Lawsuit focuses on state's liability in EB-5 fraud case

Published: Sep. 25, 2017 at 8:36 AM EDT
Email This Link
Share on Pinterest
Share on LinkedIn

Attorneys made their case Monday over the state's liability in a massive alleged fraud case at the center of the state's largest EB-5 project -- Jay Peak.

A newly filed lawsuit puts blame on three state agencies and nearly a dozen top officials who foreign investors say tried to cover up the alleged con.

The central question in court Monday -- was the state complicit in the alleged fraud of $200 million in foreign investments?

Attorneys for multiple EB-5 investors squared off over a recently filed 92-page lawsuit against the state. Among the new allegations -- $25,000 kickbacks paid by Jay Peak President and CEO Bill Stenger. The finders fees allegedly went to immigration attorneys recommended by the state, like Anthony Korda, when foreign investors bought into projects.

Investors also take aim at top Vermont officials, including then Governor Peter Shumlin, who took a 100-thousand dollar all expense paid trip to Asia to find even more investors to buy-in.

"I think a deposition exploring those issues with the people who were traveling with the Jay Peak entities -- with these states employees that were going to China on the Jay Peak dime -- and being paid by Jay Peak to live this lavish lifestyle, why they did or did not take actions that the investors were begging them to take on their behalf," said Chandler Matson, the lawyer representing foreign investors in the case.

The lawsuit alleges the state Regional Center's executive director at the time, James Candido, told investors "he had investigated and reviewed everything and that it was safe to make an investment."

"I see the Vermont Regional Center acting as a securities brokerage house, in the marketing of securities," Matson said.

The investors group alleges the state was complicit in defrauding EB-5 investors out of hundreds of millions of dollars for years, through failed "oversight and monitoring" of projects led by Stenger and partner Ariel Quiros. They also accuse the Department of Financial Regulation of ignoring investors' concerns, leading up to what they call an "outright cover-up" by state officials.

But in court, the state's lead attorney, Megan Shafritz, maintains doctrines protect them from litigation. "The state retains its immunity for claims of fraud, for claims of misrepresentation. So, securities fraud claims cannot be asserted against the state," she said.

"This is a clear set of facts where -- I call it the "rogue state agency" -- went into the Wall Street world," said Russ Barr, an attorney representing investors.

Attorneys from the state have to file their motion to dismiss the case by October 9th. Meanwhile, federal regulators have already brought 52 counts of securities fraud against Quiros and Stenger. However, no criminal charges have ever been filed.