Vermont did not provide adequate oversight to prevent large-scale fraud at ski resorts and other development projects funded with foreign investor money through a special visa program, a state audit finds. found.
The financial scandal, which first came to light in 2016, became the state's biggest fraud case and rocked Vermont and the Northeast Kingdom.
Vermont's former attorney general in 2018 sought an audit of the state's involvement in the Jay Peak and Bark Resort projects to address a loss of confidence in state government due to misconduct, the state auditor's office said. Doug Hoffer said in a report released Thursday. The audit was completed after the conclusion of legal proceedings, he wrote.
This finding is not entirely surprising, Hoffer writes.
“In short, we discovered a pattern of misplaced trust, unfortunate decision-making, long delays, and missed opportunities to prevent or minimize fraud,” Hoffer wrote.
Ariel Quiros, a Miami businessman and former owner of two ski resorts in Vermont, was involved in a failed plan to use tens of millions of dollars raised in EB-5 to build a biotech factory in Newport. He was sentenced to five years in prison in 2022. visa program. The program allows foreign nationals to invest $500,000 in the United States and create at least 10 jobs in exchange for a chance to become permanent residents. Former Jay Peak president William Stenger and Quiroz consultant William Kelly were each sentenced to 18 months in prison.
However, the fraud also included seven other projects at Jay Peak Resort and Bark Resort.
In 2016, the Federal Securities and Exchange Commission and the state of Vermont alleged that Mr. Quiros and Mr. Stenger participated in a “large-scale fraud scheme over an eight-year period.” The civil allegations include misusing more than $200 million of the approximately $400 million raised from foreign investors through the EB-5 visa program “in a Ponzi-like manner” to develop various ski resorts. was included.
In a Ponzi scheme, funds provided by new investors are used to pay high returns to early-stage investors to show that the company is thriving. If the amount of redemption required exceeds the amount of new investment, the system breaks down.
Mr. Quiros and Mr. Stenger settled a civil lawsuit with the SEC, with Mr. Quiros turning over more than $80 million in assets, including two resorts. In his seven projects at Jay Peak and Burke, “construction took place, but not necessarily to specifications or to the costs told to investors. Large sums of money were simply misused. only,” the report states.
Under the EB-5 program, the federal government will designate regional centers to promote economic growth and oversee and monitor sponsored projects, the report said. Most regional centers are privately owned, but the Vermont regional center was operated by the state government.
The center was the EB-5 office within the Commercial and Community Development Authority and had the contradictory duties of marketing and promoting EB-5 projects and regulating them, the audit report said.
“Experts and policymakers have long warned against such arrangements, fearing that government agencies relied on to support project success may be reluctant to exercise their regulatory powers. Furthermore, marketing firms may not have the necessary skill sets to properly regulate complex financial arrangements.'' Unfortunately, this is all too true with ACCD. ,” the report states.
Last July, Vermont agreed to pay $16.5 million to resolve all pending and potential lawsuits from foreign investors against the development project.
Goldstein wrote that U.S. Citizenship and Immigration Services is still determining the immigration status of Jay Peak and Burke investors. At least 424 of Jay Peak's 564 investors have already obtained green cards, and the state is working to increase the chances that more investors will obtain green cards, she wrote. Ta.
