EB-5 Director: Audits of Jay Peak Discouraged

A director of the Vermont EB-5 Regional Center said he repeatedly recommended audits for the Jay Peak Resort projects, but was told to stand down in efforts he said were coordinated by current and former members of the Shumlin administration.

In a sworn deposition last month, Brent Raymond said he asked the commerce agency secretary to order an independent financial review in May 2012 — after a tipster warned state officials about financial improprieties at Jay Peak. At the time, the resort’s developers, Ariel Quiros and Bill Stenger, planned to solicit $800 million from foreign investors for a grand, sprawling series of developments in the poverty-plagued Northeast Kingdom.

“I recommended forensic audits. I was told no,” Raymond said. “I had asked for various documents. I was always told no.”

Four years later, in April 2016, federal regulators shut down the Jay Peak developments and accused Stenger and Quiros of misusing $200 million of investor monies in a Ponzi-like scheme that involved eight projects, most of which were built.

The Vermont Regional Center was required to oversee and manage the projects, according to legal agreements. In July, U.S. Citizenship and Immigration Services terminated the state-run EB-5 program because state officials didn’t do enough to stop the fraud, which occurred over an eight-year period. The commerce agency is appealing the decision.

In a deposition taken by attorney Russell Barr, Raymond, who was director of the program for three years, says commerce agency and state securities officials, the developers and their agents, including Gov. Peter Shumlin’s former deputy chief of staff and close confidante, shut down questions about financial improprieties and self-dealing by Quiros and Stenger. In addition, Raymond says U.S. Citizenship and Immigration “was so mismanaged that it didn’t provide enough direction to regional centers to really know what their responsibilities would be.”

The deposition is a window into what state officials knew and when, and why they did not investigate allegations in 2012 that the Jay Peak developers were misusing investor funds and giving kickbacks to lawyers. Instead of exercising their authority and legal obligation to prevent the fraud and protect the interest of investors, state officials not only refused to investigate in 2012, 2013 and much of 2014, they also heavily promoted the Jay Peak projects in China.

After alarms had been raised about Jay Peak’s finances, and despite Raymond’s own misgivings, he frequently shared a booth with Jay Peak at EB-5 conferences. In 2013, Shumlin appeared in a video that was translated into Chinese, falsely claiming the projects were audited by the state. And there were several junkets to China in 2013 and 2014 in which Shumlin, Sen. Patrick Leahy, D-Vt., and Rep. Peter Welch, D-Vt., were featured speakers at meetings with investors organized by Jay Peak.

Many of the 800 immigrants who invested in Jay Peak said they did so because Leahy and Shumlin vouched for the projects.

Stenger had a close relationship with Leahy, and Quiros was close with Shumlin. Both politicians received large campaign contributions from Jay Peak. While Quiros has been called the “mastermind” of the scheme, Stenger had immense political clout in Vermont — having testified in Congress about EB-5, traveled on a trade mission with Leahy to Ireland, and on multiple occasions being named Vermont Chamber of Commerce’s “man of the year.”

The deposition was taken last month in a federal investor case against Shen Jianming, an immigration attorney who allegedly took $1.25 million in kickbacks from the developers. Raymond is a witness providing testimony in the case, and is being represented not by his own counsel, but by the Vermont attorney general’s office, at taxpayers’ expense. Barr Law Group, which is also suing the state on behalf of investors, is representing three Chinese plaintiffs.

Quarterly Financial Reports ‘Never’ Filed
Raymond’s concerns about the finances at Jay Peak began when he was invited to participate in a conference call in May 2012 with Douglas Hulme, a former business partner who cut ties with Stenger, the former CEO of the resort, and Quiros, the former owner of the ski area in February that year.

Raymond says he got on the call late and didn’t recall what Hulme’s attorney Eugene Lindsey said, except that “he gave us absolutely no information.” But in an email to Raymond’s predecessor, James Candido, in April 2012, Lindsey explicitly said Hulme had concerns about expenditures and the use of funds at Jay Peak.

It is not known what was actually said or how the state communicated with the Jay Peak developers before or after Hulme raised red flags about the finances at the resort because Shumlin, Gov. Phil Scott, former Vermont Attorney General Bill Sorrell and his successor TJ Donovan have refused to release records pertaining to the state’s complicity in the fraud. Scott and Donovan have used a relevant litigation exemption clause in the Vermont Public Records Act to block records requests from VTDigger. The governor’s office is worried about the state’s liability to investors; Donovan believes the state can use an absolute immunity defense to fend off an investor lawsuit now pending before the Vermont Supreme Court.

Raymond, however, makes it clear in his deposition that the state could have stopped the fraud years before the Securities and Exchange Commission brought 52 counts of securities fraud against the developers for the scheme, which started in 2008 when Quiros illegally purchased the resort with investor funds that were supposed to be held in escrow accounts for the construction of two hotels at Jay Peak.

If the state had obtained use of funds and other financial statements from Jay Peak, Raymond says the original act of fraud that led to shortfalls for later projects “would stick out to somebody who has familiarity with balance sheets and transfers.”

Raymond claims that after he became director of the EB-5 program in June 2012, he repeatedly asked his superiors — Commerce Secretary Lawrence Miller, deputy secretaries Lucy Leriche and Pat Moulton, and John Kessler, general counsel for the agency — to require audits of the projects.

“I can’t tell you how many times I … went to people to tell them of my concerns,” Raymond said. “So, typically (my concern) was listened to and then I may have been allowed to request information in writing or verbally, or a couple of times they said, yes, let’s have them meet in person. Sometimes, they’d let me seek sort of an affidavit response. Sometimes, my recommendations were not — or oftentimes my recommendations were not followed.”

Commerce secretary Miller initially agreed that Jay Peak needed to pay for an independent audit by an accounting firm that would be selected by the state. Later, when Stenger insisted it would be “very, very expensive,” Miller let the subject drop. “He decided they didn’t have to do the audits,” Raymond said.

At that point, the regional center director says he didn’t see the point of asking for quarterly financial reports, which were required by the U.S. Citizenship and Immigration Service.

“I never asked for quarterly financial reports when I worked as director because if you can’t get an audit done, you know, what are the chances of getting a quarterly report?” Raymond said.

Miller did not respond to a request for comment.

“As far as I know, there was so much communication on a regular basis that people felt that quarterly reports weren’t needed unless there was something of concern where we wanted it on the record,” Raymond continued in the six-hour deposition.

Raymond’s comments are in direct conflict with statements made by the state in an appeal of the regional center termination submitted earlier this month to the USCIS.

The failure of the Vermont EB-5 Regional Center to require the quarterly reports was cited by USCIS as a reason for terminating the state program. In its appeal, the state chided the federal agency for referring to VTDigger reports from 2014 and insisted that the projects were monitored appropriately and quarterly financial reports were filed.

Alex MacLean: Stop Asking Questions
Raymond says it was his responsibility to review the Jay Peak projects, but he was not allowed to ask questions of Stenger without permission from Miller, Kessler, the governor’s office or from Shumlin’s former deputy chief of staff, Alex MacLean, who went to work at Jay Peak in 2013.

“I often was not privy to conversations and decisions made,” Raymond said. “Bill had a regular line to various people in state government.”

In several instances, he says, he was asked to stand down.

For example, in 2013, when Raymond reviewed an investor agreement for a biomedical facility in Newport proposed by Stenger and Quiros, he became concerned about self-dealing and inappropriate family connections.

When Raymond asked Stenger why he and Quiros sold the land for AnC Bio Vermont to investors for $3 million more than they paid for it, and why relatives were benefiting from a $10 million technology and distribution deal, he was told to stand down.

“I couldn’t make heads or tails of the pro forma of AnC Bio,” Raymond said.

Raymond’s questions prompted MacLean to run interference as the governor’s liaison at Jay Peak. A former Shumlin aide, she was hired by Stenger in 2013 to manage the Renaissance Project, a hotel and retail building in Newport that never materialized.

Raymond said MacLean told him to stop asking questions about AnC Bio Vermont.

“(Alex MacLean) told me it was totally unacceptable the questions I was asking and told me she was going to — she had spoken to the governor and was going to speak to Lawrence Miller,” Raymond recalled. “She didn’t feel the questions I was asking were appropriate.”

In a text exchange with VTDigger, MacLean categorically denied the allegation.

Raymond had received a certified letter from an attorney in South Korea that didn’t adequately address his concerns about whether Alex Choi was Ariel Quiros’ brother-in-law. Choi was a longtime business partner of Quiros and the owner of AnC Bio Korea. He was prosecuted by the Korean government for defrauding investors in 2012 — the same year an identical project was brought to Vermont and approved by Miller. The question about the exact nature of his relationship with Quiros is unresolved.

Raymond asked MacLean if he could follow up “and was told no. Lay off.”

Questions about Quiros’ family ties in relationship to AnC Bio Vermont, MacLean told him, were “off limits,” Raymond said. He recalled that she said: “You don’t speak to Bill Stenger that way.”

After that, Raymond said he tried to balance his questions with niceties. In one exchange from 2014, for example, Raymond calls Stenger “a great man.” Such blandishments became part of a strategy he hoped would keep him from getting into trouble with the governor’s office.

“So this is my attempt to nudge him, but there’s a term within management when you’re trying to give feedback to somebody who works under you,” Raymond said. “You sandwich it with a compliment, you give them feedback, and then you give them another compliment. I didn’t sandwich it. I just put a compliment at the end to try to avoid my being — my being spoken to about how I was communicating with Bill Stenger.”

“At that point I was just tired of seeking permission for a lot of things,” Raymond said.

‘Base-Level’ Concerns About AncBio Vermont
On behalf of Lawrence Miller, the commerce secretary, Raymond signed off on federal applications for the regional center. In one of the applications, the state attested that the developers had applied for FDA approval of artificial organs that were to be manufactured at AnC Bio Vermont.

Raymond told Barr that he knew “they never moved forward with the stated FDA approval.” In the July decision to terminate the state-run EB-5 center, USCIS said the regional center statement about the FDA approval was a “material misrepresentation.”

In 2012 and 2013, when the state first began reviewing the AnC Bio Vermont project, FDA approval was the least of Raymond’s worries.

“I mean, there were so many other concerns that I had,” Raymond said in his deposition. “I didn’t even go as far as the FDA approval. There were so many base-level concerns that I had that I didn’t go that far.”

He was most stressed about the developers double counting jobs, which allowed them to bring on more investors.

Because of the fraud, more than 700 investors will not recoup the hundreds of millions dollars they invested and 400 likely will not receive the green cards they were promised. Raymond says he “never, ever had any knowledge of embezzlement or misuse of funds.”

Raymond forwarded all of Jay Peak’s offering documents to state securities regulators at the state Banking, Insurance, Securities and Health Care Administration, the precursor to the Vermont Department of Financial Regulation, looking for advice.

“BISHCA had no concern with them,” Raymond said. “They said it wasn’t their job.”

In the summer of 2014, after investors complained they had been bilked, and Raymond spurned entreaties for help, the commerce agency contacted the SEC and asked to be subpoenaed in order to be deposed and to provide records to federal regulators.

At the end of the deposition, Barr asked to continue questioning Raymond, but was rebuffed by Bill Griffin, the chief assistant for the Vermont attorney general. Griffin has refused to reschedule the interview and has moved to quash a subpoena of Kessler, the commerce agency counsel.

https://www.vnews.com/former-eb5-officials-say-shumlin-blocked-oversight-20371656

Mentions

• Vermont EB5 Regional Center
• U.S. Citizenship and Immigration Services
• Jay Peak - AnC Bio Vermont
• Brent Raymond
• Ariel Quiros
• Bill Stenger
• Peter Shumlin
• Patrick Leahy

Litigation Cases

• MICHAEL I. GOLDBERG vs The AM Wealth Management Group of Raymond James & Ariel Quiros & Joel Burstein
• JAMES B. SHAW, JOHANNES EIJMBERTS, and LORNE MORRIS Individually and On Behalf of All Others Similarly Situated, vs The AM Wealth Management Group of Raymond James & Bill Stenger & Joel Burstein & Ariel Quiros
• ALEXANDRE DACCACHE, on behalf of himself and all others similarly situated vs Ariel Quiros & Bill Stenger & The AM Wealth Management Group of Raymond James & Joel Burstein
• State of Vermont vs Bill Stenger & Ariel Quiros
• UNITED STATES SECURITIES AND EXCHANGE COMMISSION vs Ariel Quiros & Bill Stenger

States

• Vermont