[A] Jay Peak investor who threatened developer Bill Stenger said the significant payback he received now seems more like “hush money” than a return on his investment.
Carlos Duarte, an EB-5 immigrant investor at the ski resort, said the Jay Peak developer agreed to pay his $500,000 investment back much sooner than others after he threatened to publicly complain about the way the developers did business. Duarte says he was upset when Stenger and his partner Ariel Quiros changed the terms of the original investment deal — converting the investors’ ownership stake in the Tram Haus Lodge into IOUs.
Duarte says he had received $300,000 in payments before the fraud charges broke two weeks ago. By comparison, his fellow investors had been paid back $74,500.
Duarte says he cut the new deal with Stenger after the developers changed the exit strategy in August 2013 but didn’t tell the investors until January 2014. Instead of being paid back at the end of five years for their ownership stake in the hotel, as originally promised, the investors were given an unsecured, nine-year promissory note that was not backed by real property.
Furious about the new arrangement, Duarte says he exchanged emails and voicemails with Stenger for three months. The Jay Peak CEO kept promising him a special arrangement, but the new exit strategy didn’t materialize.
At the end of April 2014, Duarte says he left a voicemail for Stenger threatening to hole up in the “fanciest hotel in Burlington” for two weeks and make phone calls to every major news outlet in the region about how he had been mistreated as an investor — unless the Jay Peak CEO paid him what he was owed immediately.
“The exit strategy – that was a red flag for me,” Duarte said in an interview. “The 10-year note — that was unacceptable to me — that was when I started to hound Bill Stenger. I didn’t know at the time obviously what was going on so my threats really hit home to him because it wasn’t in terms of violence. It was in terms of well, I’m going to subpoena all the investors, and I’m also going to pack myself up to Burlington, and my background is in radio and entertainment, and I’m going to go on every radio station and every TV station and every newspaper and ask why we’re not getting our money.”
“He probably thought the last thing I need is this guy. Of course looking back now, he couldn’t have slept that night,” Duarte said.
Duarte says Stenger, for a change, called him right back, and in a deal that was eventually arranged with attorneys, Stenger agreed to pay Duarte $103,000 a year for five years.
In return, Duarte agreed to stay quiet.
Before news of the charges broke two weeks ago, he had received three of the payments.
“Looking back at it now, it really looks like hush money,” Duarte said.
Stenger did not respond to a request for comment. The former CEO of Jay Peak has been accused, with his partner, Ariel Quiros, of diverting $200 million in immigrant investor funds. Stenger has maintained he is not guilty of wrongdoing and he is cooperating with federal regulators.
Duarte says he feels lucky to have gotten as much as he did out of the Jay Peak developers.
While Duarte got a special deal with significant sums up front, the other investors in the Tram Haus received a $10,000 payment in 2014 and two repayments of $21,500 each in 2015 and 2016. All of the Tram Haus investors have received green cards and permanent residency in the United States.
The Tram Haus Lodge was the first development in a suite of six projects at Jay Peak Resort that was built with EB-5 immigrant investor funds. The SEC investigation alleges that Quiros used the $500,000 investments made by 35 investors in the hotel was to buy the Jay Peak Resort in 2008.
That revelation didn’t come to light until the SEC charged Quiros with diverting funds on April 12.
But nearly two years prior, the Tram Haus investors knew something had gone wrong. In January that year, Stenger sent a letter to investors about the conversion of their ownership stake into loans. Twenty of the investors were incensed at the seizure of their asset, which Stenger claimed in early 2013 was so profitable that he was thinking of buying it from the investors himself. They sent emails to the Vermont EB-5 Regional Center, demanding that state officials take action to curb Jay Peak investor abuses.
But their complaints fell on deaf ears. The state defended Stenger and dismissed the investors’ concerns. In July 2014 Stenger changed the deal yet again — he shortened the loan period from nine years to five years with payments of $21,500 for the first four years and a balloon payment of $434,311 in the final year.
Tony Sutton, leader of a group of disgruntled investors in Tram Haus, which has now grown to 25 and includes Duarte, says, “Nobody agreed and nobody signed the promissory note terms.”
VTDigger wrote a series of stories in 2014 about Stenger’s treatment of the investors and the state’s lax oversight of the Jay Peak projects.
In a November 2014 letter to investors, Stenger discouraged investors from talking to the media, and he wrote that a VTDigger article about specific investors “could be extremely damaging to individual investors and their visa status.”
Sutton said by email that Stenger tried to mislead investors about their green card status “by quoting a 2009 amendment that specified that they were required to have set criteria in terms of income or net worth.”
“This was another failed scare tactic that he tried to use to make investors think that their immigration status was in jeopardy,” Sutton said.
Sutton has sent a letter of complaint to the Vermont Department of Financial Regulation about the special deal, and possibly others.
Sutton says in all the investors are still owed $15.9 million total.
But Michael Goldberg, the court-appointed receiver for the Jay Peak Resort, has said $14.87 million is owed to the Tram Haus Lodge investors.
The $1 million difference, Sutton says, open “the distinct possibility that there are other investors who also cut deals with Stenger.”
“The math is very simple, if all investors were treated equally and Stenger had he tried to adhere to some kind of fiduciary responsibility, and now we all can appreciate that he had trouble recognizing that concept,” Suttton wrote in a letter to the Vermont Department of Financial Regulation.
Editor’s note: this story was updated April 30, 2015 at 11:30am.
