FRAUD: Two businessmen behind Jay Peak and Q Burke resorts in Vermont have been charged with fraud, according to the Securities and Exchange Commission.
By Michael Bielawski and Bruce Parker | Vermont Watchdog
Businessmen behind Jay Peak and Q Burke ski resorts have been charged with fraud for alleged misuse of more than $200 million in investor money approved through the federal EB-5 program.
According to announcements from the Securities and Exchange Commission and the Vermont’s Governor’s Office, businessmen Ariel Quiros, of Miami, and William Stenger, of Newport, Vermont, raised more than $350 million through the federal EB-5 Immigrant Investor Program. However, $200 million of that money was spent on unapproved purposes, including $50 million spent on Quiros’ personal expenses.
The money came from about 700 oversees investors through a program administered nationally by the U.S. Citizenship and Immigration Services, which allows foreign nationals to obtain green cards in exchange for investing at least $1 million — at least $500,000 in rural or high-unemployment areas.
“This is obviously a difficult day for Vermont and for the many people, myself included, who are so invested in growing jobs and economic opportunity in the Northeast Kingdom,” said Gov. Peter Shumlin. “Most of all, this is a difficult day for the hundreds of employees in the Northeast Kingdom who rely on Jay Peak, Q Burke, and the related projects that appeared to hold so much promise.”
Vermont is filing suit against the two men after a year-long investigation by the Department of Financial Regulation into the pair’s complex financial dealings, which spanned across about 100 accounts and 10 financial institutions.
Quiros and Stenger started planning new resort developments around 2008 via the EB-5 program. The funds were intended to be used for constructing the new Jay Peak Hotel Suites L.P. (known as Tram Haus Lodge) and Jay Peak Hotel Suites Phase II L.P. (known as Jay Hotel). However, the complaints allege that Quiros inappropriately used $20 million instead to purchase Jay Peak Resort in 2008. Another $30 million was spent on personal uses.
The future of the unfinished projects is now in jeopardy. The scope of the plans had been described in a Private Placement Memorandum, an agreement with the foreign investors on how the money would be used.
“We allege that since 2008, the defendants have defrauded hundreds of millions of dollars from hundreds of investors,” said DFR Commissioner Susan Donegan. “The duty of my Department is to ensure that Vermont’s securities laws are followed, and that investors are protected.”
Quiros allegedly used the $50 million to purchase a luxury condominium, pay off millions in income taxes and buy a $2 million apartment at Trump Place in New York City. The SEC has frozen Quiros’ assets, and all EB-5 projects and assets at issue in the federal and state complaints have been handed over to a court-appointed lawyer from Miami for administration and oversight.
The SEC has issued a temporary restraining order on the men to prevent them from any involvement with the EB-5 projects while the litigation is pending.
“Vermont law prohibits unfair and deceptive acts and practices in commerce,” said Vermont Attorney General William Sorrell. “There is no different standard when the marketing is to those residing overseas.”
Lt. Gov. Phil Scott issued a statement on Thursday expressing concern about the workers and families associated with the resorts.
“Based on information from the Securities and Exchange Commission this project is in jeopardy, and this will be devastating to the workers, their families, the community and many businesses in the region. I’ve reached out to the Northeast Kingdom’s Senate delegation and will be working closely with them on this ongoing matter.”
Contact Michael Bielawski at mbielawski@watchdog.org