SIOUX FALLS, S.D. – A longtime critic of a U.S. immigration program that attracts foreign investment in exchange for green card qualifications says it tends to draw marginal business opportunities that would have trouble securing regular financing.
Construction of the idled Northern Beef Packers plant in South Dakota was spurred by funds from the EB-5 program, in which foreign investors can secure permanent residency for as little as $500,000. Former plant officials say federal investigators have been asking questions about the financial dealings and EB-5.
David North, a fellow with the Center for Immigration Studies, a non-profit based in Washington, D.C., that examines immigration policies, said many projects that turn to EB-5 have had trouble getting backing from traditional banks.
“These tend to be sort of second-class investments because they don’t make it with the banks or they don’t make it with the people who tend to fund these sort of things,” North said Friday, noting some of the projects lack sound business plans and simply shouldn’t be pursued.
Northern Beef Packers opened its $109 million state-of-the-art facility on a limited basis in 2012 after years of delays. Its owners filed for Chapter 11 bankruptcy protection in July, saying they did not have enough money to buy cattle for slaughter.
Once a locally owned project, Northern Beef Packers is 41 per cent owned by businessman Oshik Song with 69 Korean investors who each gave at least $500,000 under EB-5.
Dennis Hellwig, who stepped down as Northern Beef Packers’ general partner more than four years ago, and Bob Breukelman, the plant’s former construction engineer, told the AP this week that they’ve been questioned by federal investigators about the plant’s finances and how the EB-5 funds were used.
The privately owned South Dakota Regional Center in Aberdeen handles the state’s EB-5 projects on behalf of the governor’s office. A telephone message for Joop Bollen, the centre’s president, was not returned Friday.
On Wednesday, Gov. Dennis Daugaard acknowledged that an investigation was underway into the Governor’s Office of Economic Development involving possible financial misconduct prior to his administration.
Daugaard said there has also been a federal investigation but declined to provide details of either.
South Dakota Attorney General Marty Jackley said late Thursday that former Gov. Michael Rounds “was not and is not a target of the state’s investigation into the office of economic development.”
The government program allows foreigners to get visas if they invest $500,000 to $1 million in projects or businesses that create jobs for U.S. citizens. The amount of the investment required depends on the type of project. Investors who are approved for the program can become legal permanent residents after two years and can later be eligible to become citizens.
Northern Beef Packers’ former loan monitor Richard Benda was found dead with a gunshot wound on Oct. 22 near Lake Andes, and his funeral was a day before Daugaard put out his statement. Benda had also served as secretary of the department that handles tourism and economic development from 2006 to 2010 under Rounds.
Northern Beef is not the first EB-5 project to fall flat.
In Mississippi, a startup energy-efficient car company that planned to build a massive auto plant and bring thousands of jobs to the area is only by a temporary construction trailer sitting on mostly vacant land. In May, the Securities and Exchange Commission subpoenaed unspecified documents from GreenTech Automotive Inc. and the area’s regional centre for possible security violations.
In Chicago, the SEC announced charges in February and froze the assets of a company that planned on building the “World’s First Zero Carbon Emission Platinum LEED certified” hotel and conference centre near O’Hare International Airport. The agency alleged that the developer fraudulently sold more $145 million in securities and $11 million in fees to more than 250 investors, most of them from China.
North said one of the reasons the program draws marginal investment opportunities is that the foreign investors recruited under EB-5 aren’t as concerned about making a return.
“The investors are more interested in green cards than making money off of them,” he said. “I’ve never seen a success story from an investor’s perspective except that they got a green card.”
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