There Are Two Ways This Can End, and They’re Both Terrible

Anne Galloway, the Captain Ahab of Vermont journalism, has returned to port with another big bloody chunk of the Great White Whale.

The whale is the EB-5 scandal, about which fundamental questions remain unanswered because a lot of information has yet to be made public. I don’t agree with how VTDigger is stonewalling its union, but this is an example of why we need Digger. Galloway is doing a tremendous public service by chasing a complicated story that no other media outlet has been willing to tackle.

Should I do a brief recap of the EB-5 thing? Is that possible? Well, here we go.

EB-5 is a program that offers green cards to foreign investors who put money into development projects in designated rural and/or poor areas. It was a small thing in Vermont until the great recession of 2008-9, when it suddenly took off. State oversight failed to keep up with its rapid growth. A lot of good projects got built, but Ariel Quiros allegedly committed large-scale fraud by taking money for projects he never built. He was assisted in these efforts by Vermont businessman Bill Stenger.

The state of Vermont, particularly the Shumlin administration, either failed to detect the fraud or tried to cover it up. Which one? Probably both, but we don’t know because a lot of key documents are still, several years later, being kept under wraps.

VTDigger has been diligently pursuing those documents, and keeps winning partial victories. Which then gives them reams upon reams of documents to go through.

On Wednesday, Digger posted another installment in its series. This time, it reports that state officials knew there was fraudulent activity two years before the the scandal was revealed by federal regulators in 2016.

Yikes.

The line that jumped out at me: Galloway and co-writer Alan Keays say that Russell Barr, an attorney representing defrauded investors, asserted that state officials “were either negligent in overseeing it or in cahoots with the developers.”

Again, yikes.

Barr has a direct interest; he’s arguing that the state bears part of the blame for investors losing their money. But I have to say, I think he’s got it exactly right. There seems to be no other conclusion you can draw from the Digger piece.

Galloway and Keays lay out some damning facts from the latest document dump. In the summer of 2014 state regulators suspended two of Quiros’ EB-5 projects: a big expansion of the Burke Mountain Resort and a cutting-edge biotechnology facility to be located in downtown Newport.

(That one should have been a dead giveaway. A Korean company wanted to build a state-of-the-art biotech plant halfway across the globe? In a hard-to-get-to town on the Canadian border with few transportation options? Really?)

At the time, state regulators hired an outside law firm to examine Quiros and Stenger’s financials. That report has yet to be made public.

By November, Digger reports, Shumlin’s commerce secretary was aware that “Quiros had leveraged margin loans against money from investors that was supposed to have been held in escrow.”

In early 2015, then-Department of Financial Regulation commissioner Susan Donegan had identified instances of fraud. At the same time, her then-deputy Michael Pieciak (now DFR commissioner) obtained bank records that showed Quiros had used investor funds meant for a development project to purchase Burke Mountain. Seems to be a clear pattern of illegal conduct, no?

Despite all of that, in March 2015 Shumlin asked his officials to lift the holds on the two projects.

I can only think of two explanations for that. He was complicit, or he was stupid.

Well, there’s a third. Perhaps he so desperately wanted the projects to succeed that he dismissed the abundant red flags. That might be an explanation. It’s not an exculpation.

This Digger report is one more step toward a complete understanding of a scandal that happened more than five years ago.

There are two ways this deplorable saga will end. One, the truth will out, and Shumlin’s reputation — already battered by his failure to deliver health care reform — will be further tarnished.

Two, the state will continue to stonewall and we’ll never know the truth.

I’d hate to think it’ll be the latter, but I can’t be sure. Our public records law is littered with exemptions, and Attorney General TJ Donovan has aggressively fought disclosure. Plus, there’s a strong tendency in Vermont politics to sweep unpleasant stuff under the rug.

Me, I prefer to face the facts, no matter how disagreeable they are.

4 thoughts on “There Are Two Ways This Can End, and They’re Both Terrible

  1. walter h moses

    Thank you John. I can’t think of a better way to ruin a career for Donovan than to keep stonewalling evidence and documents. I think Shumlin could care less what happens, his reputation is in the toilet.
    Anyway, it’s good to see you haven’t forgotten, the reminder that the whole mess is still cooking was needed.

    Reply
  2. Zim

    John

    As for the latest nothing burger from Anne – I will bet you a night of your choice of beer nothing will ever come if it this year or five years down the road. Maybe after enough time, something might slip out but probably the only people who might care will be dead and gone. The state is protecting itself and the economic and political elites of Vermont – which is what they should be expected to do. If they admit guilt its going to cost the taxpayer a bundle and there would be s**t storm for all those connected to it. Considering its was on Schumlin’s watch, the Dems are not even remotely interested in the truth coming to light and its understandable. Unless the Fed steps in and does something, the State intransigence can wage its war of attrition til Stenger expires.

    Interesting assertion by Barr:

    “In the end, the Vermont Regional Center, joined by Assistant Attorney General William Griffin and the DFR, ensured that Vermont contractors and employees would be paid at the expense of the investors,” Barr wrote in the filing.

    Did the various contractors who worked on these project know it was all a scam – I have to imagine they knew or had some inkling. Obviously screwing the foreign investors was the political expedient thing to do because if Vermont businesses and employees got screwed there would be hell to pay at election time. Really, who cares about Chinese m/billionaires trying buy a green card or residency?

    Nonetheless, the bigger story should is why Vermont is ranked #1 as the most corrupt state in the Union. https://bestlifeonline.com/most-corrupt-state-america/ . Granted I tend to take these kinds of articles with a grain of salt but digging down through their various sources there is some merit to the claim. To be fair, the rest of the states don’t registers much better for ethics and oversight.
    We certainly know Vermonter love stealing from their employers. Like whatever happened to the millions the Coventry clerk stole? Has there ever been any investigations into how poorly run the state is? I mean whoever is the IT Director of the DOL should have been canned a long time go.

    My take is that Galloway will keep the story alive for brand and credibility purposes only and just do enough work to make it look like VTD is working on it. Its the Vermont way. Also, I am not surprised about her stonewalling her employees – she’s a business owner whose job is the same as every other business owner – extract the maximum value for least cost from each employee while mouth bs platitudes.

    Digger recently removed its share icon and share count from all their articles, commentaries and LTE. Now what could be the reason for this other than trying to inhibit information flow and obscuring from public view what issues people are interested in and share and the one no one gives a s**t about. They are moving back to the one-dimensional model of news. Can’t imagine anyone under 40 or even 50 reading Digger ATP.

    Have a great weekend.

    Reply
  3. H. Jay Eshelman

    If you truly prefer the facts in the EB-5 ‘whale’, don’t ignore some of them. Specifically, there are three players in the EB-5 fiasco that you haven’t named. Antonio Pomerleau, the late Vermont real estate tycoon with related interests in a Newport, VT real estate deal with Bill Stenger and Ariel Quiros that failed just before the EB-5 scandal broke. And Pomerleau’s niece, Marcelle Pomerleau, who openly supported the Northeast Kingdom deal along with her uncle, AND who’s husband happens to be, yes, Senator Patrick Leahy. In fact, the Pomerleau-Leahy connection conspiracy continues to this day with the siting of the F-35 fighter jets in Burlington. Is it any wonder that information is being laundered and withheld when so many prominent people are involved?

    Reply
  4. zim

    Interesting dimension with the Pomerleau connection and I am sure there is a whole closet full of skeletons roaming these green hills. Do we actually have any real journalists in Vermont or are the only paying gigs blowing bum smoke on behalf of the corrupt wealthy white people?

    One of the few courageous journalists around William Kiesling:
    Midnight Ride of Jonathan Luna

    Never bought the story of the former Rutland mayor son’s death…that was a fishy one buried by fearless free press.

    Reply

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