Steve Westra, who served as South Dakota’s commissioner of economic development, is now a vice president at CJ Schwan’s, a company that has received $69 million in state-backed grants and loans. The financial support was approved after Westra left public office in May 2023, with his employment at the firm beginning in May 2024.
The funding supports the construction of a $550 million food production facility in Sioux Falls, expected to employ around 600 people. The project, led by CJ Schwan’s—a subsidiary of South Korea’s CJ Group—also includes a downtown office with 50 additional staff.
Jeff Erickson, chairman of the state Board of Economic Development, also serves on CJ Schwan’s corporate board. While he has recused himself from discussions and votes related to the company’s aid packages, critics argue the dual roles raise ethical concerns.
Reynold Nesiba, a former state senator and board member, called the arrangement “deeply problematic” and suggested Erickson should resign from one position to avoid conflicts of interest. Tim Reed, a Republican senator and former economic development CEO, acknowledged the project’s economic benefits but described the appearance of Westra’s transition as “absolutely terrible.”
Erik Muckey, a Democratic representative, urged a legislative investigation into potential conflicts, emphasizing the need for transparency.
CJ Schwan’s stated that Westra was hired only after his government service ended and that no discussions occurred while he was in office. Erickson confirmed he abstained from relevant board decisions and disclosed his corporate affiliation, though he denied any financial gain from the project.
The company noted Erickson joined its board in 2016, years before the South Dakota project was conceived, and that his role was requested by a shareholder.
State aid includes a $6.7 million Future Fund grant for land development, up to $15 million in sales tax rebates, a $15 million low-interest loan, two $15 million reimbursements for construction costs (including a wastewater treatment facility), and over $2 million in infrastructure grants for gas-line improvements.
The initial pledge was made in 2021 when Westra led the Governor’s Office of Economic Development. Since he joined CJ Schwan’s, additional approvals have brought total support to $69 million, down from an initial $95 million due to adjustments in loan and rebate amounts.
The company highlighted its community investments, including $250,000 to Forward Sioux Falls and sponsorship of the Sanford International golf tournament. Over $75 million in construction contracts have gone to local firms.
Governor Larry Rhoden praised the project as a major economic win, crediting former Governor Kristi Noem’s administration for attracting the investment.
However, political debate continues. Jon Hansen, a Republican gubernatorial candidate, criticized the aid as “corporate welfare” and labeled Westra’s move a “blatant example of crony capitalism.” Michael Rohl, another Republican senator, opposed Westra’s reappointment in 2023, citing integrity concerns.
Westra previously faced scrutiny during the pandemic when businesses tied to him received federal relief funds. Records show Hegg Companies, where he held leadership roles, obtained over $3 million in state grants, despite claims of a leave of absence.
Lawmakers are now considering reforms to increase oversight of the Future Fund, which operates under gubernatorial control. A proposed bill would require board approval for grants, aiming to enhance accountability.
— news from Argus Leader
— News Original —
Company that hired state’s former head of economic development benefits from millions in aid
Steve Westra was South Dakota’s commissioner of economic development four years ago when the office first agreed to provide financial assistance for a CJ Schwan’s company project. n nAfter leaving state government, he’s now a vice president for the company, which has benefited from state grant and loan approvals totaling $69 million. n nAll the while, the chairman of the state board that approved some of the aid, Jeff Erickson, has also been a member of the CJ Schwan’s board of directors. n nThe state funding is helping CJ Schwan’s with the construction of a $550 million food production plant in Sioux Falls that will have an estimated 600 employees — a project that the Governor’s Office of Economic Development has described as the largest single private investment in South Dakota history. The company, which is part of a South Korean global conglomerate known as CJ Group, has also opened an office with 50 additional employees in downtown Sioux Falls. n nState Board of Economic Development minutes say Erickson abstained from discussion and votes on financial assistance for the company. Westra’s LinkedIn page indicates he waited a year after leaving state government to begin working for CJ Schwan’s, which is the state’s legally required waiting period for former state employees to benefit from a contract they were involved with, or to enter into a new contract with the state. n nYet lawmakers and others from both sides of the political aisle are questioning the ethics of the situation. n nFormer state Sen. Reynold Nesiba, D-Sioux Falls, served on the state Board of Economic Development until last year. He said Erickson’s dual roles on the CJ Schwan’s corporate board and a state board that’s approved tens of millions of dollars in aid for the company are “deeply problematic.” To avoid the appearance of impropriety, Nesiba said, Erickson should give up one position or the other. n n“Serving both simultaneously tarnishes the reputation of both institutions,” Nesiba said. n nSen. Tim Reed, R-Brookings, is the former CEO of the Brookings Economic Development Corp. He said the jobs and tax revenue generated by the CJ Schwan’s project will be a win for South Dakota and Sioux Falls, but “the optics” of Westra’s transition “are absolutely terrible.” n n“I think there are some concerns with this,” Reed said. “The safeguards are supposed to be there with the one-year statute, but is that enough? I think we may need to revisit that.” n nRep. Erik Muckey, D-Sioux Falls, said lawmakers should investigate Westra’s conduct. n n“This is a serious issue and a potential conflict of interest that deserves the full weight of the Legislature looking into it,” Muckey said. n nNesiba, Reed and Muckey had not been aware that CJ Schwan’s hired Westra until South Dakota Searchlight informed them. n nResponses to concerns n nWestra did not respond to multiple South Dakota Searchlight messages. CJ Schwan’s said in an email that Westra “is currently employed by CJ Schwan’s to advise on business development and government relations matters. He was hired after he left state government. At no time did anyone from the company discuss potential employment with Mr. Westra while he was involved with state government.” n nReed and Muckey are two of the four non-voting legislative members of the state Board of Economic Development, serving alongside 13 citizen appointees, including Erickson. Reed said Erickson “recuses himself and does not participate in the discussion” when matters involving CJ Schwan’s arise. n nErickson was required to file a financial interest statement with the state to serve on the Board of Economic Development. He disclosed in his 2017 statement — the most recent one available from the South Dakota Secretary of State’s Office — that Schwan’s was one of numerous businesses supplying him, his spouse or his children with more than 10% control or more than $2,000 of annual family income. n nWhen Searchlight asked Erickson for further information about those disclosures, he mentioned his abstention from matters pertaining to CJ Schwan’s and said he disclosed his conflict to the rest of the state Board of Economic Development. Although he serves on the CJ Schwan’s board of directors, Erickson told Searchlight in a written statement, “I have no ownership interest in this company and have not financially benefited in any way from this project.” In response to Nesiba’s assertion that Erickson should give up his state board or corporate board position, Erickson said he disagrees and stands by his statement. n nCJ Schwan’s said Erickson “was asked by one of our shareholders to represent their interests on our board, and his service began years before any discussions or plans related to our South Dakota project even began.” Erickson began serving on the company’s board in 2016. He had already been a longtime member of the state Board of Economic Development by then, with minutes showing him in the chairman’s role as early as 2012. n nState aid approvals benefiting CJ Schwan’s n n$6.7 million grant from the Future Fund — a pool of economic development money controlled by the governor — to the Sioux Falls Development Foundation for land in an industrial park that the foundation developed and transferred to CJ Schwan’s for its construction of a food production plant. n nUp to $15 million in rebates of state sales taxes paid on project construction and equipment, via the Reinvestment Payment Program. n n$15 million low-interest loan from the Revolving Economic Development and Initiative Fund to support construction of the plant. n n$30 million more from the Future Fund, paid in two $15 million installments to the Sioux Falls Development Foundation, to reimburse CJ Schwan’s for construction costs including an on-site wastewater treatment facility. n n$448,000 grant from the Local Infrastructure Improvement Program to the Sioux Falls Development Foundation for gas-line infrastructure that will benefit CJ Schwan’s and the broader industrial park around it. n nAnother $1.55 million grant from the Future Fund to the Sioux Falls Development Foundation for gas-line infrastructure that will benefit CJ Schwan’s and the broader industrial park around it. n nTotal: $69 million. n nThe state first pledged assistance for a CJ Schwan’s project in 2021. Then-Gov. Kristi Noem’s administration committed to providing $6.7 million in grants through the Governor’s Office of Economic Development, which Westra led at the time. He left his state government job in May 2023. n nSince May 2024 — the month Westra began working for CJ Foods, according to his LinkedIn profile — the company’s project has been approved for another $32 million in state grants, a $15 million low-interest state loan, and up to $15 million in state sales tax rebates. n nFrom ice cream trucks to food production n nSchwan’s was founded as a family company during the 1950s in Minnesota. It was known for its yellow trucks and delivery drivers who went door-to-door selling ice cream and frozen food. n nOver time, the company grew to include the production of frozen foods for grocery stores and the food-service industry. The transformation culminated in that part of the business being acquired in 2019 by CJ CheilJedang, a subsidiary of South Korea-based CJ Group, for a price reported at the time as $1.84 billion. CJ Group, which is publicly traded in Korea, disclosed revenues of about $30 billion last year. The Schwan’s home delivery service, which was not part of the acquisition, has since been shut down. n nThe company first contacted the state in the fall of 2019 — the year Noem became governor and hired Westra to lead the economic development office. The company said it was planning a major project in one of several states. South Dakota officials met with the company over the course of a year to discuss the project and potential state incentives. n n“GOED has actively recruited Minnesota businesses, particularly those with strong ties to South Dakota, for years — CJ Schwan’s is one such business,” said a statement from the state economic development office to South Dakota Searchlight. “Their Sioux Falls project emerged in 2020 through GOED’s ‘South Dakota Means Business’ campaign and the subsequent hard work of many in Sioux Falls and at GOED.” n nWestra explained the campaign’s philosophy in 2020. n n“We hear over and over from business owners in Minnesota and other states that increased government regulations are making it difficult to earn a profit and plan for growth,” Westra said at the time. “We want to get the word out that it doesn’t have to be this way.” n nNear the end of 2020, the company had narrowed potential sites to two states. In January 2021, CJ Schwan’s announced its selection of a site in northern Sioux Falls. n n“The combination of the state’s highway infrastructure, geographic proximity to serve our customers, and South Dakota’s pro-business environment were all factors in our decision,” the company said in a statement to South Dakota Searchlight, explaining its choice of the site. n nThe company hopes to open its Sioux Falls plant next year with 600 full-time jobs paying an average of $19 per hour. The facility will include production lines for the bibigo brand of steamed dumplings and egg rolls marketed to the food-service industry, the company said last year, plus a warehouse, distribution center and office space. n n“Projects of this scale and complexity are only possible through strong business/government partnership,” the company said, “and the state of South Dakota has provided outstanding support to us.” n nIncentives begin n nWestra signed the agreement promising the state’s first assistance to CJ Schwan’s, which is dated Sept. 30, 2021. It was a commitment to provide $6.7 million in grants from the state’s Future Fund to the Sioux Falls Development Foundation. The state paid the money to the development foundation in 2024, when the foundation transferred land in its Foundation Park to CJ Schwan’s for the project. n n“It covered what it cost us to develop the land,” said Bob Mundt, president and CEO of the foundation, adding that the land transfer to CJ Schwan’s was “part of our contribution to help bring them here.” n nMundt declined to comment on the ethical concerns expressed by lawmakers but offered comments on the worthiness of the CJ Schwan’s project. n n“This is a great project for the city and state of South Dakota,” Mundt said. “We feel that it has tremendous potential for growth and expansion in the future.” n nMundt said another state competing for the project had a site ready to go, making the land important in the competition to recruit the company to Sioux Falls. n nThe source of the initial state aid for the project, the Future Fund, is a pool of money that was created in 1987 at the request of then-Gov. George Mickelson. It was placed under the exclusive control of the governor, with the intent of enabling the state’s chief executive to respond quickly when economic opportunities arise. n nState law mandates only that the fund be used “for purposes related to research and economic development for the state.” The money comes from South Dakota employers, who pay a fee to the Future Fund when they submit payroll taxes to the unemployment benefits program. n nNoem sparked controversy and bipartisan lawmaker criticism with several uses of the Future Fund, including a fireworks show at Mount Rushmore, a Rapid City-area shooting range that legislators refused to pay for, a Governor’s Cup rodeo in Sioux Falls, and a workforce recruitment campaign that Noem starred in. n nLawmakers on a government oversight committee recently endorsed a draft bill that would take some control of the fund away from the governor. The bill would require each Future Fund grant to be approved by a majority of the Board of Economic Development, which already has oversight of other economic development programs. n nSen. Taffy Howard, R-Rapid City, plans to introduce the bill during the legislative session that begins in January. She said the Future Fund is one of a range of government financial incentives for businesses that “need more transparency, objectivity and unbiased oversight than we have now.” n nState aid continues n nNoem’s office announced in April 2023 that Westra would step down as economic development commissioner on May 22 of that year. Further aid would not begin flowing toward the CJ Schwan’s project until 2024, by which time Westra was a company employee. On his LinkedIn profile, Westra lists his title as senior vice president of business development and his start date as May 2024. n nIn August 2024, the state Board of Economic Development — chaired by Erickson, but with him abstaining as he did on each discussion and vote related to CJ Schwan’s — approved up to $31.5 million for the company from the state’s Reinvestment Payment Program. It provides rebates of state sales taxes paid on qualifying construction and equipment expenses. That approval and some of the other aid benefiting CJ Schwan’s went to SFC Global Supply Chain, which has been described as a subsidiary of CJ Schwan’s in company documents. n nThe sales tax rebate has since been reduced to a maximum of $15 million. n nThe state board additionally approved two loans to the company in September 2024 through the state’s Revolving Economic Development and Initiative Fund. It provides low-interest loans to help finance land, buildings and equipment for business expansions and relocations. The CJ Schwan’s project was initially awarded two REDI loans totaling $25 million, but those commitments expired before the loans were taken out, and the loans were not made. Instead, the state board approved a $15 million REDI loan in October of this year. n nCJ Schwan’s conducted a ceremonial groundbreaking for its Sioux Falls project in November 2024. n nThe next month, the Noem administration pledged another $30 million from the Future Fund. The grant was split into two $15 million awards to the Sioux Falls Development Foundation so it could reimburse some of CJ Schwan’s construction costs, including building an on-site wastewater treatment facility. The first $15 million was paid out that month, and the second $15 million was provided in June this year. n nThe Governor’s Office of Economic Development said both of the $15 million grants were approved by the Noem administration before Noem resigned in January to accept the top job at the U.S. Department of Homeland Security. Her departure elevated her lieutenant governor, Larry Rhoden, to governor. n n“The current administration’s role has been to review progress and release funds only after the required milestones were met,” the state economic development office said in a statement to Searchlight. n nThe office also said that when CJ Schwan’s selected South Dakota, Sioux Falls required the company to build a wastewater treatment facility that the company would not have been required to build in other states. n n“To present a competitive bid for the project to move forward, the state agreed to a Future Fund grant to offset those additional costs,” the office said. “But for this grant, CJ Schwan’s would have chosen a state without this requirement.” n nIn March of this year, the state Board of Economic Development approved a $448,000 grant to the Sioux Falls Development Foundation from the state’s Local Infrastructure Improvement Program for natural gas infrastructure supporting the CJ Schwan’s project site. n nConstruction work at the site began in May this year, and in June, Rhoden awarded another $1.55 million grant from the Future Fund to the Sioux Falls Development Foundation to further assist with the natural gas infrastructure at the site. The work funded by the infrastructure grant and the latest Future Fund grant will also benefit the broader industrial park around CJ Schwan’s as it continues to develop. n nThe latest Future Fund award brought the total amount of Future Fund assistance for the project to about $38 million. n nThe total of all state grants and loans initially approved to benefit the CJ Schwan’s project added up to $95 million, but after the reductions to the REDI loans and sales tax rebates, the amount is now $69 million. n nMeanwhile, CJ Schwan’s said it has pledged $250,000 to Forward Sioux Falls, a joint economic development venture of the Greater Sioux Falls Chamber of Commerce and Sioux Falls Development Foundation. The company said it has also sponsored the Sanford International golf tournament in Sioux Falls for the past three years. More than half of the construction contracts associated with the Sioux Falls project so far have been awarded to local contractors, the company said, totaling more than $75 million. n n“We look forward to continuing to support the community and the vitality of the region as a corporate citizen,” the company said. n nRhoden said he is proud that South Dakota “is a destination for world-class companies like CJ Schwan’s.” n n“This project will be a huge benefit to our economic growth — it’s a major feather in the cap of former Governor Noem, and the state’s investments brought South Dakota a $550 million plant that will support 600 good-paying jobs in Sioux Falls,” Rhoden said. n nPolitical fallout n nThe state’s approach to economic development is one of the central issues in the campaign for next year’s Republican gubernatorial nomination, which has four candidates so far: Rhoden, who is serving the remainder of Noem’s second term, U.S. Rep. Dusty Johnson, Aberdeen businessman Toby Doeden, and state Speaker of the House Jon Hansen. n nHansen, of Dell Rapids, has made criticism of the Governor’s Office of Economic Development one of his main campaign themes, calling aid from the office “corporate welfare.” He said Westra’s transition from state economic development commissioner to an executive for a company receiving millions from that office “may be the most blatant example of crony capitalism I’ve seen yet.” n n“I’m committed to ending this abuse — whether through legislation this session or as the next governor — and stopping the unaccountable slush-fund spending in our government,” Hansen said. n nSouth Dakota Democratic Party Executive Director Dan Ahlers, a former legislator, said he’s bothered by Westra’s transition — which Ahlers called a “golden parachute” — and by CJ Schwan’s being part of a global conglomerate “that doesn’t need this kind of assistance.” He said some of the state aid given to the company would have been better used “to cultivate entrepreneurship at the local level in this state for small business owners to help get their ideas off the ground.” n nSen. Michael Rohl, R-Aberdeen, said Westra’s actions in helping to arrange state aid for a company that he ended up working for “certainly appear unethical and premeditated.” Rohl voted against the state Senate’s confirmation of Westra’s reappointment to a new term as economic development commissioner in 2023 because, according to Rohl, Westra “lacked the integrity my neighbors expect.” Rohl was one of six people in the 35-member Senate to vote against Westra’s confirmation. n nThe CJ Schwan’s situation is not the first time Westra has faced ethical questions. n nWhile he was serving as state economic development commissioner during the COVID-19 pandemic, companies connected to Westra and his business associates received state coronavirus relief grants, according to a 2021 South Dakota Public Broadcasting review of state records. n nHegg Companies, where Westra had long held leadership roles, was awarded $574,425 from a state small-business grant program funded with federal pandemic relief dollars. Additional corporations registered to Hegg Companies President and CEO Paul Hegg and his father, Board Chairman Peter Hegg, received roughly $3 million combined. n nWestra listed income from Hegg Companies on a required financial disclosure when he joined Noem’s cabinet in 2019. Noem’s spokesman, Ian Fury, said at the time that Westra was on a leave of absence from Hegg Companies. But when Hegg Companies filed its 2020 annual report with the South Dakota secretary of state, the corporation still listed Westra as vice president and secretary.