It was supposed to be a mutually great deal: South Dakota would get a much-desired beef slaughterhouse, and dozens of wealthy immigrants would get visas to live legally in America.
But it all went bad, and since then, great mystery has loomed over the failed Northern Beef Packers plant and the EB-5 immigration program. State and federal officials and private citizens involved in the deal have dodged questions and hidden documents from public view. Almost seven months after the scandal broke, it remains unclear who applied for green cards and what ultimately happened to their money.
Now, according to bankruptcy documents obtained by the Journal last week, some answers have come to light.
Records show the third and final round of foreign financiers for the Northern Beef plant were 50 Chinese nationals who invested $500,000 each in the plant. In addition, each immigration program applicant shelled out $45,000 more that was split among the state-sanctioned private corporation and lawyers.
Most of those investors, however, have not gotten their visas, according to an attorney involved in the proceedings, and they appear unlikely to get back their investments. Right now, it's unclear where all that money went.
Where is the money?
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EB-5 is a federal program administered by states where wealthy foreigners can get green cards by investing large amounts of money in businesses — $500,000 each in South Dakota's case.
Money from the program has built dairy facilities and power plants across the state, along with the Deadwood Mountain Grand Casino.
But South Dakota's EB-5 program has come under public scrutiny since the bankruptcy of Northern Beef and the apparent suicide last fall of Richard Benda, a former state official who played a large role in the state program.
After construction cost overruns and cash flow problems, the Aberdeen slaughterhouse laid off nearly 370 employees in 2013, declared bankruptcy, and was auctioned off last week.
Tuesday's purchase of the slaughterhouse by White Oak Global Advisors will free the company from bankruptcy proceedings. The new revelations about the investors are buried in a complex series of bankruptcy proceedings started by the Aberdeen plant in 2013 that are available electronically but remain difficult to find.
Since the apparent suicide of Benda last October, it has been revealed that the state lost between $2 million and $3 million on Northern Beef. State government has investigated the EB-5 program in South Dakota, and a federal investigation may be ongoing. Some officials close to the EB-5 investigation claim that records on EB-5 were taken or destroyed.
Donald L. Swanson, an Omaha-based attorney, said that the 50 Chinese investors in a third round of EB-5 financing for the failed plant will probably be big losers in the deal. He expects they will get neither a refund nor a permanent visa.
"It appears at this time that they are all out of their money," said Swanson, who is representing some of the investors in Northern Beef's bankruptcy proceedings. "And the odds of them getting a permanent visa appear to be dwindling."
That stark reality is at odds with what investors were told in May 2012.
"Northern Beef Packers LP is providing a guarantee of refund back to that investor if their I-526 petition is unsuccessful," David Palmer, the company's president, wrote in a letter to investors.
An initial round of financiers, who owned a stake in the plant, were from South Korea; the second and third rounds of EB-5 financiers came from China. Last spring, Gov. Dennis Daugaard's administration blocked a request for a fourth round of EB-5 financing.
Chris Bentley, a spokesman for U.S. Citizenship and Immigration Services, which oversees the federal EB-5 program, said all investor money is supposed to be held in escrow until visa applications have been approved.
"It's not released from escrow until that happens," Bentley said. He said he has never heard of an instance in which investors were given neither a visa nor a refund.
Extra money flows in
Investors didn't just pay the $500,000 in investment money, according to the beef plant bankruptcy records. Each investor also paid $30,000 in administrative fees to the South Dakota program officials, as well as $15,000 each in attorney fees. That means the 50 investors in the third and final round of beef plant financing paid, in all, $25 million to fund the plant, $1.5 million to private program administrators; and $750,000 to attorneys.
The investment money was intended for the plant's construction. But since few records have been released, it remains unclear whether the administrative fees were paid directly to SDRC Inc., the state-sanctioned private corporation set up to handle the EB-5 program, or elsewhere.
Bentley said that USCIS does not track or regulate any fees charged on EB-5 investments.
Jeffrey Sveen, an Aberdeen attorney who helped solicit overseas investors and process their EB-5 applications, did not return a call last week seeking comment. Sveen is listed in bankruptcy documents as the attorney representing SDIF LP 9, which was the third and final pool of the beef plant's immigrant investors.
Joop Bollen, the director of SDRC Inc., which was active from 2008 until last fall, didn't respond to an online request for comment.
Bollen may also hold EB-5 records that the state no longer has access to, according to the president of Northern State University. Northern State University houses the South Dakota International Business Institute. Bollen later moved from working there to direct SDRC Inc., the private group that was spun off from the institute to administer EB-5 applications.
"Joop Bollen resigned his employment at NSU on December 21, 2009; he took virtually all records in his office relating to his EB-5 activities and he requested no permission of NSU to do so," wrote university President James Smith, in a response to a records request made by a citizen earlier this year.
Profile of investors
The U.S. Citizenship and Immigration Services agency recently denied a public records request from the Journal seeking the applications of the hundreds of immigrants who have applied for visas for investing in South Dakota projects.
But several investors are named in the Northern Beef bankruptcy proceedings. Those named are from China — many from Shanghai — and records show they paid into the limited partnerships used to pool money for Northern Beef Packers in 2011 and 2012.
One is named Lin Bai, according to the bankruptcy records. Bai paid his $500,000 investment in May 2012, along with the $30,000 in administrative fees and $15,000 in attorney fees.
Bai was one of four people out of eight named in one set of documents who did get approved for a visa interview. Bai received notice in November 2012 from the U.S. Consulate office in Guangzhou that he would have a visa interview that December.
Guangzhou, a city of about 14 million in Southern China, is known historically as Canton. Bai attended and passed the interview, according to records.
Bai's current address is in Torrance, a beach-side California town south of Los Angeles, according to court records. The property at the address is a two-bedroom, two-bathroom 1,600-square-foot condominium, according to the Los Angeles County Assessor's Office. It sold in April 2013 for $505,000, according to the assessor's office.
It is not known, however, whether Bai is in America, or if he is here through the EB-5 program or another avenue.
David North, a fellow with the Center for Immigration Studies, a nonprofit critical of American immigration policy, says more transparency is needed for both Americans and the immigrant investors.
North said Americans deserve to know more about the people who are buying their way into the country. And investors deserve more transparency in the EB-5 program so they don't get fleeced out of money or visas. Due to fraud concerns, at least one country is already changing its views on the EB-5 program, according to North.
"The Chinese government is smelling so much fraud in this thing," North said, "they're cracking down on people selling EB-5 projects in China."
Contact Joe O'Sullivan at 394-8414 or firstname.lastname@example.org