Last year, Congress extended the the EB-5 program—which grants foreigners a green card for themselves and their families if they invest at least $500,000 or $1 million (depending on the area) in a business that creates or preserves at least 10 jobs for U.S citizens or permanent residents—until September 30, 2016 with no changes.
That extension was controversial, as the program had come under scrutiny with federal auditors, noting that the program is vulnerable to abuse and fraud. There was good reason for concern: In 2013, the Securities and Exchange Commission sued the developer of the the O’Hare Hotel and Convention Center, accusing Anshoo Sethi of scamming more than 250 EB-5 investors, most of them from China.
The program has reared its head again in a new hotel-related case. Developers of a hotel and rental cottage project (as well as a biomedical research facility) in northern Vermont have been accused of misusing hundreds of millions of dollars from green card-seeking investors, perpetuating a Ponzi-like scheme for eight years.
Last month, the federal Securities and Exchange Commission and the state of Vermont accused Ariel Quiros—owner of the Jay Peak ski resort—and the resort's president of misusing more than half of nearly $400 million raised from foreign investors for the hotel and other projects.
Civil complaints also claim that Quiros and his cohorts stole $50 million of investor funds for personal use, including the purchase of the Jay Peak and Burke Mountain ski resorts. Quiros has been served with a class-action lawsuit filed by a Jay Peak investor in Miami federal court. Investor Alexandre Daccache filed the lawsuit in an attempt to recover the money "misused, commingled, and stolen by Quiros and [Bill] Stenger with the assistance of Raymond James [Financial] and [Joel] Burstein" for all the investors, according to court documents. Daccache, a Brazilian citizen, invested $500,000 with the accused in August 2010, and paid $50,000 in administrative fees.
Jay Peak and Q Burke Mountain Ski Resort are in federal receivership, under the control of Michael Goldberg, a court-appointed lawyer, who expects that both resorts and a new hotel that has not yet opened, will have to be sold.