Editor’s note: This commentary is by Don Keelan, a retired certified public accountant and resident of Arlington. The piece first appeared in the Bennington Banner.
Gov. Phil Scott announced on Sept. 27 that he has not ruled out establishing a special prosecutor to delve into the massive fraud perpetrated on hundreds of investors and contractors in the Northeast Kingdom.
It would have been more impressive to have heard that Gov. Scott and the leaders of the Vermont Legislature were naming a nonpartisan special prosecutor. It appears that the ramifications from such a massive fraud executed in Vermont are so huge that the administration and the Legislature have become paralyzed regarding how to deal with it.
The federal government’s announcement that it will soon close down the Vermont EB-5 program for lack of oversight should not solicit an attitude of complacency from the administration and Legislature. It is not unlike what occurred a few years ago, when Vermont was twice denied reimbursement by CMS for mental health charges at the state’s mental health hospital — complacency was evident then as well.
If, in fact, the allegations (52 charges) brought by the Securities and Exchange Commission and the state’s Department of Financial Regulations are proven to be true, those in charge of state government owe an impartial investigation to the citizens of Vermont, the investors and others. There were too many state agencies and employees involved in either overseeing the EB-5 projects or in promoting the projects and their owners – all of which was taking place when red flags of collusion, misappropriations of investor funds, and kickbacks were well known.
The special prosecutor should have two specific goals: The first, finding out if state employees knew what was taking place and when, and if they were under any pressure not to disclose what became known. And, second, discovering how state government should deal with massive projects in the future – whether in infrastructure, health care, education, or IT conversions.
To the layperson it is incomprehensible that a $250 million fraud could have taken place within 50 miles of Montpelier and three state agencies did not know about it until the SEC called it out in 2015. Someone at the Department of Commerce and Community Development, the Department of Financial Regulation or the Office of the Attorney General had to have some suspicions.
The files and correspondence of our state political leaders – former Govs. Jim Douglas and Peter Shumlin, Sens. Patrick Leahy and Bernie Sanders, and Rep. Peter Welch — should also be made available to the special prosecutor. They all played key roles in promoting the Northeast Kingdom projects.
Furthermore, the AG’s office should put aside the doctrine of immunity. There is a difference between raising it when defending pothole litigation on I-89 and the coverup by certain state officials that has taken place within the EB-5 scandal.
In the Northeast Kingdom project, nearly 900 foreign investors relied on the state of Vermont to protect their investments. Each of them put up $550,000 to secure a footing (green card) potentially leading to citizenship. I have often wondered, had the investors been Vermont residents, would the administration and the Legislature acted sooner and more decisively in getting to the bottom of what went wrong?
I still cannot comprehend how the owner of the project allegedly stole $50 million and used it for personal items. How does one spend such a large sum on personal items and no one knows where it was spent or transferred, other than to pay some taxes and purchase a condominium in New York City? This aspect of the scandal has not been disclosed and begs the question, why not?
It has been five years since the SEC commenced its investigation of the scandal in the Northeast Kingdom. It was also about the time that state officials received tips of possible wrongdoing. Why did it take so long for state officials to act? Hopefully, a special prosecutor will be appointed and tell us why.
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