After six years of legal wrangling, a group of defrauded Jay Peak investors are getting their day in court.
A two-week trial that will decide whether the state harmed investors by failing to stop the $200 million fraud at Jay Peak Resort began on Monday.
The trial, which is expected to feature testimony from key former state officials including former Gov. Peter Shumlin, began with attorneys for the investors and the state selecting 16 local residents to serve on the jury.
The EB-5 immigrant investors say Vermont officials billed special state oversight as part of a sales pitch for the development projects, but in fact provided little to no supervision. Each of the 32 investors, represented in four separate trials over the next 18 months, are seeking damages in Sutton et. al. v. the Vermont Regional Center et. al.
Benjamin Battles, chief of the state attorney general’s legal division, has argued in court filings that the state is immune from lawsuits claiming misrepresentation and that each investor must prove they had a special relationship with state officials.
Judge Mary Miles Teachout explained to the more than 60 local residents summoned to Lamoille County Superior Court on Monday that the jurors’ job is to be fair and impartial.
A number of potential jurors said they could not be dispassionate about the EB-5 program, the investors nor Jay Peak Resort. Several voiced strong opinions about “rich people buying themselves into this country.”
Chandler Matson, a plaintiff’s attorney for Barr Law Group, told potential jurors he would “be asking for big damages” to make the investors whole. Asked whether they would have a problem with that, many said they would.
“Where does the money come from? My taxes?” one man said. “I might have a tough time with that as a taxpayer.”
Matson said the attorneys were not going to talk about the source of funds. Another potential juror asked why taxpayers “have to pay.”
“Why aren’t the individual people who didn’t do their jobs picked out?” the juror said.
David Groff, an assistant attorney general, asked if the potential jurors felt sympathy for the plaintiffs. No hands when up.
“Would you have a hard time ruling for the state?” he asked. Again, silence.
A long and winding road
The investors are from Europe, South America, Africa and Asia. Each put up $500,000 in exchange for green cards and a return of their investment with a profit. In order to meet federal immigration requirements, each investment must create at least 10 jobs.
More than 850 foreigners invested in the Jay Peak projects, which included expansion of the Jay Peak and Burke Mountain ski areas and plans for a biomedical facility in Newport. Many cashed out retirement accounts or sold family homes to pay for the investment, according to the plaintiffs’ complaint.
When federal regulators charged former Jay Peak president Bill Stenger and his business partner Ariel Quiros in 2016 with 52 counts of fraud for misusing investor funds, the Ponzi-like scheme came to a crashing halt and many investors were left in a lurch. Eight years later, about half do not have green cards and don’t have the money to reapply for another project. Many more have not received their original investment back. With the recent sale of Jay Peak resort, 529 investors will see roughly 22% of their losses covered, according to Michael Goldberg, the Jay Peak receiver.
Getting to trial has been an uphill battle for the investors. Their first legal action was launched in 2017 and dismissed by a Lamoille County judge in 2018 who ruled that the state was protected by sovereign immunity.
The Vermont Attorney General’s Office has attempted to delay or stop the trial altogether, court documents show.
In 2020, the Vermont Supreme Court rejected a lower court judge’s decision to dismiss the case and remanded four claims made by the investors back to Lamoille County. Those claims include: breach of contract, breach of the covenant of good faith and fair dealing, negligence and gross negligence. The latter is directed at the two former directors of the regional center, James Candido and Brent Raymond.
Judge Teachout ordered in March that the attorney general’s office release 39,000 pages of state documents that had been withheld under exemptions in the public records law. She denied the state’s motion to stop the trial on June 1. When that failed, the attorney general’s office appealed Teachout’s decision to the Vermont Supreme Court.
“The claims Plaintiffs have asserted against the State are novel and the damages Plaintiffs seek from state coffers are unprecedented,” Battles, with the attorney general’s office, wrote in a June 5 motion.
The justices rejected that appeal in a two-sentence denial issued last week, allowing the trial to go forward.
Attorneys for the investors say in court records that the Vermont EB-5 Regional Center was acting like a business as it became increasingly involved in the Jay Peak projects. State officials — including Peter Shumlin, who was then governor; former U.S. Rep. and current U.S. Sen. Peter Welch; former U.S. Sen. Patrick Leahy; regional center directors; and state employees — solicited investors on behalf of the Jay Peak developers and assured them that the state of Vermont would audit and rigorously manage the developments, according to Barr Law Group, which is representing the investors.
Barr Law Group confirmed that Shumlin, Goldberg and former Jay Peak President and CEO Bill Stenger are expected to testify during the trial. (Stenger was recently released from prison after serving about half of an 18-month sentence for his role in the scandal.) The firm will also ask former commerce secretary Lawrence Miller, and the two former directors of the center, James Candido and Brent Raymond, to appear before the jury.
The plaintiffs say state officials pledged to audit and rigorously manage the Jay Peak developments on its website, in a video, in email communications, during in-person meetings, and by offering documents and marketing materials. The state’s stamp of approval was the No. 1 reason investors opted for Jay Peak instead of other projects in the United States, they say.
Documents released in discovery show that the state did not conduct reviews of Jay Peak projects before they approved them, nor did they require that the developers submit reports. An audit of the Jay Peak projects never occurred, Candido and Raymond told FBI investigators.
Charmaine Enslin, an investor from South Africa who invested in Penthouse Suites, one of eight development phases of the Jay Peak projects, said in an affidavit that the state of Vermont “unambiguously” claimed a role in the approval and oversight of developments, and management and regular monitoring of the projects.
“To be sure, but for the state of Vermont’s oversight offer, I never would have invested in the Jay Peak Penthouse Suites L.P. phase of the Jay Peak projects,” Enslin testified.
Enslin and seven other investors are expected to testify over the next few days.
