Big Finance Firms Pony Up in Vt. EB-5 Case — Nothing Similar in S.D.

By David North on April 14, 2017

Two large national financial firms have agreed to pay a total of $163.3 million to settle claims against them arising out of the EB-5 (immigrant investor) scandal in Vermont.

Meanwhile nothing of the kind has happened in South Dakota, where the EB-5-related losses were probably even larger.

The biggest of the big bucks started heading in the right direction yesterday, when Raymond James, the nationwide brokerage firm, agreed to a $144.5 million settlement orchestrated by Michael Goldberg, the court-appointed receiver in the Vermont case. Raymond James paid out $4.5 million in an earlier settlement, while Citibank had, similarly, paid $13.3 million for its part of the scheme.

According to a report on Vermont Public Radio the settlement will make a huge difference, stating:

If approved by the federal judge in Miami, it will pay all contractors and creditors in full, will repay many investors to the tune of nearly $100 million, and will complete several projects at Jay Peak Resort.


The Jay Peak ski resort was the destination for the EB-5 moneys; it is in the poverty-stricken "Northeast Kingdom" of Vermont, near the Canadian border, and its earlier activities (before the Ponzi scheme was uncovered) had been applauded by Senator Patrick Leahy (D –Vt.), then chairman of the Senate Judiciary Committee. He has since lost all enthusiasm for the program, as he indicated in testimony before the House Judiciary Committee.

The Jay Peak project was managed on the ground by William Stenger and looted, according to the Securities and Exchange Commission, by Stenger's Florida-based partner, Ariel Quiros. The latter had used EB-5 moneys routed through Homeland Security's anointed regional center, the state's own entity, for his own purposes, including buying a small condo in New York's Trump Tower. The SEC, playing the hard-driving cop in the case, found that $200 million in EB-5 funds had been misused and a smaller (but still large) sum had been lost or stolen.

Though I have seen nothing in writing on this, I suspect that neither Citibank nor Raymond James had profited at anything like the levels of these payments, but both paid up, presumably rather than continue to face negative press accounts regarding their roles in the case. In the Raymond James instance, it had placed EB-5 moneys in Quiros's margin accounts, a totally inappropriate facility for such funds. (Quiros played the stock market, not always successfully.)

Meanwhile, in a somewhat parallel case in South Dakota, the one other state that had, for a while, a state entity serving as the regional center, there has been no such relief. If anything the South Dakota case was much more egregious than the one in Vermont.

More money was lost or stolen, more projects failed, the state's political leaders were deeply involved in some aspects of the case, a key player was found dead (his shotgun wound in the stomach was ruled a suicide by the State's Attorney General), a mysterious multi-million-dollar payment was made to a bank account in Cyprus owned by a Russian railroad oligarch, and a state criminal indictment of another key play, Joop Bollen, ended with an extremely generous plea bargain including no jail time and a $2,000 fine, as has been previously reported (see here and here).

Why the different outcomes? There are several reasons: No nation-wide financial firms seem to have been involved in South Dakota; the state government helped undo the scandal in Vermont, but the people in South Dakota's capital of Pierre did not; and the federal efforts were aggressive in Vermont (the SEC), but were lackluster in South Dakota.

One of the untold stories in South Dakota was how the Acting U.S. attorney there managed to keep his job through two transitions (showing real political skill) while he managed to do absolutely nothing about the EB-5 scandal, the biggest financial fraud in the state's recent history. That will be the subject of a separate posting.

In the meantime, the central part of the EB-5 program, the one allowing the sale of visas for half-million-dollar investments, will sunset on April 28, though Congress may well give it a few more months of life via the continuing resolution, as it has several times in the recent past.