USCIS has, finally, done the right thing regarding the blizzard of scandals that marred the EB-5 program in South Dakota, from sloppy accounting (at least $5 million is missing), to a huge bankruptcy (for the state) of a large, EB-5-supported beef slaughterhouse, to the alleged suicide of a prominent GOP politician and major EB-5 figure who was ruled to have shot himself in the stomach with a shotgun.
According to a detailed account by reporter Bob Mercer of the Mitchell (S.D.) Daily Republic, who has been relentless in his pursuit of the complex story, USCIS has listed a long series of questionable actions by the state and proposes to terminate South Dakota as the operator of the DHS-licensed middleman agency for the program, the regional center.
The EB-5 immigrant investor program provides a family-sized set of green cards to aliens who invest half a million dollars, through a USCIS-approved regional center, in a business venture that can claim the creation of 10 jobs. Most regional centers are private-for-profit entities, but a few states have taken on this role (e.g., Vermont and Michigan).
The heart of the program is currently in the hands of Congress, as the key element in it will expire on December 11 unless Congress acts to extend it, as we reported earlier. The significant provision is one that makes it far easier for the regional centers to claim the creation of 10 jobs; it allows for the estimating of indirect job creation. There are skilled economists who specialize in these estimations.
While there have been many reports of EB-5 scandals around the county — it is a lightly policed program involving apparently easy investment funds that has attracted a wonderful array of aliens and citizens, schemers and crooks, as we wrote earlier — all previous attempts by government agencies to uncover the South Dakota problems came to naught.
The Republican governor and attorney general, and the GOP-dominated state legislature, took numerous steps to block any serious inquiries and to blame everything on the late Richard Benda, the dead man. An FBI report on the situation was never made public; it was turned over the acting U.S. attorney, a man wanting appointment as the U.S. attorney, who, I suspect, felt it was too hot to handle.
The not very skilled, and totally outgunned, Democratic Party in the state tried to make EB-5 a major issue in the 2014 election, but failed to do so. It was a potentially relevant matter because most of the state's problems with EB-5 came during the tenure of then-Governor Michael Rounds (R), who successfully ran for the U.S. Senate last fall. Had USCIS completed its investigation some 13 months ago, it might have caused Rounds' defeat, or at least reduced his margin of victory.
Among the USCIS findings, according to reporter Bob Mercer, were these:
- Three payments totaling $1.7 million inexplicably went to a holding company in Cyprus that owns Russian railway companies;
- More than $5.1 million was used to purchase a Hong Kong-based lender;
- That lender had previously provided $2.85 million as bridge financing at 29 percent interest to the bankrupt slaughterhouse. That loan cost nearly $7.5 million before the purchase of the lender;
- Approximately $3.3 million was improperly spent on expenses; and
- Incomplete and an inaccurate reports were filed for five consecutive years.
The Cyprus company is owned by one of those oligarchs who keep Vladimir Putin in power and the payments, as I recall, were not made directly to it. They went through a British Virgin Islands financial outfit that was incorporated in the Cayman Islands and thus this single transaction was related to not one, not two, but three of the world's off-shore banking centers. Mercer did not stress it, but a 29 percent interest rate is pretty remarkable.
Had I been a writer for the local Democrats' campaign last fall I think I would have pointed out the irony of a Republican state administration indirectly pumping money into the hands of both the Chinese and Russian economies, but that was never discussed.
Again, according to Mercer, "The USCIS allegations ... are noted in passing in a lawsuit filing in state circuit court Friday ... on behalf of the state government."
That suit, in turn, seeks both financial records and money from Joop Bollen, who had run the EB-5 program in the state, first as a state employee and later as a state contractor. At one point Bollen, the state official, signed an agreement with Bollen, the private contractor, to take the EB-5 business (and I think millions in fees) away from the state and to give it to Bollen's own company.
Let's hope that some of the missing elements of this story come out in the weeks and months to come.