All That Glitters is Not EB-5 GoldDocument Transcript
“Pot of Gold Economic Investments Might Just Be Mud,”By Mark Renkert, McslChairman, SMART Holdings USA“All That Glitters Is Not Gold,” described Shakespeare in Merchant ofVenice in 1596 depicting the importance of discernment when determiningvalue.And thus can be said about the media’s campaign trumpeting job andeconomic development creation of the United States EB-5 Program.“10,000 Jobs To Be Created,” The Burlington Free Press(http://bfpne.ws/ZS1nBl )Vermont is one of a growing number of states where the media blitz hasraised a skeptic’s brow.Morrisville, Vermont hosted a now-rejected EB-5 Dreamlife SeniorHousing Project originated by Quebec Canada resident, Richard Parenteauwho has funded two dozen business starts and failures over the years andlately, the Stowe Reporter Newspaper reported that Parenteau’s DreamlifeRetirement Resorts, LLC which filed “Regionally” (which means that theydon’t have to meet the Job Generating characteristics mandated by most EB-5 Projects) has raised fraud concerns over principal misrepresentation over
partner credentials. (Quick Reference Guide for EB-5: EB-5 CharacteristicsEasy Chart)But the zeal of chasing EB-5 Investors is like the Gold Rush of the 1840’s.And gold it is ..... for Investment idea originators like Stenger who can getas much as $25,000 per investor and each product can have up to a 100investors regardless whether the Investment Project flies or not.Thats right - Project Hosts get up to $35,000 in fees per investor. And somefeel that might be the true motivation behind many of the projects.For Jay Peak: once the I-526 had been approved, Stenger has an additionalclause in the subscription agreement that provides compensation of $10,000per investor even if the investor did not pursue the investment after the 30-day review period ended, making Jay Peak one of the few EB-5 regionalcenters that charged (and still charges) a document fee. (moresee: http://bit.ly/VU4aUm )There are armies of hucksters traveling the world recruiting groups ofinvestor pools with a zeal not seen since the Time-Share-CondominiumRecruitment blitzes of yesteryear. Often with the same kinds of results.
In Vermont officials sought to stop EB-5 privileges from Richard Parenteauof Quebec after serious misrepresentations occurred. And in Missouri,government officials ran for cover with the colossal failure of MamtekInternational when 600-almost-jobs went “poof” as the $65M deal inMoberly, MO tanked sending the CEO to jail for theft and Missourilawmakers asking critical questions:“How are jobs forecasted and why is there no audit trail to show a jobgenerating trail. There has to cause-and-effect linkage and it has to beclear and transparent.”“Four jobs of a promised 600 were created in the Missiouri project– whyweren’t the risks disclosed to lawmakers – why weren’t investors told thatthere was NOT a plant already in operation in China as stipulated in theapplication process?”In Vermont, Bill Stenger’s EB-5 project led the the development of a largewater park and indoor pool at a ski area that increased room night visitswhen ski conditions were bad. But continuing EB-5 Projects a Bio-lab iscurrently only half-funded and a Door / Window Door Manufacturing grab
the headlines with “Job Creation 10,000 Jobs Forecasted.Says business financier and valuation expert, Michael J. Kipp, CPA, theCEO of SMART Holdings USA – “That 10,000 Job Generation Number is astatistical impossibility and could not be sanctioned by any Sarbanes OxleyInvestment Prospectus in the United States.”Long time Stenger EB-5 alliance Rapid USA (http://www.visausa.com)CEO, Douglas Hulme, in February 2013 distanced itself from Stenger’sinvestments.Seven Day’s Newspaper reported (http://www.7dvt.com/2012vermont-eb-5-visas) "For five years, Rapid USA had worked closely with Jay Peak toattract foreign investors. The company advertised the project internationallyand helped investors navigate the complex process," but the relationshipsoured when Rapid USA lost confidence in the Jay Peak Plan.In March 2013 hundreds of immigration attorneys around the world receivedan email from Rapid USA that announced, “Rapid USA no longer hasconfidence in the accuracy of representations made by Jay Peak, Inc., or inthe financial status of and disclosures made by [it].”Rapid USA, CEO, Douglas Hulme turned down repeated media requests to
elaborate on his company’s claims. But his silence was deafening andsparked speculation about Jay Peak’s ability to deliver on promises led onecritic to claim that Jay Peak and Rapid USA were violating federal securitieslaws.“Overall, we have significant concerns about [Jay Peak’s] ability to operateas a going concern,” says Michael Gibson, an EB-5 financial investmentadviser who has tangled with Stenger in the past and who posted Hulme’semail on his industry blog. “We’ve had our suspicions for years. We don’tbelieve Jay Peak is making money.”Michael Gibson is a leading US EB-5 Expert and has reported and bloggednumerous frauds and potential frauds all over the US reported here:( http://eb5news.blogspot.com/2012/04/michael-gibson-reports-investor.html )Vermont politicians have stood with Stenger to date.Still…… other Politicians in other states did the same standing by theirproject yet were duped while also steadfastly supporting the sinkinginvestments and indicted officers. One case involved Missouri Governor JayNixon who ardently supported a failed EB-5 Project that jailed its CEOBruce Cole who was charged with theft and securities fraud and who wasarrested with a $500,000 bond. (http://www.mogop.org/2011/09/5689/)
Meanwhile constituents in Missouri have lost confidence in their jobcreation team.
While in Vermont: Stenger disputes the allegations and provideddocumentation showing that sales for the season are up 38 percent over2012’s— or $5.7 million. Lift-ticket sales are down $400,000 from last year,Stenger says, but an increase in lodging options on the mountain — 1000more beds this year alone — has more than made up the difference. Forexample, sales during the last week of March reached $891,000, comparedwith $589,000 for that same week in 2011. Analyst point out that Jay’sdiscounted package deals have eroded margin but boosted volume makingprofitability illusive and reliant on steep discounts.Still others don’t like how data is compiled, measured or reported.Non-Verifiable methodology reporting to US Citizens the program’s JobCreation and Economic Benefits are key reasons why The Federation ForAmerican Immigration Reform (FFAIF) opposes the U.S. Citizenship andImmigration Services (USCIS) EB-5 program.FFAIF reports that 70% of EB-5 projects fail to make four years of operationand that less than 1% of job touted are actually created.So in Vermont’s case that would be fewer than 1,000 jobs after hundreds ofmillions in investment.The FFAIF study reported: At present, the debate about the EB-5 programconsists primarily on anecdotal evidence of the success or failure of ahandful of investment projects. Analysis of available data strongly suggestthat the failure rate has been high, and that the economic benefits providedby the EB-5 program have been negligible, at best. As the USCISOmbudsman has noted: “The bill’s supporters predicted that about 4,000millionaire investors, along with family members, would sign up, bringingin $4 billion in new investments and creating 40,000 jobs [annually]."However, the most comprehensive study of the program was a 2005Government Accountability Office (GAO) report which analyzed theperformance of the program from 1992 through 2004. The GAO found thatafter 12 years the EB-5 program had only led to $1 billion (instead of thepredicted $48 billion) in investments and there was no reliable accounting ofjobs created.
To be sure there needs to be reliable and accurate reporting of facts soinvestors can make informed decisions. EB-5 Promoters need to be heldaccountable about making Forward-looking statements through the mediaand in their publicity vehicles and measures need to be taken by a governingoversight body to avoid both investor fraud and for State’s taking a hit likethey did in Moberly, Missouri.And while Shakespeare’s line in Merchant of Venice talking about goldrings true….. it is also important to remember that there is no such thing as afree lunch when it comes to investment and that EB-5 may be toounpredictable, unregulated and wild for a State’s economic developmentengine to rely on.(Mark Renkert, Mcsl, is Chair of SMARTvt and is a Labor ForceParticipation Expert and who has supervised thousands of job seekers forover two decades. He works as a Retained Executive Recruiter, a HumanCapital Advisor, and Strategic Human Capital Development Advisor toFortune 50 Companies where he serves on their Board of Directors.http://www.linkedin.com/in/smartvt )