Federal authorities are investigating the finances of an idled beef plant and a federal immigration program that supplied much of its funding, two former chief players in the company told The Associated Press on Thursday.
The revelation comes a day after Gov. Dennis Daugaard said the state's economic development office was being investigated. Daugaard declined to provide details of that investigation, and state officials on Thursday refused to say whether the investigations are the same. News of the probes comes soon after a former top official in the development office was found dead with a gunshot wound.
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 they have been questioned by federal investigators about the idled Aberdeen plant's financial dealings and the federal EB-5 program, in which foreign investors can secure permanent residency for as little as $500,000.
"There were some discrepancies in the way the EB-5 program was being handled," Breukelman said.
Neither Hellwig nor Breukelman would go into detail about the agents' questions or their responses.
On Wednesday, Daugaard told the Sioux Falls Argus Leader an investigation was underway into the Governor's Office of Economic Development prior to Daugaard's administration involving possible financial misconduct. Daugaard declined to provide details of that inquiry, but said there "has also been a federal investigation."
Daugaard's statement was made public a day after the funeral of Richard Benda, who was found dead with a gunshot wound on Oct. 22 in a grove of trees near Lake Andes. Benda, who had served as secretary of the department handling tourism and economic development from 2006 to 2010 under former Gov. Mike Rounds, was Northern Beef's former loan monitor.
South Dakota Attorney General Marty Jackley said Benda's death remains under investigation, and a final autopsy report is expected in two weeks to a month.
"We're treating that as a crime scene because there was a gunshot wound indicated," Jackley said.
Neither Jackley nor Daugaard's spokesman, Tony Venhuizen, would comment on whether the investigations Daugaard revealed Wednesday involve Northern Beef, Benda or the Aberdeen-based South Dakota Regional Center, which arranged EB-5 loans to the beef plant and other projects in the state.
Allegations about the South Dakota center have drawn the attention of U.S. Sen. Charles Grassley of Iowa, the ranking Republican on the Senate Judiciary Committee. Grassley in February sent a letter to the U.S. Citizenship and Immigration Services asking the agency to look into the "possible violations."
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 less than a year later, saying they did not have enough money to buy cattle for slaughter. With $138.8 million in liabilities and just $79.3 million in assets, according to court documents, the plant laid off most of its employees.
The plant was pitched in 2006 in response to Rounds' South Dakota Certified Beef initiative. Rounds, who is now running for U.S. Senate, hoped to get the state's ranchers premium prices by allowing consumers to track animals from birth, through a feedlot and to a meatpacking plant.
Rounds said in a statement issued Wednesday that he "recently became aware of an investigation into some alleged misconduct" but referred all questions to Jackley. Mitch Krebs, Rounds' Senate campaign spokesman, said Thursday the former governor would not comment further.
Jackley said late Thursday that "Mike Rounds was not and is not a target of the state's investigation into the office of economic development."
Once locally owned, Northern Beef Packers is 41 percent owned by businessman Oshik Song with 69 other South Korean investors who each gave at least $500,000 under the federal EB-5 program. The plant used the funds to spur the start of construction, and Hellwig stepped down as general partner when the Korean investors asked to buy out his shares.
The new owners recruited another round of EB-5 investors, but the new investment fund provided loan money instead of equity shares in the company. Northern Beef eventually began to ramp up production earlier this year to about 200 head a day — far short of the 1,500 capacity — after obtaining additional financing.
Bankruptcy attorneys have asked that a minimum bid of $12.75 million be set for the plant, which is scheduled to be sold at auction on Dec. 5.