VTDigger exclusive: Jay Peak loses trust of first EB-5 investors

Bill Stenger stands before the future Stateside Hotel at Jay Peak in September 2013. File photo by Hilary Niles/VTDigger

Bill Stenger stands before the future Stateside Hotel at Jay Peak in September 2013. File photo by Hilary Niles/VTDigger

© Copyright, VTDigger 2014

A group of immigrant EB-5 investors are incensed that Bill Stenger, president and CEO of Jay Peak Resort, seized ownership of the Tram Haus Lodge and turned their half-million dollar equity stakes in the property into IOUs.

Investors had no knowledge of Stenger’s actions until five months after they were executed.

Ariel Quiros stood briefly after the opening of Jay Peak Resort's Stateside Hotel to announce he had purchased the company bringing light plane manufacturing to the state-owned Newport State Airport. Photo by Hilary Niles/VTDigger.

Ariel Quiros stood briefly after the opening of Jay Peak Resort’s Stateside Hotel to announce he had purchased the company bringing light plane manufacturing to the state-owned Newport State Airport. File photo by Hilary Niles/VTDigger

Stenger and his partner at Jay Peak, Miami-based Ariel Quiros, dissolved the company on Aug. 31, 2013, turned the investments into unsecured loans and “waived” investors’ legal rights, according to documents obtained by VTDigger. Stenger says he sent an email to investors with the promissory note on Jan. 24 of this year, but he did not mail official, paper copies until May.

After the investors sent letters of complaint to Stenger and the state, Jay Peak agreed to change certain terms of the IOU in a take-it-or-leave-it offer earlier this month.

What is EB-5?

EB-5 is a federal program that offers green cards, and eventually permanent residency, to immigrants who invest $500,000 or $1 million in pre-approved development projects in the U.S. Each investment must generate 10 jobs.

In an interview, Stenger said he did not need to consult with the 35 limited partners in Jay Peak Hotel Suites, LP, before he dissolved the company, because Jay Peak had the legal right to do so under the limited partnership agreement with the investors.

Stenger said he regrets not communicating better with both investors and state officials, and he takes full responsibility for the “big mistake.”

“I made a mistake in not communicating with the investors, and I should have,” Stenger said in an interview Friday. “And I’ve apologized to them, rather profusely, that it was my oversight in not reaching out to them in August when that decision was made. And I was wrong. It was not intentional.”

About half of the Tram Haus investors in the state’s first EB-5 project, however, say they have lost faith in Jay Peak and the state-run Vermont Regional Center, which oversees all EB-5 developments in Vermont. One investor said he had his life savings invested in the Tram Haus, and most fear they will never recoup their investments in the property.

The dissolution was legal under the limited partnership agreement, Stenger says. Regional Center director Brent Raymond agrees, though he said the transaction’s execution did not meet state standards.

Under accepted industry standards set by the Institutional Limited Partners Association, any amendment to such an agreement should require the approval of a majority interest of the limited partners.

Bill Stenger (right) presides over the ribbon-cutting ceremony to open Jay Peak's Stateside Hotel and Baselodge in December 2013. Photo by Hilary Niles/VTDigger

Bill Stenger (right) presides over the ribbon-cutting ceremony to open Jay Peak’s Stateside Hotel and Baselodge in December 2013. File photo by Hilary Niles/VTDigger

According to best practices promulgated by the Association to Invest in America, a trade group that represents EB-5 regional centers, of which Stenger is a board member, limited partners in EB-5 projects must be informed of substantive changes to limited partnership agreements.

Unilateral authority to dissolve the partnership without investor consultation was provided for in the agreement, Stenger said. As a general partner, his sole discretion broadened after the immigrant investors achieved permanent residence.

“Once that’s done, we can do what we want,” Stenger said.

Stenger said he dissolved the partnership because a few of the investors were asking for an “exit strategy,” and he felt compelled to develop a schedule for repaying investors. In a letter to investors dated July 14, Stenger apologized for the “unintentional delay” in communication.

“My objective was and is, to guarantee a repayment of the full investment of $500,000,” Stenger wrote (emphasis his).

Stenger said he originally told immigrant investors there was no guarantee they would recoup their investments after five years because he wasn’t allowed to offer such a commitment under U.S. Customs and Immigration Service rules.

The primary purpose of the program is to help investors obtain green cards and establish U.S. residency, Stenger said. Return on investment and repayment of capital are secondary, he said.

“Every investor that got involved in the EB-5 program knows that there is no guarantee of any return, and no guarantee when they’ll get their investment back,” Stenger said. “We’re making a good faith effort on Phase I. We have committed ourselves, contractually, to pay them back 100 percent of their investment by 2018. And that’s a pretty good outcome. Is that the best outcome? If the real estate market after 2008 had been progressing the way it might have from 2005 or 2006 and didn’t have this, I mean, you know what happened. We’re recovering.”

Last September, Stenger told reporters Jay Peak would repay the investors $50,000 a year over 10 years.

“And our partners are thrilled,” Stenger said at the time.

Yet the terms of the Aug. 31, 2013, promissory note Stenger and Quiros signed just weeks before specify that investors would receive a 1 percent interest rate and payments on their $500,000 principal over a nine-year period: $21,500 each year for eight years and a check for $343,697 on Jan. 31, 2023.

The Vermont EB-5 Regional Center, which oversees the immigrant-funded projects in the state, was aware of the dissolution of Jay Peak Hotel Suites, LP, around the time the papers were signed. But Stenger did not inform Regional Center director Brent Raymond about the terms of the deal, nor did Raymond ask for specifics.

Raymond said Jay Peak representatives verbally informed him the resort had agreed on an exit strategy for the immigrant limited partners. He assumed the investors were being paid off, and that they were satisfied.

“I guess I can blame myself for making assumptions,” Raymond said.

Disgruntled investors sent formal letters of complaint to the Vermont Regional Center in May. Several say that instead of investigating their complaints, Raymond directed them back to Stenger for answers.

Investors who communicated with VTDigger asked not to be identified for fear of retaliation.

Fifteen of the investors then sent letters to a different state department over the July Fourth weekend. A week later, Stenger sent the 35 investors a new, take-it-or-leave-it IOU with a five-year payback period.

In a letter sent with the second promissory note, Stenger said the second offer would “omit any reference to waiving legal rights,” and he guaranteed their loans against the full value of the entire Jay Peak Resort facility. The letter says he would “re-evaluate the plan at the end of each fiscal year to determine if the payment can be further accelerated.”

Tram Haus: The first part of a grand plan

Jay Peak's Tram Haus Lodge. Photo by Justin Cash/skivermont.com

Jay Peak’s Tram Haus Lodge. Photo by Justin Cash/skivermont.com

The Tram Haus, which was built in 2008, is the stepping stone Jay Peak used to launch a sweeping, $600 million interconnected set of developments in Vermont. The Northeast Kingdom Economic Development Initiative included developments at the Jay Peak Resort and Q Burke ski resorts, improvements to a local airport, and developments in Newport, including an office building, a window factory, a biotechnology research and manufacturing campus, and a marina, hotel and conference center.

The plan, publicly lauded by state officials, including Gov. Peter Shumlin and Sen. Patrick Leahy, D-Vt., promised to bring thousands of jobs to the poorest region of the state. The ambitious development plan has also received national media attention.

Plans to bring the German window manufacturing company Menck to Newport fell through in September 2013. The buildout of the state-owned Newport State Airport was pulled from the EB-5 pipeline in favor of private equity. The mixed-use Renaissance Block in downtown Newport and a waterfront marina, hotel and conference center on Lake Memphremagog remain in limbo months after real estate complications surfaced this spring.

The Northeast Kingdom initiative continues to be touted by state officials as a showpiece of the EB-5 program. Vermont’s EB-5 Regional Center is overseen by the state’s Agency of Commerce and Community Development; it was long the only state-run program in the United States, until Michigan formed its own regional center earlier this year.

Gov. Peter Shumlin and the state’s congressional delegation have endorsed the EB-5 program in general, and the Northeast Kingdom initiative in particular. In 2012, Leahy successfully pressed his colleagues in the Senate for an extension of the national EB-5 regional center pilot program. Shumlin has traveled to Asia to promote the Vermont Regional Center’s work, in an effort to help the state recruit more immigrant investors. His travel expenses were paid for by Jay Peak Resort.

Mounting investor expectations

The Tram Haus, also known as Phase I, was the first EB-5 project for both Jay Peak and the state. Like the other developments, Tram Haus is heavily leveraged by EB-5 monies. Stenger and Quiros put in $6 million in private equity and $17.5 million from 35 immigrant investors to build the $23.5 million property.

Congressman Peter Welch, D-Vt., Gov. Peter Shumlin and Ary Quiros, CEO of Q Burke Mountain, joke at a groundbreaking ceremony for the ski resort in June 2014. Photo by Hilary Niles/VTDigger

Congressman Peter Welch, D-Vt., Gov. Peter Shumlin and Ary Quiros, CEO of Q Burke Mountain, joke at a groundbreaking ceremony for the ski resort in June 2014. File photo by Hilary Niles/VTDigger

The Tram Haus is also the first project in which payments for EB-5 investments have come due. Stenger and Quiros are trying to manage expectations as they develop an exit strategy, not only for the first 35 investors in Phase I, but also for the 150 investors in Phase II who will likely expect an exit plan next year. In all, Stenger and Quiros have completed five separate EB-5 projects, with about 500 investors. A sixth, Stateside Hotel and Baselodge, is near completion. Two more, AnC Bio and Q Burke, are under preliminary construction.

Northeast Kingdom Economic Development Initiative

These numbers are approximate and the project costs do not include additional private capital. Job numbers reflect the estimated value of direct, indirect and induced employment (combined) generated by the investments.

Granting of conditional visas comes first, and indicates USCIS has signed off on the business plan and its job creation projections. Granting of permanent residency indicates USCIS has recognized job creation.

Jay Peak Hotel Suites (Phase I)
Tram Haus
$17.5 million EB-5 money
35 investors
350 jobs (total)
Project complete, and all investors granted permanent green cards.

Jay Peak Hotel Suites Phase II
Hotel Jay and water park, ice arena, golf course, club house and commercial conference center
$75 million EB-5 money
150 investors
1,500 jobs (total)
Project complete, and all investors granted permanent green cards.

Jay Peak Penthouse Project
55 suites on the top floor of Hotel Jay
$65 million EB-5 money
130 investors
1,300 jobs (total)
Project complete, and all investors granted permanent green cards.

Jay Peak Phase III-A
Golf & Mountain Suites
$45 million EB-5 money
90 investors
900 jobs (total)
Project complete, and all investors granted permanent green cards.

Jay Peak Phase III-B
Lodge & Townhouses
$45 million EB-5 money
90 investors
900 jobs (total)
Project complete, and all investors granted permanent green cards.

Jay Peak Phase III-C
Stateside hotel and base lodge
$67 million EB-5 money
134 investors
1,340 jobs (total)
Project nearly complete, and all investors granted conditional green cards.

AnC Bio
$110 million EB-5 money
220 investors
2,200 jobs (total)
Project pending Act 250 and other permits. Conditional green cards have started to be approved.

Q Burke Mountain Resort
Hotels, conference center and recreation facilities
$120 million EB-5 money
240 investors
2,400 jobs (total)
Ground broken for initial construction. Conditional green cards have not yet been approved.

◊ ◊ ◊

A few other projects intended for EB-5 funding are on hold: Newport’s waterfront marina, hotel, conference center and Renaissance Block, and Jay Peak’s West Bowl buildout and village development. The state already has signed MOUs with Jay Peak on the latter endeavors in Jay. The developers have not yet signed an MOU with the state for the Newport projects, which may or may not be rolled into one. The MOU is necessary before EB-5 investors can be solicited.

Stenger said on Friday that Jay Peak is looking at a fractional ownership program to pay back investors in both the Tram Haus and subsequent EB-5 projects. Such business decisions are at the sole discretion of the companies’ general partners, he said.

Dissolving the Tram Haus limited partnership was in the best interest of the limited partners, in his view.

But many of the investors disagree. About half of the limited partners have complained.

“I believe this decision is outrageous and has seriously jeopardized the financial futures for myself, my wife and my children,” one investor wrote in a letter to the state. “If I had known a simple $500,000, 5-year investment would turn into a 15-year investment I would NEVER have considered the EB-5 Program.”

The investors allege, in letters sent to the state earlier this month, that they expected full repayment by 2013. Over the course of the past five years, they have each been paid a small return on their $500,000 investments.

USCIS regulations prohibit EB-5 developers from guaranteeing investors will get their capital back; investments must be at-risk. Stenger said the company is vigilant in following this rule, and he doesn’t know where the investors would have gotten such an impression.

“Our intent has always been after a certain period of time we would evaluate the market,” Stenger said. “And if we could pay back or begin paying back after five years, we would. And indeed we have.”

Stenger said he’s doing “everything in his power” to improve the situation for investors — accelerating the payment, shortening the timeframe, developing a fractional program, and “setting up a structure for future projects so that we can continue to have a more predictable repayment program.”

“I don’t want to be sitting here having a conversation about unhappy customers,” Stenger said. “I’m in a business where 85 percent of our customers are repeat people. This is not something I’m comfortable with, the fact that we’ve got some unhappy people. I do not like this. And I’m doing everything in my power to improve it.”

The five-year loan agreement issued July 14 specifies payments of $21,500 for the first four years and a balloon payment of $434,311 in the final year. Stenger has asked the investors to agree to the second promissory note in writing.

In their complaints to state officials, many investors scoffed at the original promissory notes, which were “unsecured.” The second note uses the Jay Peak Resort as collateral. The resort’s infrastructure was expanded largely with other EB-5 investments.

“I have many hundreds of other investors who are expecting at some point an exit strategy,” Stenger said. “And I want a positive one. So I’m working my ass off right now to implement and keep our businesses here successful, jobs continuing to perform well, the businesses growing, and also set up a situation where there can be a predictable inflow of capital, maybe from a new real estate product line, that will be a multi-year conduit for the repayment of these investors.”

Vermont Regional Center inaction

Investors also allege that the Vermont Regional Center has not adequately responded to formal complaints and pleas for assistance. The center, which is part of the Agency of Commerce and Community Development, has an oversight role, including the authority to cancel agreements with developers.

Brent Raymond, director of Vermont's EB-5 Regional Center. File photo by Hilary Niles/VTDigger

Brent Raymond, director of Vermont’s EB-5 Regional Center. File photo by Hilary Niles/VTDigger

One Tram Haus investor describes ACCD officials as uncooperative and indifferent to their plight. He says Raymond has “reflexively sided with Jay Peak,” failed to act on their complaints and refused to provide documents they have requested. The investor said he and others feel abandoned by the Vermont Regional Center, which has represented its role to the world as the “EB-5 police.”

Raymond said Friday he takes “great pains” to respond immediately to investor concerns, but it has no authority over the private placement memorandum. The Tram Haus agreement was signed by investors, and it gave the general partner the legal right to dissolve the company, he said.

“Obviously, we had concerns that a document dated in August was delivered sometime in May,” Raymond said. The timing of the second, revised promissory note didn’t surprise him because it followed after Raymond received complaints and pursued the issues with Jay Peak.

“I also had concern about whether or not it was legitimate for the general partner to dissolve the partnership,” Raymond said. He and the agency’s lawyer examined the documents and concluded it was allowed, he said.

The center has no ability to intercede in private legal contracts, he said, but it is making more of an effort to hold Jay Peak accountable. Company management now copies the center on all communications with investors. Raymond also has asked Jay Peak to submit weekly written updates. As of Friday, the first deadline the company agreed to had been missed by a day.

Pat Moulton, the new ACCD secretary, said she couldn’t comment on the details of the relationship between Jay Peak and the investors, nor on the current dispute over the dissolution of the company and conversion of equity stakes into loans.

“If this is a provision within the agreement the investors have with Jay, these kinds of conversions can happen,” Moulton said. “It doesn’t reflect on the regional center if they exercise something within their rights to do.”

Moulton said Friday the center has been monitoring Jay Peak “right along.” Recently, the center put the resort “on notice,” and is now requiring the company to submit quarterly reports. Before now, the regional center did not require any formal reporting, even though MOUs with all the EB-5 projects include a clause that quarterly reports are to be submitted.

Moulton and Raymond said there is little the regional center can do to help investors who are already invested in projects.

“We’ve advised investors that if you feel something is wrong you should get counsel but it’s not our purview in the regional center,” Moulton said. “As long as it’s in compliance with the SEC and USCIS, the rest is up to investors and the company. I don’t think it reflects poorly on the regional center. We have been doing our due diligence.”

With the regional center’s limited requirements and abilities to intercede, however, it’s unclear how far its diligence and authority, even when fully exercised, can go.

Some investors say Brent Raymond, for example, directed investors back to Jay Peak with their complaints. They allege that Raymond said they would need to provide him with proof of fraud in order for him to take action.

The Tram Haus allegations focus on a lack of transparency from Jay Peak — a charge Stenger denies. He said Jay Peak provided quarterly reports and required documentation throughout the limited partnership, and the company is now responding to requests for detailed financial accounting.

But investors, kept in the dark about the status of their own $500,000 equity investments, fear that without partnership status, they’ll lose legal rights to access the documents they would need to prove fraud.

Copyright 2014 VTDigger.org. All rights reserved. This material may not be published, broadcast or rewritten.

A sunset silhouette of Jay Peak from the nearby town of Troy illustrates the magnitude of the resort's development. The building that receives the tram up the mountain has altered the skyline. Photo by Hilary Niles/VTDigger

A sunset silhouette of Jay Peak from the nearby town of Troy illustrates the magnitude of the resort’s development. The building that receives the tram up the mountain has altered the skyline. File photo by Hilary Niles/VTDigger

Anne Galloway

Comments

  1. Annette Smith :

    Is anybody surprised? Anyone out there who didn’t see this coming? Bait and switch, Ponzi scheme, house of cards? If it sounds too good to be true, it probably is?

    Pretty expensive green card. Did the investors read the fine print?

  2. victor ialeggio :

    Great work, Anne & Hilary,

    This kind of EB-5 blowback involving foreign investors who feel that they have been burned by their “sponsors” has been showing up in courtrooms across the country, last couple of years.

    The Roman senate, during the last days of that empire, pioneered the sale of citizenship for private gain: semper in excretia sumus solim profundum variat.

    • Paul Lorenzini :

      Hmmmmm, smells of desperation doesn’t it?

  3. Pete Novick :

    First rate reporting – keep it up Team VTDigger.org! This is Pulitzer level investigative reporting.

    Geez, all those jobs Governor Shumlin hailed, washing dishes, making beds, mowing common areas, washing the golf carts, etc., are lost…?

    Maybe folks can go to Randolph and compete for full-time jobs at Vermont Castings paying $9.33 an hour, as reported right here in VTDigger July 15.

    The race to the bottom continues apace.

  4. Bill Olenick :

    Thank you VT Digger for digging up the truth bout something that has the appearance of being too good to be true…
    Lets us look at the numbers.
    It appears from the article that over 500 green cards were given to investors.
    Who did the due diligence on these 500 wannabe Americans who invested in this program?
    Washington? Yea right.
    As to the investors a fool and his money are soon parted.
    My main concern is the Due D on those given green cards which opens the door for their family members to get in.
    What was the source of this money and could they have been fronted by bad guys wanting in to sop up the criminal gravy?
    Do you trust Washington to get this program right?
    It is morally wrong for our politicians to sell our citizenship for a little investment cash when there is enough cash at home to invest but the government agencies and their elected masters have made it so difficult for home grown investors that they look abroad, dangling the carrot to lure in unsuspecting, a fool and their money are soon parted, types.
    What one puts out is usually returned in spades and I fully expect this is just the tip of the iceberg.
    Please do yourself and our fair state a favor…vote out all politicians who supported this program .

    • Pam Ladds :

      This makes no sense Mr Olenick! You are blaming the investors, assuming that they are criminals? On what basis? Because they are “foreign”. The focus here needs to be on what happened at Jay Peak, not what politicians signed off on particular investors. These investors, in good faith, (maybe with limited foresight) literally bought into an investment program. They bought Green Cards for themselves and other family members (the value of that program is a separate issue), these cards are only valid for 2 years unless a variety of other criteria are met!. And they were cheated! The focus here needs to be on the apparent “breach of contract” and what this means for other investment in the area. As well as the morality of what now seems to be Bait and Switch.
      Excellent reporting VT Digger

    • Jed Guertin :

      It would be easier to vote in the few politicians who spoke out against the program.

  5. Deb Tyson :

    Thanks VT Digger for being REAL reporters and reporting the truth. More newspapers should take cues from you.
    This story sounds like fraud was written all over it and was preplanned before investors got involved. Not a good look.

  6. George Plumb :

    Excellent in depth reporting that we wouldn’t find elsewhere in Vermont. Thanks Anne and Hilary. And very good comments about this Ponzi Scheme, which are exactly the words that came to mind as I was reading the article. And yes the whole EB-5 program is immoral and I am surprised that our politicians support it.

    What hasn’t been mentioned are the environmental impacts. Most of these projects will add tremendous amounts of carbon dioxide to the atmosphere. And because we are running out of cheap fossil fuels they are going to be unsustainable in the long run. They also help to destroy our forests and water quality.

    Let’s be concerned about future generations and not just making big bucks for a few people who are already rich.

    OK, now I am going to increase my membership donation.

  7. John McClaughry :

    This is good reporting by VTDigger – but I am slow to jump to the conclusion that Stenger & Co. are somehow breaking faith with the deal the EB 5 investors bought into. Stenger concedes that his corporate relations were poorly implemented, but I don’t hear any allegations of fraud etc. from the investors who mainly wanted the residence permit and were willing to put $500k at risk to get it. I wonder how many would agree to take their $500k back and go back where they came from…

    • C. N. Davlantes :

      As a lawyer said “It’s just a mistake so lets call it a mistake. It’s your money.

    • Jamie Carter :

      I agree with this 100%, most of the people were paying to fast track their green card apps. They still have a promissary note paying them back AND these people have been given a green card. Sounds like perhaps they are worried about losing out on any future profits?

  8. Lance Lindgren :

    When I first read about this program, I thought how wonderful. But the complexity of the whole plan looked way too big. Now things have begun to unravel and this could only be the beginning. The State better get involved now to make sure things are still moving forward before this situation deteriorates further!!

  9. Big story and good for Digger but now we need follow up on, of course, follow the money. Where has the money gone, into which pockets owned by whom or which group?

    The investors are saying fraud? Is there any investigation by regulatory groups? Or is this, as so often happens, the creation of a legal document that is deceptive, or in other words is loaded with hidden ambushes.

    Or is it not that at all? That Jay Peak is deep in the red and needs a tourniquet? Is under funded? Is a wily group or a business that moved too quickly, trying to cross a bridge too far?

    Great story about American business on the edge and I look forward to follow up!

  10. Anthony Brainerd :

    The whole scheme seemed far-fetched from the beginning, to me.

  11. Bill Dunnington :

    Great reporting.

    Kiss of death for EB-5 in Vermont.

    Come home Brent.

  12. Jeff Nichols :

    Looks like the end of the Jay Peak photo ops for the Governor. Going to have to ride the success of his Health Care system now….oh wait…..

  13. Paul Lutz :

    Given what is going at the southern border, why even have the EB-5 program. Just send your kids across the southern border. The US taxpayers will feed them, house them, and then fly the entire family in. Then, the US taxpayers will give the entire family housing, and EBT card and a Obama phone. Silly investors!!!

  14. Rosemarie Roy :

    I sure hope this doesn’t mean that the block of buildings on Main Street in Newport, which have been vacated, will remain that way forever! It really looks terrible and I am ashamed to have tourists come here and see this. Why weren’t the businesses and apartment tenants allowed to remain there until it was time for demolition? They have been vacant for months. When will this reconstruction take place? It seems that the further construction on Jay Peak and Burke Mountain are more important than Newport. Since Mr. Stenger waited so long to acquire the lakefront property for the hotel/conference center, he has lost his chance to purchase that property.

  15. The x dividend incentive here was the “green card” the investors along with their immediate family got.
    I’ve always felt that” buying” green cards, no matter how much business it generates, is less than desirable from an ethical standpoint. But that’s me.
    It would also be interesting to know the country of origin these investors are from.

    That said, great job of reporting, Anne and Hilary on the EB-5 program here and the VT Regional Center that has got very little news coverage concerning details up until now. Especially the terms and return on investment in this case.

    • It would also be interesting to see if the terms of the “balloon payments ” are met in a timely manner…ski area investment has always been dicey. Just ask Les Otten’s lenders and investors of the defunct American Ski Company or the folks at Mt. Ascutney, to name two.

  16. Prospero Gogo :

    Great reporting, but please everyone re-read the headline. Investors are losing trust, that they are unhappy. There may be allegations of fraud, but no factual support to these allegations according to the article.

    All the evidence mentioned in the article shows that the money was spent and not pocketed, and that the investors signed onto a limited partnership, not a general partnership. Additionally, some are unhappy because they are not getting all their money back within 5 years. They forget that this is an investment, and a risky one, if one looks at the historical return on investment for ski industry projects, and this in the setting of global warming and shortened ski seasons!

    The money these investors gave was a roll of the dice, like any investment, and not backed by the FDIC or such. It was not a fee for their green cards, either. If they are unhappy it’s because they had different expectations without having a lawyer carefully examine the limited partnership papers.

    Just my two cents.

  17. Marguerite Mason :

    Great work Anne and Hilary ! vtdigger just gets better and better as Vermont politics get worse and worse.

    Any indication of how many of the promised jobs actually exist? average wage?

  18. J. Scott Cameron :

    Excellent piece of journalism.

  19. Barry Kade :

    Remember this golden oldie?
    Give me your tired, your poor,
    Your huddled masses yearning to breathe free;
    The wretched refuse of your teeming shore,
    Send these, the homeless,
    Tempest-tossed to me
    I lift my lamp beside the golden door!

    • Paul Lorenzini :

      Funny that we accepted such an obligation at the bequest of France.

  20. Henault Judith :

    Thank you, Hilary and Anne. Journalism as it should be practiced!
    I hope you do a follow up on Brent Raymond as he seems to be getting off fairly lightly for such a major lack of oversight.

  21. John MacGovern :

    Great reporting, indeed. When first I heard of this government scheme, I was deeply suspicious of it. It has all sorts of problems and they will become clear as the days go by. Why not simply let foreign investors receive a Green Card when they buy an existing US business with x number of jobs, or, simply lower the taxes so existing businesses can make some money and hire more people. Programs like this will ultimately fall of their own weight and stench. What will be left are “empty buildings in Newport” or some such, sadly.

  22. Christopher Maloney :

    I guess Anthony Palmerleau had the right idea not getting tied up with this guys big ideas in Newport!

  23. Jim Barrett :

    Anytime someone from a foreign country pays half a million to start a business here when it can be done for free is either a fool or being scammed. Shumlin is even involved and this should be looked at by the justice department.Politicians are good at scamming the public out of money, that is what they do and this is no different. Who are the people (names) who are willing to fork over half a million to have a business in this state? here are they from? Why is it we don’t have any information on anyone ???

    • jim dewalt :

      excellent article… nearly 8000 jobs created for the NEK, really?

    • Barry Domina :

      All investment comes with risk, and bumps in the road, look what has been built! Looks like all the ducks are in a row to me. If I were one of the 500K investors I would have been sold on the project. I think Bill is such a good business professional he knowns how to do the right thing. Bill would not plan ,just to have this project become unsuccessful. Bill does not allow failure, he looks for solutions!

  24. Jimmy Fordham :

    It’s pathetic that a majority of you find such glee in this situation. Instead of pointing fingers and saying “I told you so” why not focus on the solution. That’s what sensible Vermonters do.

    • Pam Ladds :

      No glee! We are still hoping that the mess downtown Newport, where I live, will still be torn down and rebuilt. Clearly there are major challenges to this, one of which is that without the Waterfront development, the Renaissance Block cannot happen either. At least according to the current plans. The drama around EB5 is an unfortunate distraction. It’s merits as a program are questionable and it clearly has to work for both the developer and the investor. In the great scheme of things $500K is not that large an amount of money (in investment terms and as a business opportunity). However, the Green Card is not the supreme prize that it once was. Most people who can afford that level of investment do not need to buy Green Cards, the paths into the country are wide open to them. It is those without money who are challenged by our immigration system.

  25. Jill Snapp :

    The promise of all these jobs….where will the people live?….my basic concern. Its all too much.

    • If you mean the EB-5 investors putting up $500k shares…I think they’ll be fine. Plenty of empty housing stock in the United States and these folks have, you know…plenty of money.

      Also, most of them won’t move to Vermont. I’d be suprised if *any* of them move to Vermont.

  26. Peter Conlon :

    The EB-5 program is clear. Investors (really green card purchasers) must put their money at risk, and there are no safe investments in the EB-5 program anywhere. Otherwise investors would not need the reward of a green card dangled in front of them. The bigger risk they face is that the project will not create enough employment, meaning they could lose the green card and their money.

  27. Bob Stewart :

    In addition to the ‘investors’, losers include the people and towns of the Northeast Kingdom.

    Any future investor doing even minimal do-diligence will ‘Google’ Stenger and walk -if not run- away.

    The key word in this excellent article is in its tittle: TRUST. Trust is the glue that binds investors to investment.

    R.I.P. Development at Jay and Burke. Thanks, Bill and Ariel.

  28. David Dempsey :

    If it sounds to good to be true, it usually is. I bet there won’t be any new pictures of Shumlin and Bill Stenger patting each other on the back and no more trips abroad to promote Eb-5 by the gov.

  29. Great reporting. It was time that someone had to guts and wherewithal to report the truth about all this…which adds up to just one word…sleaze, a word that has always dogged Jay Peak.

    • Paul Lorenzini :

      When I used to ski, Jay was the best! Then everyone caught on, and now it sucks. No surprise that the preppie, government suckers ruined it. Jay was great, then the word got out, and the Vampires came.

  30. Dave Bellini :

    No one forced investors to gamble half a million on a ski area. They don’t like the terms of the deal? Read before you sign. Do they really not understand the terms of the deal they made? Really?

  31. walter moses :

    Simply great reporting! OMG, do any politicians want to do a photo opp and a trek to China with Stenger now? A limited partnership to an unsecured IOU? Swiftly changed to Jay being the security? Leveraged to the hilt? ACCD says, “get an attorney” to investors? Flim flam, smoke and mirrors, scam!

  32. Ron Pulcer :

    Regarding: “One investor said he had his life savings invested in the Tram Haus, and most fear they will never recoup their investments in the property.”

    Investing 101: Don’t put all your eggs in one basket.

    Meanwhile, on our other border, children from Central America, with no “savings” at all, are risking their lives to escape violence from drug gangs (fueled in part by demand for heroin here in Vermont, through one of the top 5 heroin routes in the world, see route #2):

    https://reportingproject.net/occrp/index.php/en/component/content/article/16-other-articles/1843-narcotic-superhighways-the-top-5-routes-for-drug-trafficking

    I’ve been suspicious of this EB-5 program all along. It’s like the Mega-IndieGoGo, but instead of getting a coffee mug, T-shirt or some other trinket, you get an American Green Card! Crowd funding for large scale economic development.

    Regarding: “The investors allege, in letters sent to the state earlier this month, that they expected full repayment by 2013.”

    And I “expect” that another “bubble” won’t collapse my401K retirement savings plan in the next 5-10 years! I’m not holding my breath on that one.

    Talk about wanting your cake (Green Card and maybe later American Citizenship), and eating it too (full repayment).

    The Governor’s new Vermont Enterprise Incentive Fund is $4.5 Million, or equivalent to nine (9) EB-5 investors. We the taxpayers do not get a Green Card (we are already citizens), and we won’t be getting any direct “repayment”, other than a wish and hope that some jobs will be saved in Vermont. There is no guarantee that this will translate into future state revenues or saved jobs. The only entity getting payment might be IBM (or some other company). Not much difference here between a recipient of of Incentive Fund payment and recipients of EB-5 investment funds (Stenger and Quiros). There is no guarantee for repayment to taxpayer or the immigrant investors.

    http://vtdigger.org/2014/04/17/ibm-likely-candidate-proposed-4-5-million-incentive/

    “Stenger said he originally told immigrant investors there was no guarantee they would recoup their investments after five years because he wasn’t allowed to offer such a commitment under U.S. Customs and Immigration Service rules.”

    Welcome to America! Your first taste of our political and economic system here in America. Money talks, but it don’t listen.

    Having said all this, as pointed out by this VTDigger article, that Jay Peak management has not conducted the first EB-5 program very well. Once a few investors were inquiring or complaining about “exit strategy”, Jay Peak should have held a meeting with all the investors. But they quietly dissolved the limited partnership in August. Did they hope the January email would have gotten lost in the each investors’ inbox, or caught up in the spam filter?

  33. Is this better or worse that VT telecom? What a place. Better keep my hands on my wallet. Bad enough that taxes are so high. Keep digging digger and tell me who is profiting from the building spurt in Burlington.

    • Paul Lorenzini :

      Well, if there is a building spurt in Burlington, then you can only thank progressive, sustainability, Agenda 21 acolytes, because they have the wherewithal to spend time making zoning laws and courting investors, mostly for their own good. I almost forgot to mention that they are “saving the planet” according to them, from us.

  34. Sylvia Fagin :

    This type of investigative journalism is exactly why I subscribe to VTDigger. Thank you!

  35. Paul Lorenzini :

    That look of Zoolander’s “Blue Steel” was never my idea of trustworthiness.

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