- Associated Press - Friday, March 7, 2014

PIERRE, S.D. (AP) - Allegations of misconduct in the state’s economic development agency focus only on a former employee, the head of the agency told state lawmakers Friday.

Pat Costello, commissioner of the Governor’s Office of Economic Development, talked at length with a legislative committee looking into the agency and its involvement in issues relating to the financing of a failed beef packing plant in Aberdeen.

“I respectfully encourage you to remember that no current employee or board member of our office has been accused of any wrongdoing,” Costello told the Legislature’s Government and Operations Committee.

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“Any alleged wrongdoing in our office is isolated to a former employee who is no longer with us,” Costello said.

State and federal investigations have focused on the agency’s former commissioner, Richard Benda, who was found dead Oct. 22 with a fatal shotgun wound. His death was ruled a suicide.

The legislative panel spent much of Friday’s meeting hearing summaries of accounting reviews that were released earlier. Two reviews by private accounting firms and an audit by the state Department of Legislative Audit were ordered by Gov. Dennis Daugaard, who said he sought those reviews after finding about alleged misconduct in the GOED before he took office.

Those reviews found problems with the GOED’s financial control procedures and its handling of documents. The audit and an investigation by Attorney General Marty Jackley found that Benda had double-billed the state for travel and that part of a state grant had for the beef plant had been improperly handled.

Assistant House Majority Leader Justin Cronin, R-Gettysburg, said the committee could hold another hearing on the issue later after a federal criminal investigation is completed.

“Personally, I think all the stuff so far has been pretty well covered,” Cronin said, adding that he doesn’t think GOED officials are hiding any information. “I don’t know that we can dig far enough to find a problem that is going to require us to call all these folks back and basically chew them out.”

Other committee members suggested looking into other aspects of the beef plant’s financing, including the role of a private entity involved in recruiting foreign investors under the federal EB-5 program, which allows people to get permanent residency if they invest at least $500,000 in approved projects.

The state audit found that just before Benda left the economic development office, he tacked on an extra $550,000 to a grant agreement to help the struggling Northern Beef Packers plant. Benda also hand-delivered a $1 million check to the Aberdeen plant, and $550,000 of that was improperly diverted to SDRC Inc. - Benda’s new employer as of January 2011 - to pay loan monitoring fees for the EB-5 program, according to a report by Jackley.

Sen. Larry Lucas, D-Mission, said the committee should talk with an official of SDRC Inc., which administered the EB-5 program and recruited foreign investors for the beef plant and other ventures in the state.

The committee’s chairman, Sen. Larry Tidemann, R-Brookings, said that SDCR Inc. official is unlikely to voluntarily speak with the committee. Lucas indicated he would be willing to have the committee subpoena that official.

Lucas said the state also needs to push to get the failed packing plant open.

Costello said he believes the plant will be opened by a new owner once bankruptcy proceedings are completed

“I think in a reasonably short amount of time we’re going to see a functioning beef plant,” he said.

Costello said the outside accounting reviews have helped GOED improve its procedures for handling documents and checking financial transactions.

Costello, who joined GOED after Benda left, said many agency employees have struggled to deal with feelings of shock, confusion and betrayal regarding Benda’s actions.

“You have to remember Richard Benda was not only a boss to them, he was also a trusted friend and co-worker for many years,” Costello said.

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