On Crony Capitalism in South Dakota

Gordon_Howie_Van_Buren_Crony_CapitalismConservative independent U.S. Senate Candidate Gordon Howie, in his latest “Truth Train” installment, talks about the crony capitalism that is rampant in South Dakota.

If you’re like me, you used to think “crony capitalism” (which is a corrupt, bastardized practice of government paybacks, back-scratching and nest-feathering whose only connection to capitalism is that it involves private money) fell only within the realm of Democrat politics; after all, for a long time, that’s the only kind of “capitalism” liberals have favored.

But as more and more liberals have infiltrated the Republican Party in recent years, crony capitalism has become embraced more and more by the “Republican” power structure. In fact, in a state like South Dakota where the GOP has been blessed to control most of the reins of government for many years, the practice has become deeply embedded in the GOP leadership and in our state government.

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For example, why would a “Republican” governor betray Republican principles and the people of South Dakota by resisting efforts to fight ObamaCare, and by taking millions in federal “bribe” money to facilitate ObamaCare in South Dakota?  Could it have something to do with that $6.9 million in federal money to “study” implementing ObamaCare in South Dakota…that we don’t really know where that money ended up, even today?  Could some of that money end up in the pockets of the health care industry…which (incidentally) donates a lot of money to GOP officials like Governor Dennis Daugaard and former governor Mike Rounds?

That’s how crony capitalism often works.  You donate to certain government officials, and certain government officials maneuver government money into your pockets (even if it violated the principles of their own party) in the form of contracts, “studies,” grants and other “business.”  You then have more money to keep funneling a portion of it into the campaign coffers of those government officials, who in turn keep bending business your way.

It’s a great racket where everybody makes out like a bandit…except the taxpayer, who gets royally ripped off.

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Or there’s the EB-5 visa program where government and private business (can you say “crony capitalism”) collude work together to sell visas to wealthy foreign investors in business enterprises…from which (coincidentally) campaign contributions seem to flow.

Just yesterday, the Argus Leader and the Washington Times reported

It was hard work for a tiny agency at Northern State University to recruit and manage millions of dollars in overseas EB-5 investments. So in January 2008 that agency’s director, Joop Bollen, signed a contract with a private firm to help manage the investment program.

What Bollen didn’t disclose in the contract was that he owned that private firm, SDRC Inc. Bollen, a public employee as director of the South Dakota International Business Institute, had founded SDRC Inc. five days before signing the deal.

Bollen’s agency and Bollen’s company would work closely together – the company collecting millions of dollars in fees from investors in that time – for two more years before he left state employment.


Now it’s become a political issue, especially in the U.S. Senate race. Former Gov. Rounds, whose administration championed EB-5 as a development tool, is the Republican nominee for Senate. The other three candidates, independents Gordon Howie and Larry Pressler and Democrat Rick Weiland, have criticized Rounds’ handling of the EB-5 program. The South Dakota Democratic Party has held regular news conferences to draw more attention to EB-5, including one on Monday in which they gave reporters a copy of the 2008 memorandum.

The agreement called for SDRC to provide a range of services, including economic analysis, promoting EB-5-funded projects and filing reports with the federal government.

Signing for SDRC — the private company — as a “director” was James Park, a partner in a law firm that had been working with Bollen to recruit EB-5 investors for years. There was no disclosure that Bollen was the sole agent and incorporator of SDRC.

The agreement doesn’t include any payment for SDRC Inc. from the state, but it wouldn’t need any.

SDRC was collecting fees from the EB-5 investors. A contract signed by one group of 70 Chinese investors to pay $10,000 per year to SDRC, a $700,000 annual payment. Other EB-5 projects may have had similar provisions for more than 500 other investors.

That’s on top of other one-time fees being collected, as much as $50,000 for each investor — $20,000 in legal fees, and another $30,000 in “service fees.”

In the January 2008 memorandum, SDRC was instructed to set up bank accounts for EB-5 investments, and to help the investors apply for their green cards, “on a fee basis.”

That’s quite a lucrative racket, if you’re in the right place in government, or have the right connections to the right places in government.

But as for the people of South Dakota (and the people of America who also pay for all that federal slush money), enriching crony capitalists and selling visas to communist Chinese investors just doesn’t seem to be much in their interest.

I’d have to agree with President Martin Van Buren and Gordon Howie: “The application of public money by an officer of Government to private uses should be made a felony and visited with severe and ignominious punishment.”

If it was, our jails would be a lot more full–and I suspect a certain former governor wouldn’t be running as a fake conservative for U.S. Senate.

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Bob Ellis has been the owner of media company Dakota Voice, LLC since 2005. He is a 10-year U.S. Air Force veteran, a political reporter and commentator for the past decade, and has been involved in numerous election and public policy campaigns for over 20 years. He was a founding member and board member of the Tea Party groups Citizens for Liberty and the South Dakota Tea Party Alliance. He lives in Rapid City, South Dakota with his wife and two children.
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