DEADWOOD — A legal settlement between the Deadwood Mountain Grand and EB-5 investors was finalized Aug. 16.
On May 29, the Black Hills Pioneer reported that the day before, an agreement had been reached which resulted in two federal lawsuits being dismissed when the settlement was paid. Tentexkota, a limited liability corporation, borrowed $32.5 million in two loans from 65 Chinese investors, who allocated a minimum of $500,000, to build the Deadwood Mountain Grand, a hotel, event center and casino. The investors were promised visas and the opportunity to obtain permanent resident status for themselves and their families through the federal EB-5 program.
Formed in 2006, Tentexkota began with a $6 million investment from its members. Additionally, the LLC received a $1.7 million historical preservation grant. Eventually, the LLC put $10.15 million into the development, according to court documents.
Tentexkota missed an April 2015 deadline to repay the $32.5 million and also failed to do so after an extension was granted until May 2016. This sparked the lawsuit.
On Friday, the Deadwood Mountain Grand announced that the settlement had been finalized.
On May 28, Dale Morris, Tentexkota’s managing member, reached settlements with the Chinese investors as well as with seven other men who guaranteed the loan, according to Kasey Olivier, a Sioux Falls lawyer who represented Tentexkota.
Those seven included Kenneth “Big Kenny” Alphin, a member of the country music duo Big & Rich; as well as Timothy Conrad, Michael Gustafson, George Mitchell, Marc Oswald, Ronald Wheeler, and Dwight Wiles.
Although Olivier declined to release the terms of the settlement, he said the parties amicably resolved the agreement.
“Mr. Morris has shown an extraordinary commitment to the employees of the Deadwood Mountain Grand as well as to the City of Deadwood and the entire Black Hills region,” Olivier said in a prepared statement.
With the cloud of litigation lifted, Mr. Morris looks forward to implementing new opportunities that will benefit the employees and patrons of the Deadwood Mountain Grand.
The Chinese investors, known collectively as SDIF Limited Partnership 2, filed a civil suit, seeking their money as well as interest and legal fees. The case was heard by federal Judge Charles Kornmann in Aberdeen, who ruled that the money was indeed owed, rejecting arguments made by Tentexkota. A federal lawsuit was later filed by Tentexkota seeking to throw out the agreement, claiming the guarantees violated federal law and should be deemed null and void, with the eight men claiming they were misled by Joop Bollen, who was the center of the EB-5 program in South Dakota both as a state employee and a private businessman.
Kornmann rejected that argument on Sept. 5, 2017.
Tentexkota then tried to void the loan, claiming the guarantee agreement itself was illegal. Kornmann rejected most of the claim but turned to the state Supreme Court for interpretation of a specific piece of state law. The Supreme Court never ruled on the question and, now with the lawsuits dismissed, likely never will.
“Deadwood Mountain Grand has made an undeniably positive economic impact to Deadwood and the region and are an asset to the community,” said Deadwood Chamber & Visitors Bureau Director Lee Harstad. “They host more than 40 shows annually, plus bring in a number of groups throughout the year, all impacting the bottom line of businesses throughout town and the city alike. We’re grateful for Dale Morris stepping in and leading Deadwood Mountain Grand’s charge in to the future.”
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