By Emerson Lynn
It breaks the heart to read the Securities and Exchange Commission’s allegations that the Jay Peak “miracle” was a “Ponzi-like” scheme involving the misuse of $200 million in investor funds.
It is a story without victors. It’s a story from which we will have to recover. And that will take time.
It is distressing because, properly done, the EB-5 program held enormous potential for the Northeast Kingdom, and that potential has been put at risk. We do not know the exact circumstances of the various projects, or the financial underpinnings of what has been built, or what is sustainable and what is not.
It is distressing because this part of Vermont has always been on the low rung of the state’s prosperity ladder and improved recreational offerings were seen as the way up. The state, and its leaders at all levels, celebrated each groundbreaking with the hope and belief that the Northeast Kingdom had found the fulcrum from which new growth could be leveraged.
The new hotels. The water park. The hockey rink. The championship golf course. The countless condominiums. Turning hundreds of seasonal jobs into almost a thousand permanent jobs. And then extending the largest to Newport, and then Burke Mountain.
The sense of betrayal is acute because people have been hurt. Many investors will most likely lose their $500,000, the entry price into the EB-5 visa program. Contractors will have a difficult time getting paid for their work. Newport’s promise of a rebuilt downtown has been pushed far into the distance. People will be at risk of losing their jobs.
How did it happen?
It happened because we trusted the project and the people behind it. It happened because we wanted it to succeed. Vermont struggles in the economic development arena. The EB-5 program, as played out by Bill Stenger and Ariel Quiros, was the arrow to the state’s bow. And when it was launched, it was launched to great fanfare. Which was part of the plan. The more the world learned about Jay, the easier it was to sell.
And everyone wanted to be part of something that held such promise. Why, we argued aloud, is this not used to greater effect statewide?
It made sense: Each time an investor came on board, the developer was sent $500,000. The $500,000 was set aside for the specified project. Each $500,000 was to generate 10 jobs. In return, the project was built and the investors got their green cards plus the promise of a possible return on their investment.
It was all the more appealing because when the Jay Peak expansion began the nation was deep in the throat of the Great Recession. As the nation sat on the edge of financial ruin, Jay Peak was booming. People were being hired. Money was being spent in one of the state’s poorest areas, and the investors’ money was debt-free to the developers.
Of course we wanted it to succeed. All of us.
It’s also misguided to regret all that happened. We have a powerful asset in place. The hotels were built, as was the water park, the golf course, the hockey rink and the condominiums. Jay Peak is a four-season resort, and is much stronger today than it was when the EB-5 construction project began in 2006. As a program, the EB-5 approach is completely defensible. It’s the oversight that was lacking.
The regret felt is also personal. Vermont is a small state and the relationships between the various sectors that constitute our economy are close. Everybody knows everybody else. This is why Gov. Peter Shumlin made it his business to travel abroad with Mr. Stenger to help him raise money. This is why Sen. Patrick Leahy spoke on his behalf in Shanghai. They believed. Their self-interest was in the end benefit, which was new growth and good jobs. They wanted to be part of that success. And they had lots of company.
That’s why it hurts. The more intimate the relationship the deeper the sense of betrayal. We will continue to ask why, and to second-guess ourselves. But hindsight, as the cliché goes, is always 20-20. It is easy to say the corruption should have been obvious, or that it was a house of cards from the outset. But neither is true. There was not anything obvious about it, and doubting everything entrepreneurial, being timid at all junctures and believing no one ,leaves us inert. Check and verify is the preferred route to nothing ever changing.
It is appropriate to investigate the state’s role in the alleged fraud. Vermont is one of two states that oversees all its EB-5 projects and when a program bears the state’s seal of approval it also bears the responsibility of proper oversight. That is our reputation. Clearly more should have been done, and it should have been done sooner. Obviously, it’s critical to separate the function of promotion from oversight.
It is a story that will continue to give. Mr. Stenger and Mr. Quiros are innocent until proven guilty and we have yet to hear their side. We still don’t know the whys and the whens. Mr. Quiros’ assets were seized. Mr. Stenger’s were not, implying perhaps that Mr. Quiros gained personally and Mr. Stenger did not. But for every question answered two will spring up. The story will play out for years.
But let’s not apologize, or retreat from the hope that sprang from the promise of the EB-5 program. We have other such projects in play. The Jay/Burke projects have been built and need support. Instead of playing for political points, our focus should be on how to take the rubble we have and build it into something better.
Emerson Lynn is the publisher of the St. Albans Messenger, a daily newspaper in St. Albans, Vt.
By Emerson Lynn