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Friday, September 24, 2010

Veblen Dairy's Korean Investors Keep Green Cards...

...but probably lose green.

I noted that those attending the bankruptcy auction of the Veblen East Dairy last week included Terry N. Prendergast, representing the Hanul Professional Law Corporation. Hanul is the Korean law outfit that handles EB-5 visa applications for foreign investors participating in South Dakota Regional Center programs. That's the program through which rich foreigners can buy their green cards simply by dumping a half-million dollars or more into American job creation projects. Veblen East Dairy is one of several projects in South Dakota that has benefited from this investment program.

So I got to wondering: could any of those Korean investors be losing their green cards due to the failure of Richard Millner's Veblen operation?

I contacted Joop Bollen, president of the SDRC, to find out what's up with our Korean investors. Mr. Bollen says the Korean may have a fight on their hands to recoup their investment, but their green cards are safe.

All that matters to the EB-5 program is that the investors' money creates jobs within the first two years. Each investor's money needs to generate 10 jobs, direct or indirect. The EB-5 program calculates that one job on a dairy operation translates into 2.66 jobs in the local economy (hire one guy to shovel poop, and he goes to town to buy more beer and lumber, which generates enough economic activity for the bar and the lumberyard to hire 1.66 new people). Thus, if one Korean's $500,000 can be shown to create four actual dairy jobs, the EB-5 number crunchers apply that multiplier, declare 10.64 jobs created, and Uncle Sam erases the word "conditional" from the Korean's green card. Welcome to America!

The Veblen East Dairy satisfied the job creation criterion for all of its Korean investors before it declared bankruptcy. Most of the Korean investors have already received their permanent status. A few investors have applied for but not yet received approval of permanent status from the feds, but the bankruptcy proceedings and change of ownership have no impact on those remaining applications. It doesn't matter who owns the operation, as long as the jobs have been created. And as I understand Mr. Bollen's explanation, it wouldn't even matter if the new owners couldn't keep the dairy going and the whole operation collapsed. Once the EB-5 investors' money creates the necessary jobs (real and statistically assumed), their green cards are secure.

Not so secure are their greenbacks, which are what Mr. Prendergast was in the neighborhood last week to check on. Mr. Bollen's office isn't involved at all with the bankruptcy proceedings, but he says Hanul and the Korean investors are discussing how they might recoup their investment with the new owners' group organized by Richard Millner (that's Vista "Family" Dairies). The investors might well "have to take a haircut," says Bollen. I am encouraged, at least, to see that the Korean investors are still paying attention and trying to hold Millner and partners accountable for their cash.
Bonus Business: Vista "Family" Dairies has 30 days to get together the $23.1 million it bid for Veblen East. If Millner's minions can't convince their remaining friends to chip in for this latest Millner shell game, VFD loses the bid, and backup bidder Whetstone Valley Dairy gets Veblen East. According to the articles of organization filed last week with the Secretary of State, Whetstone Valley Dairy, LLC, is managed by Steve Myers and Michael Crinion of Brookings.


  1. I'm leaving this comment on this post because it is the most recent one dealing with dairies.

    For a generation the South Dakota Department of Agriculture has been trying to save dairy farming in the state. To accomplish this they have pushed bigger and bigger factory type dairies. Meanwhile the number of families making a living from dairying continues to drop, the total number of cows milked drops and conversely the average number of cows per operation increases.

    Maybe we are doing something wrong. How about having SDSU set up a series of adult education classes for dairy families to learn the art of cheese making. Value added right on the farm. Instead of selling milk for 14¢/lb they could sell cheese for $4/lb. Now admittedly 14¢ is for raw milk picked up by a tanker on the farm and the $4 is a fairly standard retail price for a pound of packaged cheese at Walmart but somewhere in there there must be a place for dedicated local dairy farmers to make a living.

    Think of the tourist spin off if there were 100 local farmers in the eastern 1/3 of South Dakota making various cheeses. Marketed correctly foodies and cheese lovers from across the country would think of SD as a hotbed of great artisan cheese. What a great way to show off the rolling hills, streams and lakes of farm country. Throw in a bunch of bed and breakfasts, farmers markets, roadside watermelon and apple stands, and some great small town cafes featuring home style cooking and you would have a winning combination for a tourist destination for younger retired people looking for interesting vacations.

    What would be the cost? Some classes taught by the Land Grant university that is supposed to be doing this thing anyway. Maybe the state economic development fund would have to make some loans to farmers or groups of farmers to finance the equipment needed to set up small on-farm cheese plants. Maybe the state Department of Agriculture would have to hire an inspector to insure those plants meet health and food safety standards. These all seem to be acceptable and minor costs compared to the potential benefits.

  2. Nick, that's the smartest thing I heard anyone say all weekend. Each of those Korean investors sunk $500K into Veblen East. The 27 Koreans it took to provide just part of the funding for that one bankrupt boondoggle could have could have seeded a few dozen small dairies along the lines you describe... if the state were really interested in sustainable economic development that produced more independent local farmers and entrepreneurs. Refocusing on small operations would get us quantity and quality.

  3. Cory, this week's High Plains Journal has a cover story about an Iowa cheese making family.


    It doesn't take 1000 cows in one operation with all the attendant pollution risks. Ten operations with 100 cows each spread over a couple of townships would pose nearly no environmental risk.

  4. ...and they'd support ten independent entrepreneurs instead of one boss relying on low-wage (and often illegal immigrant) labor. Again, heck of an idea, Nick!

  5. Frisian Farms price list is here


    Artisan gouda for $14-$16/lb.

    They make 300lb of cheese twice a week using 3000lb of milk each time. At 14¢/lb for milk they use $1.40 worth of milk to make $14 worth of cheese. Now that's value added.


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