Grim-faced state officials reveal alleged EB-5 fraud last April: DFR Commissioner Susan Donegan, Governor Peter Shumlin, Attorney General Bill Sorrell, and Commerce Secretary Pat Moulton. VBM file photo.
Vermont Business Magazine Governor Phil Scott today released his Administration’s plan to expedite public disclosure of records relating to EB-5 (immigrant investor) projects in the Northeast Kingdom in connection with alleged fraud case against Ariel Quiros and Bill Stenger. In February, Scott directed the Vermont Department of Financial Regulation (DFR) to develop a plan that would accelerate the release of documents, while protecting the State’s ability to enforce the law and maintaining the integrity of the State’s civil lawsuit against Quiros, Stenger and multiple corporations and partnerships.
“This matter is one of the largest alleged fraud cases in Vermont’s history and a matter of significant public interest, so I feel it is important to release documents in as timely a manner as possible,” Scott said. “I’ve advocated for transparency to restore faith and trust in government and in the EB-5 program, while also ensuring the release of information does not jeopardize the legal cases brought by the State or federal government. Our top priority is to preserve the integrity of the legal process so the State can effectively enforce its laws.”
The Administration’s disclosure plan, developed in consultation with the Vermont Attorney General’s Office, dictates that DFR will track the discovery process – the process through which the State would disclose documents to defense lawyers as part of its civil enforcement case. As EB-5 project documents from the State’s files are produced to the defendants, the State will file a motion with the Court that would allow for the public release of those documents, as further detailed in the Administration’s disclosure plan. If the Court grants the motion, the State will make those documents available to the public.
The Tram Haus Lodge was the first Jay Peak EB-5 project completed. VBM photo.
“This plan balances the Governor’s goals to inform the public on this important matter, with ensuring we uphold the integrity of the case,” said DFR Commissioner Michael Pieciak. “Releasing the documents as they are disclosed to the defense will result in a far faster public records disclosure process than is typical in litigation, where documents are only disclosed after the case closes. In this case, that could be years away, but through our proposal we anticipate disclosure to begin in a matter of months.”
The discovery schedule has not yet been set for the State’s civil enforcement case, but the formal discovery process is expected to begin by late spring. As detailed in the disclosure plan, documents would be released and made available on the DFR website on a rolling basis, when produced to the defendants and approved by the Court. This process is likely to continue through the end of 2017.
For more information, the full disclosure plan is copied below:
Plan for Expedited Disclosure of Records
Pertaining to EB-5 Projects in the Northeast Kingdom
March 10, 2017
On February 7, 2017, Governor Scott, through his Chief of Staff, directed the Department of Financial Regulation (DFR) to develop a plan to accelerate the release of documents related to the pending EB-5 litigation. The goal is to expedite public disclosure of documents while not jeopardizing the enforcement of Vermont’s laws.
In April 2016, the State filed a civil lawsuit against Ariel Quiros, William Stenger, and multiple corporations and partnerships associated with EB-5 projects in the Northeast Kingdom of Vermont (“EB-5 Projects”). This civil enforcement case alleges multiple violations of the Vermont Uniform Securities Act and the Vermont Consumer Protection Act. The case was filed in Washington Superior Court. See State v. Quiros, et al., Dkt. No. 217-4-16 Wncv.
Discovery has commenced and the State expects to produce a significant volume of documents from the State’s files to the defendants on a rolling basis. Certain documents in the proceeding – for example, documents protected by the State’s attorney-client privilege and the work-product doctrine – will not be produced to the defendants or others. Some documents may be produced to the defendants subject to court-issued protective orders, meaning they cannot be made public. Given the enormous volume of documents, the process of reviewing and producing documents in the litigation will take considerable time.
Prior to filing the civil enforcement case, state agencies responded to multiple requests for access to EB-5 documents in the State’s files. State agencies produced voluminous documents and also withheld documents based on statutory exemptions such as privilege or trade secret. After
the civil enforcement case was filed, requests for access to EB-5 documents in the State’s files have been denied, in part, based on the statutory relevant-to-litigation exemption. This exemption, contained in 1 V.S.A. § 317(c)(14), helps protect the integrity and ultimate outcome of the state’s civil enforcement case, but also allows the disclosure of litigation records once they are ruled discoverable by the relevant court.
In response to the Governor’s directive, DFR has consulted with the Attorney General’s Office to develop a plan to release certain litigation records during the litigation. The plan detailed below balances the public interest in disclosure of records under the Access to Public Records Act and the public’s interest in the effective enforcement of the Securities and Consumer Protection Acts.
EB-5 Project Document Disclosure Plan
1. As EB-5 Project documents from the State’s files are produced to the defendants, the State will file a motion in the civil enforcement case asking the Court to rule the documents discoverable under 1 V.S.A. § 317 (c)(14), to the extent the documents are not subject to a protective order issued by the Court or other public record exemptions such as for private personal information (e.g., social security numbers) or trade secrets.
2. DFR will post the motion on its website upon filing.
3. The State will not object to media requests to intervene in the case for the limited purpose of being heard on whether the State’s motion should be granted. Note, in this regard, that defendants would have a right to oppose the motion and might do so.
4. If the Court grants the State’s motion and rules that particular EB-5 Project documents from the State’s files are discoverable, the State will make those documents available to the public.
5. Additionally, if an EB-5 Project document is made publicly available by a third party outside the state’s legal proceedings, the State will prioritize making the document available on its website barring a legal restriction that prevents its release.
6. It is anticipated that the discoverable EB-5 Project documents will be made available in electronic format on DFR’s website. Given the volume of records in the case, this website publication likely will be done on a rolling.
Source: Governor. 3.13.2017