Burlington — A federal judge has blocked an attorney for a group of EB-5 investors from questioning former state officials who oversaw the scandal-plagued immigrant investment program in Vermont — at least for now.
Judge Christina Reiss said Russell Barr, the Stowe lawyer who brought suit on behalf of a handful of investors from China, first must take the deposition of Shen Jianming, an immigration attorney accused of taking advantage of foreign investors in a kickback scheme.
Shen is accused of taking $1.25 million in kickbacks in return for bringing foreign investors to the Jay Peak projects.
Depending on what Shen says in his deposition, the judge may allow Barr to depose former state officials.
Barr has argued those officials were negligent, or even complicit, in a $200 million investment fraud perpetrated by Jay Peak developers Ariel Quiros, the former owner of the resort, and Bill Stenger, the former CEO.
Stenger and Quiros solicited more than $450 million in EB-5 monies through the state-run investment program.
The investors were told Jay Peak had the state commerce agency’s seal of approval and cite endorsements from U.S. Sen. Patrick Leahy and former Gov. Peter Shumlin as the principle reason for buying into the Northeast Kingdom projects.
The fraud occurred over an eight-year period while state commerce agency officials were responsible for overseeing the projects.
Brent Raymond, the former Vermont EB-5 Regional Center director, testified in a deposition taken in August that he asked his superiors in 2012 to press Quiros and Stenger for an audit.
That request, which was ignored, came four years before the Securities and Exchange Commission charged the developers of Jay Peak with 52 counts of securities fraud.
Barr alleges that Shen was paid by the Jay Peak developers to bring in more foreign investors as part of a kickback scheme. At the time, Shen did not tell immigrant investors he was getting a pay off from Stenger — in addition to legal fees from foreigners for help with immigration paperwork.
In a ruling from the bench, Judge Reiss is requiring Barr Law Group to depose Shen before she decides whether testimony from state officials is relevant.
“Why isn’t it the place to start with attorney Shen?” Reiss asked attorney Chandler Matson, Barr’s co-counsel in the case.
“Scheduling issues,” Matson replied. “I can’t say it anymore elaborately than a scheduling issue.”
Reiss also ruled against a bid by Barr to make his lawsuit a class action, but gave him 30 days to refile his complaint with more specific allegations before closing the door on the request.
“I am granting them an opportunity to try again,” the judge said of Barr and Matson.
The hearing on Monday provided the latest twist in a long-running legal battle between Barr and the Vermont Attorney General’s Office, which has played out over two separate lawsuits regarding the state’s role in the investor fraud scandal at Jay Peak.
The Vermont Attorney General’s Office has been assiduously seeking to block Barr’s attempt to question high-ranking state officials who were involved in the operation of the Vermont EB-5 Regional Center, which oversaw the state program soliciting foreign investment for local projects.
In court on Monday, Assistant Attorney General Jon Alexander, whose office is representing the state officials Barr wants to depose in the Shen case, referred to Barr’s push to questions those state officials as a “fishing expedition,” borrowing the term the judge used earlier in the hearing.
Barr countered that he was just looking for answers for investors bilked out of green cards and money. More than 400 investors have lost their money and are not eligible for permanent residency because of the fraud.
“They came here for the rule of law,” Barr said of his clients. “They are looking for justice.”
Judge Reiss said the lawsuit before the court was not brought against the state or state officials.
Before allowing Barr to push ahead and question former employees of the regional center, she said it was important to find out what officials told Shen, if anything.
Later in the hearing, Alexander, who earlier had contended that the state was not party to the action, asked that if Shen is deposed the state be given notice and be allowed to attend.
“I don’t see, for the same reasons as I just ruled, that there is any affirmative reason why you should be there. You can ask for a copy of the the transcript if you want,” the judge said.
“If the parties don’t mind, I don’t mind,” Reiss added. “Otherwise, I don’t see a reason for the presence of the state of Vermont.”
Barr has wanted to depose the state officials as he presses forward in a lawsuit he filed in September 2017 against Shen.
Attorneys for Shen, as part of his defense, have blamed state officials for not properly monitoring the EB-5 projects. According to Barr, that opens the door for him to question the state officials involved in the operation of the EB-5 program at the time of the alleged kickback scheme.