U.S. Sen. Patrick Leahy, D-Vt., is on track to secure reforms he’s been seeking for several years to the federal EB-5 immigrant investor program — which has been at the center of the largest fraud case in Vermont history.
The program was shelved last summer when Congress failed to reauthorize EB-5, which since 1990 had provided green cards to foreign investors who put money into qualified job-creating projects around the country. In recent years, the minimum investment was $500,000.
A section of a $1.5 trillion omnibus spending package to fund the federal government through September brings back the EB-5 program, though with sweeping, long-proposed reforms intended to rein in unscrupulous developers.
The legislation is expected to gain lawmakers’ approval ahead of a Friday deadline.
Years ago, Leahy was an ardent, vocal supporter of the EB-5-financed projects in the Northeast Kingdom headed by Jay Peak developers Ariel Quiros and Bill Stenger — projects that have since led to criminal charges.
For the past several years, Leahy has become one of the leading advocates for reform, saying fraud in the program had become “rampant.”
Asked if Leahy’s reform efforts were a result of the EB-5 projects in Vermont that led to fraud allegations, David Carle, a Leahy spokesperson, said Thursday, “He actually started his reform effort before that all came to light.”
Among the reforms are provisions calling for the U.S. Department of Homeland Security to step up project audits, site visits and fraud investigations.
More than 800 investors from 74 countries put money into the projects headed by Quiros and Stenger, and more than half of them have not been able to obtain the green cards they had sought that would allow them permanent U.S. residency.
Leahy, joined by U.S. Sen. Chuck Grassley, R-Iowa, had pushed for the reforms in the EB-5 program many times in the past, only to see them shelved during past reauthorizations.
Backers of the EB-5 program, who in the past objected to reforms, now wanted to get it back up and running and have agreed to the reforms, according to Raj Venkataramanan, Leahy’s chief counsel on the Senate Judiciary Committee.
“The dynamics were just right,” Venkataramanan said. “The industry — eight, nine months into a lapsed program — were feeling the pain at quite a high degree and essentially came to the table and asked us what the terms would be.”
Venkataramanan didn’t have the exact number of EB-5 investors who were stalled in the visa process when the program expired — and that this legislation would help — but estimated it’s in the thousands.
The reform measure revives the EB-5 program through 2027. It has been included in the omnibus spending package that Leahy, as chair of the Senate Appropriations Committee, helped negotiate.
On the Senate floor Thursday, Leahy urged his colleagues to support the legislation, and singled out the EB-5 provisions it contains.
“Of note, this bill also reforms and reauthorizes the EB-5 visa program, which has been abused by corrupt actors for too long,” the senator said. “I have championed these bipartisan reforms for many years, and I am proud that we are finally going to enact them.”
The Vermont scandal
The EB-5 program has been embroiled in scandal in Vermont. In April 2016, regulators brought federal and state lawsuits against Stenger, former CEO and president of Jay Peak, and Quiros, a Miami businessman and the ski resort’s former owner.
The lawsuits accused the two men of misusing $200 million of the more than $350 million they raised in investor money through the EB-5 program.
The money had been raised over several years to fund massive upgrades at Jay Peak, including hotels, condos and a waterpark, as well as a later failed initiative to build a biomedical research center in Newport, known as AnC Bio Vermont.
The two developers have since reached financial settlements in the civil actions, but still face criminal charges filed against them and two of their associates in 2019 by federal prosecutors in connection with the AnC Bio Vermont project. That project, despite raising more than $80 million from over 160 EB-5 investors, never got off the ground.
Stenger and Quiros have both reached plea deals that will result in prison time. They are awaiting sentencing, expected later this year.
Leahy had promoted projects overseas for Stenger, a close associate. When reports of the regulators’ enforcement actions came out, Leahy said he felt “betrayed.”
A reform in the latest package might have helped investors allegedly defrauded in Vermont. It calls for regional centers, which are responsible for overseeing EB-5 projects, to have “policies and procedures in place to protect against fraud.”
The state-run EB-5 Regional Center in Vermont, which had overseen the projects headed by Stenger and Quiros, had been the subject of blistering reports from the U.S. Citizenship and Immigration Services, which first called for it to be shuttered in 2017.
Last year, that federal agency, which oversees EB-5 regional centers across the country, agreed to reinstate Vermont’s regional center.
Another reform measure would mandate that “investor capital be maintained in noncommingled accounts in U.S. banks to prevent the misuse of investor funds.”
In Vermont, according to court filings, funds were commingled for projects headed by Quiros and Stenger, with investor money from one used to help backfill another due to the alleged fraud and cost overruns.
How EB-5 works
In the EB-5 program, investors have historically put up $500,000 toward a qualified project, plus a $50,000 administrative fee. In exchange, that person has become eligible for permanent residency in the United States if that investment creates at least 10 jobs.
The restructured program calls for foreign investors to put at least $1,050,000 into a qualified project for a green card, or $800,000 in a high-unemployment area.
Mike Pieciak, commissioner of the state Department of Financial Regulation, said Thursday that reauthorization of the EB-5 program and reforms in the legislation are good news for investors in Vermont projects who are petitioning for their green cards.
“There are still hundreds of investors who are in some process with (the U.S. Citizenship and Immigration Services),” Pieciak said. “For some small subset with those investors, they were waiting for action that could only have been taken if there were reauthorization.”
He estimated that, had the program not been reauthorized, between 10 to 20 investors in Vermont projects would have had “no path forward” on their petitions.
Pieciak said he wasn’t sure what effect reforms would have had if they had been in place for the developments led by Stenger and Quiros in Vermont.
“I think it would have certainly tightened the oversight,” he said. “It would have certainly provided guardrails and guidelines for the regional center that really weren’t in place for much of its existence.”