A federal judge Friday morning released an order she had previously sealed, a day after VTDigger filed a motion to make it public.
It’s the latest twist in the years-long EB-5 investor fraud scandal in northern Vermont that has spurred a slew of lawsuits from bilked foreign investors as well as federal criminal charges against project developers, including Ariel Quiros and Bill Stenger.
Judge Christina Reiss’ flip-flop comes in a legal dispute regarding the questioning of a whistleblower about what he knows about an alleged “kickback” scheme to recruit EB-5 foreign investors into Jay Peak projects.
The five-page order by Reiss had been filed under seal Monday, prompting the news organization to submit a motion Thursday seeking the release of the document.
Early Friday morning Reiss released the order, which had earlier been docketed as a “confidentiality order,” and sealed. A short, one-sentence entry on the docket Friday releasing the order does not state the reasoning behind the decision to reverse course.
In the decision, the judge sets the ground rules for the deposition of Nicholas Hulme of Rapid Visa USA, a firm which had solicited foreign EB-5 investors for Jay Peak projects. Rapid made $15 million in fees from immigrant investors over a six year period from 2006 to 2012.
The judge is curtailing lines of inquiry made by the plaintiffs regarding the state’s lax oversight of the fraudulent Jay Peak projects. Reiss will also be on call for the defense attorneys if they object to questions posed by plaintiffs’ attorneys. She is also requiring the defrauded investors to pay for a security detail to accompany Nicholas Hulme to and from the deposition.
Under court order, the deposition of Nicholas Hulme will be sealed.
It was Nicholas Hulme, and his father, Douglas Hulme, who blew the whistle in 2012 on Quiros and Stenger by alerting 100 immigrant attorneys, including Jianming Shen, that Jay Peak’s financials were not sound, according to court records.
The lawsuit accuses Shen of bilking investors out of $1.25 million through a kickback scheme, allegedly resulting in payments to him from Jay Peak developers Stenger and Quiros in exchange for securing investors in their projects.
Attorney Russell Barr, representing a group of EB-5 investors, has been seeking to depose the Hulmes as part of the lawsuit he brought more than a year ago against Shen. Barr believes the Hulmes may help him prove that state officials were complicit in the fraud.
In the order released Friday, Reiss wrote that records related to the deposition of Nicholas Hulme, including any documents marked as exhibits during his questioning, will be considered confidential and subject to a protective order from the court.
That also includes any references to the date, time, location, and duration of the deposition.
The order also stated that the Hulmes’ attorney had raised “legitimate safety” concerns for her clients, telling the judge during a hearing earlier this month that Quiros, in a deposition before the U.S. Securities and Exchange Commission in 2015, had threatened to kill Douglas Hulme.
In that deposition, Quiros called Hulme a thug, tyrant and a bully.
“It’s terrible what that son of a bitch did,” Quiros added of Douglas Hulme. “I will — when this SEC gets over with, I’m going to go over after that man, I promise you. I will kill that man for what he did.”
In a section of the order released Friday labeled, “Deposition security,” the judge wrote that Barr must “provide and pay for whatever level of protection the Collier County, Florida, Sheriff’s Office believes is appropriate to provide for the witness’s safety.”
In addition, according to the order, Barr must “consult with Nicholas Hulme’s counsel for the purpose of facilitating such arrangements.”
The order also lays out the process for using any information obtained during the deposition as the litigation in the case moves forward. To include any reference to the confidential material in a filing, the filing attorney must first consult with Hulme’s attorney to get consent to the use of the information, the order stated.
If the parties can’t come to an agreement, according to the order, the filing attorney will submit two versions of the filing to the court, a public one and a confidential one.
The public one will redact the confidential matter, while the confidential one will contain all the information and be filed under seal, with the judge ultimately deciding whether to make the redacted information public.
The judge has also asked that she be notified when the deposition is taking place.
“I am going to make myself available for while the deposition is going on,” Reiss told the attorneys in the case during a hearing earlier this month.
“If there is a problem,” she added, “you will be calling me and I will be ruling in the midst of your deposition.”
The judge’s order released Friday follows on an earlier ruling she made in the case preventing Barr from deposing high-ranking state officials, including former Gov. Peter Shumlin.
Barr argues that since Shen had asserted as a defense the endorsement by state officials of the EB-5 projects, he should be allowed to question them. The Vermont Attorney General’s Office, representing those state officials, have termed Barr’s bid to request those officials as a “fishing expedition.”
The U.S. Citizenship and Immigration Services last year terminated the state-run Vermont EB-5 Regional Center, citing the state’s negligence and material misrepresentations in its operation while overseeing the Jay Peak project for nearly a decade.
Over those 10 years, more than 800 foreign investors put $500,000 each into the Jay Peak projects, seeking green cards if the money they put up led to the creation of the required jobs.
Now, more than half have lost both their money and their access to permanent U.S. residency.
Stenger and Quiros, as well as two of their associates, were charged in May with wire fraud and making false statements in the biggest of the EB-5 projects they headed: a failed proposed $110 million biomedical center in Newport called AnC Bio Vermont.
Those criminal charges came three years after both state and federal regulators leveled civil investor fraud lawsuits against Stenger and Quiros, alleging the two men misused $200 million of the more than $400 million they raised through the EB-5 program.
Both Stenger and Quiros have since reached monetary settlements in those civil cases, neither admitting or denying the allegations them.
