Jay Peak bombshell

[noreasterbackcountry]

Meh. Same old story as before. The investors didn't read their contracts and now want to claim the money was a loan and not an at-risk investment. Of course, this happens once they got their greencards. So they raise a stink because they want their money back. (Despite the fact it wasn't a loan). State tells them to read their contract- and contact Jay.
The investors point to notification errors by Jay- errors which created no substantive change in their ownership interest or lost money. Oh, and nobody has evidence of fraud -despite yearly audits of Jay's operations.

In the end, the investors get a sweeter deal- by getting secured interests because they raise a stink.

What is so amusing about this whole "stink" is the fact that VT is getting criticized for what is essentially their competitive advantage over all the other EB-5 regional centers: government involvement and oversight.

A regional center can be started by someone in their garage. The involvement by the State provides more public oversight, accountability (and control over flow of investments) than one would get from a private center- and guard against some of the horror stories seen in other places where the money just plain disappeared. Yes, there could be more oversight (like yearly program specific audits), but there's still more oversight than for private entities which have ZERO reporting requirements beyond the USCIS applications.

If you want a conspiracy theory, then think about this: Investment banks are just now getting into the EB-5 game, realizing there's this untapped flow of cash coming in from folks who's secondary concern is getting a decent investment. They are competing in what has quickly become a saturated market. Who benefits from eliminating VT's competitive advantage over all the other EB-5 regional centers by spreading rumors of impropriety?

 

[thetrailboss]

Meh. Same old story as before. The investors didn't read their contracts and now want to claim the money was a loan and not an at-risk investment. Of course, this happens once they got their greencards. So they raise a stink because they want their money back. (Despite the fact it wasn't a loan). State tells them to read their contract- and contact Jay.

That's a very broad and unfair simplification as to what has happened. These folks were equity owners and had their interests quietly extinguished (for no stated reason) and converted to an unsecured loan. Yes it has been reported that this was within JPR's discretion but management did not tell the investors until several MONTHS later.

What is so amusing about this whole "stink" is the fact that VT is getting criticized for what is essentially their competitive advantage over all the other EB-5 regional centers: government involvement and oversight.

You obviously did not read the article or understand the whole point and that is that folks feel as if Vermont is NOT doing ANY oversight at all. I think it's becoming clearer and clearer that they are not.

 

[noreasterbackcountry]

That's a very broad and unfair simplification as to what has happened. These folks were equity owners and had their interests quietly extinguished (for no stated reason) and converted to an unsecured loan. Management did not tell the investors until several MONTHS later.

Their agreement allowed the general partners to convert their equity interest. If they read the agreement they would know this. Where's the controversy? That they weren't earlier notified of a change that they couldn't have stopped anyway? Whipdee frickin' do.

You obviously did not read the article or understand the whole point and that is that folks feel as if Vermont is NOT doing ANY oversight at all.

Actually I did read the article- or the series of them to be exact. And they clearly indicate that there is oversight and reporting to the regional center by Jay. Could it be better? Yes. But to suggest there is none (like there is with a completely private entity) misstates the facts.

 

[from_the_NEK]

This story makes Vermonters look like the uneducated & backwards hicks that judgmental & arrogant New York City and Boston tourist types already think they are.

Yeah, cause projects with financial shenanigans NEVER happen in big cities/Wall Street. :roll:

 

[thetrailboss]

Their agreement allowed the general partners to convert their equity interest. If they read the agreement they would know this. Where's the controversy? That they weren't earlier notified of a change that they couldn't have stopped anyway? Whipdee frickin' do.

The fact that JPR did the conversion is not as much of the problem as the lack of transparency and communication. Maybe the "gosh darn we should have told you sooner" is the case, but if someone did that with regulated securities they'd be in serious trouble and for good reason.

Actually I did read the article- or the series of them to be exact. And they clearly indicate that there is oversight and reporting to the regional center by Jay. Could it be better? Yes. But to suggest there is none (like there is with a completely private entity) misstates the facts.

But again the issue is that the Center sees itself more as a cheerleader than as a regulator. That's a problem. In fact, it's a big issue with other entities that regulate finance. If the center was providing proper oversight, i.e. accountings and reportings for EACH project, then this would not happen and we'd have greater confidence in what is going on. You seem to assume that they are providing oversight (and a lot of other folks do as well) when it seems clearer and clearer that they are not--either because they don't have the resources or authority to do so or because of some other reason.....

 

[VTKilarney]

In the end, the investors get a sweeter deal- by getting secured interests because they raise a stink.

So that's why the EB-5 money has all but dried up for Jay? Give me a break. And keep in mind that the fantastic loan that was promised to the investors was very late in coming and anticipates a MASSIVE balloon payment. But I suppose to you a potential huge balloon payment is better than owning the actual real estate, eh?

 

[noreasterbackcountry]

So that's why the EB-5 money has all but dried up for Jay? Give me a break. And keep in mind that the fantastic loan that was promised to the investors was very late in coming and anticipates a MASSIVE balloon payment. But I suppose to you a potential huge balloon payment is better than owning the actual real estate, eh?

It has dried up primarily because of increased competition in the market. The (unsubstantiated) allegations of fraud certainly don't help.

And if by "owning" you mean a limited partial ownership interest- with limited rights on tranferrability of that interest, in an entity that owns the real estate versus being a creditor. Then yes, I would. Especially if that interest was then secured. You would be in a much better position if things ultimately went belly-up.

But the question is: If the interest they owned to begin with was convertible... and then it was converted.... then no, they haven't lost any rights, because it was always convertible and always out of their control. That ship sailed when they signed an agreement that allowed the GP to convert their interests.

You seem to assume they could have stopped the conversion or had some right to control it- they didn't.

So again, their only complaint is that they weren't timely notified of a change over which they had no control.

 

[VTKilarney]

It has dried up primarily because of increased competition in the market. The (unsubstantiated) allegations of fraud certainly don't help.

Which means that the investors view untested projects as being more appealing than Jay Peak with their track record. Does that not tell you something? And isn't Stenger/Quiros to blame for pissing off their investors? Stenger claims that it was merely because in 9 months he couldn't get the documents prepared for the investors. Please...

And if by "owning" you mean a limited partial ownership interest- with limited rights on tranferrability of that interest, in an entity that owns the real estate versus being a creditor. Then yes, I would. Especially if that interest was then secured. You would be in a much better position if things ultimately went belly-up.

The investors were led to believe that they would be able to sell a fractional share of the real estate on the open market. I'd take that any day over a promised balloon payment. Apparently we differ in that regard. Keep in mind that Stenger/Quiros originally gave them an unsecured loan, and only after public outcry made it secured. But it's not secured by the brand new hotel. It's for the antiquated ski facilities, if I have read correctly. And you think that prospective investors won't pay attention to these details?

But the question is: If the interest they owned to begin with was convertible... and then it was converted.... then no, they haven't lost any rights, because it was always convertible and always out of their control. That ship sailed when they signed an agreement that allowed the GP to convert their interests.

I agree that they signed the document. On the other hand, the marketing never led them to believe that this would happen. I don't think that either party shoulders all of the blame. Again, even if the COULD do it, it sends a message that investment in a Vermont ski area is a bad idea. You can't deny that the message is out there - all thanks to Mr. Stenger and Mr. Quiros.

 

[noreasterbackcountry]

This Forbes article cites some statistics regarding the increased competition, and also how at least one big developer is getting into the game: http://fortune.com/2014/07/24/immigration-eb-5-visa-for-sale/

The article also cites a few examples of fraudulent private regional centers. I'm not saying it can't happen with a state run regional center, but those horror stories are less likely to occur. If I was out soliciting investment for the VT regional center I would bring a copy of the article to show folks what could happen with the purely private regional centers.

 

[noreasterbackcountry]

The investors were led to believe that they would be able to sell a fractional share of the real estate on the open market.

We know that the agreement allowed the GP to convert their interest once they obtained their greencard. This has been confirmed by VT Digger, among others. They did not have a "fractional share of the real estate".. they had a fractional share of the entity that owned the real estate. There's a difference- especially as limited partners. Further, that fractional share was not secured- because the rules prohibit a secured interest (at least while they are in the process of getting the greencard). Given that the GP had the right to convert their interests, I would be wholly surprised if the agreement also allowed each of the LP's to convert- so long as they did it before the GP served them notice of the GP's election to convert. I suppose an agreement like that is conceivable... Weird, but conceivable. But there has been no confirmation that there is any such provision.

The more likely scenario is that they obtained their greencard and now they are looking for any/all leverage to get their money back as quickly as possible-- regardless of the effect on the regional center or investment in VT.

I don't have much pity for those folks who can invest $500k and want to change the deal once they got what they want (greencard) at the expense of future investment in VT.

 

[BenedictGomez]

What is so amusing about this whole "stink" is the fact that VT is getting criticized for what is essentially their competitive advantage over all the other EB-5 regional centers: government involvement and oversight.

Huh? :blink: Have you even been following this story?

The involvement by the State provides more public oversight, accountability (and control over flow of investments) than one would get from a private center- and guard against some of the horror stories seen in other places where the money just plain disappeared.

I would say this is decidedly false from the evidence we've seen.

The private centers need to show results to keep their going concern alive and continue to get funding from the EB-5 game.

As for Vermont's EB-5 program, exactly what, "public oversight and accountability" are you talking about? The government EB-5 of Vermont has demonstrated beyond any shadow of a doubt or by anyone's possible definition that it is completely incompetent at best, and perhaps complicit at worst. How the hades you're defending them in this matter is completely beyond me, another bit of evidence you couldn't possibly be following this story closely.

Yeah, cause projects with financial shenanigans NEVER happen in big cities/Wall Street. :roll:

You're correct, history has shown that fraud can happen ANYWHERE, yes, on "Wall Street" and in "Big cities" and elsewhere.

But the word "fraud" connotes that "shenanigans" were pulled in the first place, by falsifying information.

In this instance, "fraud" wouldn't even be necessary, because HUNDREDS of MILLIONS of dollars (literally) were all handed to 1 entity (literally) with absolutely no auditing requirements (literally).

Bernie Madoff was an extremely devious and smart individual that had to constantly falsify records and documents, and go to a lot of work and trouble to keep his "Wall Street" Ponzi scheme going. Whether there is any serious wrongdoing here that goes far beyond the intentional deception that's already occurred remains to be seen. The point is, however, that there is absolutely no oversight here, so much so that absolutely no deception would be necessary to "make off with the money". To your point - No, I've personally never seen anything quite like this in my life involving hundreds of millions, on "Wall Street" or in "big cities" or elsewhere.

 

[noreasterbackcountry]

Huh? :blink: Have you even been following this story?

I would say this is decidedly false from the evidence we've seen.

Go back up the thread and read about the quarterly reports submitted the state.

Now, give me examples of where a private regional center has been submitting quarterly reports to anyone other than USCIS. Then and only then would that statement be false.

The private centers need to show results to keep their going concern alive and continue to get funding from the EB-5 game.

Now go read the Forbes article I posted and you'll see this doesn't hold water.

As for Vermont's EB-5 program, exactly what, "public oversight and accountability" are you talking about? The government EB-5 of Vermont has demonstrated beyond any shadow of a doubt or by anyone's possible definition that it is completely incompetent at best, and perhaps complicit at worst. How the hades you're defending them in this matter is completely beyond me, another bit of evidence you couldn't possibly be following this story closely.

Again. Go up the thread and you'll read about quarterly reports to the state. That is more than you would get from a private regional center.

The point is, however, that there is absolute no oversight here, so much so that absolutely no deception would be necessary to "make off with the money". To your point - No, I've personally never seen anything quite like this in my life involving hundreds of millions, on "Wall Street" or in "big cities" or elsewhere.

The claim there is "no oversight" is hyperbole at best.

And again, go read the Forbes article if you're interested in examples of private schemes.

 

[VTKilarney]

We know that the agreement allowed the GP to convert their interest once they obtained their greencard. This has been confirmed by VT Digger, among others. They did not have a "fractional share of the real estate".. they had a fractional share of the entity that owned the real estate. There's a difference- especially as limited partners. Further, that fractional share was not secured- because the rules prohibit a secured interest (at least while they are in the process of getting the greencard). Given that the GP had the right to convert their interests, I would be wholly surprised if the agreement also allowed each of the LP's to convert- so long as they did it before the GP served them notice of the GP's election to convert. I suppose an agreement like that is conceivable... Weird, but conceivable. But there has been no confirmation that there is any such provision.

The more likely scenario is that they obtained their greencard and now they are looking for any/all leverage to get their money back as quickly as possible-- regardless of the effect on the regional center or investment in VT.

I don't have much pity for those folks who can invest $500k and want to change the deal once they got what they want (greencard) at the expense of future investment in VT.

So Stenger was merely lying in this interview? http://www.eb5fullservice.com/blog/2232/

 

[VTKilarney]

Go back up the thread and read about the quarterly reports submitted the state.

You are either clueless or deceptive. Either is bad.

From the July VTDigger article:
Moulton said Friday the center has been monitoring Jay Peak “right along.” Recently, the center put the resort “on notice,” and is now requiring the company to submit quarterly reports. Before now, the regional center did not require any formal reporting, even though MOUs with all the EB-5 projects include a clause that quarterly reports are to be submitted.

And even if the reports had been submitted, that's all you have to suggest that there was actual oversight? Thin gruel, if you ask me. Submitting something does not mean it was reviewed and/or acted upon.

 

[VTKilarney]

I don't have much pity for those folks who can invest $500k and want to change the deal once they got what they want (greencard) at the expense of future investment in VT.

I would agree with you if the marketing did not mislead. Based on what I have read, it's my opinion that at best they were mislead. So, again, attributing fault solely to one party in this transaction is absurd. You're also playing a cute game of blame the victim. Because nobody should question why it took Stenger several months to get documents to the investors telling them about a MAJOR change in their investment. Oh, wait... did he ever get those documents to them? Even if everything you say is true (which we have shown is not), Stenger still looks like an absolute clown. That has done damage in and of itself.

 

[BenedictGomez]

Go back up the thread and read about the quarterly reports submitted the state.

For starters, this is false. State of Vermont did not review quarterly financial reports.

More importantly, even if they did (which they didnt) a cursory review of what is contained in a quarterly financial report is nearly meaningless when we're talking about the flow of hundreds of millions of dollars. You need a complete financial audit conducted by an outside entity, which common sense would deem is occurring with a pot this large. This is one of the largest EB-5 programs in America. It's not happening.

give me examples of where a private regional center has been submitting quarterly reports to anyone other than USCIS.

The private EB-5 entities do conduct financial reviews and/or audits. Whether they be quarterly, semi-annual, or annual. Regardless, if they did so much as lift a finger it's (apparently) more than the State of Vermont is doing. That's NOT to say I think the private EB-5 companies are wonderful either. On the contrary, I think this entire EB-5 program is a complete trainwreck ripe for abuse.

 

[noreasterbackcountry]

I would agree with you if the marketing did not mislead. Based on what I have read, it's my opinion that at best they were mislead. So, again, attributing fault solely to one party in this transaction is absurd. You're also playing a cute game of blame the victim. Because nobody should question why it took Stenger several months to get documents to the investors telling them about a MAJOR change in their investment. Oh, wait... did he ever get those documents to them? Even if everything you say is true (which we have shown is not), Stenger still looks like an absolute clown. That has done damage in and of itself.

How can they have been misled if the agreement they signed said the opposite of what they are now claiming? Someone who has the means to hire a competent lawyer and is now claiming they were lied to (when the agreement clearly laid out what to expect) is not a victim.

You can call it a MAJOR change all you want, but you still haven't explained how their position was materially altered by the conversion- except the loss of some hypothetical right to sell that is contradicted by what we already know from VTDigger.

And you also haven't explained the harm-- even if it WAS a major change- of the lack of notice if they had no control over the right of the GP to make that change. (Also keep in mind that the agreement didn't require notice- that was from an unincorporated recommendation on LP practices)

 

[thetrailboss]

Huh? :blink: Have you even been following this story?

Thanks. I'm glad I'm not the only one who thought that! :lol:

And my understanding, from the articles and what is known, is that the State DID NOT require quarterly reports from JPR and was "satisfied" with words of reassurance and an audit of JPR's ENTIRE operations.

 

[noreasterbackcountry]

For starters, this is false. State of Vermont did not review quarterly financial reports.

Because you are obviously having trouble scrolling up:

Gotta love this quote from here: http://www.eb5fullservice.com/blog/2232/
James Candido, the principal overseer of State of Vermont EB-5 projects, stated to me that he inspects Jay Peak’s financial records at least four times per year and that he has not seen any financial irregularities or problems in Jay Peak’s finances.

The private EB-5 entities do conduct financial reviews and/or audits.

Anshoo Sethi disagrees.

 

[thetrailboss]

How can they have been misled if the agreement they signed said the opposite of what they are now claiming? Someone who has the means to hire a competent lawyer and is now claiming they were lied to (when the agreement clearly laid out what to expect) is not a victim.

That's NOT the point! :roll:

You can call it a MAJOR change all you want, but you still haven't explained how their position was materially altered by the conversion- except the loss of some hypothetical right to sell that is contradicted by what we already know from VTDigger.

They had an equity interest and believed because of the hype that their asset would have increased in value because of all the cool things that JPR was doing. Some apparently thought they were buying actual "units" in the Hotel that they could resell...at least what one article I read said. Then management quietly converted their status to (initially) unsecured creditors. That's a huge difference. After the so-called "stink" they got secured interests against JPR as a WHOLE.

To step away from that issue though, what lurks in the background is that many are questioning Stenger and company about their plans and if they are really feasible considering economics, etc. Some have felt that Stenger and Company really just don't have the money to make it all work and that things are not as rosy as they appear. Back in May, Mr. Pomerleau did not just back out from the Waterfront Hotel/Marina Project, but he called up WCAX and they did a whole story on it...why would he do that? Pomerleau I think was sounding the alarm and saying they don't have the money. That's unusual for him to make such a statement over that. After that other plans at Jay were quietly delayed and then this whole thing came to light. That's the context of the situation.