A Lamoille County judge on Wednesday said a motion to place the Vermont EB-5 Regional Center into receivership was possibly unnecessary and perhaps unconstitutional.
Russell Barr of the Barr Law Group in Stowe filed the emergency motion on Friday, arguing a receivership would help protect the immigration status of his clients — investors in EB-5 projects at Jay Peak.
Under the EB-5 program, foreign investors can receive green cards in exchange for a $500,000 investment in a project that creates jobs in an economically depressed region of the country.
Ariel Quiros and Bill Stenger raised hundreds of millions of dollars from EB-5 investors for their ski resorts in the Northeast Kingdom, only to be accused by the U.S. Securities and Exchange Commission of operating a "Ponzi-like" scheme that saw them misuse $200 million. Quiros was accused of taking $50 million for himself.
Stenger entered into an agreement with the SEC in 2016 that resolved his case, but still faces an active lawsuit from the State of Vermont, as does Quiros. In August, Quiros' attorney, Melissa Visconti, said he would not contest the SEC charges against him and now will only litigate damages.
Barr filed a lawsuit against the state in June, claiming officials knew about the fraud but covered it up.
Barr says the Vermont Regional Center is imminently threatened by the stated intention of the U.S. Customs and Immigration Service to shut it down in the wake of the Jay Peak fraud.
"When a regional center loses its designation it stops all immigration processes," Barr told the Burlington Free Press on Wednesday. "It's a devastating result."
Attorney General T.J. Donovan had just received the court order Wednesday, but said it "spoke for itself."
Vermont Attorney General T.J. Donovan speaks at a news conference Thursday, Feb. 9. (Photo: APRIL MCCULLUM/FREE PRESS)
"What I care about the most is there's a full accounting of what happened here, the good, the bad and the ugly," Donovan said. "At the same time our job as lawyers for the state is to protect the state against lawsuits."
The state has argued that it is immune from liability in the EB-5 case.
In his order on Wednesday, Judge Thomas Carlson says he does not yet see any "actual emergency" for Barr's clients, and questions whether the plaintiff's request would "ever make sense on a non-emergency basis."
Under a receivership, a third party would take responsibility for the Regional Center rather than the state. Barr envisions an immigration expert stepping into the role. The resorts at Jay Peak and Burke Mountain were placed into federal receivership after the U.S. Securities and Exchange Commission, together with the State of Vermont, brought fraud charges against Quiros and Stenger.
Bill Stenger, left, and Ariel Quiros speak at an event in 2013. (Photo: GLENN RUSSELL/FREE PRESS FILE)
But Judge Carlson says there is no "statutory basis" for receivership in the case of the Vermont Regional Center, unlike when a bank or corporation is "winding up and/or at risk of mismanagement."
"In this case, however, there are no private assets to be managed nor private funds to be controlled," Carlson writes.
Carlson goes on to question whether he has the constitutional power to do as the plaintiffs ask.
Finally, Carlson questions whether a receiver would have any better chance than the state of preserving the Jay Peak investors' path to citizenship.
The state has agreed to "wind down" the regional center saying it hopes to coordinate with federal authorities to "address the closure in a way that ensures stability for Vermont's economy and protects employees, contractors and investors in the projects."
Judge Carlson concludes by saying the court will schedule a hearing on the plaintiff's motion, "but not as an emergency matter." He says he may cancel the hearing if further arguments lead him to believe "there is no point."