Story & Video: Gubernatorial candidates pounce on alleged EB-5 fraud, call for transparency and release of documents

MONTPELIER — Candidates seeking to succeed Gov. Peter Shumlin are calling for transparency and one is seeking an independent commission to review the state’s involvement as a federal and state fraud case against two Northeast Kingdom developers proceeds.

Democratic gubernatorial candidate Peter Galbraith calls for an independent commission to investigate the state's role in EB-5 projects that are the subject of civil fraud litigation. (VPB/Neal Goswami)

Democratic gubernatorial candidate Peter Galbraith calls for an independent commission to investigate the state’s role in EB-5 projects that are the subject of civil fraud litigation. (VPB/Neal Goswami)

Democratic Gubernatorial candidate Peter Galbraith, a former Windham County state senator, held a State House news conference Monday to call for an independent commission appointed by the chief justice of the Vermont Supreme Court to investigate the state’s role in the fraud case against Bill Stenger and Ariel Quiros. The two men are facing civil litigation filed by the federal Securities and Exchange Commission and the state for allegedly misusing $200 million in investor funds they raised through the EB-5 Immigrant Investor Program. Quiros is accused of using $50 million of investor funds for his own personal gain.

Galbraith said the two men have contributed significant amounts of money to Gov. Peter Shumlin and the Vermont Democratic Party and it should be determined if those contributions resulted in any favorable treatment for the EB-5 projects led by Quiros and Stenger at the Jay Peak and Q Burke Mountain resorts, and other projects in Newport.

“Both men used corporations they owned and controlled as a device to circumvent limits on individual contributions. From 2010 to 2014 the two provided more than $74,000 to Gov. Shumlin’s election campaigns and to the Vermont Democratic Party. In these election cycles, Shumlin was the only candidate for a top tier office to have a seriously contested election. In effect, all this money supported the governor’s elections,” Galbraith said.

The commission, according to Galbraith, should investigate:

— Whether the state exercised appropriate oversight over the Quiros-Stenger EB-5 projects
— Whether the state gave the Quiros-Stenger projects preferable treatment in terms of environmental permitting, infrastructure and roads and enforcement of labor laws
— Whether any public money went to support the projects
— Whether the governor’s office intervened in the regulatory process to benefit the projects
— Whether political contributions had any influence on the governor’s handling of the projects or other business projects associated with large contributors

Galbraith also criticized Shumlin for traveling to Asia on a trip paid for by Stenger to promote the EB-5 program in Vermont.

“In examining these questions, I hope the commission will also look at whether the governor’s presentations while traveling on Stenger’s dime led unsuspecting foreign investors to believe the projects were sanctioned by the state of Vermont or the U.S. government and therefore safer investments than they actually were,” he said.

The commission, Galbraith said, should also make recommendations on whether travel paid for by private developers should be allowed.

The Legislature should act in the next few weeks before it adjourns to create the commission, Galbraith said. But neither lawmakers nor the governor should be involved in selecting its members, he said.

“Those who receive corporate and special interest money are ill-equipped to judge its consequences. Instead, I would propose that the chief justice of the Vermont Supreme Court appoint the commissioners. This would give the commission both independence and credibility,” Galbraith said.

Galbraith’s Democratic primary opponents are also seizing on the alleged fraud to demand transparency from the Shumlin administration. Matt Dunne, a former Windsor County state senator, called for the release of all emails from the Shumlin administration and from former Republican Gov. Jim Douglas’ administration, who held office when the alleged fraud began in 2008, related to the case.

Matt Dunne

Matt Dunne

“We must not make presumptions until we have all the facts, but what we need now is for the Shumlin and Douglas administrations to place transparency above all other concerns and voluntarily release all of the emails relating to the EB-5 development in question,” Dunne said in a statement released by his campaign. “There is a lot at stake here. The coming weeks and months will be difficult ones for Vermonters as the details and scope of the SEC investigation become clear. We must begin this challenging time with transparency. Releasing all of the emails in question is a critical first step.”

The Shumlin administration came under fire over the weekend after it was revealed that it made a request on April 1 to the Department of Information and Innovation to destroy the emails of five former staffers that were more than three years old. Administration officials said Monday the request was part of an ongoing effort to archive all appropriate correspondence and was unrelated to the fraud investigation. No emails have been deleted, officials said, and all emails pertaining to the EB-5 projects involved in the alleged fraud were preserved because of a litigation hold sought months ago by Attorney General Bill Sorrell.

Another Democrat in the race, Sue Minter, Shumlin’s former secretary of the Agency of Transportation, also called for the release of emails related to the alleged fraud case.

Sue Minter

Sue Minter

“We need to restore the public’s trust in government and their hope for the future,” Minter said in a statement from her campaign. “Vermonters are entitled to know that the public interest is the highest priority in decisions made by government officials. I call for the emails relating to the EB-5 investigation to be released to the public and that all emails of the Governor’s staff and former staff be saved — no emails should be deleted. This is the first step to restoring public trust in government.”

Republican gubernatorial candidates also criticized Shumlin. Bruce Lisman called on Shumlin to return about $15,000 in campaign contributions from Quiros and Stenger. He said it is “totally unacceptable that the Governor wants to redirect some of these funds to fellow politicians.”

Shumlin initially indicated that he would not return the contributions but use them as allowed by law since he is not seeking re-election. State law allows the funds to be returned, donated to other candidates in accordance with campaign finance law or donated to charity.

On Monday, Shumlin spokesman Scott Coriell said Shumlin has decided to donated $15,000 to a not-yet-named charity in the Northeast Kingdom dedicated to alleviating opiate addiction.

Bruce Lisman

Bruce Lisman

Lisman also pounced on the news that the Shumlin administration sought to destroy the emails of former staffers. He called it “wholly unacceptable.”

“Such conduct raises very serious and disturbing concerns. It is imperative that all e-mails and other records be preserved relating to the Administration’s lengthy and in-depth dealing with Messrs. Stenger, Quiros, their businesses and agents,” he said in a statement from his campaign.

Republican Lt. Gov. Phil Scott, who is facing off with Lisman in a Republican primary, issued a statement last week saying there appeared to be “a significant lack of oversight” from the Shumlin administration of the EB-5 projects led by Quiros and Stenger.

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