Tag Archives: EB-5 Vermont Regional Center

Get to the bottom

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It has been a busy week since the SEC locked up Q-Burke and cracked down on Stenger and Quiros’ “Ponzi like” EB-5 scheme.

One thing that has grabbed a lot of attention is a “batch” of emails from the Shumlin administration that had been slated to be deleted.  Speculation is rampant about the timing – why in early April, prior to the SEC action, this batch of correspondence was slated to be wiped.EB-5 chart 1

They reportedly may contain correspondence between Shumlin’s former staff member Alex MacLean, who was then working for Jay Peak’s Bill Stenger, and the governor’s office. Administration officials say the request to delete was routine. And they want them made public however Attorney General Sorrell is said to be reviewing the issue.

Now The Vermont House has scheduled a debate for Friday to consider a proposed resolution calling for the release of the emails, joining several candidates for governor and others requesting the contents be made available to the public.

Rep. Chris Pearson (P-Burlington), who heads the House Progressive caucus, says there’s an easy way to put to rest any lingering questions.

“I agree with a whole lot of Vermonters that something seems very fishy here,” he said. “But I’m not asserting anything. I’m saying: Show us the emails and prove it to us.”

To that end, he and four fellow Progressives have introduced a resolution asking Shumlin to deliver the emails to a House committee by May 1.

Maybe it is worth asking this: Is it more likely the email batch is simply an embarrassment (a big one perhaps) for the Shumlin administration, or could it be a smoking gun?  I’d bet on embarrassment over smoking gun. So good: “show us the emails” because the longer it hangs fire the more suspicion gathers.

But if the point is to get to the bottom of how the state allowed this Ponzi scheme to happen, why not start at the bottom rather than the top?

Not exactly the bottom, but how about at the state Agency of Commerce and Community Development(ACCD). This would be the state agency that had the schizophrenic task of promotion and oversight of approved EB-5 programs until February 2015 when oversight began to be shared actively with the Department of Financial Regulation (DFR).

The ACCD’s directors of the Regional EB-5 Center for both the Douglas and Shumlin administrations had day-to-day dealings and traveled extensively overseas in support of Jay Peak and Q-Resorts’ team.

In their designated role former Regional Center Directors James Candido (Douglas’ man) and  Brent Raymond (Shumlin’s former Director) were the faces Vermont presented to foreign investors. Their attendance at worldwide EB-5 conventions signaled Vermont‘s stamp of approval for Jay Peak /Q-Burke, helping  Stenger and Quiros gather funds.

Considering the scale of fraud alleged could state officials so familiar with the operation not have expressed some worries or had suspicions? And just what was the calculus that weighed in favor of ignoring the tell-tale signs, of favoring the developers-cum (alleged) robber barons over their responsibilities to the people of Vermont and the (alleged) foreign-investor-victims?

At some point Vermont’s  combination “watchdog” and enabling agency – going back to the Douglas daze – deserves as much or more attention than Shumlin’s batch of emails is now getting. The Regional EB-5 Center was there helping sell the snake oil from the start. What did the directors know and when might they have known it ?

Q-Resorts fallout: revisionist photoshopping we might see

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Reports are, as you might expect, that Vermont pols are working hard to put a little sunlight between themselves and alleged EB-5 ponzi artists Bill Stenger and Ariel Quiros. It will prove a little harder for some than others.

Early on in the EB-5 saga, in October 2009 Governor Jim Douglas went on a junket to South Korea with Stenger and Quiros . While there, according to a press release at the time,  he facilitated the first EB-5 investor seminar for the now-failed AnC Bio as part of his economic development mission to Asia.

Will former Governor Douglas try to blur it away even though he had a front row center seat?douglas ancbio 2

Vermont.gov press release: “On behalf of the people of Vermont, I want to welcome AnC Bio VT to Vermont,” Douglas said while at the AnC plant in Seoul. “This is an exciting opportunity that can bring hundreds of high-tech, good paying jobs to our state.” — Gov. Douglas 2009 [vermont.gov noted that pictures were available for the press]

Starting in 2004 EB-5 was Led by Jim Douglas

The following is from Bill Stenger’s 2011 written testimony to US House Subcommittee on Immigration Policy and it couldn’t be clearer:

It was not until late 2004, because of improved C.I.S. [U.S.C.I.S.] efforts and the renewed commitment by our state officials led by Governor Jim Douglas, that the program became truly functional from our perspective in Vermont.

To be there or not to be there?

This was Bill Stenger’s birthday celebration on September 27 2012, Newport’s Lake Memphremagog.

getmerewrite
#1 Left to right: Congressman Peter Welch, Bill Stenger, Sen. Patrick Leahy, Sen. Bernie Sanders, Gov. Peter Shumlin, Ariel Quiros and William Kelly. #2 Left to right: Bill Stenger, Ariel Quiros and William Kelly

No one is exactly trying this, because you can’t just photoshop yourself out of the recent past, but a few Vermont politicians may try to blur the lines and change the focus, with or without technical wizardry.

 

Stenger, Quiros, meet The Backstreet Boys – sort of

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Yesterday, Miami lawyer Michael Goldberg was appointed by the SEC as the receiver to oversee and administer the assets of Q-Resorts’ EB-5 projects, now under a cloud of federal and state fraud charges.

The choices and arrangements made by Attorney Goldberg on behalf of the SEC as receiver will have big impacts on Vermont’s NEK. And after a ton of  litigation wallows its way through the courts, and depending on the outcome of those legal proceedings, the receiver is tasked to recover and protect funds and other assets the defendants have obtained in connection with the fraud and to distribute those assets to injured investors if a determination of liability is made.

And Michael Goldberg, Q-Resort’s SEC appointed receiver, has managed some of the largest Ponzi scheme liquidation recoveries in U.S. history, according to his bio.

A notable one he manged was as Trustee of the Louis J. Pearlman and Transcontinental Records estates  also known as Lou Pearlman’s twenty-year Ponzi scheme.

BSBoysPearlman, aka the “Svengali behind the ’90s boy-band craze,” created and managed the Backstreet Boys, and NSYNC. Pearlman was convicted of defrauding investors to the tune of $300 million by creating an airline and airline service company which did not exist. He tried to flee, but was caught on the run in Indonesia and brought to court.

Now, thanks to a simple twist of fate, the SEC (and indirectly to Carlo “Charles” Ponzi), Bill Stenger and Ariel Quiros share more with NSYNC’s Justin Timberlake than ever dreamed possible.

Q-Burking* Mountain

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In 2014, right out of the gate, reports were that Bill Stenger and Ariel Qurios’ Burke Mountain project got off on the wrong foot when a name change clashed with local sensibilities.Burkenbottle

 It’s off to a rocky start. When Quiros bought the ski area, many locals and loyal skiers bristled that he changed its name to Q Burke Mountain — a move they perceived as arrogant.

It wasn’t purely arrogance; it was just that sending a message — the winners are now in charge — to potential EB-5 investors was deemed infinitely more important than the opinion of the locals:

 Quiros says the name change is a message to investors. […] But Burke Mountain’s international reputation for chronic failure was worthless to him. He needed to change the name to associate “Burke” with his and Stenger’s success at Jay Peak, which businesspeople know is owned by Q. Resorts.fb-logo

Fast forward to this past week, where at Q-Burke Mountain hotel and conference center events are taking an interesting turn. The new hotel opening was delayed due to a multi-million-dollar dispute with the general contractor. An announcement of 180 layoffs of local employees followed quickly.

Partners Bill Stenger and Ariel Quiros wasted no time laying off the blame elsewhere:

In a swipe at the state, resort officials said in the news release announcing the layoffs that “Q-Burke Mountain Resort has worked diligently to create jobs and to retain personnel even through rough times, however, job creation, job retention, and economic development do not seem to be as important to the state as previously believed.”

It may not be easy to pass that one off with a straight face. After all, Vermont has been promoting (some might say pimping) the Q-Burke and the Jay Peak developments to potential EB-5 foreign investors. Motivated by the prospect of NEK jobs, Vermont has been marketing them around the globe as a sound investment almost from the start. In fact, it took multiple loud complaints from disgruntled Jay Peak investors and an SEC investigation before the state tightened up its accounting enforcement.

Why growl and snap at the hand that enables your EB-5 money habit? Same reason they added “Q” to Burke, a message to investors, which in this case is: it’s not our fault and keep investing. Because one season of bad weather, reports of unpaid bills and the specter of a hulking empty hotel could slow their foreign investment to a trickle-when they need gallons per hour.

And, in closing let’s return to Burke 2014 and “Q” arrogance:

Quiros understands the community doesn’t like the new name, he says. But he believes they’ll come to appreciate the value it brings, once he proves the long-term value of his plan. He thought about public perception “300 percent,” and stands by his decision.

“If I make a mistake here, I lose everything! I lose everything,” Quiros says. “Because in the world market, I don’t get the money from a bank. I get from word of mouth.”

Exactly “300 percent” right: no money from banks. It comes through the State and Federal EB-5 Immigrant Investment Program. Chances are Vermont will get over the criticism (because of the promises of local jobs). But maybe it’s a risky strategy to dump on the state after they have helped provide a steady stream of investors. T rump

And there are plenty of other EB-5’s in other states begging for foreign investors. Donald J. Trump’s got one, a huge, beautiful, luxury Jersey City Hotel and conference center for example … just a coupla minutes from Manhattan and it’s huge , HUGE!

*“Burking” : originally meaning to smother,  but which later passed into general use as a word for any suppression or cover-up.

EB-5 extended despite “constantly evolving” schemes

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Critics and some supporters of the EB-5 investment and immigration program agree it needs improvements in oversight to avoid fraud. Yet with the passing of the Congressional omnibus spending bill in December, the program was extended without changes for the next nine months. This is in spite of the fact that the Government Accounting Office raised doubts about regulators’ ability to keep up with “constantly evolving” schemes to defraud investors.

However, according to one business publication there is rejoicing. Congress’ extension without changes is welcome news for all participants of the program— investors, regional centers, developers, and marketing agents alike—for the time being.

The Immigrant Investor Program grants permanent residency to foreigners who are willing to invest $500,000 in certain approved businesses that promise to create at least 10 jobs. Vermont’s Regional EB-5 Center has several such programs, including developments at Mt. Snow, the Trapp Family Lodge, and Sugarbush. The largest by far is Bill Stenger’s $750-million Northeast Kingdom Economic Development Initiative which includes Jay Peak, AnC Bio and Q-Burke.EB-5 map2

A year ago this February, the state of Vermont was sufficiently worried about security fraud allegations that they shifted oversight of the program (in VT.) to the Department of Financial Regulation. Nationally, the SEC reportedly subpoenaed Jay Peak’s EB-5 records and conducted interviews with development associates.

Alarms and warning bells have been going off nationally for a while.

As of May 2015, the Securities and Exchange Commission and other federal law enforcement agencies had 59 open investigations relating to EB-5 projects, 35 of which “primarily involved securities fraud issues,” according to the report. The SEC received more than 100 “tips, complaints and referrals related to possible securities fraud violations” between January 2013 and January 2015.  

EB-5 supporters Senators Chuck Grassley and Patrick Leahy hoped a proposed series of reforms would tune up potentially fraud-ridden programs. Among the changes that made it to a compromise bill (but which eventually proved to be sticking points) were rules to narrow definitions of employment areas, closer supervision of regional centers, impose filing fees for investors and increase the investment requirement to $800,000. The powerful US Chamber of Commerce and the Real Estate Roundtable, along with large developers, opposed the changes.

But none of that was destined to happen. And EB-5 developers, lawyers, and marketing agents now have until September 2016 to drive stakes into future reforms. Are they really the  stakeholders, or are they the vampires sucking in money from investors seeking a return in addition to green cards?

Why did Rapid Visa USA and Jay Peak Part Ways?

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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.