RCBJ Perspectives: Innocent Investors Might Finally Escape EB-5 Hell in Vermont

The Below Article will be published in the upcoming Reauthorization Edition of the IIUSA Regional Center Business Journal!

by Cletus M. Weber; Founder & Partner, Peng & Weber PLLC; & Elizabeth Peng, Founder & Partner, Peng & Weber PLLC

Hundreds of innocent EB-5 investors within the Vermont Regional Center (RC) have suffered for a long time, but two government actions might give such investors hope of finally escaping their tragic circumstances in the coming months—or years.

Broadly promising is that after the Investor Program Office (IPO) terminated the Vermont RC in July 2018 for actions having absolutely zero to do with any EB-5 investors themselves, the Administrative Appeals Office (AAO) issued a March 25, 2021 decision vacating the RC termination and remanding the matter back to the IPO with instructions to issue a new decision consistent with the logic of the well-reasoned 2019 Path America decision from the Western District of Washington. More on the AAO decision below.

Also important but applicable to only a subset of the Vermont RC investors, the Vermont Department of Financial Regulation issued a cease-and-desist order that essentially compels the successor of two ownership entities of fully completed EB-5 projects at Vermont’s Mount Snow Ski Resort to continue operating within the context of the EB-5 program.

Specifically, in 2019, Vail Resorts Inc. (Vail) acquired the Mount Snow Ski Resort from Peak Resorts Inc., and in late 2021, Vail informed relevant investors that Vail’s recently acquired EB-5 entities planned to return all remaining EB-5 funds to the investors in early 2022 and to terminate the EB-5 relationship altogether—irrespective of where such investors were along the path to obtaining conditional green cards or removing conditions on such green cards. The Vermont Department of Financial Regulation intervened, issuing the cease-and-desist order alleging that inherent immigration benefits constituted a substantial portion of value in the EB-5 offering and that Vail would therefore be violating securities laws if its EB-5 entities returned the EB-5 funds prematurely and left the EB-5 investors high and dry with respect to the immigration benefits that the predecessor had offered as enticement to invest in the first place.

With respect to the more broadly applicable March 21, 2021 AAO order to vacate and remand IPO’s termination of the Vermont RC, affected investors should be substantively optimistic, but procedurally patient. The AAO order theoretically leaves IPO the option of simply alleging new and improved rationale for reaching the same termination outcome as before, but a reasonable reading of the AAO opinion reflects an expectation that IPO will in fact reinstate the Vermont RC. Time will tell, however, whether IPO will even act on the AAO order without first facing a federal mandamus action to compel IPO to do so.

Substantively, the AAO faulted IPO for not considering positive factors or mitigating/corrective action in deciding to terminate the Vermont RC. “To determine whether a regional center serves the purpose of promoting economic growth, the Chief should consider a variety of factors, both positive and negative. Positive factors may include the extent of any job creation, the amount of investment, and the overall economic impact. Negative factors may include inaction, mismanagement, theft, fraud by or otherwise affecting the regional center, any resulting damage, and the risk imposed on investors or the economy. An evaluation of negative factors should take into consideration of any mitigating or corrective actions taken by the regional center.”


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