Business & Economy

Margolis: In the EB-5 subculture, Jay Peak finances questioned

Many of the features and rides in the new Jay Peak water park are heated by capturing waste heat from an ice arena.
Much of the money for the expansion at Jay Peak has come from the EB-5 program, in which foreign investors are given green cards in exchange for investment capital. Photo courtesy of Jay Peak Resort.

Jon Margolis is’s political analyst.

Is the recently expanded and much-ballyhooed Jay Peak Resort in the Northeast Kingdom facing financial difficulties?

Or did a former associate of the resort just get miffed and write a snarky letter that set off inaccurate speculation?

Probably the latter, and not just because Bill Stenger, Jay Peak’s owner, insists that the resort is doing just fine, and is “about 35 percent ahead (of last year) in revenues.”

It’s also because James Candido, the state official who keeps tabs on the resort’s affairs, said he found “no issues” regarding its finances.

And perhaps because Douglas Hulme, who started the discussion of the resort’s situation by announcing that his firm “no longer has confidence in the … financial status of … Jay Peak,” declined several requests over a three-day period to discuss his allegation.

The reason a state official – in this case an economic development specialist in the Department of Economic Development (part of the Agency of Commerce and Community Development) – is keeping tabs on a private business is that most of the money for Jay Peak’s recent expansion has come from foreigners, via what is known as EB-5, a federal investment program run by the United States citizenship and Immigration Services.

Part of Candido’s job is to make sure the various requirements of the law are being followed.

In return for investing at least $500,000, the foreigners get “green cards” for themselves and their immediate families, allowing them to live in the United States. To critics, the program amounts to selling U.S. resident status to the wealthy while the not-so-wealthy are stuck on waiting lists. To advocates, led by Sen. Patrick Leahy, the program provides investments and jobs to capital-short areas such as the Northeast Kingdom.

Both descriptions might be accurate. Either way, what the little flappette about Jay Peak reveals is that, like many financial schemes, the EB-5 program has created its own subculture – a collection of agents, lawyers, financers, consultants, kibitzers (for a fee), and hangers-on, most of whom seem to know one another, at least by reputation, and almost all of them eager to cash in on what appears to be an endless flow of cash from well-heeled folks from all over the world willing to put up big bucks to get themselves and their families into the United States.

One reason Hulme’s angry (and vague) blast at Jay Peak gained some traction after he emailed it to perhaps 100 immigration lawyers was that one of the better-known figures of this subculture, a Florida blogger and financial analyst named Michael Gibson, gave it wider circulation and tried to figure out what had caused the break between Jay Peak and Hulme’s firm, Rapid USA Visa, Inc.

The firm helped make the connections between the resort and potential foreign investors.

“Several analysts,” Gibson wrote, “have speculated that it may be due to … the financial condition of the resort due to the large amounts of capital expenditures and low revenue from the warm winter and low bookings.”

But both Stenger and Candido noted that while the “low bookings” may have seemed reasonable conjecture from Gibson’s New York perspective, Vermont ski resorts are actually having a good year. Unlike some neighboring states, Vermont has stayed cold enough (until now) for snow-making.

Gibson, who did not identify the “analysts,” was reported to be out of the country and unreachable. According to some observers who follow the EB-5 world (but who did not want to speak on the record), Gibson is reliable because his success depends on selling his information, creating an incentive for accuracy. But others, who also did not want to be quoted, pointed out that neither Jay Peak nor Rapid USA Visa had bought his information, perhaps rendering him less likely to be favorably disposed toward them.

The EB-5 program is complex, fast-growing, and therefore open to abuse. In December, the New York Times reported evidence that “suggests that in New York, developers and state officials are stretching the rules … often relying on gerrymandering techniques to create development zones that are supposedly in areas of high unemployment — and thus eligible for special concessions — but actually are in prosperous ones.”

One of those areas, the Times reported, was the site of the Atlantic Yards project in Brooklyn, which includes a proposed new arena for the National Basketball Association’s New Jersey (for now) Nets. In a 2010 story called, “Overselling the American Dream Overseas,” Reuters reported on several misstatements to investors by the developers, including the assertion that New York state’s government was involved in the project.

But even EB-5’s critics acknowledge that the Vermont’s EB-5 projects – there are three others in addition to Jay Peak, and Candido said three more were in the works – follow the regulations and seem to be meeting their goals.

One difference is that only in Vermont is the regional center — the federally authorized investment pool that markets the projects — public. The state is the regional center. The other 199 regional centers in the country are private, meaning the for-profit projects are being monitored by another for-profit entity.

Jay Peak has more than 400 EB-5 investors, Stenger said, and their investments have helped transform the property from a ski lodge into an all-weather, four-season resort with an indoor skating arena, a water slide, and golf courses. Stenger said it was those indoor winter activities – the skating arena and the water slide – that helped the resort prosper despite the snow-sparse winter.

Considering the lack of specifics in the suggestion that Jay Peak is in some financial trouble, the discussion of Hulme’s email is not likely to do the resort any harm. Nor is it likely to weaken support for the EB-5 program from Leahy or its other champions.

But the program, or at least the part of it that applies to Jay Peak, has to be reauthorized before the end of the year, and some of the other revelations of abuses might convince Congress to make some changes in the way it is monitored and regulated.

Correction: Michael Gibson is from Florida not New York as originally reported.

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Jon Margolis

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  • Okay – now answer me this … if Jay Peak is doing so well by the “Sell America to the 1%” EB5 program, what has happened to wages there? Have they gone up proportionally to Jay Peak’s success?

    The above question is not a grasp in the dark. Some years ago I did a short investigative piece about some economic development grant money that was given by the state (Vermont) to Bolton (I believe this was right around 2000). As I talked with folks what became clear was Vermont would supply economic development money, the owners would see increased profits, and the employees would see … well I was told by one high ranking official the employees would see nothing extra.

    The EB5 program is just one more instance where cash not people are being put in charge of our world – just as money can buy unlimited and unfettered speech while physical gatherings to exercise constitutionally protected speech is to be physically assaulted – our labors are to continue to be made subservient to someone else’s quest for cash.

  • Bill Peberdy

    It isn’t at all clear who, if anyone audits EB-5 programs once they are in place. James Candido the Commerce Agency’s Economic Development Specialist found “no issues” regarding Jay Peak finances .You say part of Candido’s job is to make sure EB-5 requirements are met but I assume he also helps promote and implement them. Candido in this sense could be considered part of what you call the EB-5 sub-cultures collection of agents, lawyers, financers, consultants . Quite a chunk of foreign investment money, power and influence is involved here and some outside examination (or an outside audit) of all of Vermont’s blossoming EB-5 subculture might clear the air.

  • These 500 or so investors bring investment money and now have a vested interest in the success of their investment. Yet someone can find fault? How about the 10’s of thousand illegals that drain our resources and under cut American workers wages. Is it better to have someone who will mow your lawn or clean your house for a few bucks less, or people bringing bags of money to an ailing economy? Jay is now situated on a much better footing. Able to attract customers from Canada to come to VT and provide a stable less weather dependent local economy. What could be wrong with that? Most other countries in the world offer similar programs.

    • Clarke,

      It will never be good enough because the left wants “social justice” to overrule common sense and financial reality.

      They bemoan the fact that there is little economic activity coming to parts of VT, and then do all they can to complain about how business is done, when it actually comes to our cute little State.

      Congrats to Jay for a job well done. Hope your detractors do not get the chance shutter this business venture with rules, laws, more taxes, negative press etc, before you get off the ground.

  • Josh Fitzhugh

    Interesting article but a bit thin. I assume those 500 investors get financial statements and their names are av available. Is that true? Call one up and see what info they are getting. Go to JP and see if they are busy. Talk to some employees. To rely on a possibly biased observer about financial health is, well, risky.

  • Willem post

    Leahy loves any federal project, social or otherwise, that serves to bring money to Vermont. EB5 is just a way to bribe the foreign top 1 percent to pay their way into the US by financing the energy-wasting, CO2-emitting follies of Vermont ‘s top 1 percent, while households and businesses that were affected by the Irene flood still have not been made whole; how about an EB5 project for them?
    Another money-wasting folly at the Sky Peak is its heavily-subsidized, under-performing , Vermont-made wind turbine.

  • Willem post

    Because some federal subsidies for renewable energy projects will likely be expiring at the end of 2012, and because no bank, etc., would make risky RE loans, Vermont’s wind oligarchy could set up corporations that use the EB5 law to provide permanent US visas to the top 1 percent of foreign households for making $500,000 “investments” in wind turbines on ridge lines to provide energy to the energy-guzzling water parks, golf courses, ice-skating rinks and snow-making systems at “year-round” ski resorts that are owned by the top 1 percent of US households.
    This will create mostly lower-wage jobs for Vermonters who will have to pay more for the expensive RE energy and for goods and services.
    Any time wind energy would be insufficient, energy would be provided by mostly fossil plants.
    This is not the energy future Vermont should be aiming for.
    It would be much better if Vermont’s energy policies would aim for zero-energy housing and other buildings and high-mileage vehicles; the higher the mileage the greater the subsidy.

  • Bruce Post

    I thought Josh and Rama had some good comments. It would be good to know about the experience investors have with EB 5 and also to know how well the employees are doing.

    In terms of info on EB 5 in Vermont, try to learn more about Vermont’s program, which I believe is the only EB 5 run by a state government.

    I recently went to Jay Peak and saw much of the extensive development that has been funded through EB 5. As it was explained to me, EB 5 helps give investors a chance to “live the American dream”, and I guess $500,000 buys a lot of the dream.

    I also was told that every Vermont Governor since the program was started here has been overseas helping to promote the Vermont EB 5 opportunities.

    As Rama commented about wages for the workers, I did ask, while at Jay, about how much folks were paid, but the answer I got back was vague and uninformative. Perhaps the Vermont Department of Labor can provide information about prevailing wages in the ski industry by employment classification?

    It is ironic: Back when the Green Mountain Parkway was being debated, many opponents warned that the Parkway would bring “inland Coney Islands” to Vermont. Actually, the Parkway would have brought a 20,000 national wilderness preserve to Jay Peak (and perhaps a larger National Park), meaning we could have avoided having part of the mountain top blown off to build the tram house on the summit. Now, in the absence of the national wilderness preserve, what we have at Jay is strikingly like an “inland Coney Island.”

    I certainly don’t want to single Jay Peak out in this regard. All across Vermont, ski resorts are continuing to urbanize our mountainsides at the same time many of our ridgelines are being acupunctured by wind turbines. Sigh!

  • dr. matt cambel md

    Ifound this whole article extremely curious.

    Jay Peak’s President Bill Stenger states” we’re 35% higher in revenues” from last year.

    Stenger’statement is baffling considering this was the worst winter in 30 years.

    This self promoting statement reminds me of Bernard Ebbers CEO of Worldcom 9 months before worldcom collapsed and was indicted for massive investor fraud and 18 months before CEO Ebber’s began serving a 40 year jail sentence.

    Question – How does a seasonal company increase revenues 35% during an economic slow down and a POOR winter season?

    None of Jay Peaks competitors enjoyed a 35% revenue boost, including Stowe, Sugarbush, Sunday River OR VAIL

    Then without fan fare, a major investment partner that delivered $240+ million in fresh working capital loans says we don’t have confidence and quickly departs.

    You have to ask why?

    Mr. Stenger appears to be an honorable man, but this needs further Independent Investigation by a non biased Federal Official with ZERO vested interest in Vermont’s local economy.

    • Via 7D:

      “Stenger disputes the allegations and provided documentation showing that sales for the season are up 38 percent — or $5.7 million — over last year’s, despite the mild weather. Lift-ticket sales are down $400,000 from last year, Stenger says, but an increase in lodging options on the mountain — 1000 more beds this year alone — has more than made up the difference. For example, sales during the last week of March reached $891,000, compared with $589,000 for that same week in 2011.”


  • Dan Luneau

    The development up there is awesome! Good for the immediate area and Vermont. Mr Stenger should be congratulated for what he has accomplished.