Court ruling: Stowe Aviation complaint allowed to proceed

The program, which allowed foreign investors to get green cards for investing in projects that produced a certain number of jobs, collapsed before Stowe Aviation could secure its funding due to the massive fraud perpetrated by investors who embezzled money through the program at Jay Peak Ski Resort and other projects in the Northeast Kingdom.

Several of those investors have gone to prison.

The Agency of Commerce and Community Development, Stowe Aviation alleged in court, had promised a “gold standard” in regulatory oversight that guaranteed the integrity of the projects, allowing the Stowe-centered team of investors to bring on four foreign investors through the EB-5 program, a $4.6 million Federal Aviation Administration grant and $1.7 million in private financing.

Stowe Aviation alleged that the commerce agency later assumed full responsibility of the memorandum of understanding from the Department of Financial Regulation as it became clear the EB-5 program was likely to be implicated in the massive fraud that would eventually be revealed in the Northeast Kingdom.

The agency then tried to force the airport operator into renegotiating the terms of the memorandum, ultimately leading to its cancellation.

Stowe Aviation’s investors say in two complaints filed against the commerce agency that the commerce agency misrepresented its “gold standard” of regulatory oversight and that this constituted “bad-faith conduct” that prevented Stowe Aviation from benefiting from the EB-5 program.

The lower courts initially dismissed the complaints on the grounds that they didn’t adequately address the terms of the memorandum, and rejected an attempt to amend them, arguing that Stowe Aviation would only be allowed to do so if there was a mistake made by the courts in the process.

The Supreme Court ruling overturned this decision and determined the trial court committed an “abuse of discretion” regarding the matter. The ruling states that if Stowe Aviation and its investors can prove that the agency violated state guidelines in its handling of the agreement, their complaints may yet be considered.

Implications

Stowe Aviation stopped operating the Morrisville-Stowe Airport in 2021. For three years, the Agency of Transportation has sought and failed to find a replacement operator.

After the collapse of their EB-5 investments, the airport improvements the Barrs and their investors planned for the airport failed to materialize. An investigation conducted by the newspaper found that the dissolution of Stowe Aviation was the result of a dispute where the state refused to allow the Barrs to hand over operation of the airport to Mendal, Roberts and other investors under a new lease agreement.

One chief contention of the Agency of Transportation was that Stowe Aviation owed the state over $100,000 in unpaid rent, an amount Mendal has argued was invalid because the commerce agency never held up its end of the EB-5 deal.

Now in a position to have their complaints considered in court, Stowe Aviation and its investors may yet be vindicated that they were subjected to material losses by the state’s actions.

A recent report from state auditor Doug Hoffer substantiates Stowe Aviation’s assertion that Vermont’s EB-5 program was not well-regulated. Alleging that structural design flaws were present in the program from its outset and that it failed to respond quickly when concerns were raised about the Jay Peak project, Hoffer found “a pattern of misplaced trust, unfortunate decision-making, lengthy delays, and missed opportunities to prevent or minimize fraud.”

Meanwhile, despite an open request for a proposal for a new operator, the Agency of Transportation has yet to replace Stowe Aviation as the airport’s fixed-base operator. Frequent fliers at the airport have reported a marked reduction in traffic, particularly in commercial charter flights.

According to Trini Brassard, an assistant director at the agency, a contract has been negotiated with a new fixed-base operator, but this new potential operator has had the agreement for months and hasn’t returned a signed copy of the contract. At this time, Brassard said, “there is no contact with them that confirms they intend to take on this role.”

Brassard said she couldn’t name this new operator due to the pending nature of the contract and because the agency is still working to determine how it will proceed.