Updated: Feds charge Quiros and Stenger with 'Ponzi-like' scheme - VTDigger
 

Updated: Feds charge Quiros and Stenger with ‘Ponzi-like’ scheme

(Editor’s note: This story was significantly expanded and updated April 14 at 6:55 p.m.)

Ariel Quiros

Ariel Quiros. File photo

The Securities and Exchange Commission announced federal fraud charges Thursday against two prominent Northeast Kingdom developers, accusing them of running a massive “Ponzi-like” scheme that included the misuse of more than $200 million in investor funds.

The charges against Bill Stenger and Ariel Quiros also claim Quiros spent $50 million of that money for personal use and in “other ways never disclosed to investors.”

The state filed a similar complaint in Washington County Superior Court.

Public officials, including Gov. Peter Shumlin, said they felt betrayed by the developers and called it a “tough day for Vermont.”

Neither Stenger nor Quiros responded to phone and email messages for comment.

According to the federal complaint unsealed Thursday, Quiros improperly tapped investor funds for the purchase of a luxury condominium, payment of income taxes and other taxes unrelated to the investments, and acquisition of an unrelated resort.

The SEC allegations say Quiros and Stenger ran a “Ponzi-like” scheme using money from one set of investors to fund deficits in earlier projects.

The charges were laid out in a federal court case in Miami, where Quiros lives.

Meanwhile in Vermont, U.S. Attorney Eric Miller said his office is investigating whether federal criminal charges should be filed. The SEC violations are civil charges, he said.

“My office has been conducting and will continue to conduct an investigation designed to determine whether or not there have been violations into federal criminal law in connection with EB-5 projects in the Northeast Kingdom,” Miller said.

Miller would not say how long his investigation has been going on or how long he thought it would last. He said as of yet, no criminal charges have been filed.

In the 82-page SEC complaint, the federal regulatory body said it was taking action to “stop an ongoing, massive eight-year fraudulent scheme” in which Quiros and Stenger “systematically looted more than $50 million of the more than $350 million that has been raised from hundreds of investors” to construct resort facilities and a biomedical research facility.

“The alleged fraud ran the gamut from false statements to deceptive financial transactions to outright theft,” said Andrew Ceresney, director of the SEC’s Division of Enforcement, in a news release.

The developers solicited funding through the federal EB-5 program, which allows overseas investors to move to the United States in return for creating jobs.

The 52-count complaint gave a detailed account of how the developers allegedly perpetrated the fraud, including diverting funds.

“As alleged in our complaint, the defendants diverted millions of EB-5 investor dollars to their own pockets, leaving little money for construction of the research facility investors were told would be built and thereby putting the investors’ funds and their immigration petitions in jeopardy,” Ceresney said.

Many of the features and rides in the new Jay Peak water park are heated by capturing waste heat from an ice arena.

The Jay Peak water park is one of the projects for which the developers sought immigrant investors. File photo courtesy of Jay Peak Resort.

The complaint says the fraudulent scheme spans seven limited partnership securities offerings all connected to Jay Peak Inc., a wholly owned subsidiary of Miami-based Q Resorts Inc. — which is in turn owned by Quiros.

According to the complaint, “Quiros orchestrated and Stenger facilitated an intricate web of transfers between the various Defendants and Relief Defendants to disguise the fact that the majority of the seven projects were either over budget or experiencing shortfalls. These shortfalls were due in large part to Quiros pilfering tens of millions of dollars of investor money for his own use.”

Stenger was far from an innocent bystander, the complaint alleges, stating that he “recklessly” ceded control of investor funds to Quiros and “did almost nothing to manage investor money, even when confronted with red flags of Quiros’ misuse.”

State officials, including Shumlin, Attorney General William Sorrell, Financial Regulation Commissioner Susan Donegan and Patricia Moulton, secretary of commerce and community development, briefed reporters Thursday on the developments.

The Securities and Exchange Commission raided the offices of Q Burke Resort on Wednesday as part of its investigation and seized computers and other property.

The federal complaint focuses on six projects at Jay Peak Resort and a $110 million biomedical research center to be built in Newport, called AnC Bio. The SEC says the developers operated the AnC Bio project “as nearly a complete fraud.”

A federal judge granted motions this week freezing Quiros’ assets and the assets of companies involved in the web of EB-5 projects. The federal court appointed Florida-based attorney Michael Goldberg as receiver to manage the companies and administer the assets of the EB-5 projects named in the complaint.

Goldberg “has managed some of the largest Ponzi scheme liquidation recoveries in U.S. history,” according to the website of his law firm, Akerman LLP. Shumlin said at Thursday’s news conference that Goldberg and his team are on the ground in the Northeast Kingdom. The governor added that based on his conversation Thursday with Goldberg, he doesn’t expect significant job losses.

Day-to-day operations at Jay Peak and Q Burke resorts are being overseen by Leisure Hotels & Resorts, of Prairie Village, Kansas.

In an email Wednesday, Jay Peak’s employees were told the resort would continue to operate normally under the outside managers’ oversight and their jobs are not at stake. The resort’s communications director, JJ Toland, told employees that Quiros and Stenger remain the owners but “have no authority to conduct business or direct operations of the resort until the SEC matter is concluded.”

The federal judge’s orders also prohibit Stenger, Quiros and their companies or agents from destroying documents and gave the SEC authority to “take immediate possession” of property and assets, clearing the way for Wednesday’s raid and a full investigation.

At a hearing scheduled for April 25 at the federal courthouse in Miami, Stenger and Quiros will have the opportunity to appear before a judge and ask the court to lift the temporary orders.

The SEC is seeking unspecified civil monetary penalties and “disgorgement of all ill-gotten gains” from Stenger, Quiros and their myriad companies. Money obtained through disgorgement in securities fraud cases is often distributed by the appointed receiver back to the investors.

The SEC is also asking the Miami judge to permanently ban Stenger and Quiros from participating in future EB-5 companies or offerings. Further, the feds want Quiros barred from serving as the officer or director of any publicly traded company.

Among the many misrepresentations Quiros and Stenger made to immigrant investors was telling them that their money would be used only for the specific project to which each investor contributed, according to the complaint.

Money raised for each project was first placed in an escrow account with a Vermont bank, then transferred to a corresponding account at a Raymond James Associates brokerage office in Coral Gables, Florida, which Quiros used to “perpetrate the fraud,” according to the SEC.

The SEC says it has “numerous” emails, letters, wires and telephone calls among Quiros, Stenger and the Coral Gables brokerage office.

Among other allegations, the complaint says Stenger and Quiros continue to raise money from “unwitting” immigrant investors for AnC Bio, the duo’s most recent EB-5 funded project. AnC Bio is a $110 million biomedical research center that is supposed to built in Newport. The pair have raised three-quarters of that money already, according to the SEC.

The offering documents for the project are “rife with material misrepresentations and omissions,” according to the SEC complaint, including stating falsely that they were in the process of getting Food and Drug Administration approval for the center’s research products. They further projected millions of dollars in revenue based on FDA approvals “they had done virtually nothing to obtain.”

Meanwhile, Quiros and Stenger are years behind their original construction schedule for the research center, and the SEC says that as a result of their misuse of investor money, “there is little money left” in the AnC Bio accounts for construction, meaning the project is unlikely to be built.

Investors who contributed $500,000 each to the research center are in “grave danger” of losing their money and having their immigration petitions denied.



Anne Galloway

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  • bruce wilkie

    Anne Galloway-You are a rock star!!!

  • Annette Smith
  • Stan Hopson

    To Digger’s credit, Anne and Co. were the only Vermont media entity peeling back this fraudulent onion. Stenger & Quiros wrecked the lives of untold thousands, taking a page from the robber barons of Wall Street. As I’ve repeated here often, the absence of private equity money was a giant RED FLAG, but Shumlin and Leahy backed this ponzi scheme 100%.

    Anne have you FOIA’d Senator Leahy and Governor Shumlin’s emails regarding this whole disaster? I’d imagine there are some entertaining back and forth from all involved.

    • Penelope Chevalier

      It’s so nice to see the SEC actually enforcing laws. If we all had to suffer through the Wall Street fiasco of 2008, one silver lining would be having the SEC force all the sleazy investment bankers and CEOs to be accountable for their actions. Watching all the Wall Street executives scuttle back to their mansions counting their money while millions suffered the loss of their life savings and homes. Many of these Wall Street investment bankers should be in prison or at least heavily fined for the money they swindled from their hapless investors. Quiros and Stenger made the mistake of bilking the wrong people. Finally tasting justice is sweet!

    • Walter Carpenter

      “Shumlin and Leahy backed this ponzi scheme 100%.”

      Didn’t this start back during the Douglas era? I seem to remember something about it back then too.

      “Steiger & Quiros wrecked the lives of untold thousands, taking a page from the robber barons of Wall Street.”

      Agreed. It is just like the robber barons of Wall Street, both in the 2000’s and the late 19th century, and of the likes of CGI, and it shows the need for much tighter regulation and control over this projects. And thanks much to Anne and the digs for exposing this sinkhole for what it really was.

      • Carl Werth

        No, Walter, the Vermont EB-5 program did not start under Gov. Douglas. It started under Gov. Dean.

        • Walter Carpenter

          “No, Walter, the Vermont EB-5 program did not start under Gov. Douglas. It started under Gov. Dean.”

          Thanks, Carl.

  • Thank you, Anne, for some of the best investigative reporting in Vermont’s history.

    • David Matthews

      Yes. Having watched this evolve for a long period of time, the professional work by VTDigger is certainly worthy of being the leading candidate for the next Pulitzer Prize in Local Reporting.

    • Peter Conlon

      vtdigger has never backed off covering these EB-5 projects and their principals with a critical eye and lots of hard work despite plenty of blowback. Journalism at its best! Now to find out if Quiros was making a chump out of Stenger.

  • Bruce S. Post

    Susan Donegan = Hero

    Bill Sorrell = Redemption

    Bill Stenger = Plea bargain

    VT Digger = Pulitzer

    Peter Shumlin = RESIGN!

    • walter moses

      Ariel Quiros?
      Patricia Moulton?
      More coming.

      • Neil Johnson

        Irony…of bad investments.

        I can go on vacation to Jay Peak. Stay in a very nice place. Real jobs are created.

        Having applied for health care insurance last June, told I couldn’t apply until December, applied in December and I’m still waiting. I can get now health insurance as the $2OO million dollar website doesn’t work.

        How could there have been such a lack of oversight from the Feds and State? If I change address on my little real estate trust account I have to notify the state.

        We need more facts. Was this project on budget? How many funds were released from Tthe state? What were the actual complaints? Was the 50 million his profit or other funds?

        • I also find it odd that at least some good comes from bad or dishonest intentions. I guess that is how we get fooled. They don’t take the money with a gun in your face, they make you feel good about it. That’s the con.
          I think $50 million would be a very high profit to expect from a $350 Million investment of someone else’s money. As far as lack of oversight, I think that no matter what the good intentions are with EB-5 projects or any other, there are people out there that can find a way and have the audacity to cheat the system. That is why our laws and Constitution are so complex.

    • Bruce…..before starting to hand out awards, wouldn’t it be better to first learn the facts?

      How did this mess happen when the state’s EB-5 regional web site clearly indicates that the Department of Financial Management(DFM) has responsibly for monitoring the flow of funds in these projects from the onset, is responsible for negotiating Memorandum of Understanding containing covenants and conditions and is responsible for visiting the job site quarterly. All this to insure that funds are properly handled and investor interests are protected.

      Instead of being involved from the project get go per state standards, DFM apparently only became involved in the matter about a year ago or well after construction commenced. Why the delay and who made the decision for such a delay? A delay that could be the cause of millions of unaccounted for dollars.

      If anything is amiss here, I don’t not believe the problem resides in the DFM or with the Commissioner as she has proven herself to be a responsible and no-nonsense regulator. Decisions involving significant variances from written policy are made way above the Commissioner level.

      At this point we have little idea of what has happened and should demand answers to the many outstanding questions surrounding this matter before assigning blame or acclaim.

      Also, I definitely have no interest in defending Stenger or Quiros other than to expect they will get their day in court.

      • Neil Johnson

        A simple accounting procedure and oversight would have prevented all of this. Get $55 million for hotel, withdraw from that account as funds are needed, work completed. It’s a simple process that all banks use with contractors. In this case the EB-5 is the bank. If this was the process we’d have no issues.

        How were projects allowed to become a Ponzi scheme?

    • Bruce S. Post

      Also, a trip down Memory Lane: http://vtdigger.org/2013/08/09/leahy-proposal-would-tweak-eb-5-job-creation-formula/

      Hillary Niles did a good job illustrating the EB5 job creation scam, as she did today on Vermont Edition.

    • Neil Johnson

      We need some more facts. Until we have money trails we have nothing. Don’t forget that this program was allowed by the regulators, federal and state for what decades? You can’t open up shop for anything in Vermont without serious over site.

      For a simple real estate transaction money has to be put in accounts and reported to the state every year. If you don’t file a rooms and meals tax form every quarter, the state bills you immediately $5,000 even when no tax is due. The irs will seize accounts quickly if you don’t pay when due……

      So how could the state allow this? How could they have had such lax oversight on such a vast amount of money?

    • Willem Post

      Bruce,
      Vermont’s senior US senator heads up the Senate EB-5 committee, likely knows of other fraud situations.
      This must be cold shower to top off a long career in the Senate.

      • Neil Johnson

        Perhaps this will be the year he decides to retire and spend more time with family.

        How convenient.

  • Jim Christiansen

    Anne- can we be treated to a photo montage of all the Vermont politicians affiliated with this mess from day one? Please.

    • Walter Cooper
    • Irene Stewart

      Anne’s photo montage would be very, very large, especially with all the pictures of Stenger and Shumlin. The Governor could not miss one opportunity to be included with all of Stenger’s announcements. But yes, it would be a great montage to hang in a man cave!

      • bruce wilkie

        “I’ve got an offer you can’t refuse’

      • George Cross

        Laying the blame for the dysfunctional EB-5 program at the doorstep of any one Governor is disingenuous and wrong. As indicated at, http://www.eb5investors.com/magazine/article/The-Public-Private-Prototype, the Vermont EB-5 program started under the leadership of Governor Dean and his administrative team. Over the years it has been nourished and flourished by/under Team Dean, Team Douglas and Team Shumlin. It has not only been the Governors who have championed EB-5, but also their numerous advisors, secretaries and commissioners and any number of Vermont business groups. On several occasions, a cadre of administration bigwigs and Vermont business leaders has traveled the world seeking investors. Both those who want to solely blame Jim Douglas and those who solely blame Peter Shumlin for the problems now uncovered in the NEK EB-5 projects are off-base. Many are to blame and the architects of the NEK projects simply exploited the excitement and trust of many politicians, including Vermont’s congressional delegation, for personal benefit. It is sad day for Vermont.

        • Jim Christiansen

          This isn’t a story about the failures of a program championed by many. It is a story of a particular set of indivuals and their projects that appear to have been used to perpurtrate fraud.

          Our Governor, and others, eagerly and often extended campaign hands for contributions from the perpetrators of this alleged fraud.

          It is reasonable and right to ask about this pay to play with the elected officials that oversee the administration of the regulatory process in Vermont.

          “Gosh, we were bamboozeled by those fancy talkin’ city folks again!” is not a valid excuse Mr. Cross. It is a pathetic statement of administrative incompetence.

        • Everyone’s to blame……so no one’s to blame……..and with this type of thinking our government continues its downward spiral.

          What a sorry state we’re in.

    • Good opportunity for a guilt by association project. If you think that you can’t be conned, think again.

  • Erica Heilman

    I concur with all above. Thank you for all the great reporting on this story. And thank you for also including the press conference audio here.

  • Jeff Nichols

    So they were able to divert money from the approved projects to illegally buy Burke Mt, and then talked the regulators into starting up the EB 5 Burke Hotel Project? Wow. Leahy and the other enablers look like accessories to fraud.That this was in motion while Stenger honored as “Citizen of the Year” is something Mark Twain would have enjoyed writing about.

  • Steven Gorelick

    Meanwhile, a full block of Newport’s downtown — including a row of historic, pedestrian-scale buildings that formerly housed small locally-owned businesses — has been demolished. The now-vacant lot should be preserved in its current state as a reminder that the promises of snake-oil salesmen like Bill Stenger and Peter Shumlin will forever be empty.

  • John Dupee

    Nifty piece of reporting Anne.

  • Tom Wheaton

    If true, this is devastating. Bill has done so much for Vermont. I am willing to wait a little while longer to pass judgment, but I mean, wow this horrific if true. I just can’t imagine Bill actually doing this.

  • Jeremy Wheeler

    If Bernie’s campaign is smart it will put pressure on Leahy, following his backtracking on EB-5 in recent days, to disavow “establishment politics” and support him as a superdelegate. Note also that. HRC’s brother is involved using political connections in an EB-5 scheme:

    http://www.politico.com/story/2015/04/touting-connections-hillary-clintons-brother-takes-on-philly-project-116596

  • Bryan Allard

    So, burke mountain had gone tits up again. Just like it did with the last owners, and the ones before that, and the ones before them, and them, and them. Come to think of it, I think every owner with the exception of one has failed at making the ski area a viable business. I remember Quinn, the schaffers, Holmes, Ginn and now querios/stenger. I remember all the illusions of grandeur and everyone talking about “when the mountain takes off”! It got close this time but it had one fatal flaw…. the owners were crooks. If you couldn’t see this coming you’ve had your blinders on!

    (1) Success is crawling from failure to failure with the same enthusiasm.

    (2) Insanity is doing the same thing over and over again and expecting different results.

    Every owner since I can remember has promised the first and been guilty of the second.

    And now here’s the punchline: Burke mountain will never work.

    • Neil Johnson

      We went through the same thing for years at Sugarbush. Winn is doing a good job now, been there for years. If they can get the hotel open soon, perhaps the next owner if they buy right will do well. Don’t forget the land leases under the hotels….those could be problematic.

  • Kathy Leonard

    Does anyone else remember an earlier proposal Stenger had for the Jay area… where he was going to build a large number of senior living condos… also with EB-5 investments?

  • Joseph Brown

    When Tony Pomerleau pulled out of that deal with Bill Stenger on the building in Newport it told something of what would eventually take place.

    • Phil Lovely

      Thank you Joseph, for mentioning Mr Pomerleau. He would be an interesting interview. When he, born and raised in Newport, withdrew from the Lakefront Project, it had to be for good reason. What did he see that took others over a year to discover?

  • todd spayth

    Unfortunately, JAIL and being stripped of ALL assets, doesn’t come close to the punishment they’ve earned. They will both look awesome in orange jump suits! I hope the investors will be kept informed, really informed, as this thing unfolds and remunerated wholly and quickly.

  • Pete Novick

    Yes, I echo others in a strong shout out that VTDigger be nominated for and awarded a 2016 Pulitzer. What a classy news organization, and one totally committed to the public interest.

    Every day while this story plays out, please run that picture of the old white men, including the leaders of Vermont’s political ruling class, standing in a line, all wearing that smug look that elites get when they all know the punchline to a bad joke that none of the rest of us are privy too.

    I sure wish Robert Penn Warren were alive to see this.

    Freedom and unity indeed.

    Cheers

    PS: An especially smug Senator Leahy calling for changes to the EB-5 program. That’s rich.

    PPS: Senator Leahy is the poster child for term limits.

  • Gary Murdock

    As long as we have all of this federal law enforcement in town can they look at VHC and the administrations use of federal Medicaid dollars?

  • Emily Seiffert

    Brava, Anne and VTDigger!!

  • Ron Pulcer

    Very good reporting by VTDigger! Thanks.

    “Ponzi-like scheme”? Probably not to the extent of Bernie Madoff scandal, but at a more Vermont-like “scale”.

    To riff on Donald Trump’s top campaign pledge, maybe we should build a “Big Beautiful Wall” around the EB-5 Program?

    Wonder if this will get any “mention” by moderators or candidates in tonight’s Dem Debate in Brooklyn? When it’s the big Wall Street Banks, the SEC, Justice Dept. and Congress sure drag their feet. When it happens way up in NE Kingdom of Vermont, the SEC acts “swiftly”! Hmmm.

  • Ed Fisher

    I told you so, I told you so !……..The citizens of Vermont must ,right now, take into consideration the involvement of the political leadership of the state of VERMONT ! How would one seriously NOT consider that each political office ,Gov.Peter Shumlin’s Sen. Pat Leahy’s , Sen ,Bernie Sanders , Con. Peter Welch could NOT be involved in this Ponzi- scheme ! Makes you wonder doesn’t it , ………….about the personal off shore portfolio’s being investigated by the “Panama Papers “????? Still want Bernie for president ?

    • Walter Carpenter

      “Still want Bernie for president ?”

      Yep.

  • Ben Hewitt

    These goons should be condemned to pass the remainder of their born days paddling sad little laps in the tepid, piss-contaminated waters of their ridiculous water park.

  • Randy Koch

    Stenger and Q were substantial contributors to Shumlin’s campaign last time he ran: $14000 (http://digital.vpr.net/post/businesses-give-big-shumlin-campaign#stream/0)

    Hard to believe Shumlin ISN’T resigning. He should at least donate the 14k to beautifying Newport after his political supporters used it as a toilet.

  • Peter Bullock

    “The defendants, if found liable, will face no jail time…”

    How can this be?

    • James Leopold

      The U.S. Attorney Eric MIller can still file criminal charges.

    • Karl Riemer

      Because the charges filed so far are in civil court, where the penalties are financial. Only criminal complaints result in incarceration. That may happen, but the first step was freezing assets and seizing records in an attempt to preserve as much as possible for recompense of investors and payment of creditors, as well as gathering evidence for ongoing investigations. Several chapters to this story are yet to be written and could well include criminal charges.

    • Willem Post

      Peter,
      They performed a lifetime of community service, I.e., no jail time.

    • Walter Carpenter

      “The defendants, if found liable, will face no jail time…”

      Good point. Why is that?

  • Dave Bellini

    Earlier this month Q-Burke wouldn’t allow VTDigger to attend the meeting with the Vermont Department of Labor regarding layoffs. How strange is that? Apparently folks were getting nervous. This is a giant mess and it will take time to untangle. Eventually the regulators will uncover will determine if corruption & fraud took place. Now that it’s a “federal case” Vermonters will likely see court cases. This sounds like the Fletcher Allen debacle years ago, only much worse.

    • Jamie Carter

      “Earlier this month Q-Burke wouldn’t allow VTDigger to attend the meeting with the Vermont Department of Labor regarding layoffs. How strange is that?”

      My guess is they were just po’d at digger. Frankly I don’t blame them, I wouldn’t have let them on the property either. It’s much like Shumlin basically ignoring 7Days.

  • christopher hamilton

    It will be interesting to see how this mess falls out for the EB-5 investors.
    On the one hand, they clearly picked the wrong guys to invest with. And how!
    However, they ponied up half a million each, believing that their money would be put to work honestly to create jobs in a depressed area.
    Will they lose the ability to receive a permanent green card because hucksters misused their captial?
    In some ways this story is just beginning.

    • Neil Johnson

      But we haven’t even been told of the complaints. We don’t know what they are. More facts please.

  • So what happens in downtown Newport?

    • Kirk Blanchard

      We wait, Steve. We wait. Tony Pomerleau has stated he might be able to do something for downtown Newport City but it will take a lot of money and plenty of time. He’s 98 so he worries he won’t have much time left.

      In the meantime I think the best thing is to either leave it as it is as a harsh lesson in objectivity for those who buy into “too-good-to-be-true” scenarios or fill in the “canyon” and make a block-long grassy park where folks can actually enjoy themselves for a while until something is decided…or not.

      • Thanks Kirk. I used to work in “economic development” in my little town, Brandon. It was like bashing your head against a brick wall. I remember sitting in a meeting in early November, because we are a State of Vermont Designated Downtown, in that new building that looks out onto the harbor, listening to people, Newporters, talk about Stenger’s plans for the town. And thinking to myself, wow, would it not be great to find someone like that for Brandon. Well, I never found that person, and I quit the job in disgust (and have never been happier) and I will just let others pay for redevelopment in the town (state grants) so I don’t have to pay through tax increases except for public education!

  • Donna Fitch

    Very much appreciate Diggers’ digging and clear reporting of the details of this situation. The projects, and estimated number of jobs that would be created, seemed to me to be too good to be true when Stegner and Quiros first announced their plans. I don’t understand how the State could fall for it. Where’s the common sense?

  • David Iverson

    I don’t know who the EB5 investors are, but my strong suspicion is that if you put as much effort into investigating them as you did Ariel Quiros, you’d find that they are cut from the same cloth. Nobody has given me any reason to feel sympathy for a rich foreign investor who is buying US citizenship and losing money to another rich foreign investor (but still getting the citizenship piece of it).

    Burke Mountain has a nearly new high-speed quad, upgraded snow-making and a hotel that is ready to be occupied once the contractor is paid. Those were one the long-term plans of previous owners, but they never happened. That’s probably because you can’t build those projects in the NEK without a Ponzi scheme. The fact is that many things have been built with this money and many people have (mostly) been paid for their work.

    Wasn’t the entire point of EB5 to get out-of-town rubes to invest in things that the savvy investors wouldn’t even consider? Wasn’t that why we threw green-cards into the mix?

    Ariel Quiros may have illegally used millions of investor money to pay his taxes. But, you know what, he paid his taxes, which is more than you can say for the majority of US corporations.

    In America today, when you line your pockets with billions of dollars from lower-middle-class workers who want to buy homes, you get a tongue-lashing and then a government bailout. But when you graft some money from the previously ill-gotten gains of the foreign 0.1%, you’re going to get prosecuted.

    Sorry to go against the tone of the other comments. But that’s how I see it.

    • todd spayth

      Are you kidding with your supposition that the investors are cut from the same cloth and using ill gotten gains? My father gave me some advice many years ago which has served me well….Let people assume you’re ignorant. Don’t stand up and prove it!

  • So the FAA and the State were sold on this public/private partnership and paid tens of millions of dollars for a runway extension and consulting fees at Newport Airport based on Bill Stenger and a false bill of goods (brand new terminal building). I would like to know who agreed to allow taxpayers being on hook for this and why the state and feds green lighted this with absolutely no formal agreement from Stenger. Sounds absolutely foolish to me.

  • Howard Dean

    I have to say, I am sad as well as mad. I agree with Tom Wheaton, This program was brought to Vermont under my leadership by Frank McDougal, who was originally appointed by Gov. Snelling if I remember right. All four of us and every other Governor in my lifetime has tried to do something to create jobs in the Northeast Kingdom. This program has worked elsewhere, and seemed like a great way to do it. Indeed, over the years there has been a great deal of job creation under Bill Stenger at Jay Peak.
    It seems to me that the program is not the problem, it was the fact that Bill took on an out of state crook as a partner, and that’s went things went south. I am sure there will be plenty of blame to go around, and I am hopeful that jail time for those who are responsible will be one result.
    For whatever oversight sins may have been committed by all of our administrations, I also am thankful that Gov. Shumlin’s folks did what they could to keep the jobs at Jay Peak under a receivership. Those working folks are the last people who should be punished.
    Jobs in the Northeast Kingdom continue to be a critical issue for Vermont. It’s important that we not let the moral failures of those who put greed ahead of service become an excuse to forget about those people whose lives have in fact been changed for the better by expanding opportunty in the most vulnerable part of Vermont. As this Ponzi scheme unravels, let us not forget the people who still deserve out commitment.

    • Azur Moulaert

      Even without a Ponzi scheme – How is a Disney like monstrosity coupled with big biotech dreams of any value to sustainable rural development? The character and heritage of the Northeast Kingdom, Vermont as a whole ,is clearly not this feudal system. What are these “new jobs” for? cleaning the rooms of rich people? building luxury condos? Vermont needs to move away from this economy of servitude as soon as possible.

    • Kim Fried

      Fully agree with your assessment Governor Dean with the exception of how Shumlin and his administration snuggled up to, and ultra supported this operation. No over
      site until things got ugly and then they take action to attempt to convince us that they didn’t benefit over the years. I hope the SEC looks at the political involvement as well as the developer’s wrong doings.

    • Steven Farnham

      While your assessment of things “going south,” when Stenger “took on an out of state crook as a partner,” may have some merit, I happened to be in House Ways and Means one day in the mid-nineties while Stenger was holding court, and he sure impressed me as being pretty silver tongued. What we have here is the classic “perfect storm.” We have a depressed area where people are desperate for economic opportunity and jobs. We have politicians that are desperate for political capital; they want to appear that they’re making a (positive) difference, so they can “grow their electability.” We have architects and contractors that want to make money, and thus want to build things. We have foreigners who want to cut to the front of the queue (essentially cheat the system) to acquire green cards, and we have created a program of dubious ethical merit, to profit from said foreigners’ impatience.

      In a classic case of fox guarding the chicken coop, all that was needed was a fellow like Quiros to assemble the pie-in-the-sky Ponzi scheme this has become. Now we can all pretend to be suffering from a bad bout of “Shock and Awe,” like we couldn’t see it coming. To be sure, the scheme might have worked, if this winter hadn’t been such a skiing industry-busting no-show. (Occasionally, one has to just stand it awe of Mother Nature’s sense of timing.)

      We should stop throwing money at people who make dubious claims to be providing jobs. We shoveled some $4M into the coffers of the Emir or Abu Dhabi (like he isn’t rich enough) in hopes that Global Foundries would breathe new life into the aging IBM plant. Now it appears the Emir wants to offload that boat anchor:

      http://www.timesunion.com/business/article/Abu-Dhabi-reportedly-looking-to-sell-6655678.php

      Are we going to throw another $4M at the feet of the next prospective buyer?

      Governor, you are spot-on correct about one thing: “Those working folks [in NEK] are the last people who should be punished.”

      And here is a simple two-point plan of what we need to do to stop punishing them (and all Vermonters):

      1. It’s high time we redirect economic development funds into smaller Mom and Pop (Vermont)-sized ventures, enabling Vermonters to build and own the businesses that are the economic engines Vermont needs. Let white elephants like IBM go as they should: The way of the dinosaur.

      2. Abolish EB-5. Why should rich people be able to buy an easy ride through the immigration process? We should expedite the process for all applicants – or none. That is the foundation of what built this country.

      Kudos to Anne for some excellent digging!

      • Ron Pulcer

        Yes, I agree. There should be more focus on helping entrepreneurs in Vermont towns and cities build up our own “local economy”, instead of always being “dependent” on out of state and foreign corporations. They often expect tax breaks, corporate welfare, and in return do whatever they can to avoid paying taxes, leaving it to the resident taxpayers.

        The owner of Global Foundries, the emir of Abu Dhabi is on the list of government officials in the Panama Papers. Of course, the Panama Papers makes this Quiros / Stenger fiasco look like child’s play. But still! When will we ever learn!

        https://en.wikipedia.org/wiki/List_of_people_named_in_the_Panama_Papers#Government_officials

        https://projects.icij.org/panama-papers/power-players/#35

        Yes, abolish EB-5! At least in Vermont, if that is possible, given it is a federal law.

        • Walter Carpenter

          “There should be more focus on helping entrepreneurs in Vermont towns and cities build up our own “local economy”, instead of always being “dependent” on out of state and foreign corporations.”

          Agreed with Ron and Steve on the helping our own local entrepreneurs rather than these corporations or out-of-state big developers and so on, who just rape us for what they can and move on. I do not know that much about the EB-5 program, though I am starting to learn about it, and am not sure whether it needs to be abolished or not, but think that if we in Vermont continue it the program has to be tightly regulated and watched over.

    • Bruce S. Post

      Are you trying to implicate Dick Snelling in your little chain of complicity?

  • Kevin Jones

    I couldn’t agree more with all of the praise for Digger and Anne Galloway. While this may currently be the most dramatic example, it is only one example of how our state government has lost its way and become much too cozy with large business interests in the state to the detriment of our state’s future. We need a wholesale change in leadership for our state government in November and instead of hearing about how we need to continue on the current path of the Shumlin administration hopefully we can hear about what these candidates will do to dissassociate themselves from these failed policies and start working for policies that benefit all Vermonters not just the business elite.

  • Azur Moulaert

    Many questions: Where are Stenger and Quiros? Flight risk anyone? who are their lawyers? is it normal for the SEC to file charges of that magnitude without criminal charges? How is stealing 50 million dollars not a crime? how come buying a visa/green card for $500,000 is even possible? how does “large bourgeois over priced entertainment coupled with biotech’s miracle workers” fit the Vermont way?

    Small is beautiful folks. These mega-plans are to big so they will fail.

  • Kathy Callaghan

    This is such a sad, sad day for the people of the Northeast Kingdom and of Newport in particular. My heart goes out to all the folks who have had their hopes dashed by these charlatans. In ways this reminds me of the of the Madoff scheme. I’m happy that a management company has been brought in to run Jay Peak and that the jobs will continue. From the reporting thus far, it appears that the state and the Feds have done a good job in managing this mess for the benefit of the Jay Peak workers.

  • Congratulations to VTDigger, not only for such fine reporting, but also for pioneering non-profit journalism. The wave of the future, I hope!

  • This is why I subscribe to the Digger. You guys nailed it yet again. THANKS for your work. I think I’ll increase my donation.

  • JP Cook

    It’s interesting to see Shumlin and Leahy running for cover and back-pedaling and distancing themselves. Mr. Dean suggests the program worked! Where were all these jobs? Actual jobs, not “ghost” jobs that weren’t directly connected to the projects and presumably will happen.

    I believe Vt. Atty. General Mr. Sorrell was too busy investigating Annette Smith to be bothered. US Atty. Eric Miller suggests it may not be a criminal offense tells us it’s business as usual with politicians and moneyed interests. The “corporate capture” and too-cozy relationships between the Shumlin administration and the EB5 program and renewable energy developers are now showing their seamy underbelly. We should thank Mr. Shumlin and his crony administration for doing more to destroy Vermont in every way, including its “mystic of Vermont pure,” destruction of Vermont’s ridge lines and natural landscape with a bogus renewably energy fiasco (thank Mr. Tony Klein for this too), and for bringing Vermont to the same level of politics as has been in the national level. After all, Vermont doesn’t want to be left behind.

  • victor ialeggo

    Stenger still in S. Africa? I hear Jacob Zuma is looking for a new court jester.

    Anne & Hillary: great work digging [sorry] this story out of the dirty snow over the years — when no one else wanted to touch it!

    PS. Anybody think Patrick Leahy was tipped off to the SEC moving in and changing locks the other day? Or was convening an EB-5 roundtable the other day just…serendipity?

  • Glenda Nye

    Anne Galloway, Thank you for the excellent reporting on Ariel Quiros and Bill Stenger. I think that US Senator Patrick Leahy and Governor Peter Shumlin should both be forced to resign, this is not only an embarrassment, but an indicator of incompetency and complete indifference towards hard working Vermonters, who struggle to financially survive in this state.

  • Bill Olenick

    Thank you Ann and Digger staff.

    Back in the 60’s I was fond of the Diggers work and it continues with a new breed of Diggers, but this one keeping us informed.

    Bravo Zulu

    William Olenick

  • I’ll add to the other comments. Nice work Anne and VTDigger! VTDigger is definitely the place to go for VT news and commentary.

  • Mark Isenberg

    While not a surprise, it is nonetheless ironic that, after all the years of this federal and state government program, all of the “oversight” imposed by several state and federal agencies, and the massive Jay Peak development that has already been completed, it is just now being termed a “ponzi scheme”? Shumlin shilled this program and development relentlessly. Another shameless attempt on the part of our inept public officials and agencies to grab cash and glory because they can’t responsibly manage what we give them through taxes. Lock em’ all up.

  • Steve Merrill

    The Jobs ARE Coming!! It’ll take HUNDREDS of well-paid Lawyers to “untangle” this mess, and we have called it “Ponzi Peak” for years as the P.T. Barnum of the NEK spread the promises like the liquid manure up here. Biggest question yet..Will Newport’s mayor dig his “Thank You Bill Stenger” sign out of mothballs and once again unfurl it over City Hall? A simple net search revealed that a “corner office in a sport’s betting firm” was AnC-Bio along with damn near NO info on Yahoo business’s site when we began “digging” in 2009. Thanks to Anne & Digger though, as of yesterday there was NO “front page” coverage in the LOCAL “newspaper”, wonder why? SM, N. Troy.

  • Steve Merrill

    Oh–I almost forgot, when I was a Village Trustee Bill Stenger barged into a 2005 meeting (we were busy @ budget time) and DEMANDED we throttle our Police Chief and stop STOPPING his “customers” ripping through at high speeds, so he got “compliant” members elected and Ta-Dahh!! NO more NTPD! As of now we are STILL violating our charter w/NO Constable, yet there’s NO “enforcement” short of suing ourselves? Just a few months ago Stenger was at the school meeting DEMANDING we “bond” a new property & pre-school for “all his employee’s children AND the employees to COME” (Emphasis mine). He said he was sorry he couldn’t vote here for it, but said nothing about “donating” to the school or PTA with his personal “funds” either. This guy has been throwing his weight around and demanding things for far too long and now the gig is up. Thanks for nothing, Bill. SM, N.Troy.

    • Walter Carpenter

      “Thanks for nothing, Bill.”

      I am sorry you had to go through that with this bully.

  • Richard Simon

    Just learned of this terrible story from my immigration attorney.

    I see that some commenters have very little sympathy for the investors. Commercial immigration is a popular method used by countries around the world to stimulate growth in communities that are suffering from high unemployment. It’s supposed to be a win-win situation.

    I chose THIS EB-5 investment because it was supported by and controlled by the State of Vermont.

    Now I have to wait and see whether any of my investment will be returned to me.

    • Kim Fried

      As a Vermonter I apologize for your misfortune. Many Vermont citizens have also learned the hard way that Vermont’s present government is not reliable or responsive to individual’s problems.

      • Walter Carpenter

        “Vermont’s present government is not reliable or responsive to individual’s problems.”

        Considering what we know from the digger’s solid reporting on this, would any other government in Vermont, past or future, have done any better?

    • Joe Perry

      Richard, as a Vermont resident I’m sorry you are caught up in this. If you read the published reports from the Vermont EB-5 web site, we looked like the gold standard for the country. Unfortunately we are a single party state with out a opposition party willing to rock the boat. Many warning signs were ignored, and now everyone is pretending they did not know. I used to believe the state was inept, now I fear it is inept and corrupt and no one is asking the right questions or demanding honest answers. As the state ran the EB-5 program why wasn’t the money tracked better. As I understand the state did not even require reports the first 4 years. I am afraid your money is gone, and you will have to sue the state to get a portion back, that will then be paid out of my wallet by increased taxes and fees. I hope someone on the federal level is investigating the state before the shredders run to much, but I doubt it.

      • Walter Carpenter

        “Unfortunately we are a single party state with out a opposition party willing to rock the boat.”

        Would the opposition party as you say have rocked the boat, considering that this was an “economic development” project and that their mantra is always about jobs? What was that saying, “Jim [ex-governor Douglas] equals jobs,” and there was big job creator in an area of the state that needs jobs? The tragedy is that the intent was good, but some silver-tongued shysters took advantage of a need and those who need it the most, I hope, do not suffer the most.

        • Joe Perry

          Walter,
          I am not a Republican (or Democrat), but the fact remains that that this Administration miss-managed the running of the EB-5 program. The jobs were never there, the hotel cost twice accepted national average. From the website “Investors are ensured that Vermont EB5 Regional Center projects are monitored by an independent and qualified regulatory authority – DFR.”
          I believe the investors have a great case to sue the state of Vermont. Notice how any time money numbers are referenced, its refused to be released “due to sensitive nature”. Anyone can tell you a ski area will not clear millions in profit in the 5 year loan period to pay back these loans. The Governor has been trying to delete emails for the last year for a reason. This is your and my money that Richard Simon and his lawyers will get. People should be marching in the streets demanding answers, but we really are sheeple now and NO One will demand answers. The Jay Peak complex does not make money to support itself, we will see empty buildings with in 5 years. I am sad for the people whose lives are being ruined, but there is now plenty of blame to go around, and the main reason I am upset is because my income will be impacted by higher taxes to pay out the lawsuit this state will lose.

      • Kim Fried

        Yes Joe we USED to the gold standard for the country but that status has been squandered by this administration and the patrician politicians in Montpelier and it will take years and years to reclaim. I completely agree with your every word/

    • Neil Johnson

      so if they sue the state and win, the tax payers are on the hook. Meanwhile those who didn’t do their job continue without penalty. We need some accountability. Leahy sending $5000 of campaign contributions to a Kingdom day care is patronizing at least, it’s not even his own money for God’s sake. Meanwhile contractors are getting the biggest shaft by far.

  • John Grady

    We might end up with some GREEN jobs in the Tourist Industry making beds and serving meals so the children can put their education to use. If they finished 3rd grade it would have been good enough.

    It’s another example of a generation of hacks in action. The same people created Food Stamp Nation for some people while stuffing their own pockets here in McMansion Nation. Instead of working towards building a better future the psychopaths worked at exploiting the system for personal gain and destroyed the country.

  • Lyle M.Miller Sr

    Please don’t let Shumlin out of the investigation or Leahy, Welch, and Sanders.

  • Michael Sakash

    Dose anyone know which of Vermont’s banks were involved in this and are they in any danger from their involvement?

  • todd spayth

    This should be handled the same way as a drug bust, ALL equities are assumed ill-gotten and confiscated. Being shielded by incorporation should be nullified in the face of fraud. Also, I cannot believe these guys are not IN the GrayBar Hotel where they cannot continue to mask their deceit. AND, how is it improprieties were “legally” discussed between the SEC and Defendants in 2010 and heightened scrutiny was not applied? SIX years later…..Really!!!!

  • Ralph Colin

    What I find really surprising – even amazing – is that nobody up to this point has mentioned that U.S. Attorney Miller’s wife was for several years and up until just a few months ago Govern Shumlin;s Chief of Staff? Could she have been aware of any of these matters.

    Could be a sticky wicket for the U.S. Attorney.

  • 25sRaQ Quiros’ brother in law is the owner of the biotech company and I find it very hard to believe our politicians did’t see this coming but were distracted by the donations and now the gov.wants emails deleated the state better get a hold of this situation before all the fish slip out of the net

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