Audit finds inadequate state oversight in Vermont’s largest fraud case
The state of Vermont failed to provide sufficient oversight to prevent the massive fraud that occurred at ski resorts and other development projects financed with money from foreign investors through a special visa program, a state audit has found.
The financial scandal, which first came to light in 2016 and became the state’s largest fraud case, shocked Vermont and the economically depressed region called the Northeast Kingdom.
In 2018, Vermont’s former attorney general requested an audit of the state’s involvement in the projects at the Jay Peak and Burke resorts to address the loss of trust in state government caused by the fraud, state auditor wrote Doug Hoffer in the report released Thursday. The audit was completed after the legal process was completed, he wrote.
The findings shouldn’t be entirely surprising, Hoffer wrote.
“In short, we found a pattern of misplaced trust, unfortunate decision-making, lengthy 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 sentenced to five years in prison in 2022 for his role in a failed plan to build a biotechnology factory in Newport using tens of millions of dollars provided through the EB -5 had been collected. visa program. Under the program, foreigners invest $500,000 in the US, a project that will create at least ten jobs in exchange for a chance at permanent residency in the US. William Stenger, the former president of Jay Peak, and William Kelly, an advisor to Quiros, each received 18-month sentences.
But the fraud included seven other projects in the Jay Peak and Burke resorts.
In 2016, the federal Securities and Exchange Commission and the state of Vermont alleged that Quiros and Stenger participated in an “eight-year massive fraudulent scheme.” The civil charges related to misusing more than $200 million of the approximately $400 million raised from foreign investors for various ski resort developments through the EB-5 visa program “in a Ponzi-like manner.”
A Ponzi scheme uses money from new investors to pay high returns to novice investors in order to give the impression that the company is prosperous. The plan collapses when the required repayments exceed the new investments.
Quiros and Stenger settled civil charges with the SEC, with Quiros forfeiting more than $80 million in assets, including the two resorts. On the seven projects at Jay Peak and Burke, “construction occurred, but not always to the specifications or at the costs communicated to investors. Significant funds were simply misused,” the report said.
Under the EB-5 program, the federal government designates regional centers to promote economic growth and oversee sponsored projects, the report said. Most regional centers are privately owned, but the Vermont Regional Center was operated by the state government.
The center, the EB-5 office within the Trade and Community Development Agency, had competing duties: marketing and promoting EB-5 projects and regulating them, the auditor’s report said.
“Experts and policymakers have long warned against such arrangements, fearing that an agency relied on to make a project work will be reluctant to exercise its regulatory powers. In addition, a marketing agency may not have the skills needed to properly regulate complex financial arrangements. such as EB-5. Unfortunately, this proved all too true at ACCD,” the report said.
Last July, the state of Vermont agreed to pay $16.5 million to settle all pending and potential lawsuits from foreign investors in the development projects.
The United States Citizenship and Immigration Services is still determining the immigration status of Jay Peak and Burke’s investors, Goldstein wrote. At least 424 of the 564 Jay Peak investors have already received green cards and the state is working to increase the likelihood that many more investors will do so, she wrote.