BURLINGTON, Vt. (WCAX) The federal government and the state of Vermont are at loggerheads over the future of the state's regional EB-5 office in the wake of the Kingdom Con fraud. No other states have a state-run regional EB-5 center, but now the federal government says it needs to go.
Vermont's largest fraud scandal began 10 years ago following Jay Peak developers Ariel Quiros and Bill Stenger's $250 million expansion.
"We are in wonderful place now but we have wonderful things to do," Stenger said back in 2016.
The expansion at Jay and then seven more projects in the Northeast Kingdom were all to be paid for through EB-5. The program trades green cards in exchange for half-a-million dollars in investments in those projects. Investors from around the world lined up.
"The whole thing sounded too good to be true; it sounded fanciful," EB-5 investor Anthony Korda said back in 2016.
It was too good to be true. In April 2016, federal officials raided Jay Peak and Burke, announcing that Quiros and Stenger were accused of a $200 million "Ponzi-like" scheme.
By the time of the scandal in 2016, more than 1,100 EB-5 investors had contributed more than $560 million in Vermont's projects. All those projects-- both in the Kingdom and elsewhere-- were managed out of the state-run regional EB-5 center.
That center came under fire from some investors who sued, alleging gross negligence, and from the federal government, which ordered Vermont to shut it down. The feds say the regional center failed to properly manage, monitor and oversee the program for many years and allowed the Kingdom fraud to occur.
"Vermont did this to get an economic advantage in the 1990s," said Michael Pieciak, the commissioner of the Vt. Department of Financial Regulation.
Pieciak says the state plans to appeal that. He points to other successful EB-5 projects, like the new beerhouse at Trapp Family Lodge, and snowmaking upgrades at Mount Snow, both of which were overseen by the center. He says the state wants to gradually wind it down because it's concerned for current investors.
"We agree with UCIS that Vermont should not be in the business of EB-5. What we disagree with is the process to get there. We think our process is much more logical. It protects the investors, it protects the investments that have been made in Vermont, it protects the developers," Pieciak said.
Quiros has reached an $81 million settlement with the Securities and Exchange Commission. Stenger has agreed to pay a $75,000 penalty. A federal criminal investigation was also launched but no charges have been filed yet. The state also has a civil case that's pending.
Michael Goldberg, the federal receiver appointed to run Jay Peak and Burke, says they are going to start to market Jay Peak to buyers very soon. Burke won't be up for buyers until sometime next year.
As far as properties in Newport, Goldberg said they will also start to market those shortly. Money from the sale of those properties will be used to pay back the EB-5 investors.