GOP Senate Candidate on the Hot Seat in S.D.

SIOUX FALLS, S.D (CN) - Former South Dakota governor and U.S. Senate candidate Mike Rounds has been sued in a pre-complaint petition to preserve evidence that claims he helped defraud immigrant investors and taxpayers in a "course of conduct so outrageous, so unscrupulous and so conniving that it boggles the reasonable mind."

Minnehaha County Commissioner Jeff Barth filed the class action on Monday, against Rounds, attorney Jeffrey T. Sveen, and former South Dakota Board of Regents Executive Director Robert "Tad" Perry, in Federal Court.

Barth also is chairman of the Minnehaha County Democratic Party.

Rounds is a Republican.

Barth's petition for pretrial discovery alleges corruption in the state's EB-5 program. The EB-5 program, created by the Immigration Act of 1990, allows select investors to qualify for U.S. residency and citizenship if they invest $500,000 or more in businesses that create jobs in the United States.

Barth claims that the "respondents knew of, should have known of, or directly engaged in the implementation of manipulative devices to:

"a) convert the management and operational control of a state-owned and operated entity, to a private entity.

"b) Fraudulently steered immigrant investors into projects that were not viable, for an initial investment $500,000 dollars with additional one-time fees of at least $85,000 dollars and ongoing annual fees of$10,000 dollars and an additional 1 percent ownership stake in the projects these immigrant investors invested in, resulting in these immigrant investors in many cases, especially Northern Beef Packers in Aberdeen, South Dakota being deprived both of their investment and of their visa.

"c) Failed to ensure that the tens of millions of dollars in fees harvested by the fraudulent conversion of the management of the South Dakota Regional Center were remitted to their rightful owners - the taxpayers and citizens of the State of South Dakota;

"[and that] d) Some respondents did personally reap the pecuniary rewards of this illicit financial fraud & scheme."

Barth seeks preservation of evidence in what he calls a "conversion contract between the South Dakota International Business Institute and the for-profit company SDRC Inc."

He claims that (nonparty) Joop Bollen ran the state's EB-5 program, overseeing the state-run South Dakota International Business Institute, which the federal government approved to direct foreign investments in South Dakota's meat processing and packing plants through EB-5.

Bollen saw "the potential for a huge capital venture, assisting foreign nationals wanting to obtain visas in the U.S.," according to the petition.

In 2008, Bollen set up a private company, the South Dakota Regional Center (SDRC), and in 2009, then-Gov. Rounds awarded it a no-bid contract from the state to handle all foreign investments, the petition states.

The Rapid City Journal reported Tuesday that South Dakota Attorney General Marty Jackley discovered something amiss while investigating trips that SDRC loan monitor Richard Benda took to China: that Benda had increased a state loan by $550,000, then received a payment from Northern Beef Packers for the same amount.

Benda died of a self-inflicted gunshot wound on Oct. 13, 2013, Jackley's office said in May this year. Jackley said in July that his office was preparing to arrest Benda when he committed suicide.

Rounds told the newspaper that Benda was "the only state official who acted illegally," and that "the attorney general has clearly stated I was not a target of his investigation."

Current South Dakota Gov. Dennis Daugaard terminated the state's contract with SDRC after learning the results of Jackley's investigation.

The Legislature's Government Operations and Audit Committee is scheduled to discuss Rounds' written responses to questions today (Wednesday).

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