The Strange Tale of a Flaky, Failing EB-5 Firm

By David North on November 2, 2015

We have previously reported that Seldon Technologies, Inc., an EB-5-funded firm in Vermont that briefly made water filters for Mexico-based Bebederos, went out of business abruptly, laying off all of its 32 employees.

In June, Seldon had a grand ceremony with Sen. Pat Leahy (D-Vt.) present to announce that it had been awarded a $20 million contract to make the filters for Bebederos. A few months later the contract was cancelled with minimal explanation.

CIS recently has learned more about Seldon, an odd and ill-fated corporation that was able to secure EB-5 funding anyway.

The Seldon failure was doubly regrettable because, while the vast majority of EB-5 projects fund urban real estate developments (e.g., in New York, Los Angeles, and Las Vegas), this time the money was to be invested in a small town (Windsor) in a rural area. Further, the money would go into a factory, not a shopping mall or hotel.

The EB-5 program, in effect, gives family-sized sets of green cards to U.S. middlemen who in turn sell them for $500,000 investments in DHS-licensed, but not guaranteed, projects. Each alien's investment is supposed to create 10 jobs for resident workers. One of the problems with the program is the ease with which questionable projects have been funded, as we have pointed out in the past.

In this case, the worrisome signs of a shaky company were visible long before, during, and after the six EB-5 investments (totaling $3 million) were made. Among the American investors in the firm was George Gilder, who famously promoted the argument in the Reagan administration that if you just cut taxes for the rich, the government's revenue would increase.

We at CIS talked to numerous people in Vermont and Mexico and examined a raft of public documents, finding the following:

  • The company was named, we were told, after Hari Seldon of science fiction novelist Isaac Asimov's Foundation series.

  • One of our Vermont readers said that when he went to a Seldon event a few years ago, most of the conversation was about cold fusion, a concept that is dubious at best.

  • The company was so hard up for cash that it borrowed $350,000 from the hollowed-out mill town of Windsor, Vt., (pop. 3,553 and falling) and, as a matter of fact, paid back the loan, perhaps using some of the EB-5 money to do so. Windsor has a budget of about $4.6 million a year, so the loan must have made a real dent in the town's finances. Borrowing money from a small town strikes me as an unusual corporate move.

  • Similarly, Seldon damaged its reputation with its only paying client by apparently seeking, or implying, it wanted investment funds both before and after the $20 million contract for water filters was signed. My colleague Kausha Luna learned this in a phone conversation with the Mexican company's director of operations, Diego Covarrubias. His firm apparently decided that Seldon was in financial trouble and terminated the contract earlier this year.

  • Seldon was purchased sometime before November 2014 by an African firm, Econet Wireless, which is headed by Zimbabwean billionaire Strive Masiyiwa. Econet has nine subsidiary firms in Zimbabwe, which probably means that Masiyiwa has a smooth relationship with that country's notorious dictator Robert Mugabe. (One wonders if Sen. Leahy knew about the Zimbabwean connection.)

  • Seldon had an almost complete change in company leadership between the filing of its annual reports with the State of Vermont in May 2013 and September 2015; of the seven persons listed as officers and directors in 2013, only two were still listed in 2015, one of whom was Mr. Gilder.

As we have noted many times, the EB-5 program attracts some very interesting people.