Business & Economy

Fraud case leaves heartache, and ‘hole,’ in Newport year later

A fence surrounds the “hole in the ground” where the Renaissance Block was planned in Newport. Photo by Alan J. Keays/VTDigger
Newport residents were expecting a “game changer.”

Instead, they have a chasm in the heart of this Northeast Kingdom city’s downtown, a visible reminder of dashed hopes for a project that turned out to be too good to be true.

A year after state and federal investor fraud lawsuits were leveled against developers Ariel Quiros and Bill Stenger, a chain link fence surrounds a series of concrete foundations left over from razed buildings that made up the former Spates Block.

The barrier is decorated with colorful artwork resembling murals, though these are made of fabric intertwined in the links of the fence. The bright images provide pops of color that help shield the remains of a dark chapter in the city’s history.

Downtown business owners talk of the disappointment and heartache they felt when they learned one year ago that massive development projects Quiros and Stenger had planned for Newport would likely never happen, including the one on Main Street.

“It’s had a very hurtful impact to us, that it hasn’t been developed,” said Steve Breault, owner of Newport Natural Market & Cafe, located directly across the street from the site. “I wish I had a nickel for every time somebody came in and asked me, ‘What’s going on with the hole?’”

Stenger and Quiros had proposed turning the several contiguous Main Street properties into a four-story development to be known as the Renaissance Block. It was to feature retail and office space and a restaurant, as well as a hotel and longer-term suites.

The site is now referred to as the “hole in the ground,” because work stalled after the existing buildings were removed but before construction began. Rental units made up most of the dilapidated buildings of the Spates Block.

And that wasn’t all Stenger and Quiros had planned for Newport, all to be funded with foreign investment through the federal EB-5 visa program.

The developers had announced a grander proposal for a site just outside downtown on Lake Road. Stenger and Quiros said they would convert the former Bogner plant into a $110 million biomedical research center. However, like the Renaissance Block, it never materialized. Federal regulators have termed that project, called AnC Bio Vermont, “nearly a complete fraud.”

Altogether the projects would have brought hundreds of job to Newport and the surrounding area, including many high-paying ones for those employed at the biomedical research facility.

Paul Monette
Newport Mayor Paul Monette. Photo by Alan J. Keays/VTDigger
“I guess I really wasn’t shocked when the news came out, more disappointed,” Mayor Paul Monette said last week of his reaction when the investor fraud lawsuits against Quiros and Stenger were announced in April 2016. “The only thing that shocked me was the scope, how expansive it was.”

The mayor said the city has since hired a consultant, Burke + White Real Estate Investment Advisors of Burlington, to come up with a marketing study to help determine the best use for the prominent Main Street site. Two grants totaling about $50,000 are helping to fund that initiative.

The firm is expected to work with a steering committee of residents and business leaders, and near the end of the year present its findings.

“We have been contracted to take a look at the Renaissance Block property, to assess the plans that Stenger had put together for the site and make a recommendation as to whether or not we think that project is viable going forward,” said David White, president and founder of Burke + White.

If it’s not, he said, his firm will conduct research and come up with a recommendation on an “action plan” for a viable project for the site.

“I’m optimistic that we will come up with some strategies that could ultimately result in a project,” he said. “With that said, we’re not miracle workers. I don’t think we’re going to be able to wave a magic wand and have a building sprout out of the ground next year or the year after.”

Another business across Main Street from the planned Renaissance Block is the Northeast Kingdom Tasting Center.

Eleanor Leger, who along with her husband, Albert, owns Eden Specialty Ciders, housed in the tasting center building, said she shared the disappointment many felt when news surfaced of the collapse of the Renaissance Block project.

But, she said, it does present an opportunity.

“I think what had been planned for there was too big. It was one person’s vision,” Eleanor Leger said. “Hopefully, we’re on a path where the city can decide what is the best use for that and attract the right kind of developer for the right kind of project.”

A short walk down Main Street from the proposed Renaissance Block site is the Lago Trattoria Restaurant, owned by Frank and Michelle Richardi. The building they own houses several businesses, including Sugar Mountain Fudge & Candy Shoppe.

“It was a real disappointment when everything fell through,” Michelle Richardi said. “We, like everybody else, had been looking forward to all these new improvements, bringing jobs to the area.”

Diane Peel has helped form a group, Newport Residents Take Charge, and members have been meeting downtown in The 99 Gallery and Community Center.

So far, she said, they have held a couple of meetings, most recently one last weekend that drew about 10 people. They are trying, Peel said, to provide ideas to the consultants that incorporate views of a wide cross-section of the community.

Peel said ideas that group members proposed include making sure the retail component of the site includes room for community activities, with ideas tossed out such as a “maker space” for local artisans and craftspeople to work and sell their wares.

Also, she said, some group members have suggested incorporating space for health and fitness activities and opportunities for art and cultural events.

“I’d like to see a space included where everybody can go and they can talk to each other,” she said. “When you get people together in a public space and you get them talking together, that’s where problem-solving starts.”

Peel said she hopes something positive will emerge from the process that got Newport to this point.

“I think what happened in having the bubble burst was good in some way,” she said. “It made people realize they need to pull together as a community. It’s kind of a blessing in disguise.”

The former Bognor plant in Newport that was to become a biomedical research site. Photo by Alan J. Keays/VTDigger
The federal and state lawsuits allege Stenger and Quiros misused $200 million of the roughly $350 million they raised from immigrant investors through the EB-5 program.

Quiros and Stenger were involved in developing several properties in the Northeast Kingdom, including building hotels at Jay Peak and Burke Mountain.

Stenger is the former CEO and president at Jay Peak. Quiros is the owner of Q Resorts, a company that includes Jay Peak.

The properties in Newport, like those at the Burke and Jay ski resorts, are now overseen by a court-appointed receiver, Michael Goldberg.

Goldberg last week announced a $145.5 million settlement with Quiros’ brokerage firm to benefit investors and contractors, bringing to $150 million the amount Raymond James Financial Services will pay. Speaking at a news conference last week, Goldberg said he is in “conversation” with several potential buyers for the Main Street site.

“We are hopeful that will be sold in the next year,” he said.

What impact any sale will have on the planning process underway in Newport is unclear.

“I don’t think any buyer is going to (purchase the site) unless they’re intending to do a significant project, so that’s not necessarily a bad thing,” he said. “If a buyer like that comes along, it’s going to be somebody who sees an opportunity. They’re not likely to sit on it as it is today, as just a cellar hole.”

Property taxes for the two proposed development sites in Newport are late arriving. A first installment for both properties was due in November; however, that payment never arrived, according to city officials.

The total amount owed for the two locations is $55,012, including $22,651 for the Main Street site and the remainder for the former Bogner property. Property taxes are not considered delinquent in Newport until the second installment is missed, which is due next month.

Funds from the Raymond James settlement announced last week are expected to cover those back taxes.

Back at the Newport Natural Market & Cafe, Breault, the owner, said he remains optimistic that something positive will happen at the Main Street site that is right outside the window of his business.

But, he said, he’s not expecting anything right away.

“Do I wish it had come to fruition? Absolutely. The impact this has had on small businesses in an already small town is pretty significant,” Breault said. “I’m going to be able to hang on. We were here way before the hole, and we’ll be here way after it’s done.”

Any work, as far as construction at the Main Street property, is still probably at least two years away, said both the mayor and White, the consultant.

“When it was announced they called it a game changer,” Monette said of the projects that Stenger and Quiros proposed for Newport.

“I think not only the city, but a lot of people were counting on the development,” the mayor added. “As far as what I learned out of this whole thing is, you shouldn’t put all your eggs in one basket.”

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