[T]he state commerce agency hired two securities law firms last year to field questions from a federal agency after allegations of fraud were brought against the developers at Jay Peak Resort.
The fraud, which involved $200 million in allegedly stolen EB-5 money, occurred under the state’s watch. The misuse of foreign investor funds began in 2008 when the developers used EB-5 money to buy the resort. Federal regulators say that act of fraud launched a Ponzi scheme that continued unabated for a decade.
Four months after the Securities and Exchange Commission brought 52 counts of securities fraud against the developers, the U.S. Citizenship and Immigration Service threatened to close the state’s EB-5 program. USCIS demanded that officials provide evidence that the Vermont EB-5 Regional Center had adequately monitored, managed and provided oversight of the Jay Peak projects.
Officials at the Vermont EB-5 Regional Center told USCIS in August 2016 that it had monitored the projects and had instituted new protections for investors. In 2015, former Gov. Peter Shumlin put oversight of the EB-5 program under the aegis of the Vermont Department of Financial Regulation.
As the Shumlin administration prepared to leave office, the state hired two law firms last year to help craft responses to USCIS. Patricia Moulton, then-secretary of the Agency of Commerce and Community Development, signed off on the contracts.
Locke Lord LLC, based in Boston, was paid $50,000 to assist the state. The date of hire for the firm was backdated to July 1, 2016. A one-year contract shows that the firm was hired to help the commerce agency respond to a July 8, 2016, request for information from USCIS.
The Washington, D.C., firm of Baker, Donelson, Bearman, Caldwell and Berkowitz was paid $595 an hour for up to $10,000 in a no-bid contract to assist the commerce agency. The firm was hired on Dec. 29, 2016.
Gov. Phil Scott, who took office in January of this year, authorized release of the contracts to the Burlington Free Press on Thursday, telling the newspaper that he knows journalists “are frustrated” about the lack of information about the state’s role in the EB-5 fraud at Jay Peak.
Scott’s release of the records comes on the heels of official notice in August that USCIS plans to shut down the center.
In a stinging 27-page notice of termination issued in August, USCIS officials said the regional center “failed to properly engage in management, monitoring and oversight of the program for many years, as required by the program.”
The state had 30 days to respond. The Vermont Department of Financial Regulation maintained in a letter to the federal agency that its oversight of the projects was sufficient and the EB-5 program could be slowly wound down.
Meanwhile, the status of the Vermont Regional EB-5 Center is in limbo. The center has no budget, no staff and is no longer taking on new developments. All activities are now managed by the Vermont Department of Financial Regulation. Two new projects with the center were canned this year, Stowe Aviation and South Face Village. Only two state approved developments are now active — a brewery at Trapp Family Lodge and a snowmaking pond at Mount Snow.
It is the second time the governor has released a handful of state EB-5 records. The Vermont Attorney General’s office has blocked all other requests for other EB-5 documents.
Repeated requests made by VTDigger in 2016, after the Securities and Exchange Commission brought 52 counts of securities fraud against the Jay Peak Developers, were rebuffed. In a response to a sweep request, Bill Griffin said there are 50,000 records and set a price of $200,000 for the documents, with no guarantee that the records wouldn’t be heavily redacted. Narrow requests for records were also blocked with high fees, which were to be used to pay lawyers in the Vermont Attorney General’s office to eliminate text from the records that they deem covered by exemptions in the Vermont Public Records Act.
VTDigger sued over communication between USCIS and the Vermont EB-5 Regional Center last year after the Vermont Attorney General’s office denied the request. The lawsuit was withdrawn in February when the Vermont Attorney General argued that a clause in the Vermont Public Records Act could be broadly interpreted, giving the state the authority to block the release of records.
The relevant litigation the state cited in its case against VTDigger last year was its own lawsuit against the Jay Peak developers, Bill Stenger and Ariel Quiros.
Scott released the USCIS communications sought by VTDigger in March and pledged he would “expedite” the release of the remaining records.
At the time, Scott said his administration needed to “hit the reset” button on the Vermont EB-5 Regional Center program. “I feel it is important to release documents in as timely a manner as possible,” he said in a statement.
Eight months later, that promise has yet to be fulfilled. Last month, Scott has said he will release 5,000 records this month as part of the discovery process in the state’s civil case against the two businessmen. The state has hired a firm to redact the records.
TJ Donovan, the newly elected Vermont Attorney General, has said the state has hundreds of thousands records related to the state’s EB-5 program.
VTDigger exposed the Vermont EB-5 Regional Center’s cozy relationship with Quiros and Stenger in a series of stories published in 2014.
