A dead guy. A bankrupt slaughterhouse. Red Chinese Communists. An open U.S. Senate seat.
No, it isn’t a 21st-century All the King’s Men but rather the facts and innuendo swirling around prohibitive favorite Mike Rounds’ attempt to turn a blue Senate seat red in South Dakota—and maybe return control of the U.S. Senate to Republicans.
As of late July, former Governor Mike Rounds is the shoo-in to replace retiring Democratic U.S. Sen. Tim Johnson. Other national publications have rated it the most likely seat to change parties.
Rounds is running against two former Republicans turned independents—left-turning former U.S. Sen. Larry Pressler and hard-right former S.D. Sen. Gordon Howie—and a twice statewide losing Tom Daschle acolyte, Rick Weiland.
Despite the unusual independent antics and Weiland’s visits to every burg in South Dakota, most observers in and outside the Land of Infinite Variety believe the never-defeated Rounds has an easy trek to D.C.
But then there is the developing Dakota thriller of death, beef, visas, and the Chinese. The likely author of the final chapters of that story is none other than Sen. Tim Johnson’s son, South Dakota U.S. Attorney Brendan Johnson. The younger Johnson could deliver an “October surprise” of indictments in a sordid case of screwed-over foreign investors, missing state money, a failed beef plant, and the suspicious death of the globe-trotter who put it all together.
Our story begins not in Pierre, S.D., but Washington, D.C. In 1990, Congress authorized the EB-5 visa program. While more complicated than this, EB-5 essentially invites foreigners to invest a half million dollars in rural areas like South Dakota in economic development projects. If those projects create a certain number of jobs, the investors receive a “green card” granting them permanent residency in the United States.
On its face, the program looks like a good way to encourage foreign investment, particularly in off-the-beaten-path and investment capital-poor places like South Dakota.
As governor, Rounds embraced the program, using it to help Brits and others establish large dairies. While locals complained of being squeezed out of the business, the controversy centered more on “those people” coming to South Dakota, a very “white” state traditionally suspicious of outsiders.
In 2005, Gov. Rounds created the South Dakota Certified Beef Initiative. With millions of acres of grass and a cowboy history of hard work and pride in their cattle, Rounds believed South Dakota had a competitive advantage nationally with its beef.
But with the decline of beef processing in the state, much of the raw product was being shipped out of state, with the subsequent loss of the “value added” aspects of packaging the meat.
So the idea was to slaughter, process, and package South Dakota’s prime beef here, then sell it to profit from nicely marbled T-bones instead of feeder calves.
But how to fund such an undertaking?
Enter EB-5. As they had done with dairy farms, Rounds and his administration believed EB-5 would garner the investment the state lacked internally. Coupled with other state and local incentives, EB-5 gave birth to Northern Beef Packers in Aberdeen.
From 1994 to 2009, the state administered the EB-5 program through the international business program at Northern State University in Aberdeen. When that proved too unwieldy, the state “spun off” the loan oversight and recruitment program to a private company called South Dakota Regional Corporation.
Overseeing the SDRC was Rounds’ secretary of tourism and economic development, Richard Benda. A South Dakota native, Benda had left the state and made his reputation in economic development in New York state. Upon his return to his home state, friends commented that he seemed “different,” and chalked it up to having played in the “big leagues “out East.
Benda, now divorced and known as a “player,” spent a lot of time away from Pierre traveling the Far East, particularly China and South Korea, recruiting EB-5 investors.
Benda was successful in getting, as Rounds’ primary opponent Stace Nelson said, “Communist Red Chinese” investors. Their money built Northern Beef Packers, a modern, state-of-the-art beef plant that opened in Aberdeen in 2012; NBP quickly closed and filed for bankruptcy in 2013. Hundreds of employees lost paychecks. Dozens of Chinese and Korean investors lost their investments and some Chinese lost their green cards.
When Rounds left office in January 2011, his lieutenant, now Gov. Dennis Daugaard, did not retain Benda. However, after Northern Beef Packers sent in a voucher to the state for reimbursement—a legitimate request under the terms of their financing with the state—the Daugaard administration gave Benda a paper check for $1 million made out to NBP. Benda hand-delivered that check to NBP, and NBP handed Benda a check for $550,000 to deliver to SDRC—Benda’s new employer.
No wire transfers. No bank drafts. Unusual even by informal South Dakota business standards.
In essence, Benda packed his own “golden parachute” from state government. Then there were rumblings of hinky “double billing” for some of Benda’s travel overseas.
Enter the U.S. attorney. Brendan Johnson began investigating the South Dakota EB-5 program in March 2013. On Oct. 22, 2013, Benda was found shot dead on a family member’s farm in southeast South Dakota. A full month later, South Dakota Attorney General Marty Jackley said Benda died of a self-inflicted shotgun wound—to the stomach.
Immediately, the South Dakota media and political blogs blew up with accusations that Benda would not take his life in such an agonizing and odd manner. Some speculated that it had to be a Chinese tong or even Chinese Communists who killed him for losing their investments in the beef plant. Maybe Benda was the slick salesman who knew too much. Mainstream media have discovered Benda had personal problems plus the possible legal problems.
A perfunctory audit by the Daugaard administration and another by a committee during the 2014 legislature both confirmed the diversion of money to Benda and Benda’s double-billing, as well as a lack of institutional controls on the submission of receipts. Neither review obtained documents from SDRC.
U.S. Attorney Brendan Johnson has been tight-lipped about his office’s investigation. Could there be an “October surprise” if Rounds or members of his administration are indicted?
Ordinarily, the Democratic opponent would benefit from any political blowback against Rounds. But Weiland has only vaguely campaigned on the issue, taking more of a general “Occupy Wall Street” populist approach against “crony capitalism” in reference to Rounds.
Pressler could benefit the most as the “good government” candidate. Though he’s hardly mentioned the EB-5 issue in his so-far low-key campaign, a major turn in the scandal might fuel his “Mr. Clean and Moderate” campaign. That ploy worked for him in 1974, when a younger, unknown Pressler campaigned against the corruption of Watergate and defeated a sitting congressman.
Rounds won 55 percent of the June primary vote against four other Republicans, three of whom attacked him on the EB-5 scandal. But where lesser known Republicans failed, a twice-failed Daschle protégé, an Obama-supporting former Republican U.S. senator, and the son of a current U.S. senator may have an outside chance of turning the “sure thing” for Rounds into a “we don’t think so” by South Dakota voters.
(For complete 2014 midterm coverage, get your campaign fix on The Grid.)
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