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In northeastern Vermont, a half-billion dollar development is helping to transform a lagging economy into the state's job-creation leader. It seems like a win for tourists and for foreign investors, who put up the money in return for green cards for themselves and their families on the EB-5 visa program. Are these investors getting what they paid for? Economics correspondent Paul Solman reports.
Earlier this week, we looked at how a little known immigration program originally intended to benefit poor and rural communities is being used, and some say abused, by wealthy urban developers. Congress must decide whether to renew the 25-year-old program next week.
Tonight, economics correspondent Paul Solman has a report about how the program is helping a poor rural area, but still stirring up controversy.
It's part of our series Making Sense, which airs every Thursday on the "NewsHour."
Just four miles from the Canadian border, surf's up, however improbably, at the Jay Peak Resort, part of the half-billion-dollar development project to transform the economically depressed Northeast Kingdom, as this corner of Vermont is called, with foreign investment. The developer is Bill Stenger.
BILL STENGER, CEO, Jay Peak Resort:
In the last seven years, we have constructed three different hotels, a beautiful indoor water park, ice arena, conference center, wedding facility. And we have had a tremendous impact on our local economy regionally as well.
A local economy that, for most of Vermont's history, has been at the very bottom, but now leads the state in job creation.
So, the Northeast Kingdom wins, tourists win, and so do the foreign investors, not only with a promised return on their investment, but — and here's the novel incentive of the so-called EB-5 program — with green cards, permanent resident visas for them and their families, in exchange for forking over $500,000 to private companies to create at least 10 jobs in areas of deep unemployment. Well, you don't have to live in Vermont. There are a number of people from around the world who love Florida, Arizona, California, warmer weather. PAUL SOLMAN: But besides the lure of sunny climes, says Stenger: Parents oftentimes will gift their son or daughter an investment. They can complete their studies here. And if they can find a job in the United States, the green card will allow them to accept the job, and within five years they will be able to apply for citizenship, and it will be granted.
Of course, some might have a problem with this citizenship for a cool half-million in cash deal, even if it is creating a winter wonderland in the jobs-starved Northwoods.
Do you think it is fair that rich people get to come to the United States, when there are so many truly desperate emigres from a place like Syria, say, out there on the water as we speak?
I'm seeking capital from a legal source that's been in existence since 1990 that is promoted by our government, helps us. And, yes, those people are successful and they're contributing to our economy.
Well, they certainly seem to be improving life in and around Jay Peak.
Before the EB-5-funded renovation and expansion began in 2008, this was a ski slope going downhill. It's now a year-round resort attracting a million customers annually to its rides, rinks, restaurants. Dining revenues alone now top $10 million, double what the entire resort took in pre-EB-5.
To do something like this for this area is immense. It's priceless. PAUL SOL For chef Mike Eldred and his assistant, Bob McCrary, economic growth has meant career growth as well.
Somebody like myself who could be maybe just cooking steaks, but because of this growth, it gives me an opportunity where I can become a supervisor. I can keep moving up. PAUL SOL Growth that has even benefited the local quilting bee. WO We started this about six years ago with 33 people at our group when we were still in the old hotel.
Kay Corsen was the event's organizer.
By Jay Peak opening this wonderful conference center, we're able to expand what we do. We have 115 people here this year.
Including Helen Short, a nurse from nearby Enosburg Falls.
I voluntarily went up and spoke to Bill Stenger because I wanted to thank him. A lot of the farms were going out of business. There wasn't much opportunity for the youth in this area. And now you have come here, and it's like this big enterprise and there is building and construction going on, and students are employed in high school.
As lifeguards, ski patrols, desk clerks. No wonder that in neighboring Newport, Bill Stenger is treated like man of the year, if not of the millennium.
Newport is where Stenger and his partner, Ariel Quiros, have half-a-dozen new EB-5 projects pending, most ambitiously a stem cell manufacturing facility affiliated with a South Korean biotech firm.
ARIEL QUIROS, Chairman:
We also will co-develop and manufacture various kinds of artificial organs, such as artificial kidney, heart and liver. PAUL SOLMAN: I understand why you would build up a resort, but a biotech center in the Northeast Kingdom?
It's a great idea. We are at the right place at the right time with capital, patient capital, and a great business plan.
There is going to be enormous opportunity in the construction trades.
Now, remember, Stenger is a promoter. And if all this sounds too good to be true, well, some say it is, most notably some of the investors.
Tony Sutton was among Jay Peak's first EB-5 investors in early 2008, but is now back home in England running a large car dealership.
TONY SUTTON, Investor:
The problems started back in 2014, when we received the exit strategy letter from Jay Peak, which was completely the opposite to what they had promised would happen.
Sutton was one of a group of 35 who put up half-a-million dollars each to build the Tram Haus Lodge at Jay Peak. Twenty of the investors have now complained to the state, which oversees EB-5 in Vermont, that Stenger and Quiros had promised their money back in five years.
But they didn't do that?
No, they gave us all IOUs. And if you look at the company that the IOUs are drawn against, our research suggests that that company, Jay Peak Management, Inc., has no assets, no income and no way of servicing the IOUs for any of the investors.
So, you don't think you will ever get your capital back?
No, not from Jay Peak.
There is no obligation to pay the investment back.
But Stenger maintains the loan is guaranteed by the entire resort, and besides:
We want to pay them back. We want to exit them.
But what — this gentleman would have liked us to have given him a $500,000 check on year five in one day. Well, the markets did — the markets crashed. We needed a little more time.
It sounded like a reasonable defense.
And besides, I said to investor Sutton:
You got four green cards for yourself and your family. So why should anybody sympathize with the fact that you didn't get your money on time or might not ever even get it?
It's not about sympathy and it's not about the return on the investment. It's about the program that we bought into and the way the program was sold to the EB-5 investors.
And that's a real concern, says journalist Anne Galloway.
ANNE GALLOWAY, Vermont Journalism Trust:
If people in other countries are investing in something that they have put faith in, and that faith is lost, that has a ripple effect across all EB-5 projects. And I know that our stories have had kind of a chilling effect.
Galloway founded the investigative reporting Web site VermontDigger.org. And dig, she has for the last two years on Bill Stenger's various projects, among the largest in the country funded by EB-5.
I know from the documents that I have collected, hundreds of pages of e-mails and contracts and agreements and so on, that there are very big questions about how the money has been handled.
There is the concern out there that investor money is being siphoned off by individuals.
That is a question that's come up, in particular around the AnC Bio project. And the state wanted to know more about what about $60 million went to.
For his part, developer Stenger investor says he's stung by any suspicions and is obviously committed to the community in which he lives and works.
Hundreds of families are relying on me and my team to implement what we do, and do it right.
Look, we're in no position to tell whether or not financial ledger domain has been going on. We leave that to the state and federal agencies now reviewing the matter.
But reporter Galloway's concern is broader.
I think, if the United States is going to promote a program that attracts people from overseas, it ought to be well-regulated.
And, in the end, that's why investors like Tony Sutton are raising a ruckus.
We had one last question for him about Bill Stenger and his partners.
One interpretation here is, they're trying to do something good for a depressed part of Vermont.
On that basis, Paul, you can rob a bank and build a hospital, and everything's fine.
This is economics correspondent Paul Solman, reporting from Northeast Kingdom, Vermont, for the PBS NewsHour.
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