A federal grand jury in Vermont filed a series of criminal indictments yesterday against Ariel Quiros and William Stenger and two others for their parts in the long-running EB-5 scandals in that state, a subject we have been writing about for the last seven years (as noted below).
The Vermont scandals involved misusing as much as $200,000,000 in EB-5 funds, and the theft of a substantial part of that total. As recently as May 16, no criminal indictments had been delivered, according to a report on the lively and useful VTDigger news website.
In the 25-year-old EB-5 program, run by the Department of Homeland Security, an alien can secure a family-sized set of green cards by investing in a DHS-identified, but not guaranteed, project. Many middlemen, usually citizens, have misused the program in many different ways, in many parts of the country, such as in South Dakota, Florida, and Illinois.
The Vermont case was particularly significant for several reasons: it was in a rural area, unlike so many other EB-5 programs; it initially had the strong support of the local Democratic establishment, notably Senator Patrick Leahy (D-Vt.), then chairman of the Senate Judiciary Committee; and the scheme's local downfall was reported in great detail by VTDigger.
Now, according to that source, Quiros, Stenger, and two lesser actors have been charged with a total of 14 indictments for "making materially false and fraudulent representations and promises, including interstate and federal wire fraud ... Quiros is separately accused of knowingly using illegally obtained funds to pay a $6 million bill to the Internal Revenue Service..."
While the Securities and Exchange Commission has often brought civil suits in such cases, all too often there has been little criminal follow-up. Meanwhile, DHS has done little to clean up the mess. So the indictments are very good news.
CIS Has Tracked This Case Since April 2012
While our coverage has been less extensive than that of VTDigger, we had reports starting as early as April 16, 2012, on the Vermont situation. Several months earlier, at the request of Senator Chuck Grassley (R-Iowa), I had testified before the Senate Judiciary Committee, taking a position against the extension of the EB-5 program. Part of that April 2012 posting follows:
Meanwhile the poster child of EB-5 investment, at least according to Sen. Patrick Leahy (D-Vt.), chair of the Senate Judiciary Committee, is the Jay Peak ski lodge and associated enterprises, all located a few miles south of the Canada-Vermont border, and near his wife's home town. Sitting to my right a couple of months ago, as I was the only anti-EB-5 witness at a Judiciary Committee hearing, was Jay Peak executive Bill Stenger, who spoke of much construction at the ski area and of many overseas investments in it.
Sen. Leahy treated Stenger as an old friend and was grumpy with me because he knew that I had written that some EB-5 investments were used to refurbish "decaying Vermont ski resorts".
I did a little research after the hearing and found that none of the Jay Peak investments had yet matured to the point where they had to be repaid, and that the Jay Peak businesses (plural) were privately held and thus there were no corporate profit-and-loss statements to be reviewed. In other words, there is a dearth of publicly available financial information on the resort.
Last month EB5info.com, the industry's e-newsletter, ran a lead story saying that Rapid USA Visas, Inc., a broker of EB-5 investments, had "terminated relations with Jay Peak, Inc." on the grounds that it "no longer has confidence in the accuracy of representations made by Jay Peak Inc. or in [its] financial status and disclosures".
A local newspaper, the Orleans County Record in St. Johnsbury, reported that Rapid's pull-out was based in part on its perception of "a poor financial state of the resort from capital expenditures, low revenue because of a warm winter … [and] doubts that job creation projections will be realized."
Since that time both Senators Leahy and Grassley have become vigorous opponents of the program.