Investors in the EB-5 program whose immigration status is in limbo due to allegations of fraud may get some relief.
Proposed changes to a federal foreign investor program working their way through Congress do not go as far as Michael Goldberg, the man appointed by a federal court to protect the interests of investors in the Jay Peak projects, had initially been seeking.
Goldberg had originally hoped for a provision that would have held harmless defrauded investors. Instead, a proposed amendment would give defrauded investors some flexibility in meeting federal requirements.
That change may be all that can be accomplished before the end of the month, when the EB-5 foreign investor program expires. Republicans in the House of Representatives are under pressure by developers to extend the law as is. Sens. Patrick Leahy, D-Vt., and Chuck Grassley, R-Iowa, are pressing for financial reporting requirements that would better protect investors. The two senators say fraud is “rampant” in the program and measures must be taken to hold developers accountable.
The biggest alleged fraud case in the history of the EB-5 program was exposed in Leahy’s home state of Vermont last April.
State and federal lawsuits filed earlier accuse Miami businessman Ariel Quiros and Bill Stenger, one-time CEO and president of Jay Peak, of misusing $200 million in EB-5 funds as part of six development projects at the resort and one in nearby downtown Newport.
Leahy had close ties to Stenger and was a booster for the Jay Peak projects. When the SEC fraud charges came to light he said he would feel betrayed if the allegations proved to be true.
Foreign investors in the EB-5 program put $500,000 into a qualified project, plus a $50,000 administrative fee. In exchange, if the investment creates 10 jobs, the investor is eligible for permanent U.S. citizenship.
Hundreds of investors in the projects headed by Stenger and Quiros are in jeopardy of losing their money and possible U.S. citizenship, including those who put up funds for a proposed $110 million biomedical center in Newport.
Federal regulators have called that project “nearly a complete fraud.”
Investors in the Stateside condo project at Jay Peak face the same job creation problem. In that case, however, the condos were partially constructed and with an injection of roughly $25 million could be finished.
Goldberg said this week the proposed reforms, which he assisted in drafting, are important steps to help prevent fraud as well as aid those investors who end up the victims. “Listen, there’s a recognition that circumstances such as this happen in the EB-5 world,” he said. “The law does not have any ability to deal with these so we need the amendment to start dealing with these issues.”
He added that he is hopeful Congress will advance the legislation, though the fate of the reform package included as an amendment may still be in doubt.
“At the very least I would hope that we come back after the election and revisit and do it,” Goldberg said, “but certainly the concept is out there.”