It is starting to look like Watergate all over again, on a smaller scale, in the South Dakota EB-5 scandal.

The national EB-5 investor-visa program grants green cards to aliens (and their families) who have placed half a million dollars in certain USCIS-approved, but not guaranteed, investments; a lot of EB-5 money has disappeared in South Dakota.

Some of the well-connected lesser functionaries of the party in power in that state were bending if not breaking the law regarding these moneys, the investigative machinery of state government is somewhere between constipated and compromised, and the local press is having a field day.

And the local establishment has found a fall guy (in this case one killed by a shotgun) on whom to place some of the blame, much as Vice President Spiro Agnew and Acting FBI Director L. Patrick Gray played that role here in Washington some 40 years ago.

Instead of Woodward and Bernstein we have Cory Allen Heidelburger of the Madville Times, Dirk Lammers of the Associated Press, and Bob Mercer of the Rapid City Journal, who has written a highly useful summary of the whole situation. So far, national media attention has been missing.

Unlike Watergate, however, the basis was not political espionage, it was plain old crony capitalism, greed, and patronage, all played out at the state level while manipulating a federal program, EB-5. As in Watergate, the most obvious victims, the Democratic National Committee in that case, and the Chinese investors in this one, are all but invisible.

The Story So Far. South Dakota, unlike its neighbor to the north, is not awash in oil and gas money and the state's political leadership has long sought EB-5 money for farm-connected investments (dairies and slaughterhouses).

This state, like only one other, Vermont, has managed the flows of EB-5 funds from aliens through a state-controlled entity. Unlike Vermont's USCIS-licensed regional center, an arm of state government, the South Dakota Regional Center, Inc. (SDRC) was privately owned and operated through a now-terminated contract with the state government. The Vermont regional center, by the way, has been free of both scandals and bankruptcies, and charges much lower fees than the South Dakota operation, a comparison no one has made to date.

In the years up to 2011, the Republican governor of the state was Michael Rounds, now a candidate for the U.S. Senate seat being vacated by retiring Democrat Tim Johnson.

Rounds might be roughly compared to Richard Nixon, and his hand-picked successor, Dennis Daugaar, the current governor, might be seen in the Gerald Ford role (most of the nasty stuff apparently took place before Daugaar took office).

One of Rounds' state cabinet members was Richard Benda, who headed the Governor's Office of Economic Development. He was an enthusiastic cheerleader for the EB-5 program and made trips to China to recruit Chinese investors. (GEOD had the regional center under contract.)

After Rounds left office, Benda was not retained in the state government, but was hired to be a "loan monitor" by SDRC. One million dollars from a fund controlled by Governor Rounds (and apparently stemming from unemployment compensation taxes) was given to the EB-5-financed Northern Beef Packers, a slaughterhouse in Aberdeen, and of this, $550,000 was sent (diverted?) to SDRC to fund loan monitoring. Northern Beef is now in bankruptcy.

I have been watching the EB-5 program closely for the last couple of years and I never heard of a state government funding a private-for profit regional center

Benda died of a suspicious shotgun wound in October and about a month later the state's Attorney General, Marty Jackley — another ally of Rounds — ruled that it was a suicide. The local press has wondered about shooting oneself in the stomach with a shotgun as a suicide technique. The AG's report, at first, did not deal with the logistics of how that was done, but later indicated, without detail, that a stick had been used to reach the trigger of the shotgun.

The attorney general's report also indicated that Benda had double-billed his China trip expenses, which could have been mere sloppiness or it could have been theft, a subject left unexplored. Some $5,000 was involved. There has been no discussion of a suicide note and no official investigation of why he killed himself, if that is what happened.

Much larger financial questions remain unaddressed. One is: What happened to scores of millions of dollars of EB-5 and other funds that disappeared into the Northern Beef coffers? Where did it all go? Someone, suggests the Madville Times, must have kept at least some of it.

Further, Northern Beef had substantial, mysterious financial transactions with a corporation located in Cyprus — I am not making this up — that is a subsidiary of a Russian railroad firm, that operates through affiliates in the British Virgin Islands and the Caymans. What was that all about?

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The Stalled Investigations. Unlike at the time of Watergate, when the White House was Republican and both houses of Congress were Democratic, the GOP has solid control of both executive and legislative branches in South Dakota, so the efforts of the local Democrats to mount a legislative inquiry have been blocked.

Earlier this week State Rep. Kathy Tyler (D-Big Stone City) called for a forensic audit of state activities in connection with Northern Beef debacle and an emergency session of the legislature for that purpose, saying that Governor Daugaars' "independent investigations" would not be adequate. She got a cold shoulder from the legislative leadership (as she must have expected).

One of the lamer excuses for not conducting a state government audit of the regional center was that the state contract with it would not permit such an audit. What government agency signs contracts that do not permit the state to find out what the contractors are doing?

Similarly, again according to the Madville Times:

On November 26, intrepid reporter Bob Mercer sent Attorney General Marty Jackley a public records request, which makes a strong case for opening the Richard Benda death investigation to public scrutiny. In response, AG Jackley agreed to open those records to review by a media pool consisting of two reporters, pending written permission from a member of Benda's immediate family. (Emphasis added.)

Do serious inquiries regarding possible murder and financial crimes against the state get blocked unless a family or a private corporation (SDRC) agree to cooperate?

Meanwhile, there is said to be an ongoing FBI investigation, but no one seems to know what that involves, or when it will end. As far as I can tell, neither the Department of Homeland Security nor USCIS (which runs the EB-5 investor visa program) has said as much as a peep about the whole thing.

On Thursday the U.S. Bankruptcy Court will hold an auction to sell the assets of Northern Beef (mostly land, plant, and equipment) with the minimum bid set at $12.75 million, a fraction of the $115 million invested in it, according to Prairie Business. About $60 million of the investment was from EB-5 investments, which came in two tranches. The alien investors in the first round may get some pennies on the dollars invested; those in the second round will probably get nothing. Whether any of them got green cards is not known at this writing.

Ultimately we will probably know a bit more about how EB-5 actually operated in South Dakota, but that apparently will not come easily.