USCIS Drops Other Shoe on Vermont's EB-5 Regional Center, Once the Darling of the Program

By David North on July 12, 2018

Finally, more than two years after it became apparent that $50 million or so was missing from the Vermont EB-5 regional center's projects, USCIS has decided to close the doors of the state agency, according to local news reports.

Regional centers in the EB-5 (immigrant investor) program take aliens' investments, usually $500,000 at a time, and place them with developers who are running (usually) real estate programs that are supposed to produce 10 jobs per investment. EB-5 gets its name because it is the fifth of the employment-based provisions in the basic immigration law; EB-5 investors, their spouses, and their minor children all receive green cards if the investments stay in place.

Most of these centers, which are coming under increasing scrutiny by the government, are private, for-profit entities run by local business people; in the case of Vermont, however, the regional center was an arm of the state government, an unusual arrangement.

For many years this regional center, and the restored skiing resorts it funded, were the favorites of Sen. Patrick Leahy (D-Vt.), who happened, at the time, to be chairman of the Senate Judiciary Committee, which oversees, among other things, immigration programs. The Vermont regional center was bringing serious money to the severely depressed northern reaches of the state, the Northwest Kingdom, along the Canadian border.

After it became apparent more than two years ago that scores of millions of dollars were missing and that Florida real estate tycoon Ariel Quiros had defrauded everyone in sight, Sen. Leahy joined his successor as chairman of the committee, Sen. Chuck Grassley (R-Iowa), in seeking to make drastic reforms to the EB-5 program, as we have reported from time to time (see, for example, here and here).

It should be made clear that the state agency was lax in its supervision of the program, and that the missing money did not wind up in the hands of the Vermont government, it went into various ventures controlled by Quiros, including brokerage margin accounts — those are the accounts that allow individuals to gamble on the stock markets with other peoples' money.

It was particularly unfortunate for the program that it proved to be susceptible to fraud even in the most unlikely environment of squeaky clean Vermont; and in one of the handful of programs that worked in rural areas.

Most EB-5 projects are real estate ventures in major cities like New York, where the EB-5 money does not make or break the projects (often in lush neighborhoods), but does provide very low-cost loans for mezzanine financing, thus making already lucrative real estate deals even more so.

Bipartisan efforts to reform the program have met with no public comments from the Trump administration, and have been stoutly resisted by the program's well-placed defenders, Sens. Chuck Schumer (D-N.Y.), minority leader of the Senate, and the Majority Whip, Sen. John Cornyn (R-Texas). The central part of the EB-5 program is authorized by temporary legislation, and that is due to expire on September 30 of this year; it is expected that the two senators will again prevail by inserting EB-5 extension language in must-pass appropriations bills, as they have done so often in the past.