Hard on the heels of the news of the huge EB-5 fraud scandal in Chicago, two other EB-5 projects, one in Vermont and the other headquartered in Virginia, were reported to be in trouble recently.
The Vermont case involved plans for building retirement centers, while the one in Virginia related to the production of small automobiles at a planned plant in Mississippi. Unlike the Chicago case — in which two developers were indicted on criminal charges — the two new cases do not involve any indictments.
An EB-5 case going badly in Vermont is particularly interesting because that state's senior senator, Patrick Leahy (D), is chairman of the Senate Judiciary Committee and an outspoken champion of the program. And the regional center handling such matters in Vermont is the only one in the nation that is an arm of state government. All the rest of the EB-5 regional centers (including the one in the Virginia case) are private, for-profit entities, some closely linked to the developers who want to use the EB-5 money.
The specific action in Vermont was that the regional center cancelled a memorandum of understanding with DreamLife Retirement Resorts, LLC, the would-be user of the EB-5 moneys. Since a regional center stamp of approval is necessary to raise funds through this program, DreamLife is, in effect, barred from the program. It should be noted that this is not an action of USCIS, the federal agency that loves the program, but a state agency that USCIS licensed as a middleman.
The Vermont Agency of Commerce and Community Development, which is the regional center, had more than adequate grounds for its decision. According to a local news report, the rejection was issued because of "material misrepresentations".
The project's problems are numerous and are spelled-out in a six-page article full of damning detail. For example, DreamLife has been in business for three years, but it has yet to start any construction and does not have control of any land on which to build one of its centers.
It listed business allies on its application form that had had nothing to do with the firm and its lawyers were not licensed to practice in the state (Florida) where the legal team is registered.
More significantly, the DreamLife founder, a Canadian named Richard Parenteau, has been convicted of perjury in Canada and, according to the Vermont state agency, was not eligible to cross the U.S. border, a handicap for someone doing business in the United States. Parenteau admitted to the conviction, but said he was indeed eligible to enter the United States.
Though the report did not raise this angle, one wonders about an EB-5 project in which a major player might be an illegal alien when in this country.
The Vermont project, unlike the one in Chicago, which had attracted money from more than 250 alien investors, had collected no funds from any would-be immigrants.
The Vermont agency, while acting totally appropriately in this case, may well have had an ulterior motive for its action; it may have moved to eliminate a possible distraction to the program in a state where its political leaders are devoted backers of the large EB-5 fundraising activity at the extreme northern end of the state, revolving around the Jay Peak Ski Resort. The last time the Senate Judiciary Committee held a hearing on EB-5, the lead witness for the program was Jay Peak's owner, Bill Stegner, while I was the only witness in opposition. Sen. Leahy is an ardent supporter of the Jay Peak activity.
Meanwhile in Virginia, an EB-5 program much larger than the DreamLife project is having heavy going, according to a recent article by Watchdog.org. The developer in this case is GreenTech Automotive, which is associated with Terry McAuliffe, the Democratic candidate for governor of Virginia. The regional center is an associated firm, Gulf Coast Funds Management, whose CEO is Anthony Rodham, the sometimes controversial brother of former Secretary of State Hillary Clinton. (The two organizations share office space in McLean, Va.)
While both the Chicago and Vermont projects have been put out of business by government authorities, the GreenTech and Gulf Coast activities are subject to both private sector criticism and some intriguing investigative reporting.
GreenTech is apparently planning to produce MyCar, a "two-seat all electric vehicle with a driving range of 50-115 miles between charges and a maximum speed of 35 mph in the United States." One claim in the article is that to date few cars have been produced. Another claim:
Officials in Mississippi [the factory site] say up to $20 million reputedly raised through the Rodham-led Gulf Coast Funds Management has yet to be delivered to GreenTech Automotive, an electric car company founded by McAuliffe.
In an earlier article on the same general subject, Watchdog.org reported as follows:
"EB-5 is good for funding certain kinds of projects, but it's not appropriate for this type of large-scale, long-term funding", said Michael Gibson, managing partner of U.S. Advisors, a Florida-based research and investment firm knowledgeable about the program.
With none of the principals willing to be interviewed, and with USCIS (as usual) silent on the specific project, Watchdog.org reporter Kenric Ward turned to some shoe-leather reporting. Among other things, he dug into government records in Fairfax County, Va., where he found that Gulf Coast had not paid for either its 2012 or its 2013 county business licenses.
Ironically, the EB-5 regional center (Gulf Coast), which is supposed to use foreign money to expand domestic employment, had secured permission from the Department of Labor to hire an H-1B foreign worker, a law clerk, at the not-very-generous salary of $36,000 a year. Whether anyone was actually hired is not known.
It would be useful, given the lax governmental supervision of the EB-5 program if more journalists investigated the program as carefully as the reporters in Vermont and Virginia.
Note: Earlier versions of this blog quoted a statement by Mr. Gibson that he subsequently retracted and which we have therefore removed from the article. In addition, GreenTech has filed a lawsuit claiming that certain other statements in the Watchdog.com articles are untrue. Because CIS is not in a position to judge which party's position on the accuracy of those statements is correct, the contested statements have also been removed from this blog.
