Body Blow for EB-5 – Millions Stolen from Projects in Vermont

By David North on April 14, 2016

The EB-5 program received a major body blow today. Projects in Vermont have been regarded as pure as driven snow, but now it turns out that one of the major players misused $50 million, which, among other things, allowed him to purchase a luxury condominium in Manhattan's Trump Place.

The revelations also came as a heavy blow to Sen. Pat Leahy (D-Vt.), who as chairman of the Senate Judiciary Committee in the past, and as its ranking member now, had staunchly backed the program. (I had no inkling yesterday when I was listening to a Senate hearing on EB-5 that the Vermont revelations were about to be announced; maybe he did not either, but he certainly sounded subdued at the time.

Vermont is one of two states in which the all-important regional center is a state agency; the other is South Dakota, whose even larger EB-5 problems have been frequently reported here. The regional centers raise the funds from the aliens (who get a set of green cards for their half million) and send the money on to the actual project developers.

There are several differences between the current Vermont scandal and the one in South Dakota.

In Vermont, the principal named malefactor is the co-owner of the various EB-5 projects in the far northern stretches of the state, called the Northeast Kingdom. He is Ariel Quiros, apparently a resident (when not in Manhattan) of Florida. The Vermont resident co-owner, William Stenger, was also named in civil actions filed by both the Securities and Exchange Commission and the State of Vermont.

In South Dakota, the one official indicted, after years of controversy, is the former manager of the State government's regional center, Joop Bollen.

In Vermont, the state government has moved against the malefactor in harmony with and at the same time as the federal government. In South Dakota, the state government and the state legislature have been reluctant to tackle the problem and spent years trying to cover up the missing scores of millions.

Early this afternoon, Vermont's Governor, Peter Shumlin (D), and three of his cabinet members held an hour-long press conference on the situation. They revealed that the state government has been investigating the lost funds for as much as a year, in cooperation with the U.S. Attorney's Office, the Securities and Exchange Commission, and presumably the Department of Homeland Security, though that agency was mentioned rarely in the session. It was a somber time for the four of them, all of whom seemed to handle the questions of the press with skill.

The state's regulators found that the money, after it left state hands, went to a bewildering maze of entities, with the transactions looking like Medusa's head in the messy graphic shown to the press.

"This," said Attorney General, William Sorrell (D), pointing to the exhibit "is a picture of fraud."

The AG did not list all of the illicit transfers of money, but he did say that some of it had been used to pay Quiros' federal income taxes.

He made it clear that both the federal and the state suits, filed earlier today, were civil in nature. In response to several questions from the media, he said that "it is still early days" and that criminal prosecutions had not been ruled out.

Most, but not, all of the EB-5 projects in Vermont, including the ski resort at Jay's Peak, were put under the jurisdiction of Michael Goldberg, who was appointed trustee by the federal courts in Miami. All EB-5 moneys were frozen. The Vermont officials said that Homeland Security had said that the alien investors in Vermont should continue to file their applications, but there were no comments on the likely outcomes of the petitions filed.

There were no federal officials at the press conference, which was carried live by the CBS affiliate in Burlington, Vt., TV station WCAX.