Judge Rules Against Seldon

Whistleblower Claims EB-5 Funds Misused

Valley News Business Writer
Sunday, May 29, 2016

Woodstock — A Plainfield woman obtained a default judgment against her former employer, Seldon Technologies, in a lawsuit she filed alleging that the Windsor water filtration device maker fired her over objecting to financial irregularities stemming from the company’s participation in a federal government’s program to award U.S. visas to foreign investors in exchange for helping to bankroll job creation.

The default judgment comes as Vermont’s involvement in the EB-5 awards, as the immigration program is known, is coming under scrutiny in the collapsed Jay Peak resort project. Federal authorities and the state filed civil complaints against Jay Peak’s owner last month alleging that he ran a “Ponzi-like” scheme that diverted millions of dollars from foreign investors seeking visas for his personal use.

The EB-5 immigration program provided U.S. visas to foreign investors for $500,000 each and the money received was to go to creating jobs at U.S. companies. Although a federal program, individual states were charged with shepherding and management of the funding to ensure it resulted in job creation.

But how much money the former Seldon employee may eventually receive, if any, remains unknown until a hearing is held to assess damages and the court can determine who is the liable party.

Seldon shut down last year after its South Africa-based owner pulled the plug on the company and its physical assets and patents were auctioned off to a Utah water filter maker.

Linda West, who worked as an accountant at Seldon from 2003 to 2012, sued the company in Vermont Superior Court in Woodstock 2013, alleging that she was fired after she complained that Seldon used EB-5 funds to pay for a company officer’s purchase of Seldon stock in addition to his federal and state income taxes and deferred income allocation.

West also claimed Seldon sold water filtration products to a company in South Africa, a country that was on the government’s list of countries that were not to be sold products made with EB-5 funds.

Seldon denied the charges in reply filings.

The parties were ordered by the court to enter into arbitration and were engaged in the discovery process when Seldon’s attorney asked to withdraw from the case last December.

The court granted the attorney’s request earlier this year.

But Seldon never responded to the court’s order to designate a new attorney within the required 30 days, prompting West and her attorney, Norman Watts, of Woodstock, to seek a default judgment against Seldon. On May 19, Judge Mary Teachout granted a default judgment in favor of West that ruled Seldon liable with damages to be assessed and determined by jury at a future date, according to court records.

According to West’s lawsuit, Seldon tapped EB-5 funds the company received from foreign investors to pay for company stock purchases by one of Seldon’s officers, who is not identified in the complaint, and also used EB-5 funds to pay for his federal and state income taxes in addition to other deferred income, all which are in violation of rules governing the legitimate use of EB-5 program funding.

When West “objected to these questionable and irregular transactions” she was fired, according to the lawsuit.

Seldon claimed that West’s termination was the result of a “corporate reorganization,” the lawsuit says, but her duties were transferred to a “younger, less experienced person (who) essentially replaced” West, showing that “the putative reorganization was pretext for age discrimination against plaintiff.”

The suit never specifies the amount of EB-5 funds that were allegedly misused, nor how much EB-5 funding Seldon received.

As previously reported by the Valley News, Seldon’s management initially sought to raise as much as $20 million from 40 foreign EB-5 investors, but the amount was subsequently scaled back to $5 million from 10 foreign EB-5 investors.

West is seeking a total claim of $896,000 against Seldon, which includes about $555,000 in “back and front pay,” about $14,000 in interest, $300,000 in punitive damages and about $27,000 in attorney fees.

Juries sometimes grant less than the amount a plaintiffs seek, however, and judges can reduce the amount on appeal.

That determination is further complicated by the sale of Seldon’s assets and which party — the former owner asset owners or the current asset owners — would be responsible for shouldering the cost of any award.

Carbon Block, the company that acquired Seldon’s assets, was not named as a party in the original lawsuit.

John Lippman can be reached at 603-727-3219 or jlippman@vnews.com.