EB-5 train wreck in Vermont

In his first year in office, Vermont Governor Peter Shumlin flew in 2011 to Miami to promote a real estate / business project funded by so-called EB-5 investors. On April 8 of this year, according to the Vermont Digger, Shumlin’s general counsel asked the state’s tech department to delete “all archived email” for five people who worked in the governor’s office prior to January 2013 and were associated with this project. The employees included the governor’s former campaign manager and top aide and former chief of staff.

Here is what we know now about the biggest scandal in Vermont for years. Much of this information is found in reportage by the Vermont Digger, a non-profit daily news service.

What is EB-5?

Congress created the EB-5 program to stimulate investment in geographic areas needing development funds. Foreign nationals can earn green cards when they invest one million dollars and create or preserve 10 jobs. If they invest in a so-called Targeted Employment Areas (TEA), they need only invest $500,000 and create 10 new jobs to earn green cards. The program was stalled for many years in part due to Washington bureaucracy, but in the late 2000s, with some revisions in regulation, it took off. The Bookings Institute, which published a study in 2014, reported that during the 2010-2012 period, on average, 13% of immigrants and their family members were admitted under employment-based preferences. And of these employment-based visas 3% were for EB-5 visa investors and their immediate family members. This sums roughly to well under a legal limit of 10,000 EB-5-related visas a year.

According to Brookings, So far, EB-5 financing has been used for projects that include large commercial-property developments, assisted-living facilities, and manufacturing plants. (See the Brookings report here.

Vermont Senator Patrick Leahy has been the leading advocate of the EB-5 program in the Senate. He has allied with Senator Charles Grassley to renew the EB-5 program with reformed rules. The renewal date was supposed to be in September 15, 2015 but has been pushed off into 2016.

Why is it controversial?

A Washington Post editorial on Sept 5, 2015 said that the program is a “flop.” “It’s corporate welfare, enabling certain businesses to attract capital more cheaply than others based on a government-conferred sweetener — namely, a visa. Perhaps inevitably, the EB-5 has channeled funding to areas such as hotel ventures that suit the needs of EB-5 seekers and their myriad highly paid consultants — but not necessarily those of local communities.”

The editorial did to point fingers at particular parties, but one element in the is the involvement of firms that sought out EB-5 investors and got a large commission for placing these investors into projects. Rapid Visa is an example. It was part of the Jay Peak project until the relationship soured in 2012.

The Vermont project

Ariel Quiros and Bill Stenger began as partners to create a succession of EB-5 projects along the Vermont – Canadian border. Initially, the projects focused on Jay Peak, a prominent though rather remote ski resort, frequented by Americans and Canadians. In 2009, the Tram Haus Lodge was opened, funded by EB-5 investors. In 2011 a spectacular (for New England) all year indoor water park opened.

According to data collected by Vermont Digger, as of now the Quiros-Stenger partnership projected $500 million in diverse projects involving mainly ski resorts and downtown development in Newport, Vermont. All the projects were located in Vermont’s “Northeast Kingdom.” So far, 439 investors were granted permanent green cards and 134 granted conditional green cards. Presumably, these awards are for well more than 573 individuals as families may be involved. Assuming that each award gave an average of two persons access to permanent residency, that would come to over 1,000 individuals. And, the Quiros-Stenger projects are not by any means completed.


During 2015, warning signals about problems with this multi-phased project began to go off. They concerned primarily a stalled project in Newport and shortage of approved funds for a hotel at Burke Mountain, another area ski resort. When the investigations are completed, it will probably become clear that many insiders knew in 2015, if not before, that entire undertaking was corrupted by the promoters.

On April 14, Vermont Digger reported that the SEC filed complaints against the operation. “In the 82-page SEC complaint, the federal regulatory body said it was taking action to “stop an ongoing, massive eight-year fraudulent scheme” in which Quiros and Stenger “systematically looted more than $50 million of the more than $350 million that has been raised from hundreds of investors” to construct resort facilities and a biomedical research facility. ‘The alleged fraud ran the gamut from false statements to deceptive financial transactions to outright theft,’ said Andrew Ceresney, director of the SEC’s Division of Enforcement, in a news release.

Some of Shumlin’s former colleagues have been working on the project and were in a position to know that something was amiss. They include Alex MacLean, the governor’s former campaign manager and top aide, and head of communications for Jay Peak between 2012 and 2015.

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