Category Archives: Business

Republican Senator Mullin: Betting on the lottery

Business, local/regional,

Pro gambling Republican State Senator Kevin Mullin wants more state-sponsored gambling. He says if he had his way he’d have a casino at Killington Ski area, but he knows the odds are against that happening. So, hoping to win a different prize in the final days of the legislature, the Senator finagled a provision into a budget bill. According to VTDigger.com the last minute provision requires the Vermont State Lottery commission to issue a report in November studying the computerized bingo game Keno. In computerized Keno players try to match 10 out of 20 randomly generated numbers to total 80, and winners are chosen every four minutes. Intralot, the Greece-based lottery operator that Vermont contracts with, offers Keno in other states. The multi-national gambling corporation boasts that it “has become an international protagonist in the lottery sector.” Sen. Mullin says:

“Nobody likes gambling, but the reality is, people will leave the state to go gambling elsewhere. I think it’s worth exploring.”

He claims if we don’t have Keno here people will leave the state to lose their money. Massachusetts, New York and Rhode Island feature Keno but New Hampshire does not. Mullin’s apparent ‘logic’ is that by adding Keno, we would stop Vermonters from going to NY, MA and RI for their gambling fix, but reap the rewards out of the pockets of our neighbors coming from NH – at least until New Hampshire wised up. Increasing state lottery betting is proving a bad way to raise a few bucks. One study from 2010 found that households with take home incomes of less than $13,000 spent on average $685.00 a year on lottery tickets. And economists note that this “game” takes money from those least able to afford the loss and redistributes money upward.

These billions also are diverted away from local businesses – with the exception of the stores where tickets are sold. “This is exactly the opposite of the kind of economic stimulus a depressed economy needs,”

Expanding Vermont’s current offering of ten lottery games at 700 outlets to include the fast paced online bingo would need approval from the House, where it faces solid opposition from Speaker Shap Smith and Ways and Means Chair Janet Ancel. Odds are for now, lottery protagonist Mullin has placed a losing bet.

Sing-a-song of EB-5

Business,

Looks as if the federal EB-5 golden goose program isn’t providing eggs as quickly for Vermont businesses as it had been. EB-5 programs in some states are experiencing various problems, and dozens of disappointed investors – many of them from China – are suing US EB-5 businesses. Serious allegations of fraud recently shut down one large project in Chicago. Foreign investors are hearing the sound of sour notes in all this negative noise.

Meanwhile here in Vermont The Trapp Family Lodge had hoped EB-5 would fuel major expansion projects. EB-5 is the Federal program that allows potential immigrants to invest $500,000 in approved job-creating business ventures in exchange for a green card for themselves and their families. According to The Wall Street Journal Johannes von Trapp hoped for $22 million in Chinese EB-5 investments to renovate existing facilities, build new timeshare units and expand their craft beer brewery.

Due to recent losses from the recession The Trapp Family lodge qualified as a “troubled business” under EB-5 regulations. The investments, according to the Von Trapp’s economist, will preserve 200 of the lodge’s’ existing jobs.

In the offering materials, Mr. von Trapp’s economist asserts the finished project will not only preserve 200 jobs at the lodge, but also will create 904 new jobs within three years – 66 jobs at the Trapp Lager brewery and restaurant, and the rest “indirect” jobs as the capital spending ripples through the economy.

It isn’t clear what kind of formula they use for these job estimates but it seems they anticipate an aggressive “ripple” ratio of direct jobs to indirect jobs to take place: 12.7 “indirect” jobs for every direct job at the restaurant and brewery.

Many people in China may know only a little about Vermont, but they are reportedly familiar with the Von Trapp family story as told in The Sound of Music. An EB-5 marketing expert told the Von Trapps this familiarity would be a big plus in encouraging investment through the EB-5 visa/green card program. The 1965 musical has been officially shown in China since the late 1970s.

To capitalize on that familiarity, von Trapp took the show on the road to China:

Sam von Trapp, wearing a jacket like Christopher Plummer’s in “The Sound of Music,” presented a slide show. “Our motto at the Trapp Family Lodge is: ‘A little bit of Austria, a lot of Vermont.’

.  Von Trapp the elder even sang the Edelweiss song with school children in Beijing. And still, the von Trapps’ efforts somehow failed to entice enough capital to meet their investment target. After three trips to China, the Trapp Family Lodge business landed only five investors worth $2.5 million, just over ten percent of their goal of $22 million from 44 visa-seeking investors.

When dressing up like a character from the Sound of Music, singing Edelweiss, and dangling US green cards fails to charm enough investors out of $500,000, it could be a clear sign the EB-5 boom days are just plain over. In simple business terms, and maybe even with a straight face, you could say the EB-5 market is, ahem, ‘maturing.’

AnC Bio Vermont – Sports and Entertainment

Business, , , ,

Jay Peak has developed a new hotel and  Disney-esque water park, financed largely with private funding through the Federal EB-5 program. Much more is promised for the next phase. A jaw-dropping six hundred million dollars of EB-5 fueled foreign investment may transform the area: more lodges, hotels, condos and a new state-of-the-art hi-tech bio-tech medical factory are planned, which will, of course, bring jobs. The project is likely to produce change fast and furious enough to stir fears of its overall impact on the community.

The proposal by AnC Bio Vermont chairman Ariel Quiros stands out among the hotels and condos. Land and buildings for the hi-tech medical facility have been purchased, and reports say they will invest $110 million dollars; when completed the factory will generate “in excess” of 3,000 direct and indirect EB-5 jobs.

In support of the project a couple slickly produced promo videos, one featuring Governor Shumlin and Senator Leahy, can be seen online. Some PR releases can be found too, and one from 2011 mentions a new AnC Bio facility in China.

According to a 2011 business report AnC Bio of South Korea …

owns a state-of-the-art cGMP cell culturing facility for stem cell therapies including research, development, and manufacturing of biomedical devices and therapies.

In January 2011 as part of a $4 million investment, AnC Bio Holdings’ Ariel Quiros was given a seat on the board of Bioheart as part of a subscription agreement (early stages of a merger) deal between the two companies. Three months later he was removed from the Bioheart board due to AnC Bio Holdings’ failure to meet its payment obligations. AnCBio had made only one payment of $400,000 of the agreed installments.The tsunami that struck Japan that year was blamed.

Incidentally, AnC Bio’s Vermont chairman also owns G.S.I., a clothing and consumer electronics importing firm based in Dade County, Florida.

Since an actual “brick and mortar” bio=tech manufacturing facility is planned for Vermont, I was hoping to find an old-fashioned image of a sleek AnC-owned factory with manicured lawn and company sign pictured online, but there is none. Yet AnCBio.com is still interesting. At the R & D Center you can click any of the three categories – Cell Therapy, Artificial Organs, and Digital Researches – and you will find that the pages linked to are blank, apparently labeled In preparation for the Vermont project. The latest information in the News Release area is from April 2008. With the ongoing PR push here in Vermont it looks like either bad planning or ineptitude to not keep this section current.

[But wait, there’s more!]

Much of AnC Bio Vermont’s hopes hinge not only on the federal EB-5 program-supplied funding but on the FDA granting approval for its artificial heart device used in surgery. Aha! Well now this is what makes the next category on AnCBio.com interesting.

In the about us section under intellectual property are found seventeen medical process and device patent application notices. Who needs “ brick and mortar” if AnC bio holds useful issued patents and procedures? This “intellectual property” is where the investment value may reside.

The list of intellectual property consists of seventeen items dated from 2001 to 2007. One is listed as issued in three countries; Republic of S. Korea, USA, and Singapore. Okay, maybe this website just hasn’t been fluffed, dusted, or updated lately, which probably isn’t unusual; surely more detailed reports must be available elsewhere.

Company history could be considered as a measure in terms of future performance. AnC Bio was once called The Sports Seoul 21 Company Ltd., and is located at 10th Floor, H&S Tower 119-2 Nonhyun-Dong, Gangnam-Gu, Seoul, Korea. It has been there since 2009 when Ariel Quiros (now chairman of AnC Bio Vermont) arrived at the ten-year-old Sports Seoul 21 Ltd., along with the new name.

Business profiles done at the time of the name change and some recent profiles online describe AnCBio like this:

Company overview

The company publishes and prints daily sports newspapers which contain news contents covering various sports including baseball, football, golf and basketball as well as entertainment news. It also offers both printed and online content, and provides links to community-specific information sources for shopping, travel and real estate on its Website. In addition, the company is involved in sports and entertainment related event businesses in South Korea. […] Sports Seoul 21 LTD was incorporated in December 1999.

Dozens of foreign investors are still needed to plunk down their $500,000 green card investment [fee] to kickstart construction of AnC Bio’s Northeast Kingdom medical manufacturing plant. Once the plant is completed and operating in the US, AnC hopes to leverage that fact to speed  FDA approval of their artificial heart device.

So, a foreign-based firm that was mostly involved in clothing, consumer electronics, and “sports information” suddenly plans a major factory in a low-income area in hopes of getting federal approval of its apparently not-yet-patented-in-the-US surgical devices. As an investment for EB-5 folks looking for some return beyond their green cards, this sounds more like two-thirds of The Music Man’s seventy-six trombones plus one third Dr. Frankenstein.

Or just maybe it is fast-track EB-5 boosterism. When speaking to a Vermont newspaper about AnC’s bold plans Ariel Quiros said, the company [AnC bio] will “write new history,” , and also noted “They called me a mad scientist, but what the world sees as a risk, I continue to pursue it, and pursue it and pursue it.

Watch out NEK – and Vermont! Make sure you’re not selling the family cow for magic beans, only to run into a mean and hungry giant.

Private Rest Area: A Good Opportunity for…?

Business, local/regional, , ,

Vermont has been saving pennies by closing Interstate highway rest areas, and for years the state has not provided sufficient funds to properly upgrade and maintain those that have remained. So pennywise and pounds foolish, it seems the state must be searching for schemes to keep rest areas available. One scheme apparently not under consideration is, you know actual proper funding of the facilities.

Now if you owned a large industrial park near an interstate and were offered a state backed monopoly business deal at the nearest highway exit, would you jump at the deal? How about if the state guaranteed no competition for many miles north and south?

From VPR News:  So the Shumlin Administration has backed a plan by developer Jesse “Sam” Sammis to build a rest area and visitors’ center off I-89 Exit 4 in Randolph. Said Administration Secretary Jeb Spaulding […]”If it goes forward it seems like a good opportunity for the Vermont taxpayer, the traveling public and for Vermont producers to have a place to display their products,” he said.

 

“Sam” Sammis, Chairman of the New England Land Company of Greenwich CT and Randolph VT, owns projects in Vermont including The Green Mountain Stock Farm and Green Mountain Office and Industrial Park.

“I said it’s a good idea, but how am I going to make this thing work financially? I’ve got to pay to build the buildings, put the infrastructure in,” he said. Sammis said he plans to use a site next door to showcase Vermont products. He would charge companies rent to display their goods.

How well would this possibly work financially? How on earth could an exclusive State of Vermont deal at a heavily trafficked interstate highway interchange benefit financially someone that owns the surrounding 170-acre office/industrial park?

State studies from an earlier 2010 effort at this project by Sammis showed that by closing the existing rest areas combined with installing Vermont promtional signage on the Interstate, 500,000 travelers would “be put on the doorstep” of a commercialized area annually.

Getting the centers off the Interstates, [Department of Buildings and General Services Commissioner Gerald Myers] added, would make it possible to have retail sales on-site, something prohibited on federally-owned land.

No mention has been made of any remuneration to the state for its guarantee of non-competition or its promotional signs directing weary, rest-room-needy travelers to the privately owned commercial venture at Exit 4.

It’s beginning to sound like our Granite State neighbors to the East, where they sell liquor at the rest areas, just in case there aren’t enough drunk drivers on the road. But then again, selling liquor is exclusively a state prerogative over there.

So there you go, Sammis is the first to potentially have a state-blessed but otherwise unregulated monopoly with zero accountability. You want one? The key is on the hook. It’s around back. (Psst, don’t tell WalMart!)

Why did Rapid Visa USA and Jay Peak Part Ways?

Business, local/regional, ,

So what did happen between Jay Peak and Rapid Visa USA? The show pony for Vermont’s Federal EB-5 investment funded expansion has hit a bit of controversy or “flappette” as one local report called it. Some principal players are unavailable to the media, and the story coverage in state has mostly consisted of assurances from Jay Peak’s owner and a State of Vermont Commerce Agency official. However, what is known is that EB-5 broker Douglas Hulme of Rapid Visa USA terminated his longtime lucrative business relationship with Bill Stenger and Jay Peak, writing that he  “no longer has confidence in the accuracy of representations made by Jay Peak.”

Rapid Visa USA had a long association with Jay Peak and had successfully brokered $200 million in investment from 400 green-card-seeking investors for the ski-becoming-destination resort.

  Assuming that figure [$200 million] to be correct, the fees paid to agents and attorneys involved with the sale of these securities offerings (the subscription fee used to be $65,000 but is now $50,000) would be well over $20 million.

The sudden departure of a business associate set off speculation in the EB-5 world about Jay Peak’s financial wellbeing.

Several other EB-5 financed projects are underway in Vermont, including a bio-tech business in the Northeast Kingdom.

Eyes wide shut?

It remains just a “flappette” locally. The EB-5 program (explained below in detail) in Vermont is a big deal, and to date it has worked well for Jay Peak. But in other areas nationally it has been criticized for spawning cynical practices that are stretching the rules and violating the spirit of the law.

Here are some numbers from the online blog EB5Info.com that examined the arrangement that existed between Jay Peak and Rapid Visa USA and brought in the funds. These amounts have been questioned but it gives an idea of the scope of a partnership that likely wouldn’t have been severed lightly or on a snarky personal whim.

  …a compensation arrangement that was very profitable for Hulme’s firm, Rapid USA Visas, earning well over $25,000 per investor once the I-526 had been approved. Rapid USA Visas and Jay Peak had an additional clause in the subscription agreement that provided both parties with compensation of $10,000 even if the investor did not pursue the investment after the 30-day review period ended, making Jay Peak one of the few EB-5 regional centers that charged (and still charges) a document fee.

 

The media – unable to talk to Rapid Visa’s Hulme or the online EB-5Info’ s analyst Michael Gibson – have relied on reassuring remarks from Jay Peak owner Bill Stenger and James Candido, the Commerce Agency’s Economic Development Specialist who found “no issues” regarding Jay Peak. Candido and the State of Vermont have an active role promoting  EB-5 and, like Stenger himself, are hardly neutral observers. Before this unpleasantness began Vermont’s Candido made an interesting point in a January interview with EB-5 expert Norman Oder when he spoke of the state’s responsibilities to investors:

“everything points to them getting their investment back” but stressed “that’s not under the jurisdiction of the government.” Because Jay Peak did not start getting investors until 2008-09, none have seen their investment periods reach maturity, so they haven’t had a chance to get their money back, Candido said. The investment is a private transaction, he said, “unless a company we see is blatantly or intentionally trying to deceive investors.”

An observer might wonder if at a minimum a “flappette” might be elevated to the level of “flap” or higher when more information becomes available. Until then the State and Jay Peak will no doubt refer often to their  “great track record”- however something caused longtime business associate and stakeholder Rapid Visa USA to bolt Jay Peak and that might tarnish the track record.

About the program: The EB-5 program allows immigrants wishing to obtain US citizenship to invest in approved private businesses ventures. A $500,000 investment in a US business that indirectly creates 10 full-time (often low wage) jobs for American workers will yield citizenship for the wealthy immigrant and family. The program has aspects of both immigration and investment so the U.S. Citizenship and Immigration Services (USCIS) and the Securities and Exchange Commission (SEC) handle oversight nationally.

Price Points of Citizenship

Business, local/regional, , ,

The Federal EB-5 Visa program may be made permanent in 2012 and the move faces limited opposition. Some whining from Senators Charles Grassley and Lindsey Graham and testimony by the Center for Immigration Studies, an anti-immigrant “think tank,” were the few remarks not leveling praise at the early congressional hearings. A New York Times editorial, while generally kind to EB-5, however has serious reservations about its implementation:

But the program has spawned cynical practices that are stretching the rules and violating the spirit of the law.

 

For those not familiar with it, the EB-5 program allows immigrants wishing to obtain US citizenship to invest in approved private businesses ventures. A $500,000 investment in a US business that creates 10 full-time (often low-wage) jobs for American workers will yield citizenship for the wealthy immigrant and family.

For a second year, Vermont and the state’s administrators overseeing the program received the EB-5 Regional Center of the Year Award from a group they oversee. This award was given by the Artisan Business Group, a brokering firm that assists American business owners in capturing investment opportunities (potential immigrants of means) in China. Estimates by the state are that Vermont received $100 million in 2011 for EB-5 visa investment. When Vermonters hear about the EB-5 Visa program at all, it often involves Jay Peak and its years-long expansion into a four-season destination resort, complete with a $25 million year-round indoor water park, funded in part through government-initiated EB-5 investor cash.

This cash-for-visa program has certainly helped Jay Peak’s infrastructure, boosted the owner’s bottom line and lastly supplied some low-wage employment for the Northeast kingdom (see trickledown theory).

The program has aspects of both immigration and investment, so the U.S. Citizenship and Immigration Services (USCIS) and the Securities and Exchange Commission (SEC) handle oversight nationally. However, questions about the oversight ability of the consistently overburdened and understaffed SEC have surfaced: from EB-5’s inception until 2010, the USCIS had decertified only two regional centers.

It shows some kind of strange disconnect that can allow one arm of our immigration policy to go piggybacking on a development scheme and actively court the wealthy to invest  cash in private business enterprises, while another arm works aggressively to deport hundreds of poor immigrants unable to buy their way to a better life. When all is said and done we may soon have a permanent structured system for marketing American citizenship for cash. Strip it all down and it does follow the money.