Following the court’s approval of a settlement with Raymond James Financial to reimburse Jay Peak and Burke Mountain creditors, Governor Phil Scott, on July 5, directed the Vermont Department of Financial Regulation (DFR) to conduct a programmatic review of the operations of the Vermont EB-5 Regional Center (VRC).
The review focused on assessing the lessons learned from the alleged fraud at Jay Peak projects, determining whether the structural changes made to the program in response were sufficient to protect the Vermont economy and investors, and making recommendations for the future of the VRC.
“The alleged fraud at the Jay Peak projects was devastating for the region, investors and contractors, and has had a lasting impact on Vermont. It was critical as a new Administration to have an accounting of the lessons learned, as well as an analysis that could inform whether to continue or end operations of the Vermont Regional Center,” said Gov. Scott.
The final report outlines the following:
- The history of the EB-5 program, including the evolution of federal and state regulatory requirements;
- The history of the VRC, including a review of its operations;
- An examination of the State’s interactions with, and eventual investigation into, the Jay Peak projects;
- A review of the structural changes made to the VRC from a regulatory and oversight perspective; and
- Recommendations for the future of the EB-5 program and the VRC.
In the report, DFR Commissioner Michael Pieciak, in consultation with Michael Schirling, Secretary of the Agency of Commerce and Community Development (ACCD) – which manages the VRC – concludes that the State took corrective actions in 2014 and currently has stronger regulatory, compliance and oversight measures in place.
However, given the growth of privately-managed EB-5 regional centers across the country, and recognizing that operating a regional center is a function best performed by a private entity, the report recommends winding down the Center’s work. It would continue to oversee existing projects, but would not take on new projects.
On August 18, prior to the scheduled release of the report, the State received notification from the U.S. Citizenship and Immigration Service (USCIS), which administers the EB-5 program federally, of its intent to terminate the Center. USCIS’ concerns centered on the alleged fraud perpetrated by Jay Peak principals Ariel Quiros and Bill Stenger, for which the State is currently pursuing a civil fraud case.
The outcome USCIS seeks is generally aligned with the Scott Administration’s recommendation to close the VRC. The State hopes to coordinate with USCIS to address the closure in a way that ensures stability for Vermont’s economy and protects employees, contractors and investors in the projects. The State will respond to USCIS accordingly, and more information on this process will be issued as available.
“As our report details, the Scott Administration agrees that the Center should ultimately be closed. It is clear from our review that state government was not, and is not, the best-suited entity for managing the EB-5 program,” said Secretary Schirling. “It is our hope that USCIS will agree with our approach for a staggered closure to minimize any adverse economic impact and ensure investors in existing, viable projects are protected.”
“While the State has taken important steps to improve oversight of the EB-5 program since the alleged fraud was uncovered, the evolution of the EB-5 program across the U.S. and here in Vermont make closing the Vermont Regional Center an appropriate action,” said Gov. Scott.
Click here to view DFR's report on the EB-5 program in Vermont and the Vermont Regional Center.
Click here to view DFR's addendum and the USCIS Notice of Intent to Terminate.
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