Vermont Wins EB-5 Settlement Less Than Three Months After Scandal Goes Public

Speaking of EB-5, Vermont, the only state besides South Dakota to run its own EB-5 program, has quickly secured a financial settlement in its EB-5 scandal. Just two and a half months after Vermont’s EB-5/Jay Peak scandal broke, the state has secured a $5.95-million settlement with securities broker Raymond James. According to Anne Galloway of VTDigger, $4.5 million goes to bilked investors, $1.25 million goes back to the state general fund, and $200,000 pays for the state’s investigation.

Vermont’s alacrity in righting EB-5 wrongs stands in stark contrast to South Dakota’s efforts to clean up its EB-5 mess. The feds began investigating our EB-5 program in March 2013. The state cut off its contractor and former employee Joop Bollen from EB-5 in September 2013. The scandal went public with the shotgun death of former economic development secretary Richard Benda at the end of October 2013. Democratic inquiries in 2014 revealed Bollen may have fleeced investors and the state for over $100 million, but the state’s efforts through the 2014 election consisted primarily of blaming the dead guy. Only after the USCIS and 35 cheated Chinese EB-5 investors began raining fire on the state in fall 2015 did the state finally get around to taking Bollen to court for a teeny fraction of the money that fell into South Dakota’s EB-5 black hole. Bollen’s trial won’t happen until February 2017.

Immigration blogger David North notes that Vermont has been more willing and more able than South Dakota to swiftly hold its EB-5 cheaters accountable. North notes that South Dakota’s EB-5 scandal has more and deeper connections to the Republicans who control our state government. But North sees more than Republican cronyism to blame:

• Vermont had the excellent services of a comprehensive SEC report on its EB-5 problems; in South Dakota a perhaps comparable (but still secret) FBI report was quashed by the acting U.S. attorney, then campaigning for the permanent position, Randolph J. Seiler. (The president has since made that appointment.) His predecessor in that position, a prominent Democrat, was singularly incurious about EB-5 matters. Thus some officials of both South Dakota parties did not do due diligence.
• In Vermont, there is one clear abuser (Ariel Quiros, a resident of Florida) and one henchman (William Stenger, a Vermonter) according to SEC, and Quiros has substantial financial holdings, such as a small apartment in New York’s Trump Tower, that have been frozen. While one subject of South Dakota’s reform efforts, the former regional center director Joop Bollen, has been identified, most of the other players are either hard to find or without assets in the United States, or both.
• On the last point, Vermont was in an excellent negotiating position with Raymond James, which has brokerage offices in the state that it wanted to preserve. In contrast, some of those who got South Dakota’s EB-5 money, who presumably should not have received any, include an ad hoc corporation with a Hong Kong Office (that made $10 million by lending an EB-5 company $2.5 million for three months), a Canadian entrepreneur whose relations to EB-5 are unknown, and a flock of Korean H-2B workers who were hired to finish a subsequently bankrupt beef slaughterhouse, despite the fact the jobs created by EB-5 are supposed to go to residents of the United States [David North, “Vermont Quickly Recovers $6 Million in EB-5 Losses; South Dakota Dawdles,” Center for Immigration Studies, 2016.07.05].

Worth noting: even Senator Bernie Sanders wasn’t exactly fast out of the gate in decrying corruption in his state’s EB-5 program. Still, Vermont’s state government recognized corruption when they saw it and went after due compensation far more quickly than South Dakota’s crony-bound machine.