Vermont Department of Financial Regulation Commissioner Michael Pieciak called it a long shot.
This week, he received word that the U.S. Citizenship and Immigration Services has agreed to reinstate the Vermont EB-5 Regional Center after previously issuing blistering reports calling for it to be shuttered.
The state had filed a motion to reconsider an earlier notice to terminate the EB-5 Regional Center and learned Thursday that a decision dated March 25 had reversed the closure, as first reported by mynbc5.com.
The decision calls for further review of the center, allowing the state-run regional center to remain open to “wind down” projects already underway rather than closing immediately. The projects in question include the Stateside condos at Jay Peak, an expansion of lodging at Mount Snow in Dover and a brewery at Trapp Family Lodge in Stowe.
“At this point, we operate as if we were not terminated since that decision has been withdrawn,” Pieciak said Friday. “Now we just have more certainty to continue with our wind down plan.”
Pieciak said the case now will be reviewed by an internal office within USCIS. “For all practical purposes, it’s directing that office to rule in our favor,” Pieciak said of the recent decision.
Gov. Phil Scott, speaking Friday at his twice-weekly press conference, said his concern has been the abrupt closing of the center by USCIS.
“We inherited this problem four years ago when I came into office,” the governor said. “It was just a timing thing. They wanted to shut it down immediately. We thought we should unwind this in a methodical way to protect those involved.”
The ruling is the latest twist in a long-running dispute between the state and USCIS over the scandal-plagued center. The state-run regional center failed to stop a Ponzi-like scheme at Jay Peak Resort that entrapped nearly 900 investors over a 10-year period.
Pieciak reiterated Friday what he had said when submitting the state’s filing Oct. 25, 2019 — that he believed the motion to reconsider was a long shot bid.
“Oftentimes when you file a motion to reconsider, it’s the last step in a legal process,” he said. “We weren’t feeling particularly good about the motion to reconsider because of the previous positions that USCIS had taken.”
If USCIS had denied the state’s motion to reconsider, the state could have filed a lawsuit in federal court against the agency in its effort to keep the EB-5 regional center open.
USCIS had decided to terminate the center in 2017, contending that the state failed to protect the interest of EB-5 investors from harm. The state appealed that ruling as well as subsequent ones, seeking instead to “wind down” the operations of its regional center rather than closing it abruptly.
The state has argued that it had taken steps to improve oversight of the center and had no plans to take on any additional projects.
USCIS in denying an earlier appeal, stated, “we conclude that the VRC no longer continues to promote economic growth and does not warrant the preservation of its regional center designation.”
The latest decision led to the state filing a motion to reconsider the closing, arguing that the center continues to promote economic growth through the projects that had previously been underway.
USCIS had earlier contended that the state failed to stop a $200 million alleged fraud in EB-5 financed projects headed by Jay Peak developers Ariel Quiros and Bill Stenger over nearly a decade.
Federal and state regulators each brought enforcement actions against Quiros, Jay Peak’s past owner, and Stenger, Jay Peak’s former president and CEO, five years ago this month. Those civil cases eventually resolved with monetary settlements.
In May 2019, criminal charges were brought against Quiros, Stenger and two of their associates in connection with a failed EB-5 project to construct a $110 million biomedical research facility in Newport.
Quiros has since pleaded guilty to federal fraud charges and is awaiting sentencing. Stenger has pleaded not guilty to the charges against him and is set to stand trial in October.
The USCIS ruling reversing the earlier decisions cited the state’s efforts at implementing increased project oversight, the enforcement actions taken against Quiros and Stenger, and the continued economic benefit of the EB-5 projects.
Pieiciak said “hundreds” of investors who invested money in Jay Peak and later projects will benefit from the ruling, allowing them to continue to pursue permanent U.S. residency through their investments. About half, or approximately 400 foreign investors, have not been able to obtain green cards, and in several cases, USCIS has rejected the visa applications of Jay Peak investors because of the fraud.
Each EB-5 foreign investor puts up at least $500,000 into a qualified project, and if that development meets job-creating requirements, the person becomes eligible for a green card, or permanent U.S. residency.
The immigration status of hundreds of investors in Jay Peak and two other unrelated projects has been in jeopardy since 2017 because of the notice of termination.
Some investors who were at risk put money into eight projects led by Stenger and Quiros, including three hotels and three condo complexes at Jay Peak, a biomedical facility, and Burke Mountain, according to Pieciak.
In addition, investors who backed separate EB-5 financed projects at Mount Snow, a ski resort in Dover, and the von Trapp Brewery in Stowe, were affected. Both had completed the solicitation of investors and all construction stages.
“The investors can go forward to get their immigration status,” Pieciak said. “The projects won’t have to come up with money to try to refund the investors.”
Michael Goldberg, the court-appointed receiver overseeing the projects at the center of the Jay Peak financial scandal, could not immediately be reached Friday for comment. In a statement, he heralded the ruling as good news for investors in projects headed by Quiros and Stenger.
“The decision to terminate the Vermont Regional Center devastated many innocent victims of the Jay Peak fraud,” Goldberg said in the statement. “I am extremely grateful to the State of Vermont for its relentless effort over the past few years in pursuing the appeal.”
In its filing for reconsideration in 2019, the state made several arguments for keeping the EB-5 regional center open, disputing the USCIS contention in its latest ruling that it was not promoting economic growth.
“The promotion of economic growth has continued at the Trapp Family Lodge project even since the (notice of termination) was issued in 2017,” according to the filing.
“Direct hires at the project increased to an average of 14 beginning in 2017, with nine new economically indirect jobs in 2017,” the filing stated. “$322,603 and $267,364 of non-EB-5 equity was invested in the project in 2017 and 2018, respectively, to maintain the 111 preserved jobs …. Another $250,000 is expected to be invested in 2019.”
Also, according to the filing, construction projects under Goldberg at Jay Peak had been ongoing, including at the Stateside hotel and condo site.
“Capital expenditures for Stateside construction in fiscal year 2019 included over $1 million for the Stateside condominiums, over $100,000 for the recreation center, and over $2.5 million for the athletic fields,” according to the filing.
USCIS cited those figures as new information in issuing its latest ruling.
“In light of the new evidence regarding promotion of economic growth that the Appellant offers on motion,” the decision stated, “which the Chief has not had an opportunity to consider, we will withdraw the Chief’s decision and remand the matter for further action and consideration.”
Meanwhile, a separate lawsuit brought by Stowe attorney Russell Barr on behalf of EB-5 investors in projects headed by Quiros and Stenger against the state remains pending. In that case, Barr contends the state was either in on the fraud or negligent in not addressing it.
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