Abdel-Fakhara v. State
| Decision Date | 06 September 2022 |
| Docket Number | 5:21-cv-198 |
| Parties | FATIME ABDEL-FAKHARA, MAURICIO ESTEBAN GARCIA GIRALDO, SYLVANA CARNEIRO HETKA, HRH LINUS NTO MBAH, PAULINA FUENTES MOAD, LINH THI THUY PHAM, TONGYI WANG, JUSTIN SINGH, JARED GRESTONI, MAXIM SMOLENTSEV, Individually, and on Behalf of a Class of Similarly Situated Persons, Plaintiffs, v. THE STATE OF VERMONT, DAVID CASSETTY, SUSAN DONEGAN, JOHN KESSLER, EUGENE FULLAM, WILLIAM GRIFFIN, PATRICIA MOULTON, MICHAEL PIECIAK, JOHN/JANE DOES 1-10, Defendants. |
| Court | U.S. District Court — District of Vermont |
ORDER ON DEFENDANTS' MOTION TO DISMISS (Doc 17)
Plaintiffs are foreign nationals who invested in financing for construction of the QBurke Mountain Hotel and Conference Center in East Burke, Vermont. Each plaintiff invested $500,000 through the federal “EB-5” program. This program offers foreign investors a path to citizenship by investing in qualified projects designed to promote economic development and create jobs in the United States. Although the hotel was completed and is open for business, it is currently held by a federal receiver as a result of fraud committed by the principals in connection with EB-5 investments in Vermont. Three of the principals have been sentenced to prison terms for their conduct. Plaintiffs have received neither the return of their investment nor in many cases the “green card” status they sought through the EB-5 program.
Plaintiffs sue Vermont state officials David Cassetty, Susan Donegan John Kessler, Eugene Fullam, William Griffin, Patricia Moulton, Michael Pieciak, and ten John/Jane Does alleging that Vermont state officials knew that investment projects designed to promote development at the Jay Peak Ski Area and at a bio-technology research facility in Newport, Vermont were tainted by fraudulent activity but concealed this information from investors. Plaintiffs allege that despite learning of the fraud, defendants continued to solicit investments, exercised control over plaintiffs' investment funds, and released these funds into the fraudulent scheme. Plaintiffs assert that this conduct constitutes a governmental taking, requiring the state to compensate victims of the scheme (Count III). Plaintiffs also claim that the individual defendants conspired to deprive plaintiffs of their Fourteenth Amendment property rights and to appropriate plaintiffs' property without just compensation (Counts I, II). Last, plaintiffs assert that individual defendants' failure to warn investors of the fraud and to ensure that the EB-5 program complied with the requirements of immigration and securities laws amounted to gross negligence under 12 V.S.A. § 5602(b). (Count IV).
In response, defendants have moved to dismiss the action for lack of subject matter jurisdiction, untimeliness, and failure to state a claim pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). (Doc. 17-1 at 18.) The court heard argument on the motion on June 3, 2022. For the reasons set forth in this opinion, defendants' motion to dismiss is GRANTED in full.
This case arises in the context of the EB-5 visa program administered by the United States Citizenship and Immigration Services (“USCIS”). The Immigration and Nationality Act allocates a certain number of visas to qualified immigrants who invest capital in geographic regions of the United States that are rural or suffer from high unemployment. These visas are commonly known as “EB-5” visas.
Eligibility for the EB-5 visa depends upon three requirements. First, the investor must show that he or she has made a qualifying investment. Second, the investor must show that the investment will create or preserve at least 10 permanent full-time jobs for U.S. workers. Third, the investor must establish that he or she is not subject to any of the U.S. immigration admissibility bars, such as a criminal record, unlawful presence in the United States, or affiliation with a terrorist group. 8 U.S.C. § 1153(b)(5)(A)-(D).
An EB-5 visa grants lawful permanent residence and a path to citizenship for the immigrant investor, his or her spouse, and their single children under age 21. See 8 C.F.R. § 204.6. The purpose of the program is to promote economic growth, increase export sales, improve regional productivity, create jobs, and increase domestic capital investment. Id. § 204.6(m)(6).
Although USCIS administers the EB-5 visa program and ultimately determines eligibility, the agency depends upon USCIS-approved “regional centers” to provide local expertise and oversight for proposed investment projects. Id. § 204.6(m). To qualify a project for enrollment in the EB-5 program, a regional center must demonstrate to USCIS that local investment projects will promote economic growth, create jobs, and provide other economic markers to track the projects' progress. Id.
Regional centers are located across the United States. The majority are private entities. Vermont is one of the few states to establish a regional center within state government. At all times relevant here, Vermont's EB-5 program was administered by the Vermont Regional Center (“VRC”), which was originally operated by the Vermont Agency of Commerce and Community Development (“ACCD”). After concerns developed over the EB-5 investment programs involved in this case, the Vermont Department of Financial Regulation (“DFR”) joined in the regulation of EB-5 investment in Vermont in 2015. The mission of a regional center such as the VRC includes the promotion of EB-5 investment opportunities and the review and approval of private placement memoranda (“PPMs”) describing the investment and disclosing risks to investors. (Doc. 24 ¶¶ 44-45.) The purpose of enlisting DFR in the operation of the VRC was to enlist the agency's “personnel and resources to supervise financial services and products offered in Vermont in a manner that advances fair business practices and protects the investing public.” 10 V.S.A. § 20.
The following facts are drawn from the Amended Complaint. These are the facts as alleged by the plaintiffs. They do not represent a finding or determination by the court. Rather the following paragraphs seek to summarize the plaintiffs' version of the facts for purposes of Fed.R.Civ.P. 12(b)(1) and 12(b)(6). The court has also considered the documents attached to defendants' motion to dismiss. These are the agreements, contracts and other essential documents governing the operation of the VRC. Their contents are not in dispute.
The court has not considered the various emails and other communications attached to the plaintiffs' reply memorandum because the court has already accepted the Amended Complaint as true for purposes of the motion to dismiss. Broadening the record to include individual emails will involve the court in an inquiry in which credibility and interpretation of the authors' intent loom large. That effort, central to a trial, is inappropriate in the setting of Rule 12. Friedl v. City of New York, 210 F.3d 79, 83-84 (2d Cir. 2000) (“[A] district court errs when it considers affidavits and exhibits submitted by defendants, or relies on factual allegations contained in legal briefs or memoranda in ruling on a 12(b)(6) motion to dismiss.”) (cleaned up).
The QBurke Mountain Resort Project was a proposal for the construction of a hotel and activity center located at the Burke Mountain Resort in Vermont's Northeast Kingdom. (Doc. 24 ¶ 37.) The project was the last in time of eight phases of EB-5 construction projects promoted by Ariel Quiros and others between 2008 and 2015. (Id. ¶ 43.) The first six phases financed improvements at the Jay Peak ski resort as well as, improperly, the purchase of Jay Peak by Mr. Quiros from its previous owners. (Id. ¶ 76.) The seventh, known as AnC-Bio, was a complete fraud in which immigrant-investors poured $85 million into a non-existent health research facility in Newport, Vermont. (Id. ¶¶ 5, 39.) The QBurke hotel project followed AnC-Bio in time.
Plaintiffs describe QBurke as a fraud similar to AnC-Bio. (Doc. 24 ¶¶ 9-18.) Plaintiffs trusted that their EB-5 investments would be spent on a legitimate business venture and would provide a path to citizenship. Instead, their funds were “misappropriated,” and in many cases, the investors' residence visas were denied. (Id. ¶¶ 102, 132-134.) Today, plaintiffs “have nothing left of their investment and have not been compensated in any way.” (Id. ¶ 108.)'[1] The individual defendants are state officials alleged to have been involved in perpetuating the EB-5 scheme, concealing the scheme from investors, or failing to satisfy their respective duties to oversee the projects and ensure compliance with applicable laws. David Cassetty is the former General Counsel of DFR; Susan Donegan is the former Commissioner of DFR; Eugene Fullam is the former Executive Director of VRC; William Griffin is the former Vermont Chief Assistant Attorney General; John Kessler is the former General Counsel for ACCD and the former principal administrator of VRC; Patricia Moulton is the former Secretary of ACCD; and Michael Pieciak is the former Deputy Commissioner of DFR. (Doc. 24 ¶¶ 20-26.) Jane/John Does 1-10 have not been named or served.[2]
Plaintiffs allege that despite knowing about fraud within the Jay Peak EB-5 program as early as 2014, the individual defendants allowed construction at the various projects to proceed for nearly two years while soliciting new investments. (Doc. 24 ¶¶ 16-51.) Plaintiffs allege that throughout 2015 defendants circulated documents showing they knew QBurke was tainted by fraud but did not halt construction or notify investors. (Id. ¶¶ 5-6.) These documents included early drafts of the now-infamous “Spaghetti Map,”...
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