A state official named as a defendant in a lawsuit brought by EB-5 foreign investors was arrested years ago on a sex crime charge in China during a related trip, a lawyer asserted Monday.

Russell Barr, one of the attorneys representing investors in the Jay Peak fraud case, alluded to the allegation in court, telling a Lamoille County judge only that an official had been arrested while abroad on an EB-5 trip. Afterward, Barr told reporters outside the courtroom that he has evidence that the official, one of 10 defendants in the suit, was arrested in China in "2013 or 2014" for "having sex with a minor" and was bailed out by another state official.

Barr declined to offer additional details, saying he would include them in future court filings. Seven Days was unable to verify the claim.

"It’s been very hard to get to the truth simply because you have state officials who have tried to hide this,” Barr told reporters.

The allegation surfaced as lawyers for investors who have sued state officials over the Jay Peak fraud case struggled to defend the merits of their lawsuit.

The investors argue that state officials played a key role in what federal investigators have called a "Ponzi-like" scheme that rocked Vermont. In 2016, the U.S. Securities and Exchange Commission filed a civil lawsuit against former Jay Peak Resort owner Ariel Quiros and president Bill Stenger, alleging that they misused $200 million in investment money over eight years for projects in Jay, Newport and Burke. Both men have settled with the SEC.

Barr and attorney Chandler Matson represent investors who each put $500,000 into Northeast Kingdom projects in return for permanent U.S. residency. In their lawsuit, they claim 10 former and current state officials engaged in fraud or gross negligence or violated laws in overseeing the projects.

For example, the investors claim that the Vermont EB-5 Regional Center, an arm of state government tasked with overseeing the projects, touted its involvement as a sign it was a safe investment. The investors also say the state failed to ensure the financial strength of the projects. The regional center closed after U.S. Citizenship and Immigration Services said it "failed to properly engage in management, monitoring and oversight." Monday's hearing centered on a motion of the Vermont Attorney General's Office to dismiss the investors' lawsuit. The office says the investors' claims are without legal merit, and that many of the defendants, as government officials, are entitled to civil immunity.

"The allegations are that they were promoting these projects too hard and bringing the hammer down too late, but there wasn’t an allegation they knew fraud was occurring or they were doing it to enrich themselves in any way," Assistant Attorney General Benjamin Battles argued in court.

During the hearing, Judge Thomas Carlson repeatedly asked Barr and Matson to cite the specific laws or regulations to protect investors that they believe state officials violated.

“I was looking for something expressed in statute that says, 'Thou shall audit,' or words to that effect, and that’s what I'm not finding yet," the judge said.

The attorneys struggled to clearly answer the fundamental question.

During the hearing, Barr and Matson were long on rhetorical flourishes denouncing the state for its role in the scheme. At one point Barr said "the state would not survive" if the lawsuit doesn't proceed.

As the hearing drew on, Carlson seemed to grow frustrated.

"I'm looking for the law," the judge said. "There is nowhere ... that it says the state has the obligation that you're now saying it does. It says the state may promote economic development, which is very different than saying the state shall [protect investors] and didn’t."

At one point, Matson alleged the trips that some state officials made to China and Vietnam to support EB-5 projects represented "grift" that was "grandiose."

Carlson responded: "I'm trying to figure out what's grandiose — the grift, or your characterization of what's happened here."

Lawyers are expected to file additional written arguments in the coming days, before Carlson rules on whether or not to dismiss the lawsuit.