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Auditor finds state bungled oversight of Jay Peak EB-5 projects in massive fraud

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Auditor finds state bungled oversight of Jay Peak EB-5 projects in massive fraud


State Auditor Doug Hoffer released a 69-page report on the Jay Peak EB-5 fraud last week that finds state oversight of foreign investor funded projects in the Northeast Kingdom was marked by “misplaced trust, unfortunate decision-making, lengthy delays and missed opportunities to prevent or minimize fraud.”

The Jay Peak fraud is the largest in Vermont’s history and involved hundreds of investors from around the world who were offered a path to a Green Card in exchange for a $500,000 investment to create jobs in an economically depressed region of the United States − in this case Vermont’s Northeast Kingdom − under the federal EB-5 program.

Jay Peak President Bill Stenger traveled the world to meet with investors, ultimately raising about $400 million for eight projects at Jay Peak and Burke Mountain ski resorts, as well as in Newport. Federal prosecutors found more than $200 million of those funds were misused, with up to $37 million going into the pocket of Jay Peak owner Ariel Quiros.

Quiros attorney Bill Kelly was found to have received up to $4 million in investors’ money that was “not legitimately earned.” Both Quiros and Kelly pled guilty to a multi-year wire fraud scheme and concealing material facts in a matter within the jurisdiction of a federal agency. Quiros also pled guilty to money laundering.

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Stenger pled guilty to a single felony count of knowingly and willfully submitting false documents to the Vermont Regional Center (VRC), the state-sponsored entity through which all EB-5 projects were approved. Stenger was not convicted of illegally taking investors’ money, but the government argued he too had a financial motive beyond the “glory” of delivering unprecedented economic development to the Northeast Kingdom, as he was expecting to receive a stake in Jay Peak Resort, as well as more than $1 million from another EB-5 project in Newport.

“Three individuals were ultimately convicted of felony offenses related to the fraud, the State’s reputation was bruised by national press coverage, and in July Vermont taxpayers learned they would foot the $16.5 million bill of a global settlement reached between the Vermont Attorney General and a group of EB-5 investors,” Hoffer wrote in a newsletter accompanying the release of the report.

‘Structural design flaw’ sets state up for mishandling oversight of Jay Peak EB-5 projects

The Vermont Regional Center gave a veneer of legitimacy to the Jay Peak EB-5 projects that Hoffer said was ultimately unjustified because of a “structural design flaw” in the way the VRC was set up.

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When the Vermont Regional Center was created, oversight was given to the Agency of Commerce and Community Development, which had an immediate conflict of interest, as it was both promoting the EB-5 program and regulating it. To make matters worse, then Gov. Peter Shumlin participated in a promotional video for Jay Peak in which he said the state was auditing the resort’s EB-5 projects, which was not the case.

Hoffer reports the ACCD didn’t find out about the video until two years after it was being shown to potential foreign investors “with this misleading and confusing claim about the State’s due diligence.”

More: A ski resort, a dream and greed: How a $350M fraud happened in Vermont’s poorest region

“The (Vermont Regional Center) did not print a retraction on its website to clarify that the State was not performing financial audits of EB-5 projects, but instead merely reviewing and signing off on project-related employment data,” Hoffer wrote in his newsletter.

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$13 million in missing EB-5 funds fails to trigger investigation by state authorities

Hoffer said the state also failed to require audits when concerns about Jay Peak’s EB-5 projects were raised by Douglas Hulme of Rapid Visas USA, a Florida firm that created and promoted the original Jay Peak securities offering materials. Rapid Visas ended its relationship with Jay Peak in 2012, saying it no longer had confidence in the accuracy of representations made by Jay Peak or in the financial status of and disclosures of the partnerships.

“In a telephone call the firm told the ACCD Secretary (Lawrence Miller) that $13 million was missing from Jay Peak’s bank accounts,” Hoffer wrote. “The hint of fraud offered an opportunity for ACCD to seek help from the (Vermont Department of Financial Regulation). They didn’t.”

Instead, Hoffer wrote, Miller asked Stenger about the allegations.

“Stenger denied them and offered records in defense,” Hoffer wrote. “The ACCD Secretary said he was satisfied with the documentation Stenger provided and dropped the matter. With so much at stake, though, due diligence should have included more than a review by a non-auditor of records hand-selected by Stenger. In fact, the U.S. Attorney later determined that the records Stenger provided covered up how the defendants misused investor funds.”

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Hoffer: There are other situations where state agencies have conflicts of interest that could cause problems

The ACCD didn’t involve the Department of Financial Regulation in oversight of the Jay Peak EB-5 projects until late in December 2014. Once the DFR began investigating, along with the U.S. Securities and Exchange Commission, the massive fraud in the Northeast Kingdom began to unravel, leading to the convictions of Quiros, Stenger and Kelly.

“Unfortunately, EB-5 is not the only program for which Vermont’s state government has assigned a state agency duties that present similar conflicts,” Hoffer concludes in his newsletter. “Farm-based water quality combines both promotion and enforcement in the Agency of Agriculture, Food and Markets. Economic development grants are frequently promoted, then reviewed and funded, by ACCD.”

Hoffer calls on state officials and legislators to “dedicate themselves to reforming system flaws like these wherever they occur.”

Contact Dan D’Ambrosio at 660-1841 or ddambrosi@gannett.com. Follow him on X @DanDambrosioVT.



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Vermont

2 Springfield men in custody after drugs and guns seized during traffic stop in Vermont

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2 Springfield men in custody after drugs and guns seized during traffic stop in Vermont


WEST RUTLAND, VT. (WGGB/WSHM) – Two Springfield men are now in custody after Vermont Police found drugs and guns during a traffic stop.

Last Thursday, officers pulled over a car in West Rutland.

The driver was identified as 45-year-old, Beau Taylor of Vermont. He was taken into custody on outstanding narcotics possession charges from earlier in the week.

While searching the car, the two men in the backseat were identified as 24-year-old, Davon Lee, and 26-year-old Geison Reynoso of Springfield.

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They were found with over 5 grams of fentanyl and cocaine.

Officers also found over 17 thousand dollars, over one hundred grams of cocaine, and three guns, one of which had been reported stolen.

Lee also has three active drug, assault, and firearm arrest warrants out of Massachusetts, and two others out of New Jersey.



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Gov. Phil Scott vs Gov. Howard Dean? Sounds ideal.

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Gov. Phil Scott vs Gov. Howard Dean? Sounds ideal.


“Been there, done that” does not apply to Howard Dean, Vermont’s longest-serving governor, who says he’s thinking about reapplying for the job he held from August 1991 through Jan. 8, 2003.

No one saw that coming. 

If Mr. Dean were to win, he would be 76 years old upon taking office, joining Sen. Peter Welch, who would be 77, and Sen. Bernie Sanders who would be 83 [assuming he runs for reelection, a decision he must make by the end of May]. Gov. Phil Scott, Mr. Dean’s assumed opponent, would be a youngster at 65.

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No ageism here.

So, what’s the takeaway? 

First and foremost, Mr. Dean would not be considering the job if the Democrats had a contender anyone thought had a chance at beating Mr. Scott. They don’t. Neither do the Progressives. [Besides, Mr. Dean’s always rather enjoyed the limelight and has a boatload of self-confidence. Why not?]

It would also be a mistake to underestimate Mr. Dean’s energy or his familiarity with Vermont’s challenges. It’s been two decades since he has been governor but the core issues remain: the mess that’s our educational system, the challenge of putting together an affordable healthcare system, the demographics of a state that is quickly aging, and the cost of living here.

It’s probably a fair guess that Mr. Dean’s motivation to run is in direct proportion to his frustration with the state’s inability to get much done. He would not be considering the race otherwise. Statewide campaigns are grueling. You don’t commit your time and energy to the campaign trail for the next six months just to stave off a little boredom.

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His assumed frustrations aside, the prospect of Mr. Dean running for governor will stir the imagination as well as the memories of his 10-plus years as Vermont’s governor. Which Howard Dean would we see? The fiscal conservative who twice lowered income taxes and had 11 balanced budgets? The governor who aligned himself with Blue Dog Democrats in opposition to the most liberal wing of the party and the state’s Progressives? Or would we get the more liberal Howard Dean, the one that moved to the left as he ran for president, and then took over the Democratic National Committee?

Regardless, Mr. Dean would be a challenger on a higher level than any Mr. Scott has faced in his last three elections. He has the necessary name recognition. He would be able to raise the money. And he’s a seasoned campaigner, one unlikely to make the mistakes of someone new to the process.

Most important, he has little to lose. Not that he would be happy losing, but he would be more inclined to say what he thinks needs to be said, rather than specializing in the doublespeak more typical of politicians who are at the beginning of their political careers.

That would be as refreshing as it is vital. Vermonters need to understand the massive challenges ahead and be part of an ambiguous discussion about how best to address them.

Mr. Dean understands the challenge he would be facing. Mr. Scott is the state’s most popular politician and he’s highly skilled in defending the state’s needs and his ability to meet them. Mr. Dean would not intimidate him, to the contrary a race against Mr. Dean would probably bring out the best in Mr. Scott.

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Two strong, clear voices vying for the most important job in Vermont, at the most crucial time.

Sounds ideal. 

by Emerson Lynn





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Vermont

The Magnificent 7: Must See, Must Do, May 1-7

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The Magnificent 7: Must See, Must Do, May 1-7


Spring has sprung, and there’s no shortage of ways for Vermonters to connect learn and have a good time. We’ve compiled seven must-do events, including The Bryan Memorial Gallery’s “Legacy 2024 Collection,” a celebration of some of the latest artists in a long line of painters who have come to Vermont and New England for inspiration.



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