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.
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.”
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.