This commentary is by Anne Galloway, the founder and editor-at-large of VTDigger, who represented the news organization in the lawsuit for state records about the Jay Peak scandal.
Ever since the EB-5 scandal was exposed, VTDigger has tried to uncover the state government’s role in Vermont’s largest financial scandal. But since 2015, the state has withheld records under a blanket exemption in the public records law.
Recently VTDigger’s legal team challenged the state’s authority to continue to use the relevant litigation exemption as a shield to block records disclosures in the EB-5 matter, and brought an appeal to the Vermont Supreme Court.
The case was about more than these records. The goal was to narrow the scope of the relevant litigation exemption in the public records law, which VTDigger and its parent organization, the Vermont Journalism Trust, argued has been used in the EB-5 case to violate the First Amendment rights of the press. Only 10 states have relevant litigation exemptions; of those, Vermont’s is the broadest, according to research conducted by Cornell Law School and cited in a briefing with the lower court.
But late last month, the high court ducked the opportunity to rule on whether the state could continue to use the legal loophole, which allows it to sidestep records requests. Deciding that VTDigger and the Vermont Journalism Trust already had all the documents they sought, the judicial panel declared the matter moot before a decision was ever reached.
“The State has now provided (Vermont Journalism Trust) with all of the records it sought in its complaint,” Justice William Cohen wrote on behalf of the court. “No live controversy remains.”
That means that for now, the state can continue to assume that it is entitled to a broad interpretation of the relevant litigation exemption, which allows it to conceal documents with impunity by arguing that they relate to ongoing legal action.
The decision is an affront to transparency, and shows just how hard it can be for the public to get answers — even when the questions are about the largest fraud in state history.
It also ends the most recent legal battle between the news organization and the state that began in October 2020. It is the third lawsuit brought by the Vermont Journalism Trust since 2017 that has been mooted as part of cat-and-mouse tactics used by the Vermont Attorney General’s Office to keep state EB-5 records secret.
In March, Assistant Attorney General David Groff voluntarily released to the trust 1,089 state communications from former commerce secretary Lawrence Miller that had been withheld under the relevant litigation exemption.
From 2011 to 2014, Miller oversaw the Vermont Regional Center, which was responsible for managing, administering and approving EB-5 projects in the state. The federal EB-5 program allowed foreign investors to put up $500,000 each for developments in economically distressed areas in exchange for green cards.
The Jay Peak developers proposed $600 million in projects fueled by EB-5 money to expand two ski areas in Jay and Burke, and a biomedical facility, a conference center, and an office and retail block in Newport. Ultimately, the developers, Jay Peak CEO Bill Stenger and owner Ariel Quiros, spent more than $400 million. About half of that amount was misused by Quiros, according to a 2016 Securities and Exchange Commission complaint.
Miller signed off on a memorandum of understanding for AnC BioVermont, a proposed stem cell research and artificial organ manufacturing plant in Newport, which the Securities and Exchange Commission later declared “nearly a complete fraud” in April 2016. More than $60 million was stolen from AnC Bio investors alone, federal regulators said. In all, more than 850 investors were harmed as part of a $200 million immigrant investor fraud. In August of that year, the U.S. Citizenship and Immigration Services, which runs the EB-5 program nationally, announced it would shut down the Vermont Regional Center for failing to stop the fraud, which occurred over an eight-year period, starting in 2008.
The Miller documents show that regional center employees were aware of fraudulent activity at Jay Peak and nonetheless promoted the projects to investors overseas. The former commerce secretary’s emails were a subset of a court-ordered 39,000-page release in the discovery phase of an investor lawsuit against the state, which went to trial on Monday.
Shortly after the release to the trust, Groff filed a motion with the high court insisting the case should be rendered moot. Acting for the trust, Cornell Law School First Amendment Clinic, Timothy Cornell and the Vermont ACLU opposed the motion.
After the high court agreed with the state, attorneys for the trust said they were disappointed by the decision.
“The Vermont public deserves complete and timely information about the State’s involvement in the EB-5 scandal,” said Andrew Gelfand, Cornell First Amendment Clinic alum, who argued the case with Harrison Stark of the Vermont ACLU. “Although the State has repeatedly cut off access to public information integral to democratic participation, we remain committed to helping local journalism outlets like VTDigger pursue important investigative reporting.”
Timothy Cornell, a private attorney who served as counsel for VTDigger during the news organization’s investigation and led the effort to sue the state, said the notion that the state can withhold documents “without having to account for any of it boggles the mind, and certainly pushes past the boundaries of the Public Records Act. This is a question the Vermont Supreme Court must answer at some point.”
The Miller emails
VTDigger first asked for the records of secretary Miller in 2015 as part of a sweeping request for state communications regarding the state’s role in the Jay Peak fraud. The state did not respond to the request for three months. Finally, Bill Griffin, former chief assistant to the attorney general, told VTDigger that there were hundreds of pages of records responsive to the request and the cost of paying state attorneys to redact the documents would be more than $200,000.
When the request was made again in 2016, it was categorically denied because the state had launched its own lawsuit against the Jay Peak developers, separate from the SEC matter.
In subsequent years, the trust sued the state three times seeking those and other EB-5 related documents.
The state Agency of Commerce and Community Development has kept secret millions of pages of records about the involvement of former governor Peter Shumlin and his administration in the fraud.
The documents provided to VTDigger in March show how deeply Vermont Regional Center employees were involved in promoting Jay Peak, managing public relations and the press, and fending off questions from investors.
Many of the email discussions from 2011 to 2014 between Miller and his team are about running interference as questions from investors, reporters and lawyers were raised about fraud. The communication strings are most often with legal counsel John Kessler and the regional center directors James Candido and Brent Raymond.
Reached by phone, Miller said he had no comment on the content of the records.
As early as January 2011, days into Shumlin’s first term, Miller weighed in on a discussion with Kessler and Candido about a request from Jay Peak CEO Stenger about increasing fees for investors to cover the cost of travel by state employees who were promoting the projects. It is unclear whether the proposal was approved, but Miller warned that “anything that suggests pay-to-play, however, has its own concerns.”
Managing public perception was a major concern expressed by Kessler, the documents showed. In a February 2013 email to Miller, the commerce agency attorney complained about a feature story in Vermont Life about Bill Stenger and his use of EB-5 funds: “The governor is going to Florida tomorrow and Friday with Bill to show the close working relationship between Jay Peak Resort and the Vermont Regional Center administered by (the Agency of Commerce and Community Development). However, the article doesn’t even mention that ACCD administers the regional center on behalf of the state, nor does it include any reference to you or Brent as key people associated with Vermont’s EB5 program.”
Kessler appeared particularly perturbed by a reference to Douglas Hulme of RapidVisa USA, who made waves in the EB-5 press for his decision to break off his relationship with Jay Peak in 2012.
“Brent and I have some concern over ACCD publishing less than flattering reports on one of its most important economic development programs,” Kessler wrote. “We were particularly disappointed to see our own state marketing magazine resurrecting the Douglas Hulme attack on the reliability of the Jay Peak Resort’s representations — it had finally, and thankfully, seemed to have drifted off the media radar screen.”
Taking credit for the success of the Jay Peak developments fell to the wayside five months later as Kessler became increasingly concerned about the ethics of the state’s relationship with the developers.
The concerns about AnC Bio heated up in February 2014 when a Chinese investor, Chang Xiao, demanded her money back and entered into a dispute with Stenger over a full refund. After reviewing all of the documents for the project, the investor said she found that “this project is totally a fraud” and alerted U.S. Citizenship and Immigration Services to her findings.
In an email to Stenger that was forwarded to Miller, Raymond and Kessler, Xiao wrote, “Scammers, You are using our funds to buy bonds. As per our limited partner agreement, the only purpose of the funds is for project construction. It is illegal for you to buy bonds without our consent.” In addition, Xiao said the land price and patent fees for AnCBio were too high and the Korean firm associated with the Vermont facility is a “cheater company.”
“I asked USCIS to confirm whether I am right or not,” Xiao wrote. “USCIS responded to me very quickly and told me that they had found same deficiencies as I found and would ensure fair trial and integrity of EB5 program.”
In response, Raymond told Miller the center needed to hold quarterly meetings with Quiros and look into Xiao’s complaints.
By May 2014, Kessler learned that Quiros’ Korean partner in the Vermont deal, Alex Choi, had been prosecuted by the South Korean government for fraud and the facility had been authorized for auction by the Korean government in June 2012.
The commerce agency suspended marketing of the AnCBio project that summer. Seven months later, under pressure from Shumlin, who had a friendly relationship with Quiros, the project was reinstated.
Read the story on VTDigger here: Anne Galloway: In EB-5 case, high court ducks chance to counter sweeping records exemption.