Rapid USA Visas CEO Douglas Hulme and Jay Peak President Bill Stenger in happier times
This email flooded the inboxes of over 100 immigration attorneys yesterday, apparently ending what may have been the longest and most successful agent/broker relationship in EB-5 visa history:
The alliance of Jay Peak and Rapid USA Visas was formed years ago, long before most people in the U.S. had ever heard of the EB-5 Visa Immigrant Investor program, and it was a union that appeared to benefit both parties substantially and resulted in an injection of over $200 Million from more than 400 investors into this little known corner of New England.
Jay Peak co-owner and President Bill Stenger was not able to raise the capital he needed to develop Jay Peak into the vision that he had for a four season, full-service resort in an area that did not receive much traditional capital investment but had heard about the EB-5 visa program and saw that as a way to attract capital and create jobs in a depressed, remote area of Vermont.
The big problem, however, was that he did not have the resources or overseas connections to attract foreign investors who could provide him with their capital in exchange for the green card. At the time, Douglas Hulme, a British citizen, was acting as a business broker in Florida selling small businesses to UK residents for purposes of qualifying them for the E-2 visa.
With the average sales price of only a few hundred thousand dollars and low commissions, he approached Bill with an idea to sell investments in Jay in return for a commission on each investor he brought in. They both agreed on a compensation arrangement that was very profitable for Hulme's firm, Rapid USA Visas, earning well over $25,000 per investor once the I-526 had been approved. Rapid USA Visas and Jay Peak had an additional clause in the subscription agreement that provided both parties with compensation of $10,000 even if the investor did not pursue the investment after the 30-day review period ended, making Jay Peak one of the few EB-5 regional centers that charged (and still charges) a document fee.
The process worked very well for both parties as they began to market the Jay Peak projects heavily in the United States, the United Kingdom where they established an office, and around the world. A frequent fixture at AILA and other U.S. and overseas EB-5 networking events, the Jay Peak/Rapid USA Visa booths were typically among the largest in the room.
These marketing expenses were funded in part by a substantial number of immigration attorneys who recommended Jay Peak projects to their clients based on the claims made by the agent / promoter Rapid Visas and the State of Vermont and it's officials. The immigration attorneys were also paid large finder's fees and commissions to promote and sell the Jay projects to their clients and could be seen toting bags of promotional material back to their offices to hand out to their clients, whom they assured that these were very good investments, or sometimes put another way, Jay Peak had a "great track record".
The combination of marketing to immigration attorneys and substantial overseas promotion led to the funding of one of the largest EB-5 regional center projects in the program today. Statements made by Bill Stenger and James Candido with the Vermont Agency of Commerce and Community Development (VACCD) put the amount of investment in the state at over $200 million and 400 investors. Assuming that figure to be correct, the fees paid to agents and attorneys involved with the sale of these securities offerings (the subscription fee used to be $65,000 but is now $50,000) would be well over $20 million.
Given that it was such a lucrative practice for all of the parties, this announcement comes as a huge surprise to everyone who received the notice. Why such a profitable arrangement was suddenly and without notice terminated by the broker/agent is not known at this time, but several analysts have speculated that it may be due to either the financial condition of the resort due to the large amounts of capital expenditures and low revenue from the warm winter and low bookings or doubts that the job creation projections may not be realized as outlined.
Should Jay Peak fail to achieve the removal of conditions upon the filing of the I-829 petition (they are claiming a 100% approval rate right now) or fail to return a substantial portion of the principal, their investors may look to the agents, promoters, and attorneys who recommended this investment for relief.
The question of whether federal and state regulators would consider Rapid USA Visas to be an unregistered broker whose activities included marketing, soliciting and facilitating the sale of a U.S. security in exchange for a commission (finder's fee) will be explored next, as well as the State of Vermont's role in supervising the activities of the projects that fall under their jurisdiction. Questions must be raised as to VACCD's role in supervising the marketing, promotion and solicitation of these projects involving possible unregistered brokers / agents and the payment of fees to unregistered persons (such as attorneys) which could be violations of federal (SEC) and state securities laws and regulations.
We will also explore the role of immigration attorneys in the recommendation of securities to their clients, issues of ethics, dual compensation, due care, conflicts of interest, and their liability should the Reg. D exemption found to have been violated and the offer rescinded, as well as what potential liability they could face should there be a failure of the project to create sufficient jobs to remove conditions or fail to repay a significant portion of the capital invested.