EB-5 Due Diligence is Essential - 5 Things Investors Need to Know

  Gov. Peter Shumlin, Jay Peak CEO Bill Stenger, Ariel Quiros, the owner of Jay Peak, and his son Ary Quiros. Photo by Hilary Niles/VTDigger

Gov. Peter Shumlin, Jay Peak CEO Bill Stenger, Ariel Quiros, the owner of Jay Peak, and his son Ary Quiros. Photo by Hilary Niles/VTDigger

I have been following the ongoing investigation around the ill fated EB-5* investment vehicle Jay Peak in Vermont ever since news began to break that things at Jay Peak were not as pure as Vermont snow a few years ago. Once upon a time, Jay Peak was seen as a model for spurring economic development with foreign money in struggling areas -- even the New York Times could not resist a profile in 2012, "Lure of Green Cards Brings Big Investments for Remote Resort in Vermont." It is a stark contrast with their May 10, 2016 article, "Fraud Charges Mar a Plan to Aid a Struggling Vermont Region."

I frequently discuss the EB-5 program with potential foreign investors and here are my tips for those considering utilizing the program for themselves and their family:

  1. Hire your own immigration lawyer. If a project insists that you use their immigration lawyer you should find another project. A client is entitled to use the lawyer of their choosing. You should also directly inquire as to whether your lawyer has a financial interest in the project or will be receiving a "finder's fee" from the project.
  2. Make sure the project has a positive immigration track record. Remember that the point of the EB-5 investment is permanent residence in the United States. If the promoters of the project cannot show you prior green card approvals seek other options.
  3. Hire an independent financial advisor to evaluate the project as a financial investment. It is unethical for lawyers to give investment advice.
  4. Beware of lack of responsiveness. I was at the beginning of our due diligence for a client and the company seeking our client's investment would not respond to multiple phone calls or emails asking for basic information. The only information we received was where the client could wire their $50,000 deposit.
  5. Do not get caught by aggressive sales tactics. I did a consultation for a client who was interested in investing in a project in New York City. He contacted me saying he needed to make a $20,000 deposit in the next 48 hours or he would lose the opportunity. The client showed me beautiful brochures and marketing materials. A quick Google search found nothing on this "shovel ready" construction project in downtown Manhattan.

The best thing an EB-5 investor can do for themselves and their family is to make sure they assemble a team of legal and financial advisors who can collaboratively find a successful project.

More reading on the Jay Peak saga: Investigative news blog VT Digger has done excellent reporting on the issue, their chronicle of the EB-5 mess in the Northeast Kingdom is well worth following. Their November 24, 2016 update, "Receiver seeks $1.95M for helping to Clean up EB-5 Mess at Jay Peak," inspired this post.

*Immigration vocabulary lesson: Simply put, an EB-5 visa is available to a foreigner and their family who invests $500,000 in a business within a defined economic area (called a regional center) and can show that their investment generated 10 jobs over a two year period. If the foreigner is successful they can obtain permanent residence in the United States for themselves, their spouse and children.