MONTPELIER — Gov. Phil Scott released a report from his administration Monday evening recommending the shut down of the state-run EB-5 regional center alongside a notice from the federal government that it plans to terminate it.
Scott ordered a review of the regional center, which oversees projects utilizing the federal foreign investor visa program, after a financial settlement in a massive fraud case was announced earlier this year.
The owner of Jay Peak Resort, Ariel Quiros, and the resort president, William Stenger, were accused last year of a massive fraud scheme involving several EB-5 projects in the Northeast Kingdom by the U.S. Securities and Exchange Commission and the state. Quiros was accused of using more than $200 million in inventor funds for his own private use in what investigators labeled “a massive Ponzi scheme.”
On Monday, Scott released a notice from the U.S. Citizenship and Immigration Services outlining its intent to close the state-run center, citing the fraud case and the state’s lack of oversight as key reasons for the pending closure.
Scott’s office said Monday that he ordered the Vermont Department of Financial Regulation to review the center’s operations in July, after a court approved a settlement with financial firm Raymond James.
“The alleged fraud at the Jay Peak projects was devastating for the region, investors and contractors, and has had a lasting impact on Vermont. It was critical as a new Administration to have an accounting of the lessons learned, as well as an analysis that could inform whether to continue or end operations of the Vermont Regional Center,” the governor said in a statement.
A report outlining the review, conducted by Department of Financial Regulation Commission Michael Pieciak and Commerce Secretary Michael Schirling, concluded that the state has taken measures to improve regulatory oversight and compliance with federal requirements since 2014. Still, the report recommends closing down the center while continuing on with existing development projects.
Scott’s office said it received the notice from USCIS on August 18, while it was finalizing its own report. The USCIS notice said the state-run regional center no longer serves the purpose of promoting economic growth because it failed to properly manage and oversee EB-5 projects.
“It appears that the Regional Center failed to properly engage in management, monitoring and oversight for many years, as required by the Program,” the USCIS notice states.
Scott’s office said the USCIS notice “is generally aligned” with the administration’s recommendation to wind down operations of the regional center. State officials are hoping to coordinate its closure with USCIS “in a way that ensures stability for Vermont’s economy and protects employees, contractors and investors in the projects.”
“As our report details, the Scott administration agrees that the Center should ultimately be closed. It is clear from our review that state government was not, and is not, the best-suited entity for managing the EB-5 program,” Schirling said in a statement. “It is our hope that USCIS will agree with our approach for a staggered closure to minimize any adverse economic impact and ensure investors in existing, viable projects are protected.”
Vermont opened its EB-5 regional center in 1997. It oversees the federal program that allows foreigners to become permanent legal residents of the U.S. in exchange for investing $500,000 in approved EB-5 development projects. Most regional centers around the country are private entities. The Vermont Regional Center has worked on 17 projects, including eight involving Quiros and Stenger.
Stenger has settled the civil charged brought against him by the SEC. Quiros’ case is still pending. The state civil case against both men is also pending.