A California arbitrator’s decision was released Tuesday involving the South Dakota Board of Regents in a legal battle over a 2007 business arrangement regarding the EB-5 program. The arbitrator’s decision deserves to be read because it explains very well what was transpiring in the EB-5 program then run by Joop Bollen at the South Dakota International Business Institute at Northern State University in Aberdeen. The decision explains the period when Bollen started his own private business, SDRC Inc., and arranged a contract between SDIBI, where he was director, and SDRC Inc. The regents have posted the arbitrator’s decision here. The arbitrator denied all of the claims and counter-claims by all parties in the case and suggests that all sides let the matter rest rather than battle next over attorney fees.
UPDATE: One reporter calls the decision an embarrassment for Democrats, and a Republican spokesman proclaims victory for Republicans. SDIBI and the regents appear to have avoided paying damages, and that’s certainly a victory, but the details of what was secretly happening in South Dakota’s EB-5 program at a key turning point are laid bare in language that is easy to understand. This will be fresh information for many people. Coming four weeks before election day, this information doesn’t seem likely to inspire confidence or increase support for how EB-5 was conducted from 2006 until the Daugaard administration in September 2013 terminated the state contract with Bollen and SDRC. Since the termination, the EB-5 program has been taken in-house at the Governor’s Office of Economic Development; GOED Commissioner Pat Costello has said publicly several times that GOED isn’t recruiting EB-5 projects or investors.
SECOND UPDATE: The arbitrator notes that Bollen didn’t disclose to the federal regulatory agency in November 2007 that SDRC Inc. was to be his own corporation. Bollen as SDIBI director contracted with SDRC Inc. in January 2008. Bollen instead said the Hanul Professional Law Corporation would control SDRC Inc. The arbitrator also notes that Bollen didn’t wait for federal approval and instead went ahead in January 2008 in registering SDRC Inc. as a South Dakota corporation headed by James Park of Hanul. The arbitrator also notes that Bollen in January 2008 began establishing the loan pool partnerships that would be used by SDRC Inc. for attracting foreign investors whose money would be borrowed to business projects. The first such project identified in the arbitrator’s decision was Dakota Provisions; it is a turkey-processing operation at Huron.