Reporter Debrief: VTDigger's Latest Alleges State Officials Knew Of EB-5 Scandal But 'Continued The Fraud'
It was a story of massive fraud involving foreign investor money that was supposed to go into hotels, biotech facilities, and other developments across the Northeast Kingdom. Now new reporting from VTDigger claims state officials knew that fraud was afoot, but did nothing to stop it.
It all came to a head in 2016, when federal agents stormed the properties of Miami businessman Ariel Quiros, the former owner of Jay Peak and Burke Mountain Resort. Criminal charges were eventually brought against Quiros and business partner Bill Stenger and advisor William Kelly.
Federal officials said Quiros was the mastermind behind a "Ponzi-like" scheme that raked in millions of dollars from hundreds of foreign investors through the EB-5 immigrant investor program, which promised foreign investors a chance to earn permanent U.S. residency once their projects brought the promised jobs to the Northeast Kingdom.
Quiros pleaded guilty last year on charges of conspiracy to commit wire fraud, among others. Kelly pleaded guilty to two charges in June, and Stenger pleaded guilty in August.
VPR’s Mitch Wertlieb spoke with Anne Galloway, founder and editor of VTDigger, about the story she’s been following for years and her new reporting that she claims shows state regulators, commerce officials, and the Vermont Attorney General’s Office hid the EB-5 fraud from investors and the public. Their conversation has been edited and condensed for clarity.
Mitch Wertlieb: Let's discuss some of your story's biggest claims, this new story that's come out, essentially that former Gov. Peter Shumlin and others in his administration had a role in misleading investors. What can you tell us about what you found out?
Anne Galloway: This latest revelation has come as a result of document searching by some attorneys who are defending Bill Stenger. They found documents that show that [former Gov.] Peter Shumlin was very involved in 2015 in the biomedical facility project and the Burke Mountain project.
And the commerce agency, which ran the EB-5 program, had already enlisted the help of an external law firm to conduct a review of Jay Peak, and they wanted to act on those recommendations. To the members of the Vermont Regional Center, it appeared to be very clear that fraudulent activity was underway.
And in the middle of all that, Gov. Shumlin met with Ariel Quiros, one of the developers, for a period of time on New Year's Day 2015.
"In essence, the state continued the fraud."
And not long afterward, state officials went ahead and greenlighted the Burke Mountain and AnC Bio projects, even though [the state] was in the middle of an investigation of commingling of funds [and] of misuse of funds. They had a good sense of what was really happening in March of 2015, when [Gov. Shumlin] pressured state officials to move ahead with reinstating those projects, which, a year prior, had been suspended by the Vermont Regional Center.
In the middle of that investigation, the state went ahead and encouraged the developers to solicit more funds from investors overseas. In the end, about 85 more investors came in to the Burke project, and there were dozens more who came in to the AnC Bio project. The Department of Financial Regulations held the money, and the money was dispersed by the Vermont attorney general’s office to contractors for those projects.
So, in essence, the state continued the fraud.
A lot of what you just mentioned is coming from previously-sealed FBI records that were quoted during the plea deal with Bill Stenger last month. Is that where you're getting most of this new information, about what may or may not have been known, from those FBI records?
These records are filed in federal court. My understanding is that [U.S. District Court] Judge Geoffrey Crawford has reviewed many of them. So, there are a known quantity.
And these are records that were available to the U.S. attorney's office and to the Vermont attorney general's office, but they didn't know they had these records until the defense attorneys brought them to their attention.
You know, it does seem that Stenger's lawyers, for example, would have an incentive to shift the blame for the scam, that some have dubbed the “Kingdom Con,” to other officials.
How have you assessed these claims, as far as evidence goes? Is there evidence that says “Yes, members of the Shumlin administration, including the governor, perhaps, knew that this was fraudulent activity?”
Yes, there is evidence filed in the public domain with the motion that was submitted to the court [in early September] that shows the Edwards Wildman law firm had submitted information about the developments that was extremely concerning in the fall of 2014.
"It's pretty clear that the state doesn't want to release these records. And one has to wonder why."
And from my own reporting in 2015, based on documents I received, it was very clear that Gov. Peter Shumlin pressured state officials to move the Burke Mountain and AnC Bio facilities forward.
So, it's pretty clear that the state doesn't want to release these records. And one has to wonder why.
I have to imagine that you reached out to former Gov. Shumlin for some comments on this. Did he respond?
No, I got radio silence.
Editor’s note: As of this interview, there have been no charges filed against Peter Shumlin or any state official in regards to the EB-5 scandal.