[A]n effort to reform the federal EB-5 visa program at the center of massive fraud allegations in northern Vermont has failed again.
The lack of action on a proposed reform package to the program continues to mean defrauded investors aren’t getting any help from Congress. That includes those investors in the EB-5 program in Vermont whose immigration status remains in limbo due to allegations of fraud involving the projects they invested in.
Congress, as it worked late last week to pass spending bills to stave off a government shutdown, approved an attached measure to one of the continuing spending resolutions that extends the EB-5 immigrant investor program to April 28 without making any changes to it.
Extending the program for several months through a continuing resolution without including any proposed reforms has been a pattern. That’s despite efforts by some lawmakers to add greater oversight to the economic development initiative as well as provide relief to some immigrant investors who end up victims of fraud by developers raising funds through the program.
Sen. Patrick Leahy voted against a continuing resolution in late September that extended the program through last Friday, Dec. 9. He also voted late last week against the continuing resolution approved in the Senate extending the existing program, which he has said is “rampant” with fraud.
“Almost everyone agrees it is broken,” Leahy said of the program in a statement explaining his recent vote. “It is time we fix it. If EB-5 cannot be reformed due to a paralysis of leadership, the time has come for it to end, not be extended, without debate, in a continuing resolution.”
Leahy, ranking Democrat on the Senate Judiciary Committee, and Charles Grassley, R-Iowa, the committee chairman, both took the Senate floor a week before the vote to push the reform legislation.
It’s in Leahy’s home state of Vermont where state and federal lawsuits filed in April allege the biggest investor fraud case in the program’s history.
The lawsuits, filed by the state of Vermont and U.S. Securities and Exchange Commission, accuse Jay Peak’s owner Ariel Quiros and Bill Stenger, the resort’s former CEO, of misappropriating $200 million of the roughly $350 million they raised through the program. The money was meant to fund a series of development projects, including the construction of hotels at Jay Peak and Burke Mountain ski resorts.
Regulators also accuse Quiros of diverting $50 million in investor funding for his personal use.
Leahy, who had been a vocal supporter of the EB-5 program and has close ties to Stenger, has said if the allegations against Stenger were proven true, he would feel betrayed.
In September, Stenger reached a settlement in the federal lawsuit brought by the SEC, neither admitting or denying the allegations. He agreed to cooperate with investigators and still faces a possible monetary penalty. The state lawsuit remains pending against him.
Quiros is contesting both the state and federal lawsuits.
Investors in the EB-5 program put up $500,000, plus an administrative fee, in a qualified project, and if the required jobs are produced they become eligible for permanent U.S. residency.
In addition to initiatives to increase financial controls over developers raising funds through the EB-5 program and their projects, a reform bill may have given defrauded investors greater flexibility in meeting the job creation requirement.
Take for example the AnC Bio Vermont project proposed to be built in Newport by Stenger and Quiros. Regulators called that plan to construct a $110 million state-of-the-art biomedical research center in the Northeast Kingdom city “nearly a complete fraud.”
Foreign investor who put $500,000 into the project through the EB-5 program never saw the required jobs created because the biomedical center never materialized.
Under the reform legislation, foreign investors who recoup their funds through litigation or other actions would have the opportunity to reinvest those funds in another qualified EB-5 project anywhere in the country. If the required jobs are created through that investment, the investor would become eligible for permanent U.S. residency.
Michael Goldberg is the court-appointed receiver now overseeing the properties at the center of the fraud cases in Vermont. He said a few weeks ago prior to the start of the lame duck session of Congress that he didn’t expect lawmakers to take up the reform measures, and he reiterated that Tuesday.
“Congress was not expected to do anything more than a simple extension at this time,” he said. “We are optimistic that Congress will revisit the issue this winter and enact legislation that will provide relief for defrauded EB-5 investors.”
About 700 immigrant investors from 74 countries invested in Northeast Kingdom projects headed by Stenger and Quiros. The immigration status of about 400 investors is in jeopardy as a result of the fraud allegation. Many have been granted temporary visa extensions, but their permanent U.S. residency remains held up.
If something isn’t done to protect those investors through a change in federal law, the defrauded Jay Peak investors could ultimately face deportation, according to officials.
