Keelan: The non-audit of the Vermont EB-5 Regional Center

By Don Keelan

On Sept. 4, 2020, the Vermont State Auditor’s office published a 32-page report titled, “Interim Report on EB-5 Program.” The information was meant to address the findings of an audit conducted by the State Auditor’s office.

The audit was requested because of two significant events: The Vermont EB-5 Regional Center was closed by the federal government and the largest fraud in Vermont history was perpetrated at real estate projects monitored by the VRC.

The EB-5 fraud began as far back as 2006 and was uncovered by the Securities and Exchange Commission in 2012-13. According to the audit report, 854 investors invested over $427 million. All of the investors were foreigners, mostly Asian, looking to obtain green cards that would eventually lead to U.S. citizenship.

Don Keelan

Approximately $250 million of the investments were defrauded, and the principal fraudster pled guilty to a series of federal charges in August. Several of his associates were also charged with criminal indictments but are still awaiting trial in federal court. Additionally, the state civil charges brought against the alleged fraudsters were settled for minor amounts, and litigation brought by investors is still pending. No state criminal charges were ever filed. Furthermore, no state employee was terminated for what took place (or what should have) at the VRC.

And therein lies the problem. What is described as Vermont’s largest loss ever to a fraud scheme, carried out while a state agency had oversight, resulted in no investigation by the Vermont Legislature. And now, key government officials receive a 32-page report described as an audit, but it is not an audit of what transpired. It is merely a print-out of the dates, agencies, federal and state laws/regulations, and players during the fraud’s seven-year history and its unfolding between 2013 and 2020.

The state report notes, “We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives.” The fact is that there are “no findings” in the report; furthermore, the conclusion is, “While some of the hardship caused by the EB-5 scandal has been mitigated for some investors, the fallout of this alleged fraud on many of the investors and Vermont is ongoing.” Now, that is quite the understatement.

In the report’s cover letter to the state auditor, it notes, “Vermont’s Attorney General requested that we audit the State’s involvement with the Jay and Burke projects (the geographic area where the fraud took place). We agreed to conduct this audit, to provide Vermonters with an independent and clear account of the State’s role.” Why not include the devastation that occurred in Newport, Vermont?

The state auditor wrote, “However, on the advice and request of the Attorney General’s office, we agreed to defer interviewing current or former state employees until certain legal proceedings were resolved since they may be called as witnesses.” Once he received this advice, the state auditor should have closed-up his audit bag and gone home — such advice and request are entirely unacceptable to an auditor.

In an accounting career as a CPA that spanned over 50 years, including time with one of the world’s largest auditing firms, I never witnessed nor heard of an auditor continuing an audit engagement when told by “the client” that one may not interview any of the entity’s personnel.

The whole objective of having the state auditor look into this scandal was to search out how the state missed such a fraud. At best, what we have now is an “interim whitewash,” or at worst, a cover-up to protect the state from litigation and outright incompetence and negligence.

It is no secret that if this fraud had been directed at Vermonters instead of wealthy foreigners, most of whom were Asian, there would have been a completely different outcome.

Don Keelan writes a bi-weekly column and lives in Arlington, Vermont.

14 thoughts on “Keelan: The non-audit of the Vermont EB-5 Regional Center

  1. Given the evidence cited below, just how difficult could it have been for Auditor Hoffer to complete his review? Mr. Hoffer should be called to testify to the Vermont Senate Committee on Ethics in this regard.

  2. Below is an excerpt from a 10/6/14 Vermont Biz/VTDigger article addressing a video by Gov. Shumlin providing assurances to investors of auditing integrity for Vermont’s RB-5 program.

    It’s a somewhat long, but it provides an insight into how the Shumlin administration was handling the EB-5 programs……Pretty damning…….No wonder no one at the State wants to audit this mess.

    Here’s the excerpt:

    “State officials have long promoted the resort and other Vermont EB-5 immigrant investor projects as a way of bringing capital into the state for economic development.

    Last year Gov. Peter Shumlin and a retinue of other state officials, including Raymond (Director: Vermont Regional Center) and Lawrence Miller, who was secretary of the Agency of Commerce and Community Development at the time, traveled to China to help Jay Peak and other companies attract investors. Jay Peak paid for the trip.

    In addition, Shumlin was filmed for a Jay Peak promotional video. He tells would-be investors that Vermont’s EB-5 projects are “audited.”

    “Vermont is the only EB-5 program that covers the entire state of Vermont and is audited by the state of Vermont,” Shumlin says. “We make sure that our EB-5 program offerings are good investments for the investor, and good economic development job creators for the state of Vermont.”

    The state has not conducted financial audits of the program, according to John Kessler, the general counsel for the Agency of Commerce and Community Development.

    In a statement, the governor’s office said Shumlin recognizes the agency “does not audit these projects, but provides independent oversight.” The governor says the Vermont EB-5 center has been an important tool for Vermont’s economic development and “the agency works hard to ensure projects do not wrongly characterize the state’s role in promotional materials.”’s-independence

  3. It’s called “cover up”. The nonaudit appears to be a tap dance. As they used to say in the Dragnet series “nothing but the facts”. If there were any involvement by state agencies or state employees, let’s find out, and if so, punish the bad guys. Unfortunately, it will never happen!!!!

  4. On January 17, 2018, Vermont State Auditor Doug Hoffer told a Senate panel he wanted to tell a story about the EB-5 scandal that played out in the mountains of the Northeast Kingdom from a perspective that he said hasn’t yet been covered. “What did they know, when did they know it, how did they respond?” he said of state employees, officials, and appointees. “What we don’t know is how particular officials responded at the time.” The auditor told the Senate Finance Committee he wanted to conduct an audit of the EB-5 program, looking specifically at the roles played by those entities.

    And what did we get? The sound of crickets. I guess this just goes to show how unethical most of Vermont’s elected officials still are.

    In 2017:
    “Vermont received a grade of F from the State Integrity Investigation and ranked 50th out of 50 states in the category of ethics enforcement because it previously had no ethics body of any sort, a rarity among the states. Vermont’s overall grade was D minus, ranking it 37th out of the 50 states.”

  5. Vermont politics, run neck and neck with Washington for whom is the most corrupt. Except in Vermont we think we have no corruption! Very Sad.

    Thank you, this as predicted by so many will be swept under the rug like so many other swindles going on in this state.

    The banks bought themselves out of jail time early on, probably protected by those in power.

    Does anybody know who was in charge of all the EB-5 projects?

    I will now resume my blissful, media free week. TGBTG…and let’s have a grand celebration when he cleans house.

  6. I think we know why they don’t want to interview potential witnesses. I think we know why TJ Donovan hasn’t done a state investigation. I have an idea that it might have something to do with the statue of limitations. Hopefully the Feds have secured up some cooperation of those already charged in order to take down some of the others involved.

      • There’s another reason VT Digger discontinued its commentary. A year or so ago, Doug Hoffer commented extensively on his intention to audit the EB-5 fiasco. Not only are there no comments on Digger today, all of the old (incriminating) comments have been deleted too.

    • 10-4 Mike. It’s all about the statute of limitations. Personally, I feel crimes against the state or country by state or federal employees should not have this statute’s protection.

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