Evslin: Governor Scott considering EB-5 special prosecutor

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Evslin: Governor Scott considering EB-5 special prosecutor

Sun, 10/01/2017 - 10:02am -- tim

by Tom Evslin There is a chance that Vermont will investigate itself and find out how the biggest scandal in the EB-5 program nationwide happened here under state supervision. When asked at a news conference about the idea of appointing a special prosecutor, Scott said “[It’s] the first I’d really contemplated something of that magnitude, but it could be something that could be beneficial. We’ll talk about it.”

“We want to be as transparent as possible,” Scott said of the EB-5 program. “We’ll see what happens in the near future, but I want to make sure that we release all the information we can so that … people have some trust with the government,” he continued.

Scott’s point about releasing all information possible is spot on. So far the attorney general’s office, whose role is to defend the state and state employees, has done everything it can to prevent the release of information needed to understand what happened. On the one hand the AG’s office argued that, because of a doctrine called sovereign immunity, a lawsuit against the state should be dismissed and the legal process called “discovery” can’t be used to compel the state to release its records or former state employees to give testimony. On the other hand, according to VTDigger, the AG’s office also says that 50,000 pages of state documents about Jay Peak are exempt from release under the relevant litigation clause of the Vermont Public Records. These two arguments together are a dangerous catch-22 which comes close to a cover-up: 1) litigation can’t be used to compel disclosure; 2) because there is litigation, the Public Records Act can’t be used to obtain information.

Scott also said, correctly IMO, that arguing the state is immune from lawsuits doesn’t inspire faith or trust in government. “When I read the media reports, when I hear immunity, and that’s the basis for an argument that we won’t know what’s happening — that the state is immune from litigation — that doesn’t give me a good feeling in my soul.”

The EB-5 projects under investigation are not the only EB-5 funded projects in the state. But, even projects without a hint of scandal will have a harder time raising money both because the feds are threatening to and probably will shut down the state’s authority to regulate these projects and because the Vermont brand as a good place to invest has been damaged. Most important, we can’t trust a government which hides its own mistakes and protects possible wrong doing. If you agree that we need to investigate this scandal ourselves, please write or call the Governor’s office and support the idea of a special prosecutor. If you think the legislature should be more aggressive in investigating the executive branch, please write your legislators. Posting on Front Porch Forum is effective as well.

Vermont Should be Investigating Itself

Our brand is becoming “non-sustainable.”

Tiny Vermont has the distinction of biggest EB-5 scandal in the country. EB-5 is a program which grants US residency to foreigners who invest in certified job-creating projects. Jay Peak Resort was built out with EB-5 funds. The same group which developed Jay also raised EB-5 funds for a biomanufacturing plant in Newport, VT, which is now a hole in the ground (really!) with no apparent prospects.

The government of the State of Vermont is impeding investigation of its own involvement in this scandal by withholding key documents and asserting immunity from lawsuits. The Vermont Legislature has yet to investigate this massive scandal and the State’s role in it.

According to VTDigger, which has done Vermont a great service by relentless coverage of this scandal:

“In April 2016, the Securities and Exchange Commission charged [Ariel] Quiros [owner of Jay peak] and [Bill] Stenger [former President and CEO of Jay Peak] with 52 counts of securities fraud and with misusing $200 million in immigrant investor funds through the EB-5 visa program, which grants permanent residency to foreigners who invest $500,000 or more in U.S. businesses and create at least 10 full-time jobs. In all, 836 investors from 74 countries were allegedly defrauded by the developers…[Stenger has since reached a settlement with the SEC]

“Many of the investors blame the Vermont EB-5 Regional Center, an arm of state government that was charged with monitoring the EB-5 program in Vermont, for not properly overseeing the Jay Peak projects. Top state politicians, including Gov. Peter Shumlin, U.S. Sen. Patrick Leahy, U.S. Rep. Peter Welch and Gov. Jim Douglas all promoted the developments to investors overseas on behalf of Stenger and Quiros.”

Last month the U.S. Citizenship and Immigration Service, which oversees the EB-5 program for the feds, wrote to Vermont that it is planning to terminate the State’s authorization to oversee the program saying “the Regional Center’s failure to provide adequate oversight and monitoring of its projects allowed the alleged malfeasance by Quiros and Stenger to occur and jeopardize the Regional Center’s ability to promote economic growth within EB-5 program requirements, as well as the EB-5 investors’ investments.”

Some investors have sued the State and former officials for their lack of oversight and active promotion of the projects. According to VTDigger:

“Megan Shafritz, the lead lawyer for the state, has said Vermont officials have ‘absolute immunity’ in the case, which protects them ‘from the burdens of discovery and litigation generally.’

“Shafritz has urged the court to block the release of documents and the deposition of a key witness in the investors’ case until after the court has ruled on a motion to dismiss, which the attorney general’s office has yet to file.”

The former officials and the State are being defended by the attorney general’s office, which is the State’s internal law firm and usually defends actions against the State; the accused officials are certainly entitled to a defense.  However, if the AG’s office’s role is defense and protecting the State, then who represents the citizens of the State if officials are guilty of wrongdoing? Are we totally dependent on the feds and/or private lawsuits to protect us against state government malfeasance?

In the federal government there is a recognized problem with the Justice Department headed by the attorney general, who is a presidential appointee, investigating the president; that’s why we have special prosecutors. But in Vermont the AG is elected independently. Do we still need a special prosecutor because the AG’s office needs to defend instead of investigate and prosecute state officials? Hard to believe but, if so, we should appoint one to look at the state’s role in this fiasco!

Meanwhile where is the legislature on this? Where’s the investigative committee? Don’t we want to know whether the feds are right in calling us incompetent or worse? Don’t we want to know how our brand got tarnished by the biggest EB-5 scandal in the country? Complacency will lead to disaster.

More at Vermont Should be Investigating Itself.

Tom Evslin is a former Dean and Douglas Administration official and founder of NG Advantage. These pieces first ran on fractalsofchange.com.