In 2016, then-Department of Financial Regulation commissioner Susan Donegan pointing to a chart detailing suspected EB-5 fraud
Sen. Patrick Leahy (D-Vt.) is co-sponsoring a new bill to clean up the scandal-plagued federal program that resulted in what officials have called the largest financial fraud in Vermont history.
Leahy, a senior member of the Senate Judiciary Committee, is again teaming up with fellow committee member Sen. Chuck Grassley (R-Iowa) to introduce a suite of reforms to the EB-5 investor program.
The program, which offers permanent U.S. residency to foreign investors in exchange for $500,0000 investments in approved job-creating businesses, resulted in a massive fraud in the Northeast Kingdom, federal authorities have charged.
An investigation by the U.S. Securities and Exchange Commission led to civil suits and later criminal charges against Ariel Quiros, the former owner of Jay Peak and Burke Mountain ski resorts, and Bill Stenger, Jay Peak’s former president and CEO. The feds described their EB-5 projects as "Ponzi-like" and later seized control of the ski resorts.
Quiros pleaded guilty last year to conspiring to commit wire fraud, money laundering and making false statements. Stenger's case is pending.
Vermont’s state-run EB-5 Regional Center, which both advocated for and regulated projects, was ordered shut down in 2018. In a press release, Leahy said the regional center program “has been exploited and abused for years.”
Leahy said he and Grassley have been working to clean up the program, and that the Department of Homeland Security, which administers the program, can’t fix the problems on its own.
“Congress must act decisively to comprehensively address the fraud and other vulnerabilities that have come to define the EB-5 program. Our bill would do just that,” Leahy said.
Leahy had been such a fervent proponent of the program years back that in January 2012, his spokesperson called him "the leading champion of the EB-5 investor visa program in Congress for more than a decade." He has in more recent years been calling for reform.
The bill is called the EB-5 Reform and Integrity Act of 2021. Asked if Leahy’s reforms were in response to the scandal in his home state, spokesperson David Carle said that was not the case.
“Senator Leahy and Senator Grassley have been pushing for their bipartisan EB-5 reforms long before the situation in Vermont,” Carle wrote in an email. “Some of what they have been trying to do likely would have helped address the case in Vermont, but this reform push predates that, and is much bigger than that.”
Previous versions of the bill have been blocked, Carle said.
Reforms outlined in the latest bill include more disclosure requirements to protect investors and certify that regional centers comply with rules designed to guard against fraud.
It also would require the Department of Homeland Security to perform audits of and site visits to regional centers every five years. Regional Centers would also have to file EB-5 projects with the Department of Homeland Security for review.
The bill would also strengthen DHS’s “ability to vet foreign investor capital to ensure it is lawfully sourced,” and to make sure those funds are not co-mingled between projects, according to a bill summary.
That was one of the key allegations in the 2019 indictment against Quiros, Stenger. Prosecutors accused them of misleading foreign investors and EB-5 program regulators to attract millions meant for AnC Bio Vermont. Authorities said almost none of the more than $90 million collected from foreign investors for the project went toward it.
If the reforms are adopted, the program — which is set to expire at the end of June — would be extended until 2026.