Slaughterhouse EB-5

Further evidence that Peter Shumlin is right to let Vermont college graduates know that Vermont has good, high-paying jobs available, Seldon

Hey, it worked for Grenada!

Hey, it worked for Grenada!

Industries, a small water-purification maker in Windsor, recently shut its doors unexpectedly, leaving all 32 employees without a job.  A few weeks ago, Shumlin actually went so far as to almost beg St. Michael’s College graduates to stay in Vermont, saying:

“We’re trying to tell the story,” Shumlin said. “It’s a myth that we do not have jobs for young people in Vermont. The facts are that we have jobs.”

Just 32 less of them now, it seems.  Now it’s true that Vermont does have jobs, but when Shumlin says this, one wonders which Vermont he thinks he’s living in:

Shumlin said there are thousands of open jobs in Vermont at dozens of employers who are “clamoring” for graduates, and that many of the jobs available are high-paying. Some starting salaries are in the $90,000 to $100,000 range, he said.

The actual data on job expectations provided by his own Department of Labor tell a completely different story, as has been discussed at some length.  In terms of short-term job prospects, 9 of the top 10 jobs in terms of growth for 2013-2015 (the report is from 2014) do not require a college degree.  In fact, the one occupation that does, nursing, is not a degree offered by St. Mike’s, which might be a bit of a kick in the shins to the Purple Knights, courtesy of outgoing governor Peter Shumlin.

Seldon Industries, however, is a more unique story, in that its existence, and subsequent closing, were made possible by the EB-5 program.  A

Leahy: So you're telling me 32 Vermonters can lose their jobs with no warning in a program I support? Ha ha ha ha! Ahem.

Leahy: So you’re telling me 32 Vermonters can lose their jobs with no warning in a program I support? Ha ha ha ha! Ahem.

significant piece of its EB-5 funding was paid for by foreign nationals who “invest” in US companies, to the tune of $500,000 or $1,000,000, and in return acquire a green card.  It’s essentially allowing wealthy foreigners to jump the immigration queue, and since the dollars come from these individuals, the investments are viewed as not coming out of taxpayer pockets.  That said, Vermont’s EB-5 Regional Center is run and  administered by the State of Vermont, the only state in the country to do so.  Clearly Vermont’s politicians are involved, so there is a cost and an impact being borne, in taxes and in policies being put forward – especially for those now out of a job at Seldon.  The 6 investors (there was a $3 million investment by EB5 investors at $500,000 per) are still likely to see their green cards, but the dollars and “investment” are another thing entirely.  Meaning entirely gone.

Even as recently as June, 2015, Seldon was to land a huge contract with Senator Leahy’s “help”, although now I’m sure the Senator won’t be knocking down doors finding jobs for 32 people:

Just three months ago, Seldon Technologies was celebrating a new contract to provide water purification devices to Mexican public schools. The deal, arranged with Senator Patrick Leahy’s help, was to mean production of a half million units, and Seldon officials expected to expand their 37-person workforce.

Seldon’s closing begs the question:  If they were on the verge of an enormous contract, why did they shutter the facility three months later?  Why would a US Senator pose for a photo op at a facility that had to know they were about to go under?

Other Vermont EB5 ventures, like Jay Peak, have run into controversy.  Jay Peak converted the EB-5 investments into loans, without the investors’ knowledge.  So much for the state’s oversight in running the EB-5 Regional Center:

Vermont strong? Only if foreign 1%er checks don't bounce.

Vermont strong? Only if foreign 1%-er checks don’t bounce.

The management of Jay Peak Resort is defending its right to convert $17.5 million in equity stakes held by immigrant investors into unsecured, nine-year loans. The conversion was implemented on Aug. 31, 2013, without the knowledge or consent of 35 immigrant investors who each put up $500,000 toward the construction of Tram Haus Lodge, which is part of the Jay Peak Resort. The deal was disclosed to reporters and the Vermont EB-5 Regional Center last year, but investors were not sent a copy of paperwork for the original loan until May of this year. Jay Peak has since offered a second IOU to investors that shortens the repayment period to five years. The promissory note is secured by the value of Jay Peak Resort, says company president Bill Stenger. But a group of 20 disgruntled investors question the value of the guarantee. Several say they expected to receive the principal on their investments at the end of a five-year period.

The Tram Haus Lodge, which was constructed in 2008, is the first phase of $312 million in EB-5 investments in Jay Peak Resort, located in the Northeast Kingdom.

But don’t worry, there was nothing illegal or unethical about completely re-structuring the “investment”:

The company and the state’s Agency of Commerce and Community Development say the decision to convert the equity investments into loans was entirely within the company’s rights.

Jay Peak owner Ariel Quiros said the transaction was “200 percent” ethical.

Oh, it’s 200% ethical.  That’s different.  I’m sure that’s twice as re-assuring to the investors who ponied up big piles of cash to have their investment re-structured without their knowledge, at the whim of Jay Peak, all done under the guidance and oversight of the State of Vermont.

One of the selling points of EB-5 is that the money is an investment, with a return – but the reality is that there is no guarantee on the funds, on re-payment, on ROI, nothing.  But those facts are clearly not emphasized to foreign investors, who were completely taken by surprise by Jay Peak’s actions.

Another EB5 project in Vermont, AnC/Bio, a medical company specializing in stem-cell technology, plans to build a brand-new manufacturing and research facility in that well-known, high-tech, Silicon Valley East corridor of northern Vermont known as “Newport”.  Clearly, if you’re thinking about building a cutting-edge technology center, anywhere in the US, you’d first think “Newport, Vermont.  Obviously!”.  The project’s developer, Bill Stenger – the same Jay Peak developer – says it will create about 400-450 jobs:

And he says Vermont is a good place for those 400-450 jobs to be created. About half will be local workers trained to make devices, and the rest will be scientists.

“Because we’re close to major colleges and universities. There are a tremendous number of reasons why living and working in our part of Vermont has value. Safe, clean, environmentally beautiful, a facility that’s state of the art and debt-free,” Stenger said.

Vermont’s major colleges and universities are located in Burlington – at least those that offer significant degrees in STEM fields.  I didn’t realize Vermont had an extra 200 scientists just lazing around coffeehouses in Burlington.  Burlington to Newport is 2 hours by car.  Is Stenger assuming PhD candidates at UVM will move to Newport to work at AnC/Bio?

Investors will seize an opportunity, whether it comes from the private or the public sector.  In this case, it’s politicians seizing the opportunity by looking for investments that are completely outside of the normal taxation realm, trading cash from the foreign 1% for US citizenship, just as long as they can make it look like the money is going to create jobs.  In fact, if indirect jobs are claimed to be created, that also helps sell the EB-5 “investment”, meaning if a local deli gets more customers because a new factory went up outside of town from an EB-5 investment, then that indirect job counts.  Except that estimating what jobs might be created isn’t an empirical matter; it’s completely guesswork, and open to spurious claims of job creation, by both the EB-5 project and the politicians that love them.

So what our politicians are telling foreigners is:  If you’re wealthy, you get to the cut to the front of the line.  What’s interesting is that the same politicians supporting EB-5 as a way to generate growth are frequently the same politicians who publicly demonize the domestic 1%.

As others have noted, it’s really just the fastest way to get a green card, for 10,000 wealthy foreigners per year:

“There have been some rare but highly publicized failures in the EB-5 program,” said Steve Yale-Loehr, an immigration lawyer at Miller Mayer and a professor of immigration law at Cornell Law School.

Foreign interest in the EB-5 program has grown dramatically in the last few years. Applications were sluggish until the recession, Yale-Loehr said. But then, when domestic financing for construction projects was tough to find, some developers started to look overseas for financing.
There were just 700 visas issued in 2007; in 2014, for the first time ever, the program reached its quota of 10,000 visas through the EB-5 program and had to stop accepting applications. The quota was reached again this year.
For wealthy foreigners, the EB-5 program is the best bet for getting U.S. citizenship. Other options—finding an employer or a family member to sponsor them—have long backlogs and a lot of paperwork. The EB-5, by contrast, is a relative breeze.

“Most of them are doing it because they want the green card and it’s the fastest or best way to get a green card,” Yale-Loehr said.

Great for the crony! For everyone else, not so much.

Great for the crony! For everyone else, not so much.

Unfortunately for Vermonters, if the “investment” tanks, the loser is not the State of Vermont, it might be the person who ponied up half a million under the assumption that this money meant a real investment, but it most certainly is the Vermonter who thought they had a job at Seldon Technologies.  Especially when their own Senator proudly claims it as one of his accomplishments in June, but is nowhere to be seen come the shutdown in September.

Oh, and if you happen to be the head of the state’s EB-5 program, and then, shockingly, find yourself working for Mt. Snow after it received $52 million in EB-5 funding?  Well, hey, that’s just cronyism.  Er, I mean, “coincidence”.

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One thought on “Slaughterhouse EB-5

  1. Seldon Water – Another “Magical EB-5” Enterprise Disappears – POOF !

    The nebulous world of EB-5 financed ventures has apparently evaporated after receiving approval for $20 million in financing from the “Green Cards for Cash” scheme promoted by the greedy political vultures including Leahy, Shumlin, Welsh, Sanders and Company, who have made sure that the scheme provides lot a of cash for the lawyers and politicians who “grease the skids” for wealthy foreigners looking for a quick way to jump the immigration line!

    This time it appears that the scheme has wrecked the lives of at least 35 of our fellow Vermonters as the Windsor manufacturing facilities of Seldon Water unceremoniously ejected the employees without notice and without any severance other than unemployment compensation – hopefully they will receive their final paychecks and they are honored at the bank.

    For now the reasons for the closing are unknown, however the fact that the company just received its largest contract ever, worth over $20 million, for water systems to be delivered to Mexico and the fact that the company was recently acquired by Econet Wireless, a South African telecommunications firm – has led to some speculation that the company may relocate to Mexico to take advantage of inexpensive labor and closer proximity to its new customers.

    Of course this could also be “power move” by the new owner and the EB-5 investors to “shake the money tree” to see if the State of Vermont (Shumlin) and the Feds (Leahy, Sanders, et al) are willing to pony up some “fast cash” to keep the jobs stateside!

    In the “Magic World of EB-5” it’s Quick and Easy Come, Quick and Easy Go!

    Like

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