[A] Stowe lawyer for investors drawn into an alleged “Ponzi-like” scheme claimed Thursday that former state officials engaged in fraud and cover-up and that former Gov. Peter Shumlin likely knew about it.
Attorney Russell Barr has filed suit against former state officials and the Vermont EB-5 Regional Center, alleging they provided assurances to investors that turned out to be untrue. The center oversaw projects in Vermont funded through the EB-5 visa program for foreign investors.
Barr’s clients are a handful of investors who put $500,000 each into Northeast Kingdom projects in return for permanent residency in the United States. They claim 10 former and current state officials engaged in fraud or gross negligence in overseeing the projects.
The lack of completion of some of the projects has put the immigration status of some investors in jeopardy, because their green cards are contingent on the investments creating jobs. Barr said Thursday at least one investor went back to China.
At a news conference Thursday, Barr accused state officials, including those in the Agency of Commerce and Community Development and at the Vermont EB-5 Regional Center, of giving investors false information and false hopes. For example, Barr pointed to a regional center marketing brochure that claimed EB-5 investors chose Vermont because of “faster approvals” and “state oversight.”
The regional center was supposed to oversee the EB-5 projects. The center was part of ACCD, which promoted and was supposed to scrutinize projects, until the Department of Financial Regulation was put in charge of regulatory oversight.
On faster approvals, the marketing material said the “credibility of the State of Vermont with governmental responsibility and oversight means that investors’ petitions are given priority by (U.S. Citizenship and Immigration Services), resulting in a faster path to approval.” Barr said state officials knew that statement wasn’t true, which he said amounted to fraud.
Regarding state oversight, the brochure said the Commerce Agency required formal written reports every 90 days and assured compliance with immigration and “regulations concerning investments.” Again, Barr said, state officials did not provide that oversight.
A judge this week rejected Barr’s request for an immediate appointment of a receiver, but the judge scheduled a hearing in November for arguments on a receivership. Superior Court Judge Thomas Carlson raised serious doubts about the constitutionality and the merits of appointing an overseer for the regional center.
“The court is not ignoring the history alleged,” the judge wrote. “What is missing is any realistic picture of how a receiver would actually improve the situation, other than saying ‘at least it’s not the State.’”
Gov. Phil Scott said the request that he name a receiver was “a legal tactic to try and benefit their legal standing” because the investors would use the appointment to claim the state knew it had done something wrong.
Scott said there were problems in the program in the past that are not going on now.
Barr called state officials involved in the EB-5 program a “rogue group of folks” who not only didn’t properly oversee it but rejected complaints by whistleblowers that the developers were acting improperly.
Asked if Shumlin was complicit, Barr said: “I would imagine he had knowledge.”
“I think it goes right to the top. Why wouldn’t it?” Barr asked at the Statehouse news conference. He said if Shumlin and other state officials had nothing to hide, then they should not fight the release of their emails and other correspondence involving the EB-5 program and its projects.
State officials, including Shumlin, have said they engaged in no wrongdoing and were duped by Quiros and Stenger, whose projects the former governor and other top state officials promoted in overseas trips to find investors.
Shumlin is not named in Barr’s suit, filed in Lamoille Superior Court. Among those named are Lawrence Miller and Patricia Moulton, who both served as commerce secretary, and Brent Raymond, who ran the regional center.
Attorney General TJ Donovan said he didn’t believe a receiver was needed for the regional center. He said the federal receiver overseeing the properties at the heart of the fraud case, Michael Goldberg, was in charge of trying to get the investors’ money back.
A lawyer for the Scott administration, Jaye Pershing Johnson, maintained the investors in the Barr lawsuit had either received permanent residency or were eligible to get their money back and thus would have difficulty proving they were harmed.
Barr said everyone in Vermont was hurt by the scandal and that state officials were “hiding” information that would show their complicity.
Donovan said he had not seen any evidence of a conspiracy by state officials to defraud the investors, but he agreed the role of state officials should be publicly examined.
“There should be a full accounting about what happened within state government, who did what, who didn’t do what, when they knew it,” Donovan said. “This was a black mark for our state, and we deserve that.”
“This lawsuit is not the proper vehicle to do that,” Donovan said. Asked whether that public accounting would have to wait until the state and federal cases against Quiros and Stenger are concluded, Donovan said: “I don’t think it can wait.”
Referring to the court cases, Donovan said, “We can’t jeopardize those cases, but I think people deserve to know what happened.”
