South Dakota gets F grade in 2015 State Integrity Investigation

After corruption scandal, officials maintain 'trust us' is good enough



Every year, 105 lawmakers and hundreds of lobbyists make the trek to South Dakota’s lonely capital city of 14,000 residents. Situated 34 miles from the nearest interstate highway, Pierre feels tiny and isolated, even by the standards of this remote plains state.

It’s in this cloistered environment that legislators and lobbyists commingle in the Capitol and in Pierre’s hotels and bars, wining, dining and even dancing the jitterbug together to fast-paced country music at the Ramkota Hotel’s RiverCentre Tavern.

It’s a comfortable atmosphere and an outgrowth of the state’s rural character. And little to none of it is reported to the public in any detail.

The state’s weak lobbying disclosure is among the reasons why South Dakota received an overall grade of F, or a numerical score of 56 out of 100, in the State Integrity Investigation, a data-driven assessment of government transparency and accountability by the Center for Public Integrity and Global Integrity. South Dakota suffered failing grades in nine of the investigation’s 13 categories, including lobbying disclosure, ranking it 47th in the nation overall. A lonely bright spot is the category of internal auditing, for which the state earned a B-.

The grade changed little from the project’s first go-round in 2012, when South Dakota’s overall score of 50 was second worst among the states. The two scores are not directly comparable, however, due to changes made to improve and update the questions and methodology, such as eliminating the category for redistricting, a process that generally occurs only once every 10 years.

Across the board, the state lacks robust laws to prevent corruption, apparently the result of a sense, at least among South Dakota’s ruling class, that burdensome controls are not needed in a rural state with a supposedly high degree of familiarity, trust and cordiality.

Tony Venhuizen, chief of staff to Republican Gov. Dennis Daugaard, referred to that oft-repeated defense when told of the state’s poor showing in the investigation.

“According to Gallup, South Dakotans' trust in their state government is among the highest in the nation, and the state has very little history of corruption,” Venhuizen said in an emailed statement. “That's why our state hasn't enacted some of these measures.”

Some support for that sentiment comes from the investigation’s finding of a wide but unusual enforcement gap, a measure of the difference between the laws and how they're actually implemented, which suggests South Dakota government actually goes beyond what the law calls for when it comes to ethics and disclosure.

That’s of little solace, however, to Democratic state Rep. Peggy Gibson.

“I’m embarrassed that we have such a low standing,” she said after learning of South Dakota’s overall score.

Lobbyists scrawl ‘none’ on reports

South Dakota suffered its lowest score in the lobbying disclosure section, for which its numerical score of 40 was second worst in the nation. Jody Severson, who operates the political consulting firm Severson & Associates, offered a three-word summary of South Dakota’s lobbying disclosure in an email interview: “It’s a joke.”

The state requires lobbyists and their employers to file just one annual expense report, due three months after each legislative session. The loopholes are so broad and the scrutiny so lax that some lobbyists disclose nothing more than their identity and their employer.

State law requires the disclosure of “all costs incurred for the purpose of influencing legislation,” but the law exempts “personal expenses of the lobbyist spent upon the lobbyist's own meals, travel, lodging, phone calls or other necessary personal needs while in attendance at the legislative session.”

Many lobbyists interpret the exemption broadly. In the space for “expense information” on the one-page form provided by the secretary of state, some filers simply scrawl the word “none.” They can do so with impunity because the reports are not audited.

What’s more, the state makes it difficult for the public to review even these minimal disclosures.  The expense report documents are not viewable online and are available only by special request.

When lobbyists do list expenses on their disclosures, they provide only the expense dates, amounts and a general descriptive term such as “meals” or “entertainment.” A separate annual registration form requires little more than contact information and the lobbyist’s “subject of interest.” Neither lobbyists nor their employers are required to disclose lobbied bill numbers, nor are they required to list salaries.

Lest any filers try to voluntarily disclose their compensation, the expense form includes a bolded warning: “DO NOT include a lobbyist salary or fee.”

Revival of ethics commission fails

The notion that personal familiarity and trust is enough to regulate government pervades South Dakota’s approach to ethics as well. The state lacks an independent ethics agency covering all branches of government, a fact that contributed to its F grade in the ethics enforcement category.

A recent episode highlighted how little appetite there is for greater oversight. After former state cabinet secretary Richard Benda committed suicide in October 2013, details of his involvement in a previously unknown and wide-ranging scandal tumbled out for more than a year, casting suspicion on other top officials, too.

It soon emerged that Benda had been facing a possible grand jury indictment of felony theft for allegedly directing $550,000 in state grant money toward his future employer to cover his own salary, and for double-billing the state for economic development trips. All of this had allegedly grown out of a federal program that offers green cards to immigrants in exchange for job-creating investments.

The scandal ultimately touched former governor Mike Rounds, a Republican who had appointed Benda and was running an ultimately successful campaign for U.S. Senate by the time the scandal broke, and Joop Bollen, the state director of the federal program, who, it emerged, had arranged a secret state contract with his own private company worth millions. Rounds faced questions about the scandal during his campaign and was alternately accused of not divulging his knowledge of Benda and Bollen’s activities, or not knowing enough about what was going on in his administration. He maintained that he had no knowledge of anything improper regarding Benda, Bollen or the EB-5 program until he was contacted by investigators.

A legislative committee consisting of eight Republican and two Democratic lawmakers conducted hearings on the scandal last year. The panel’s Republican leadership declined Democratic requests to use the committee’s subpoena power and instead allowed key witnesses, including Rounds and Bollen, to answer questions by written correspondence. The committee eventually issued a report pinning all blame on Benda. Neither Bollen nor Rounds were found officially responsible for any wrongdoing.

This year, dissatisfaction with the hearings led Democratic lawmakers to push for reinstatement of the state’s Ethics Commission, which was repealed in 1979. The Republican majority laughed the bill out of the House on a 53-16 vote. During the House debate, one lawmaker, Republican Lee Schoenbeck, said that if an ethics commission could help combat corruption, then “I want a Tom Cruise commission to make us all strong and handsome.”

Gibson, the lawmaker who sponsored the legislation, said the Benda scandal showed that partisan legislators are incapable of serving as ethics watchdogs, highlighting the need for an independent ethics commission.

“It was pooh-poohed like we don’t have a problem with ethics in this state,” Gibson said of her bill. “I think we do have a problem.”

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