MONTPELIER, Vt. (WCAX) – A new audit takes a look at who knew what and when during the Kingdom Con. The report slams state leaders for not doing enough, but stops short of finding them culpable.
In 2018, former Vermont Attorney General TJ Donovan asked state Auditor Doug Hoffer for a comprehensive look at the Ponzi-like scheme that later resulted in the criminal conviction of three men. The auditor’s office combed through thousands of documents previously shielded from the public’s view. Hoffer says top Vermont officials were not complicit in the fraud. “While there’s a lot of people in Vermont who believe state employees were on the take or just useless and incompetent, that’s not what we found. We found no evidence whatsoever of corruption — pure-old fashioned corruption, none,” he said.
But in his report, Hoffer says state leaders failed to provide enough checks on the development projects in the Northeast Kingdom, which led to misplaced trust, unfortunate decisions, making lengthy delays, and missed opportunities to prevent fraud. He adds more oversight should have come from the Agency of Commerce and Community Development, which he says acted as both the promoter and the regulator of the EB-5 program. “They had the Agency of Commerce, which did the marketing piece — that’s what they like and that’s what they’re there for — but they missed moments in time where they could have made different choices and different decisions,” Hoffer said.
The EB-5 program solicits half-million dollar investments from foreign nationals in exchange for green cards. The program is responsible for the massive expansion at Jay Peak and Burke Mountain. But in 2016, state and federal regulators discovered the fraud that resulted in the misuse of $200 million, leaving projects unfinished, contractors unpaid, and investors hung out to dry.
Russ Barr, a lawyer who’s represented foreign investors and reached a $16 million settlement with the state last summer, says while Hoffer’s audit is “the most clear-eyed analysis of the state’s role that has come from a state entity,” he left out key materials including state financial regulators’ internal memos and phone records with federal investigators dating back to 2015, which he alleges show state leaders knew about the fraud and failed to act.
“The governor’s office, ACCD {Agency of Commerce and Community Development}, DFR {Department of Financial Regulation}, and AGO {Attorney General’s Office} were all involved to protect themselves and their agencies at the direct expense of families following the rule of law to legally immigrate to our country. The state auditor’s report neglects this area of investigation,” Barr said in an emailed response to Hoffer.
In an emailed response, Hoffer pushed back on Barr’s concerns, and said the foreign investors’ perspectives are included in the audit. He also disagrees the documents Barr described, were not included in the report. He says internal memos from DFR on QBurke, notes from phone meetings with the Securities and Exchange Commission and emails from then- Commissioner Susan Donegan were all included in the audit.
“Lastly, the settlement term sheet that you signed in July 2023 states “the Parties agree that neither the State of Vermont nor its current and former officials and employees engaged in fraud, self-dealing, or other intentional misconduct.” I submit that this wording is more consistent with our report than the statements in your email,” Hoffer wrote.
WCAX reached out to multiple state officials for their reactions to the audit, including former Governor Peter Shumlin, but never heard back.
802 NEWS PODCAST: STATE OFFICIALS AND THE EB-5 SCANDAL
Mark Johnson spoke in-depth with Hoffer about his new audit for the 802 News Podcast. You can listen now on www.wcax.com or the WCAX News App.