiedemann said, pointing out that none of the investigations were able to find anything more than the $550,000 already known to be missing. “And so do I think somebody’s maybe dragging something out? Yeah.”

If postponing a public call for subpoenas until closer to Election Day was a political move, it doesn’t appear to be working. South Dakota is a heavily Republican state that hasn’t voted for a Democrat in a presidential election since Lyndon Johnson in 1964. A recent CBS News/New York Times Upshot/YouGov Battleground Tracker poll showed Rounds with a commanding 14-point in the senate race and Daugaard with an even more formidable 27-point lead in his re-election bid as governor. 

Daugaard’s opponent in the gubernatorial election, Democratic state Rep. Susan Wismer, sits on the committee and has requested that Tiedemann allow Democratic legislative leaders to choose a proxy for her at the Sept. 24 hearing.

Jason Frerichs, leader of the Democratic minority in the state Senate, said it is important for the committee – whether or not that includes Wismer – to look into this issue and be prepared for results of the investigatory actions.

“(South Dakota’s) good name is still at risk, and that’s why in this process of wanting answers that we can show anyone who wants to do business in conjunction with the state in the future that if there are problems, we’re going to get the bottom of it, figure out who needs to be held accountable, and look for the proper corrective action and move on,” Frerichs said.

Amidst all the controversy surrounding it, the NBP plant now sits empty. In December, White Oak Global Advisors, a San Francisco firm that describes itself as a “specialty finance company” on its website, bought the plant for $44 million. King said White Oak was a creditor in the original construction of NBP. The company did not respond to questions from Agri-Pulse regarding the future of the facility, but several sources said there was a good chance the plant would be operational again either through White Oak’s operation or through a lease or sale to a different company.


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