Investigation of SD bankrupt plant ongoing

Nov 29, 2013

—$550k “redirected” in packing plant construction

The ongoing investigation into the bankrupt Northern Beef Packers, in Aberdeen, SD, appears to be stirring up more questions than answers.

South Dakota Gov. Dennis Daugaard opened the door for public scrutiny when he recently shared documents on the investigation of the packing plant and its loan monitor, State Official Richard Benda.

Benda died from a self-inflicted gunshot wound on Oct. 22, according to the Attorney General’s Office.

While some of the research involved double bookings and payments of plane flights by Benda, the bigger story centers around the funding given for the EB-5 program used to gain foreign investors for financing.

In a letter to Gov. Daugaard, Attorney General Marty Jackley shared that $550,000 of a sum of up to $1 million issued by the South Dakota Department of Tourism for construction or equipment costs related to the Northern Beef plant was “redirected from its intended purpose and purportedly used to pre-pay EB-5 loan monitoring fees for the South Dakota Regional Center, Inc. (SDRC).”

U.S. Citizen and Immigration Services (USCIS) administers the Immigrant Investor Program, also known as “EB-5,” created by Congress in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. Under a pilot immigration program first enacted in 1992 and regularly reauthorized since, certain EB-5 visas also are set aside for investors in Regional Centers designated by USCIS based on proposals for promoting economic growth, according to the USCIS website.

All EB-5 investors must invest in a new commercial enterprise, which is a commercial enterprise:

•Established after Nov. 29, 1990, or

•Established on or before Nov. 29, 1990, that is:

1. Purchased and the existing business is restructured or reorganized in such a way that a new commercial enterprise results, or 2. Expanded through the investment so that a 40 percent increase in the net worth or number of employees occurs Under EB-5, a foreign investor can make a $500,000 investment to a project in a rural area.

If various criteria such as jobs are met, the investor and family can receive a permanent visa to live anywhere in the U.S.

The plant recruited potential investors under this program, and by the time it closed its doors, it was primarily owned by South Korean investors. SDRC recruited potential investors using the services of Hanul Professional Law Corporation, based in California and South Korea, to process citizenship documentation.

While the plant spent several years trying to get off the ground, state officials hit a wall, refusing the plant more investor loan options through the EB-5.

According to Daugaard, diverted funds were used to pay SDRC in January, 2011, when State Government Official Benda left his position for one at the Center. He was found dead of a self-inflicted gunshot wound on Oct. 22. Benda was a huge supporter of Northern Beef Processor.

The double billing of plane flights occurred on Benda’s watch, creating the review, which would eventually reveal $550,000 of redirected funds in December of 2010.

Despite the find, the Attorney General is ready to move on.

“Because the individual who submitted the vouchers is deceased, there will be no further action by the Attorney General’s office on the voucher matter,” Jackley wrote to Daugaard.

But the federal investigation continues, and several politicians are trying to find answers.

Rep. Kathy Tyler (D-SD) told reporters that she wanted the issue on an executive board meeting, but was voted down. Tyler told reporters that she wants a forensic audit done by an independent accounting firm that provides details on all offshore wire transfers, identifies the secret investors who provided a bridge loan to Northern Beef and accounts for all payments made by SDRC to attorneys.

“There are foreign investments and there are foreign loans, and there’s money going back and forth to the Cayman Islands,” Tyler shared with the Associated Press. “There are a lot of things that aren’t being answered.”

The plant opened in October of 2012, following a number of financial problems and construction delays. By July of this year, the company had filed for bankruptcy.

A plant auction is scheduled for Dec. 5 at the federal courthouse in Sioux Falls, according to the Aberdeen News. The opening bid for the plant is $12.75 million, and bids will be sought for the facility, property, machinery, equipment and supplies.

According to court documents, the plant is facing $138.8 million in liabilities and has just $79.3 million in assets. — Traci Eatherton, WLJ Editor