A new report released by State Auditor Doug Hoffer this week affirmed a longstanding conclusion of the EB-5 scandal: that a lack of state oversight allowed the fraud to happen.

“In short, we found a pattern of misplaced trust, unfortunate decision-making, lengthy delays, and missed opportunities to prevent or minimize fraud,” Hoffer wrote in an introduction to the audit findings.

But the audit, which began in 2018 but was interrupted by the criminal investigations and related trials, does not appear to offer many new details beyond what has already been documented in the case, a fact that Hoffer himself appeared to acknowledge in releasing the report on Thursday.

“At the highest level, our findings should not be entirely surprising,” Hoffer wrote.

Instead, Hoffer said, the findings would offer “the first comprehensive, one-stop accounting of how State government did (or did not) provide oversight of the EB-5 program — specifically the Burke and AnC Bio Vermont project,” he said, referring to two of the Northeast Kingdom development projects at the heart of the investment scheme.

In his 63-page report, Hoffer outlines how state government, specifically the Vermont Regional Center that was run by the Agency of Commerce and Community Development, had conflicting duties of both promoting and regulating the EB-5 program.

According to the findings, experts and policymakers had warned that agencies responsible for the success of a project would be reluctant to use their regulatory authority. 

“In addition, a marketing office may not have the skill sets needed to properly regulate complex financial arrangements such as EB-5,” Hoffer said. 

The report found that ACCD did not have any written policies and procedures to define oversight responsibilities. Accordingly, even though ACCD officials stated they performed oversight, there is little documentation verifying their statements as few records were kept, according to the report.

Moreover, the findings point to a passive approach by the agency, citing the lack of communication with investors about claims that the state audited EB-5 projects, a false assertion made by then-Gov. Peter Shumlin in a video promoting the program.

In his conclusion, Hoffer argued a more proactive approach by ACCD “could have mitigated investor losses.”

Oversight changed once the ACCD recognized it did not have adequate resources in August 2014, Hoffer found. The Department of Financial Regulation’s consequent involvement led to the separation of marketing/promotion and regulation duties, and more rigorous reviews followed, according to the report.

“Had appropriate systems been in place, with properly delineated roles and responsibilities between State agencies, addressing this historic fraud would not have been so dependent upon ad hoc decision-making by individual State officials,” Hoffer said.

Hoffer warned that the EB-5 program is not the only one for which the state government has assigned agencies with conflicting duties. 

“While these conflicts do not mean that fraud will occur, they represent the types of poor internal controls that make it more likely,” Hoffer said.

The federal EB-5 program grants permanent residency to foreigners who invest $500,000 or more in U.S. businesses and create at least 10 full-time jobs. In all, 836 investors from 74 countries were reportedly defrauded in the multi-million-dollar scheme, the largest fraud case in the state’s history.

The projects were led by former Jay Peak owner Ariel Quiros, former resort president and CEO Bill Stenger and attorney William Kelly, a close adviser to Quiros. All three were indicted on federal charges and sentenced to prison for their roles in the fraud.

Many of the investors have still only seen a fraction of their investments returned — and no green cards, the auditor’s findings noted.

In response to the audit, current economic development commissioner Joan Goldstein, who was appointed to the post by Shumlin in February 2015, said that claims against the ACCD were resolved in settlement agreements, which involved assisting investors with their immigration status. 

“At least 424 of 564 Jay Peak investors have already obtained green cards and we are working to increase the chances many more will succeed,” Goldstein said. 

In June 2023, the state settled with eight investors who alleged that, at best, the state and several of its employees were negligent in the oversight of the EB-5 regional center and, at worst, active participants in it. The agreement was reached two days before the case was slated for trial.

Another settlement deal of $16.5 million followed last summer, which involved the state and 64 people who sued Vermont and would settle all “pending and potential” lawsuits against the state by the investors in the Northeast Kingdom projects. 

The state’s insurance carrier decided not to provide coverage for the settlement, leaving taxpayers footing the bill.