State hires firm to redact Jay Peak docs

State hires firm to redact Jay Peak docs

EB-5 Visa, EB5 Visa, EB5 Investments

Mike Pieciak, commissioner of the Department of Financial Regulation. 

The state has hired a com­pany at a cost of up to $450,000 to re­move “Per­son­ally Iden­ti­fi­able In­for­ma­tion” from doc­u­ments be­fore mak­ing them pub­lic in its EB-5 in­vestor fraud law­suit against Jay Peak Re­sort de­vel­op­ers.

The state De­part­ment of Fi­nan­cial Reg­u­la­tion an­nounced Mon­day the hir­ing of the Chicago-based firm, Per­cip­i­ent, LLC.

The an­nounce­ment comes nearly a year af­ter Gov. Phil Scott called for an “ex­pe­dited” plan for the pub­lic re­lease of the records in the case, and al­most two years af­ter the state filed charged Ariel Quiros, the owner of Jay Peak, and Bill Stenger, for­mer pres­i­dent, with de­fraud­ing more than 800 for­eign in­vestors.

Michael Pieciak, com­mis­sioner of the De­part­ment of Fi­nan­cial Reg­u­la­tion, said in a state­ment that the con­tract “rep­re­sents a crit­i­cal step for­ward in pro­vid­ing trans­parency to Ver­mon­ters re­gard­ing the al­leged Jay Peak fraud.”

“It bal­ances the great pub­lic in­ter­est in mak­ing the Jay Peak records avail­able with the need to pro­tect per­sonal data of in­no­cent in­vestors and busi­ness own­ers,” Pieciak said.

Per­cip­i­ent is ex­pected to re­view the es­ti­mated 1.5 mil­lion pages of records re­lated to the law­suit, and redact “fed­er­ally pro­tected in­for­ma­tion” about peo­ple, such as so­cial se­cu­rity num­bers, bank ac­count num­bers and dri­ver’s li­cense num­bers, ac­cord­ing to the state De­part­ment of Fi­nan­cial Reg­u­la­tion.

The con­tract calls for Per­cip­i­ent to charge 30 cents per page, with the cost to the state to re­view the es­ti­mated 1.5 mil­lion doc­u­ments not to ex­ceed $450,000, ac­cord­ing to the de­part­ment.

Pieciak said later Mon­day that Per­cip­i­ent was cho­sen over the other bid­der for sev­eral rea­sons, in­clud­ing that it is “solely” in the lit­i­ga­tion sup­port busi­ness.

“This is sort of their wheel­house,” the com­mis­sioner said.

Also, he said, the com­pany pre­sented a strong process, which in­cluded hav­ing each doc­u­ment re­viewed by at­tor­neys as well as soft­ware sys­tems, with an­other per­son spot check­ing the re­sults to en­sure that no pro­tected in­for­ma­tion gets re­leased to the pub­lic.

“We’re talk­ing about 800 in­vestors,” the com­mis­sioner said. “To re­vic­tim­ize the vic­tims by re­veal­ing their data would be to­tally in­ap­pro­pri­ate.”

The other bid­der did­n’t pro­vide a “de­fin­i­tive” price. The com­pany pro­posed a pi­lot pro­ject that will be used to es­ti­mate the time it takes to com­plete the process, Pieciak said.

Per­cip­i­ent will start its re­view with an ini­tial batch of 5,000 doc­u­ments, at an es­ti­mated cost of $1,500.

Once the in­for­ma­tion is redacted, the state will file a mo­tion in Wash­ing­ton County Su­pe­rior Court, where the law­suit is pend­ing, ask­ing the judge to make the records pub­lic. Other par­ties, in­clud­ing Quiros and Stenger, could file ob­jec­tions, prompt­ing the pos­si­bil­ity of a hear­ing, he said.

Per­cip­i­ent and the state will con­tinue to work on ad­di­tional batches of records and af­ter a sim­i­lar court process, if ap­proved by the judge, the doc­u­ments will be made avail­able on a “rolling ba­sis” on the the state De­part­ment of Fi­nan­cial Reg­u­la­tion’s web­site.

Per­cip­i­ent of­fi­cials could­n’t im­me­di­ately be reached for com­ment Mon­day af­ter­noon. The firm de­scribes it­self “as a le­gal tech­nol­ogy and ser­vices com­pany help­ing clients tackle le­gal op­er­a­tions, le­gal processes and elec­tronic doc­u­ment re­view.”

The state in early No­vem­ber posted on­line a re­quest for pro­pos­als for a com­pany to re­view and redact the doc­u­ments with work ini­tially ex­pected to start Dec. 4. That was pushed back as the state said it needed time to fur­ther re­view the bids and com­plete cy­ber-se­cu­rity checks due to the sen­si­tive na­ture of the ma­te­r­ial.

The gov­er­nor called for an “ex­pe­dited” plan to re­lease the records in March 2017. At that time, the re­lease of the records was pro­posed to fol­low the dis­cov­ery sched­ule in the case, which was ex­pected to be com­plete by De­cem­ber 2017.

How­ever, late last year Judge Tea­chout ap­proved the at­tor­ney gen­er­al’s re­quest, with the de­fen­dants, Quiros and Stenger, con­sent­ing, to push back that dis­cov­ery dead­line to Nov. 15, 2018, nearly a year later. The state is not re­quired to make all of the records pub­lic un­til then.

In its fil­ing, the state said the ad­di­tional time was needed to re­view the large vol­ume of records.

The state’s con­tract with Per­cip­i­ent will run through Jan. 1, 2020. Pieciak says that date, which runs well af­ter the cur­rent dis­cov­ery dead­line, is a “con­tin­gency” time­line.

State and fed­eral reg­u­la­tors filed sep­a­rate law­suits in April 2016 against Quiros and Stenger. The fil­ings al­lege the two men op­er­ated a “Ponzi-like scheme” with money from the EB-5 visa pro­gram for for­eign in­vestors.

The law­suits claim Quiros and Stenger mis­used $200 mil­lion in EB-5 funds. Quiros is ac­cused of loot­ing $50 mil­lion for his per­sonal use.

The money had been raised to pay for a se­ries of de­vel­op­ments in Ver­mon­t’s North­east King­dom, in­clud­ing mas­sive up­grades at Jay Peak as well as other pro­jects in Burke and New­port. About $200 mil­lion, or about half of the money for the de­vel­op­ments, was di­verted.

The Ver­mont EB-5 Re­gional Cen­ter, which is run by the state, did not pro­tect in­vestors from the fraud. The Ponzi-scheme went on for eight years, and fed­eral of­fi­cials have said the state’s over­sight was wholly in­ad­e­quate. A group of in­vestors has also sued, rais­ing ques­tions about what state of­fi­cials knew when.

Mean­while, the Ver­mont At­tor­ney Gen­er­al’s of­fice and the De­part­ment of Fi­nan­cial Reg­u­la­tion have blocked the re­lease of records, cit­ing a rel­e­vant lit­i­ga­tion ex­emp­tion in the Ver­mont Pub­lic Records Act.

For­mer At­tor­ney Gen­eral Bill Sor­rell, who was in the of­fice at the time the law­suit against the de­vel­op­ers was filed in April 2016, said the doc­u­ments would not be made avail­able to the pub­lic un­til af­ter the law­suit ended, cit­ing an ex­emp­tion in the Ver­mont Pub­lic Records Act for rel­e­vant lit­i­ga­tion. Sor­rell es­ti­mated at the time that the lit­i­ga­tion would take five years.


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