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Published February 03, 2014, 10:27 AM

SD governor aware of Northern Beef’s struggles before taking office

South Dakota Gov. Dennis Daugaard says he does not think the state’s financial support for the now-defunct Northern Beef Packers plant was a mistake.

By: Chris Mueller, Forum News Service

South Dakota Gov. Dennis Daugaard says he does not think the state’s financial support for the now-defunct Northern Beef Packers plant was a mistake.

“I think that was the right decision,” Daugaard says.

Northern Beef Packers, a beef-processing plant in Aberdeen, opened in 2012 but closed after only a few months of business and declared bankruptcy. Daugaard, a Republican, says he was aware of the beef plant’s struggles even before he took office in 2011.

“That was something you could see coming for a long time,” Daugaard says.

South Dakota would still benefit from a large beef-processing facility, Daugaard says. The failure of the Northern Beef Packers plant was largely caused by inexperienced investors who lacked the funds to properly develop the plant, he adds.

“It was running, but it didn’t have enough volume,” he says. “And they didn’t have enough cash to create that volume.”

The plant cost more than $100 million to build. White Oak Global Advisors, a San Francisco-based investment firm, bought the plant in December with a $44.3 million cash-and-credit bid. Daugaard says he remains hopeful White Oak will get the plant up and running, and says state assistance isn’t out of the question.

“We’d consider it just like any other economic development project,” he says.

The state committed $30.76 million in loans and grants to the development of the plant, though a substantial portion was never awarded.

Daugaard also commented on the death of Richard Benda, who was the state secretary of tourism and economic development under former Gov. Mike Rounds when Daugaard was lieutenant governor. Benda had ties to the development of the Northern Beef Packers plant during and after his time in state government.

Benda was found dead in a grove of trees Oct. 22 near Lake Andes. The 59-year-old had died of a self-inflicted shotgun wound to the abdomen two days earlier, according to an investigation into the death by the South Dakota Attorney General’s Office.

Benda left state government at the end of Rounds’ term in early 2011. An investigation, revealed by Daugaard after Benda’s death, found that $550,000 of a $1 million state grant given to the Northern Beef Packers plant had been improperly diverted to Benda’s new employer, SDRC Inc., which was handling the state’s participation in the EB-5 program. Benda served as SDRC’s loan monitor for the Northern Beef Packers project.

Daugaard says he has no way to judge whether Benda intentionally committed any wrongdoing with regard to the diversion of the state funds.

“I’m told that these projects have to have loan oversight, and they often pay pretty significant money,” Daugaard says.

A federal investigation into the EB-5 program, which allows foreign investors to secure permanent residency for as little as $500,000, and its finances pertaining to the beef plant is also ongoing.

Since Benda’s death, it has been revealed that Benda improperly received about $5,500 after he turned in duplicate receipts for travel, including trips to China, during his time in state government.

Daugaard says he doesn’t know whether Benda intentionally double-billed the state or if it was a mistake.

“Regardless, it occurred,” he says. “Whether it occurred through error or through deliberation, we should have procedures that avoid it.”

Daugaard says the state has hired two independent accounting firms in an effort to prevent such double-billing from occurring again. One of the firms was tasked with reviewing every transaction made by the South Dakota Governor’s Office of Economic Development since 2009, and the other was tasked with reviewing the state’s internal procedures.

Daugaard says he does not expect either of the audits will produce any major new revelations.

“I have not been focused on assigning blame,” Daugaard says. “I’ve been focused on preventing recurrence.”

Daugaard stopped short of accusing Benda of any wrongdoing but did speculate that the circumstances, as well as the anxiety involved, likely contributed to Benda’s decision to take his own life.

“I’m sure he committed suicide because of the stress of this situation,” Daugaard says.

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