The state of Vermont failed to provide adequate oversight to prevent a massive fraud involving ski area and development projects funded by foreign investors through a special visa program, a state audit has revealed. The scandal, which came to light in 2016, shook Vermont and the economically depressed Northeast Kingdom region. The former attorney general of Vermont requested an audit in 2018 to address the loss of trust in state government resulting from the fraud. State Auditor Doug Hoffer’s report, released on Thursday, highlighted a pattern of misplaced trust, unfortunate decision-making, lengthy delays, and missed opportunities to prevent or minimize fraud.
Miami businessman Ariel Quiros, the former owner of two Vermont ski resorts, was sentenced to five years in prison for his involvement in a failed plan to build a biotechnology plant in Newport using funds raised through the EB-5 visa program. The program allows foreigners to invest $500,000 in a U.S. project that creates at least 10 jobs in exchange for a chance to earn permanent U.S. residency. William Stenger and William Kelly, who were also implicated in the fraud, received sentences of 18 months. The fraud extended to seven other projects at Jay Peak and Burke resorts.
The federal Securities and Exchange Commission and the state of Vermont accused Quiros and Stenger of participating in a “massive eight-year fraudulent scheme” in 2016. The allegations involved the misuse of over $200 million of the $400 million raised from foreign investors for ski area developments through the EB-5 program. The report mentioned a Ponzi-like fashion in which new investments were used to pay high returns to early-stage investors, leading to the collapse of the scheme when required redemptions exceeded new investments. Quiros surrendered more than $80 million in assets, including the two resorts, to settle civil charges with the SEC.
The state of Vermont agreed to pay $16.5 million last July to settle pending and potential lawsuits from foreign investors involved in the development projects. The United States Citizenship and Immigration Services is still determining the immigration status of the investors in the Jay Peak and Burke projects. A significant number of Jay Peak investors have already received green cards, and efforts are being made to increase the chances for many more to obtain them. The Vermont Regional Center, which was responsible for overseeing the EB-5 projects, had conflicting duties of marketing and regulating the projects, leading to inadequate oversight and monitoring, according to the auditor’s report.
The findings of the audit point to a failure in the state’s oversight and regulatory measures for the EB-5 projects, resulting in a significant financial scandal that harmed foreign investors and the reputation of the state government. The mismanagement and lack of proper supervision allowed for fraudulent activities to occur over an extended period, impacting multiple projects and investors. Efforts are now being made to address the aftermath of the fraud, including settlements with affected parties and ongoing determination of the immigration status of the investors involved. The need for stronger oversight and regulation in similar programs is emphasized to prevent future occurrences of financial fraud and misconduct.
