State officials refused to allow another round of EB-5 immigrant investor loans for Northern Beef Packers last spring, just as the Aberdeen processing plant faced financial collapse.
The rejection came in a series of telephone calls on or about May 21 rather than a letter, governor’s spokesman Tony Venhuizen said Wednesday.
On one end was Joop Bollen of Aberdeen. Bollen was president for SDRC, the company he had formed to administer EB-5 loan projects in South Dakota as a contractor for state government.
On the other end were Pat Costello, the governor’s commissioner for economic development, and his deputy, Nathan Lukkes.
Two months later, Northern Beef shut down.
Under his contract, Bollen needed Costello’s approval for a new EB-5 loan fund called NBP IV.
Technically it was for a company called Dakota Farm Raised High Quality Beef Limited Partnership that was incorporated May 14 by Karl Wagner of Aberdeen.
Two other EB-5 loan funds totaling $60 million previously had been arranged by Bollen for the Northern Beef project.
After years of construction delays and financial strain, the processing plant opened in mid-October of 2012. But 108 production workers were laid-off in mid-April of this year.
In late July the company filed for bankruptcy protection and laid off its remaining 260 production workers.
The company had $25 million in state government loans waiting since 2010 but never met the conditions to receive the money.
After the April lay-offs, the plant continued to operate while more money was sought, such as through another round of EB-5 loans.
Under EB-5, a foreign investor can make a $500,000 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 United States.
Bollen looked to the Governor’s Office of Economic Development for help.
“GOED did not approve the request because there were significant concerns about the viability of the project and additional project details were needed,” Venhuizen said.
At that point the record of SDRC and Bollen with EB-5 projects generally was good but there had been two recent rejections at the federal level.
In 2012, the U.S. Citizenship and Immigration Services agency that oversees the EB-5 program blocked a loan pool created by Bollen and SDRC for the Iberdrola wind farm known as Buffalo Ridge II in northeastern South Dakota.
In 2013, the federal agency rejected the Bollen-SDRC loan pool for Dakota Gobblers, part of the Dakota Provisions turkey and meat processing operation at Huron.
Approximately two dozen foreign investors from those two funds shifted their money into a loan fund for Northern Beef known as NBP III.
But there also were scores of investors, now without projects, who hadn’t yet withdrawn their money or transferred it yet, according to SDRC’s last EB-5 report to GOED in August.
The relationship between SDRC and GOED ended when Costello terminated the contract by letter dated Sept. 19. Neither Bollen nor Costello has publicly said why, and the letter doesn’t state a specific reason.
Bollen incorporated SDRC – the initials refer to South Dakota regional center, an EB-5 program designation – in January 2008.
He traveled the world in the past five years working with EB-5 recruiting services in other nations. In one instance he conducted a seminar in Dubai hoping to attract Afghan investors.
Often making those trips was Richard Benda, who was then-Gov. Mike Rounds’ secretary of tourism and state development. EB-5 became an important component of Rounds’ strategy for business investment in South Dakota.
Benda championed the Northern Beef plant as an extension of the South Dakota Certified cattle program started under the Rounds administration. Benda worked on Northern Beef’s behalf from the private side after Daugaard didn’t keep Benda in his new administration in 2011.
State records show Benda made two appearances for Northern Beef before state economic development boards in mid-2011. Those boards and loan programs had been part of his department while he was secretary just months before.
Benda died Oct. 20 of an apparent gunshot wound. His death remains under investigation.
Bollen had been performing immigrant business recruitment for nearly two decades in South Dakota. He originally worked from Northern State University and operated what was known as the South Dakota International Business Institute.
Bollen told the Aberdeen American News in an interview after the termination letter surfaced that he doesn’t want to talk about his relationship with GOED.