Feds scrutinize Vermont’s EB-5 program

On the eve of her departure from the Agency of Commerce and Community Development next month, Secretary Pat Moulton acknowledged the federal agency in charge of the EB-5 program is questioning Vermont's EB-5 Regional Center regarding Jay Peak and another project.

U.S. Citizenship and Immigration Services sent the so-called Request for Information to the Commerce Department in July. The state agency has until the end of August to answer the federal agency's questions, Moulton said. The Burlington Free Press made a public records request to Moulton for the federal document on Thursday.

The response from the Vermont Regional Center is being formulated without the help of its former director, Gene Fullam, who resigned abruptly July 20 after just more than a year on the job. Moulton said she couldn't talk about the reasons for Fullam's departure because it is a personnel matter. Fullam also declined to comment, and the state has not released his resignation letter.

Moulton, who is leaving to become interim president of Vermont Technical College on Sept. 19, said the federal inquiry includes "lots of specific questions" about where the money went at Jay Peak, and the status of the foreign investors in the various Jay Peak EB-5 projects.

"Right now we're trying to figure out what we can say, given pending litigation, since we don't have all the answers to their questions in some cases," Moulton said. "We're working on that as we speak."

The Free Press also requested the Request for Information from U.S. Citizenship and Immigration Services, after the agency declined to provide, or even acknowledge, the document existed.

"While we cannot discuss specifics of any case, please know that we are committed to ensuring the integrity of the EB-5 Program," said spokeswoman Anita Moore.

In April, the state Department of Financial Regulation and U.S. Securities and Exchange Commission alleged Jay Peak and Burke Mountain principals Ariel Quiros and Bill Stenger perpetrated one of the biggest frauds in EB-5 history, misappropriating some $200 million of investor funds. Both resorts have been placed under federal receivership as a federal court in Miami attempts to sort out the situation. Quiros and Stenger have denied the allegations.

The second Vermont EB-5 investment project the federal agency is asking questions about is the now-closed Seldon Technologies, a Windsor water filtration device maker.  A former accountant at Seldon Technologies, Linda West, alleged she was fired after she complained the company misappropriated EB-5 funds to pay for a company officer's income taxes and purchase of Seldon stock, the Valley News in West Lebanon, New Hampshire reported. West won a $400,000 lawsuit against the company for wrongful dismissal.

U.S. Citizenship and Immigration Services "saw the press report and wanted to know more," Moulton said Thursday.

Moulton said that while West prevailed in her lawsuit for being unjustly fired, the alleged EB-5 fraud at Seldon Technologies was "not on trial."

"My understanding has been that accounting work was done that indicates no fraud," Moulton said. "The Department of Financial Regulation will be looking into that more to assure that."

Under the federal EB-5 program, foreign investors have the opportunity to receive a green card in exchange for an investment of $500,000 in a development project in rural or economically depressed regions of the country that create a specified number of jobs. .

Increased scrutiny

The inquiry by U.S. Citizenship and Immigration Services into Vermont's EB-5 Regional Center comes at a time when the federal agency has vowed to increase its scrutiny of regional centers, the vast majority of which are privately owned and operated.

On July 28, Nick Colucci, chief of the agency's EB-5 program said in a conference call with stakeholders his agency is focused on making sure regional centers are providing the oversight they should for their projects.

Colucci said that when his agency becomes aware of any threats to the integrity of a program, it takes "corrective action," including terminating regional centers in "appropriate cases." He said U.S. Citizenship and Immigration Services had terminated 55 regional centers as of July 12.

"We will issue a Notice of Intent to Terminate a regional center if the regional center fails to submit required information or if it no longer serves the purpose of promoting economic growth," Colucci said.

In his talk, Colucci also made what appeared to be a reference to the Jay Peak case, although he did not name the ski resort in the Northeast Kingdom.

"You may have also heard of cases where funds have allegedly been moved between projects without notifying the investors," Colucci said. "Sometimes, the improper movement of money can signal the beginnings of a Ponzi-like scheme. This harms not only investors and communities but also, I would add, could jeopardize the very existence of the program."

The allegations against Ariel Quiros and Bill Stenger involve moving money between projects without notifying the investors, and a Ponzi-like scheme.

'I think it's a struggle'

Pat Moulton said she does not believe the Vermont EB-5 Regional Center is in any danger of being terminated, but she said she does want to make sure federal authorities are clear on how the Vermont Regional Center works.

Moulton said prior to the news of the alleged Jay Peak fraud breaking in April, she had a conversation with the fraud division at U.S. Citizenship and Immigration Services to determine "what our potential liability was."

"There were questions directed at us like, 'You've got the list of investors because you get the money,'" Moulton remembered. "The answer was, 'No, we don't get the money, we don't get the list of investors. Those are held by the project.'"

Most of the hundreds of EB-5 regional centers in the United States are privately owned and operated, and are connected to a specific development project or projects. The Vermont Regional Center is state-owned and operated and acts as an umbrella organization under which private EB-5 development projects are sponsored.

"No money comes into this office," Moulton said. "We never touch a nickel of investor money. It all goes directly to the project. We're not in a place where we could redirect funds."

Even today, Moulton is not sure the federal immigration agency understands how the Vermont Regional Center works, not to mention foreign investors and even the general public.

"I think it's a struggle," she said. "People overseas see Jay Peak alleged fraud and Vermont Regional Center and think it's one in the same. That's something we have to make people understand as well as (U.S. Citizenship and Immigration Services) understand is we're not the average regional center."

http://www.burlingtonfreepress.com/story/money/2016/08/19/pat-moulton-talks-vermont-regional-center-faces-questions-eb-5/88904234/

Mentions

• Vermont Agency of Commerce and Community Development RC
• Vermont EB5 Regional Center
• Jay Peak - Q Burke Mountain Resort, Hotel and Conference Center L.P.
• Seldon Technologies
• U.S. Citizenship and Immigration Services
• UNITED STATES SECURITIES AND EXCHANGE COMMISSION
• Ariel Quiros
• Bill Stenger

Litigation Cases

• State of Vermont vs Bill Stenger & Ariel Quiros
• UNITED STATES SECURITIES AND EXCHANGE COMMISSION vs Ariel Quiros & Bill Stenger

States

• Vermont