Among the unsolved mysteries of South Dakota’s EB-5 scandal is how $167 million in state subsidies and private capital, including $95 million in EB-5 visa investment money, could have disappeared into Northern Beef Packers, a beef plant that took six years to build, ran nine months before going bankrupt, and then sold at auction to a clever investor for a mere $4.8 million—literally, pennies on the dollar.
We may find an answer to that mystery in Vermont, where state officials allege that developers Ariel Quiros and Bill Stenger used EB-5 money for something other than the EB-5 projects with which they lured their foreign investors:
Governor Peter Shumlin, Department of Financial Regulation (DFR) Commissioner Susan Donegan, Attorney General William Sorrell, and Agency of Commerce and Community Development (ACCD) Secretary Patricia Moulton on Thursday afternoon announced that the State and US Securities and Exchange Commission (SEC) have filed similar civil actions alleging investor fraud dating back to 2008 at EB-5 development projects run by Florida resident Ariel Quiros and Bill Stenger….
From his very first contact with Jay Peak in 2008, Quiros “improperly” and with Stenger’s assistance, bought Jay Peak Resort with a substantial amount of EB-5 funds. AnC Bio, meanwhile, was to be a $110 million, medical clean-room EB-5 project originally set to open this fall. The SEC alleges that AnC Bio, the last of the approved projects, was a virtual ATM machine for Quiros.
…The complaints allege that Quiros and Stenger misused more than $200 million of investor funds intended for EB-5 development projects in northeastern Vermont. The cases further allege that Quiros misappropriated an additional $50 million of investor funds for his own personal use. According to the allegations, investor funds were unlawfully diverted, or misused, between and among various EB-5 projects over many years. In addition, Quiros’s alleged misappropriations of investor funds for personal use include: over $2 million to purchase an apartment at Trump Place in New York City; millions of dollars to pay personal income taxes and other personal expenses; and over $20 million to purchase Jay Peak and Q Burke Resorts [Timothy McQuiston, “State Files Suit Alleging Investor Fraud at Jay Peak, Inc EB-5 Projects,” Vermont Business Magazine, 2016.04.14].
Virtual ATM—that sounds like how South Dakota’s EB-5 czar Joop Bollen is charged with using the EB-5 money his state contract required for liability purposes to buy Egyptian artifacts and TIF bonds in Northern Beef Packers. A scheme in which EB-5 money was diverted to other uses could also explain the apparent mismanagement, delays, and unpaid contractors and employees.
The Vermont escapaders apparently used a complex web of corporate entities to cover their misappropriations. That sounds much like how Joop Bollen structured his state-approved EB-5 scheme. let’s hope South Dakota’s Attorney General is preparing a map like Vermont A.G. Sorrell’s corporate diagram to help explain to the jury how Bollen moved his—oops! our money. And let’s hope A.G. Jackley shows more curiosity and traces those intricate money paths back through Northern Beef Packers and all the way to Cyprus and Russia.
Bonus Political Notes: Quiros and Stenger have contributed to Vermont’s ruling politicians, much like friends of EB-5 in South Dakota; the difference, of course, is that Democrats have power in Vermont.
Democratic U.S. Senator Patrick Leahy spoke Thursday to demand reform in the EB-5 program. Senator Leahy has worked with his Republican colleague from Iowa, known EB-5 watchdog Chuck Grassley, to bring more accountability to EB-5. The Senate passed an EB-5 amendment in 2013, but the GOP House refused to take the matter up for a vote. Rep. Kristi Noem, what’s that you said about wanting EB-5 reform?
Vermont and South Dakota are the only two states that have run EB-5 Regional Centers themselves rather than leaving it entirely to private companies. Yet these state-run programs seem just as susceptible to fraud and corruption as numerous privately-run EB-5 programs in other states. With so much corruption in EB-5, perhaps we need to drop the word reform and focus on the word repeal.