[I]n a settlement with VTDigger this week, the state of Vermont agreed to release a batch of records as part of a four-year dispute over EB-5 documents held by the Vermont attorney general’s office.
More than 200 pages of forms submitted by the state to the U.S. Citizenship and Immigration Service from 2011 to 2018 were released to VTDigger on Friday. The 924A forms list amounts raised and job creation numbers for each of the projects at Jay Peak and other EB-5 projects under the purview of the Vermont EB-5 Regional Center. Records from 2011 were missing from Vermont Department of Financial Regulation files. The department provided a copy from USCIS, which was heavily redacted.
USCIS shut down the Vermont EB-5 Regional Center last July after it determined that the state failed to stop the Jay Peak developers from misusing $200 million and bilking 800 foreign investors.
VTDigger’s lawyer, Timothy Cornell, of Boston-based firm Cornell Dolan, said the settlement with the state is “the first step in our fight to uncover the full story of what happened in the EB-5 scandal.”
“The state has put up roadblocks to our rights to access public records using exceptions to the state public records law and bureaucratic hurdles,” Cornell said. “Now the state knows that we are looking to break those barriers down to give Vermonters the transparency they have a right to.
“I hope that next time, Vermont citizens will not have to resort to a full team of seasoned lawyers to get the documents they have a right to,” he said. Cornell was part of a legal team that included Dan Richardson of Tarrant Gillies and Richardson, and Cornell Law School’s First Amendment Clinic led by Cortelyou Kenney.
VTDigger began seeking records in the Jay Peak fraud case in July 2014 when allegations of fraud began to surface. The news organization’s requests have been largely blocked since June 2015, shortly after VTDigger reported that the Securities and Exchange Commission was investigating Jay Peak Resorts.
Ten months later, federal regulators shut down the “Ponzi-like” scheme. It is the largest EB-5 fraud case in the nation’s history.
The fraud was perpetrated from 2008 to 2016. The Vermont EB-5 Regional Center, which was part of the state commerce agency, was responsible for oversight, management and administration of the eight Jay Peak projects in the Northeast Kingdom.
VTDigger is seeking to understand what state officials knew and when and why the commerce agency allowed the developers to continue marketing the projects to investors after a whistleblower came forward to warn the state of financial improprieties in 2012.
The state has used the relevant litigation exemption to block release of records in the EB-5 scandal.
Gov. Phil Scott announced an expedited plan for releasing 1.5 million pages of documents in March 2017. Yet no documents in the EB-5 scandal have been released by the state without pressure from lawsuits filed by VTDigger.
Scott says 800,000 redacted financial records will be issued by the end of the month pertaining to the state’s investigation of Jay Peak owner Bill Stenger and his Miami business partner Ariel Quiros. Communications between commerce agency officials and Jay Peak, whose relationship is at the center of a lawsuit from investors, may not be released for years.
In a statement, Scott said he was committed to transparency. “The EB-5 fraud represents a dark period for the Northeast Kingdom and given the clear public interest in this fraud, I remain committed to ensuring transparency to Vermonters by releasing relevant documents as early as legally possible,” he said.
Attorney General TJ Donovan, whose office advised the administration against releasing the records until entering mediation with VTDigger over its lawsuit, said: “I am pleased as well in reaching a resolution with VTDigger that provides and promotes transparency while balancing the competing needs of fulfilling our professional obligations as lawyers.”
Most of the documents sent to VTDigger on Friday show which projects related to Jay Peak were active in the years from 2011 to 2018, how much EB-5 money had been invested up to that year, and how many jobs were maintained or newly created.
One of the forms from Jan. 31, 2015, for example, stated that AnC Bio Vermont had raised $32 million from EB-5 investors. The next year it had raised $41 million. However it’s not clear how many jobs were created, if any, as that space on the forms are empty or marked “N/A” for those two years.
The $100 million biomedical research facility in Newport never got off the ground. The filing includes no information about Federal Drug Administration product approvals. Federal regulators, termed the AnC Bio Vermont project “nearly a complete” fraud. USCIS said in its notice terminating the regional center that the state made “material misrepresentations” when it signed off on AnC Bio Vermont.
As part of the settlement with VTDigger, the governor, the Vermont attorney general’s office and the Vermont Department of Financial Regulation also agreed to release communications between commerce agency officials and Douglas Hulme, a former business partner, who warned the state in 2012 about financial improprieties at Jay Peak. Instead of heeding that warning, state officials doubled down on the Jay Peak projects, greenlighting the AnC Bio project.
In addition, the state has agreed to release communications between Sen. Patrick Leahy’s office and the state about the EB-5 program. Leahy was a friend of Stenger, the president and CEO of Jay Peak. Leahy wrote a letter of support for the AnC Bio project, held his 50th wedding anniversary at Jay Peak, and asked Stenger to testify in Congress about the benefits of the EB-5 program. The two went on a trade mission together to Ireland. Leahy also solicited investors in China on behalf of the EB-5 program and the Jay Peak projects.
When Stenger was charged with 52 counts of securities fraud, Leahy said he felt “betrayed” by his friend and that he would be disappointed if he were the one responsible for the fraud. Leahy has refused to release his office’s communications with Stenger. The senator has said since the EB-5 scandal unfolded in Vermont that the program is rife with fraud throughout the nation and he has pushed for reforms.
During internal deliberations over VTDigger’s records request, state attorneys were at odds over whether releasing them would undermine their own legal strategy in defending former government officials.
Gavin Boyles, general counsel at the Department of Financial Regulation, said there was “no principled line to be drawn” between the 924s and hundreds of thousands of additional documents that the state is withholding due to the relevant to litigation exemption in Vermont’s Public Records Act.
“There is nothing in them that is particularly new or damaging. As you know some of them are already public in redacted form,” Boyles wrote on Sept. 12, in emails obtained by VTDigger through a public records request.
“I would still recommend that we not release the 924s, however,” he added. “The line we’ve drawn, per our recent phone call, is that we’ll release DFR documents because DFR is no longer a party to litigation. These are not DFR documents and there’s no principled line to be drawn between them and any of the other multitudes of non-damaging non-DFR documents that are relevant to the litigation.”
Jaye Pershing Johnson, the governor’s general counsel, disagreed, according to the email exchange, in which she argued for the release of the EB-5 records.
“I disagree there is no bright line for releasing — the documents can be obtained from a federal agency and many of them are already public. I no longer see a bright line for withholding and again express the desire of this Office to release,” she writes.
VTDigger filed a request through the Freedom of Information Act months ago to get the 924s from USCIS, but has not heard back.
Boyles was referring to some 800,000 documents that DFR says it is in the process of redacting. The investigation led by Financial Regulation Commissioner Michael Piechek focused on how the fraud was carried out from a financial perspective, as opposed to how state officials let it happen, or whether they might have been involved.
The state already settled its case against Jay Peak’s developers, Ariel Quiros and Bill Stenger, but is still facing two lawsuits from Stowe attorney Russell Barr. One of those suits accuses state officials of having dirty hands in the fraud. The attorney general’s office, which is representing those officials, says releasing documents could damage their client’s case.
However, that argument was also called into question by Johnson, in an email exchange with Boyles and other state attorneys. She points out that the state is also arguing that it had no legal duty to oversee the development or the use of EB-5 funds, in which case it can’t be held liable for failing to do that.
“The reason we have stated for withholding is that they are relevant to litigation as it relates to claims of misrepresentation by the State,” Johnson writes on Sept. 12. “However, we also say, in our USCIS filings… (i) they are not our representations — we accepted them wholesale from the developers; and (ii) we had no legal or other duty to look behind the numbers.”
“We are saying IF there are misrepresentations, and I still do not have a clear idea about whether that is the case, they were never our representations, but rather the representations of the developers,” Johnson continues. “If they were not our representations, the forms are not relevant to litigation.”
However, the argument put forward by Boyles apparently won the day, until VTDigger moved to take the state to court over the records.
VTDigger filed the lawsuit in Washington County Superior Court in early January seeking the so-called I-924 and I-24A forms submitted to the state over the past several years.
The forms track the various projects under the oversight of the Vermont EB-5 Regional Center, and were submitted to the U.S. Citizenship and Immigration. The forms include the annual reports from the regional center, known as I-924s, and amended forms for specific EB-5 financed projects, called I-924As.
The lawsuit had been seeking records from 2008 to 2016, the timeframe in which the state was overseeing the Jay Peak Resort EB-5 projects.
It was also during that period that Quiros and Stenger, according to civil lawsuits brought by state and federal regulators, defrauded hundred of foreign investors who each put $500,000 into the projects.
The news organization, in the lawsuit, disputed the state’s “relevant to litigation” claims.
“By broadly construing the word ‘relevant’ under the litigation exemption, the State threatens to cut off valuable information to all Vermonters,” the lawsuit stated.
“As such,” the filing adds, “a narrow interpretation of this exemption is warranted and is in keeping with the Vermont Supreme Court’s repeated admonitions to narrowly construe the exemptions lest they swallow the disclosure principle.”
