Laura Ziegler filed her first public records request because she wanted to weigh in on a proposed rule change about how and when psychiatric patients could be forcibly medicated.
Since that first request 18 years ago, anything Ziegler may have learned hasn’t necessarily made accessing public records easier. Through her work as a citizen activist for patients’ rights — especially psychiatric patients and prisoners — Ziegler says she continually gets the run-around: Agencies redacting records that historically have been public. Delaying responses to her requests. Even respondents saying records don’t exist, when she knows they do.
The plan was grand: Half a billion dollars of private money invested in Vermont’s Northeast Kingdom, the state’s most rural — and most economically challenged — region. Four-season destination resorts, year-round manufacturing jobs, an international airport, a veritable “Renaissance” to revive the economy on the shores of Lake Memphremagog, which spans the Canadian border.
Some of those projects did get built: Jay Peak Resort, formerly a sleepy ski area with renowned slopes, now also boasts an indoor water park, golf course, hockey arena, hotels, penthouse suites and condominiums galore. Burke Mountain Resort likewise got its first hotel, and an on-site conference center.
But in Newport, Vt., the Canadian border town, an empty hole the size of a city block gapes where commercial buildings and apartments were razed to make room for the Renaissance project that isn’t to be. At the state-owned airport, an extended runway awaits international flights that can’t land without U.S. Customs operations in the new terminal that’s not built. Those manufacturing projects? Never begun.
And roughly 700 immigrant investors from 74 countries, who collectively poured about $350 million into the master vision, are yet unpaid. Some have received the green cards offered in exchange for their investments, through the federal EB-5 Immigrant Investor program. Others’ immigration status hovers in limbo, while federal and state lawsuits play out against Jay Peak owner Ariel Quiros and longtime resort president Bill Stenger.
The U.S. Securities and Exchange Commission and Vermont’s financial regulators allege the two men perpetrated a “massive” securities fraud in which they illegally pooled and misappropriated investor money for years. Quiros, they charge, also leveraged the funds through unauthorized loans, which he then used to help amass his own personal fortune.
Also implicated in the saga: state officials, from governors to department heads to employees charged with overseeing the state’s EB-5 program since 1997.
Did Quiros really do it? Did Stenger know and help? Should or could the state have prevented the alleged fraud, or stopped it sooner? If this happened at Jay Peak — and in Vermont, where the state government itself oversees EB-5 developments — what’s occurring in places with less accountability?
My ongoing investigation, in partnership with Vermont Public Radio, tells the unfolding tale of Jay Peak, of the hundreds of immigrant investors who trusted its leaders with their money, and of the state officials who kept giving their developments green lights — until announcing in April 2016 sweeping fraud charges against them.
It was a grand plan. Jay Peak was a modest ski area transformed to a year-round destination. Now the resort would lead the biggest private investment Vermont’s Northeast Kingdom had ever seen – about a half billion dollars to revive the region’s rural economy with tourist developments, plus manufacturing from windows to airplanes to biotech.
Now the U.S. Securities and Exchange Commission and state regulators say Jay Peak’s EB-5 scheme was a fraud. Stenger and resort owner Ariel Quiros face 62 civil charges of misleading investors and misusing more than $200 million of their money, including $50 million for Quiros’s personal benefit. Stenger has denied wrongdoing to local press. Neither could be reached for comment. The two are locked out of their resorts, which will stay open under an appointed receiver. Quiros says assets are frozen. Criminal charges may follow.
By Hilary A. Niles
GLOBE CORRESPONDENT APRIL 21, 2016
MONTPELIER — The news was stunning: Two of Vermont’s most prominent businessmen, Jay Peak Resort owner Ariel Quiros and president Bill Stenger, were accused last week of securities fraud and misuse of more than $200 million raised from investors since 2008.
But red flags had been waving for years over their use of a controversial federal program that grants US residency to foreigners in exchange for job-creating investments.
Some of the warnings dated to 2012, when an immigration attorney involved in Jay Peak’s securities deals publicly severed his relationship with the developers, implying their financial disclosures were misleading.
Construction delays mounted, and a crucial real estate deal was canceled for lack of payment. Investors complained that Quiros and Stenger had changed the terms of their payouts.
Other alarms rang later, heard only within state government: An approved business plan didn’t pass legal muster. Jay Peak withheld information about a key business partner. Quiros and Stenger resisted the state’s requests for documentation.
But state officials overseeing the visas-for-investment program largely allowed the Jay Peak executives to proceed — a testament to the developers’ promise of much-needed spending in Vermont’s most economically challenged counties and the strong political support from two governors and Vermont’s congressional delegation.
“You had a sense something wasn’t right here, just on the questions we weren’t getting answered,” said the state’s commerce secretary, Patricia Moulton, whose agency runs Vermont’s immigrant investor program. She eventually became suspicious of Jay Peak.
Quiros and Stenger’s designs were as audacious as the fraud they are accused of committing. In 2012, the duo unveiled a half-billion-dollar plan for Vermont’s Northeast Kingdom. It would sweep from the Jay Peak ski resort, near the Canadian border, to the newly acquired and renamed Q Burke Mountain.
Jay Peak would build a biotechnology campus, window manufacturing plant, mixed-use hotel, conference center, and marina known as Renaissance Block.
Q Resorts, Jay Peak’s parent company, wholly owned by Quiros, even took over management of the Newport State Airport
in a flurry of promises that saw the facility renamed Northeast Kingdom International Airport.
But only expansion of the ski resorts came to pass. At the airport, international flights have yet to land or take off.
Development money was to come from the federal EB-5 visa program. EB-5 offers permanent residency to foreign investors and their family members if at least 10 jobs’ worth of economic activity can be attributed to an investment of at least $500,000 in a qualified US business.
The investment offerings are exempt from the federal securities registration that’s common for stocks and bonds, but otherwise subject to federal and state securities laws.
Vermont’s EB-5 office has worked with about a dozen developers since 2006, but none more than Jay Peak. Quiros, who is based in Miami, and Stenger raised more than $350 million from over 700 investors in at least 74 countries, according to an April 12 lawsuit filed by the Securities and Exchange Commission.
Neither man could be reached for comment.
Vermont runs its EB-5 program through an entity owned and operated by the state. It’s an unusual setup adopted by only one other state, Michigan. Hundreds of other regional centers, as the EB-5 offices are known, are for-profit outfits.
Even at a news conference to announce allegations of “massive” fraud leveled by the SEC and the state, Governor Peter Shumlin promoted the added assurance that state oversight affords.
Yet compliance with securities laws appears to have been an afterthought.
Moulton, the state commerce secretary, said that until Vermont financial regulators got involved in 2015, about a year after the SEC began investigating, the regional center conducted no systematic, independent, third-party reviews of projects’ business plans.
“We can all sit back now and say there are probably 18 things we should have done. But we were not required in our position as a regional center to do that level of analysis. We’re required as a regional center to market projects,” she said.
Moulton said this is a weakness in the whole EB-5 system, and one Vermont corrected after bringing in financial regulators. She said the commerce agency’s due diligence previously amounted to a review of applicants’ business plans and the reputations of their principals. With Jay Peak, Bill Stenger carried the case. The longtime president of the iconic ski area was a known entity in Vermont well before Quiros bought the operation in 2008.
And with Jay Peak, as with other projects, state officials mostly took the word of attorneys who had drafted the securities offerings, Moulton said.
The econometric forecasts on which job-creation projections were based — the heart of EB-5 — were taken at face value, even though they were paid for by developers. Market analyses also were trusted, but never verified beyond EB-5 approval by US Citizenship and Immigrant Services.
That federal green light remains the only required business plan review in the EB-5 process.
In 2012, Doug Hulme, an immigration attorney who had worked with Jay Peak, cut ties with the resort over alleged financial misrepresentations. Hulme issued a news release saying his company, Rapid USA Visas, “no longer has confidence in the accuracy of representations made by Jay Peak.”
But Hulme himself was the cause of consternation in the state EB-5 office, because Rapid USA at the time was improperly marketing itself as the state regional center, Moulton said. The state chalked it all up to “sour grapes,” Moulton said.
No financial audit of Jay Peak was performed.
Not every project got a pass, though. The regional center did rescind agreements with other developers and has declined to work with at least one group it was “not comfortable with,” Moulton said.
The state does not appear to have applied such scrutiny to Jay Peak until early 2014, when a group of investors began complaining that Quiros and Stenger had converted investor’s equity shares in the resort’s Tram Haus Lodge to unsecured IOUs — without their knowledge or consent.
Prior to this, Moulton said, more-rigorous inspection hadn’t seemed necessary because there hadn’t been any visible problems.
“Projects were getting built. Jobs were being created. Money was being spent. There was nobody screaming and hollering, no question marks, until the first conversion of Phase I investors from equity into debt.”
After a brief suspension by the regional center, the state allowed Jay Peak to continue selling its EB-5 securities, with conditions set by the Department of Financial Regulation. Responsibility for compliance for all of Vermont’s EB-5 projects was moved to Financial Regulation, which exercised its subpoena power to demand over 300,000 documents from Jay Peak. Its investigation is one the commerce agency had neither the resources nor the authority to conduct. The resulting charges against Quiros and Stenger largely mirror the federal charges by the SEC.
Shumlin, who is finishing his third two-year term, deflects questions about whether Vermont’s EB-5 center should have been reformed sooner. He cited its structure as a legacy of prior administrations. “We made the change when we made it, and we found what we found,” Shumlin said by e-mail.
Statewide base property tax rates might increase again — by a nickel in 2015 — to meet the rising cost of education. But in recommending the rate bump, Tax Commissioner Mary Peterson also suggests looking for a way to get schools to curb spending.
Peterson issued her official property tax recommendation Tuesday afternoon: Base homestead property tax rates should go from 94 cents to 99 cents, she said; non-residential property tax rates should increase from $1.44 to $1.49. Peterson recommended no change to the homestead income tax rate of 1.8 percent.
The Legislature, which ultimately sets statewide tax rates, will consider Peterson’s recommendations when it reconvenes in January.
Lawmakers also might respond to Peterson’s urging that they consider ways to limit the growth of education spending from year to year. Her message echoes one she delivered to the House Ways & Means Committee at a recent pre-session meeting that focused on education finance.
Gov. Peter Shumlin on Tuesday also appealed to school boards to keep their budgets lean.
930 words / VTDigger.org Despite conceding that Vermont will miss his target of statewide broadband and cellular coverage before year’s end, Gov. Shumlin Wednesday gathered top telecommunications executives to celebrate how far they’ve come.
About 3,000 homes still lack high-speed Internet service — representing less than 1 percent of residences in the state. Of those homes without service, solutions have been identified for the vast majority, though connection dates remain elusive. Five or fewer locations still remain without any solutions figured out. Administration Secretary Jeb Spaulding said the effort has been largely successful. “I think (the governor) is excited and thankful and gratified for the progress we have made, and I think for all intents and purposes, we have hit his target.”
When North Bennington turned its public school private this year, some people in the Statehouse and Agency of Education grew nervous.
What would this mean for local and state taxpayers, they wondered. For the Education Fund? For children in the district?
A moratorium and an outright ban on the same transition in other towns were floated in both the House and Senate, but ultimately lawmakers settled on a committee to study the issue further. That group met for the second time Wednesday morning. It’s off to a slow — but passionate — start.
Central to the sometimes edgy debate was all manner of access: Access to a full range of services for students with special needs, access to school choice for families and access to school records and accountability mechanisms for state officials and members of the public.
In a bid to shore up the controversial EB-5 Immigrant Investor Program, Sen. Patrick Leahy, D-Vt., has proposed a roster of improvements: stronger oversight, better reporting and streamlined reviews of business plans and visa applications, among them.
His revisions also would tweak the job creation requirement to define full-time employment not as someone working at least 35 hours per week, but by the equivalent of a full-time job, “regardless of how many employees fill the position.”
The changes would be written into a new statute that codifies and makes permanent what is now a pilot program. So-called regional centers help private businesses pool investments from would-be immigrants, at either $1 million or $500,000 apiece, depending on the regional center’s location.
Controversy on Capitol Hill this week shined a national spotlight on one of Vermont Sen. Patrick Leahy’s signature economic development initiatives — a program that plays a key role in Vermont’s business strategy.
Monday, the Department of Homeland Security Office of the Inspector General revealed to a lawmaker an ongoing investigation into Alejandro Mayorkas. The director of U.S. Citizenship and Immigration Services is President Barack Obama’s nominee to fill the No. 2 position at the Department of Homeland Security.
Mayorkas, a tip from an FBI analyst alleged, had helped secure approval for a visa for someone whose application had previously been denied once, then again on appeal. The visa application was filed through the federal Immigrant Investor Program, also called “EB-5” for the type of visa it affords.
Further allegations implicated Mayorkas in mismanagement of the EB-5 program, and extended to other USCIS officials suspected of obstructing a program audit by the Securities and Exchange Commission.
In a letter to a staffer for Sen. Chuck Grassley (R-Iowa), the Inspector General’s Office indicated that the preliminary investigation had found no criminal activity, but it also referenced a separate, ongoing audit of the EB-5 program that was in its “final stages.”
Leahy is in the process of pushing Congress to make EB-5 permanent after 20 years in a pilot stage. The program — until Monday — had remained fairly obscure by national standards, despite a recent spike in use. But in Vermont, EB-5 plays a prominent role.
This day-turn news brief was written for radio and read on-air.
COLUMBIA — State Representative Bart Korman has sponsored a bill to reclassify electricity generated at any sized hydroelectric plant as renewable.
Under current standards, only hydro-electric power produced at small plants qualifies as renewable. The change could matter to the state’s power companies, which must ramp up their renewable energy sourcing from two percent to fifteen percent in the next eight years.
Korman – a Republican from High Hill – says that’s an unrealistic goal.
“We don’t have very much renewable energy out there. To get to a 15 percent by 2021, we’re going to have to do a few things, or purchase renewable energy credits,” Korman says.
But changing the definition of “renewable” doesn’t achieve the goal of the standards, according to P.J. Wilson, head of the nonprofit Renew Missouri. The organization is fighting the bill. Korman says it may come before the full House for a vote next week.