February 20, 2014 · By Bob Ellis · 1 Comments
A bill to end South Dakota’s participation the EB-5 Immigrant Investor Program was heard in the South Dakota House State Affairs Committee yesterday.
HB 1167 was crafted in the wake of last year’s South Dakota scandal involving Northern Beef, the EB-5 program and the South Dakota Governor’s Office of Economic Development (GOED).
EB-5 is an immigrant visa program which, in exchange for green cards, requires foreign investors to invest at least $500,000 in a project designed to create jobs. In this case, that involved Northern Beef, and the controversial suicide of former governor Mike Rounds’ Director of Economic Development Richard Benda.
In addition to the unusual suicide of Benda, the scandal involves money paid out by the state on the failed venture which cannot be recovered for the taxpayers, as well as audit reports which have found problems with the procedures used in the program. Additionally, there are national security concerns over the EB-5 program; the Northern Beef scandal involved Chinese investors. With Governor Dennis Daugaard courting business relations with China, these concerns are ongoing.
Prime sponsor Rep. Stace Nelson began his testimony about HB 1167 by handing out a memo by U.S. Senator Chuck Grassley (R-IA) about the EB-5 program, and a memo from former CIA Director James Woolsey about threats to America. Nelson said that before serving in the legislature, he was an NCIS agent where he dealt with counterterrorism, force protection, intelligence and other matters in addition to law enforcement duties. Nelson said that without divulging any classified information, all the open source information indicates that China is a threat to the United States economically and militarily. Referencing the Grassley memo, Nelson said it outlines the susceptibility of our nation to foreign threats through this program, and pointed out that the memo also has an attachment from U.S. Immigrations & Customs Enforcement outlining that agency’s concerns about the EB-5 program.
Nelson said he had assisted his constituents in Hanson County in opposing an EB-5 program involving investors from South Korea in a large corporate dairy farm. Nelson said the operation was looking for a large TIF (Tax Increment Financing) break that would have taken years to pay off, and also mentioned the cost to the taxpayers of the Northern Beef project. Nelson said he had not heard from a single South Dakotan who liked the program or the “crony capitalism” involved. Nelson said that like many others, he believes in the free market and that the government should not be picking winners and losers in the market. Nelson said his constituents in Hanson County didn’t pay their taxes to have those taxes used to finance businesses to compete with their own.
Pat Costello of the Governors Office of Economic Development spoke in opposition, stating that the EB-5 program is a federal program that will likely continue whether or not the state of South Dakota is involved. Costello said his office believes there will be opportunities in the future to use the program as an economic incentive tool.
In rebuttal, Nelson said that the scandals we’ve already seen should be enough for us to realize that the state should not be involved. Nelson said he knew of no one in their right mind who considered it prudent to get involved with communist China. Nelson found it incredulous that anyone would be “falling all over themselves to get access to this money” to involve communist China with the food production industry of America. Nelson said that although EB-5 is a federal program, the state of South Dakota can decide not to be involved with it.
Rep. David Novstrup made a motion to kill the bill, which was seconded by Rep. Dean Wink. Novstrup said that while we all have concerns with the program, perhaps the federal government should reform it, and that the state’s lack of involvement in the program wouldn’t stop businesses from seeking foreign investors on their own.
Rep. Bernie Hunhoff said that if other states continued to have access to the EB-5 program, South Dakota would put itself at a disadvantage by not using it.
The bill was killed on a 12-1 vote:
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"We don't intend to turn the Republican Party over to the traitors in the battle just ended. We will have no more of those candidates who are pledged to the same goals as our opposition and who seek our support. Turning the party over to the so-called moderates wouldn't make any sense at all." - Ronald Reagan, Nov. 10, 1964