Crime and Justice

Federal judge, prosecutor put new roadblock in investor's effort to get visa documents

Ariel Quiros, Bill Stenger
Jay Peak developers Ariel Quiros, left, and Bill Stenger were indicted May 22, 2019, in federal court in Burlington. Photos by Glenn Russell for VTDigger

Foreign investors have faced a wall of opposition from the Vermont Attorney General's office which has blocked information about the state's role in the scandal at Jay Peak. The immigrants, all of whom paid $500,000 each for visas through the EB-5 program, are now navigating hurdles from federal prosecutors and a federal judge who have blocked document disclosures.

Assistant U.S. Attorney Paul van de Graaf moved to block the developers of Jay Peak from disclosing certain documents to the victims, including travel records related to the state’s Vermont EB-5 Regional Center, the state-run entity that had been charged with overseeing the $426 million in projects headed by Ariel Quiros, Jay Peak’s former owner, and Bill Stenger, the resort’s past president and CEO. 

Attorney Russell Barr of Stowe filed to intervene on behalf of the alleged defrauded investors in the criminal case arising from the May 2019 indictment of Quiros and Stenger. Two of their associates were also indicted by the U.S. Attorney's office. 

Stenger has been charged with fraud and false representations to the government. In court filings, his attorney said the documents would help prove his innocence.

Van de Graaf raised concerns that Stenger’s legal team would disclose the records to attorneys representing the defrauded investors in a civil lawsuit.  

Judge Geoffrey Crawford refused during a Friday hearing to allow Barr to intervene in the case, saying that victims of a crime are not permitted to take part in a criminal proceeding at this stage. Typically, he said, that happens later in criminal cases, such as sentencing.

“It’s kind of like having another relative in the room,” Crawford said of the intervention request. “It gets crowded.”  

The judge called on the prosecutors and Stenger’s legal team to reach a resolution on the matter.

“I guess we’ll move it offline,” Brooks McArthur, an attorney representing Stenger, said during the hearing. 

A “protective agreement” is in place regarding the material that Stenger’s defense receives from the government in discovery, meaning Stenger’s lawyers cannot share that information with third parties not related to the defense. 

At issue are materials that the Stenger’s defense receives through its own subpoenas as part of an investigation as part of the case.  

Barr represents EB-5 investors who invested in Jay Peak thanks to Stenger and Quiros through the federal visa program, hoping to obtain green cards and permanent U.S. residency as a result of those investments of at least $500,000 each.

Instead, Barr claims in a lawsuit against the state, that state officials charged with overseeing the projects failed to act to stop the fraud either because they were in on it or as a result of negligence.

The U.S. Citizenship and Immigration Services, which oversees EB-5 regional centers around the country, issued a blistering report in the summer of 2018 blaming the state for a lack of oversight that allowed for the alleged fraud to occur in the projects led by Quiros and Stenger. 

The Vermont Attorney General’s Office, representing the state against Barr’s lawsuit, has been fighting allowing Barr to conduct depositions of state officials and obtain documents and information related to the state’s alleged involvement in the fraud ever since the Stowe attorney filed his lawsuit almost four years ago.

Van de Graaf, in his filing and at the hearing Friday, referred to the potential sharing of information by Stenger in his criminal case to Barr as an end-run that would help Barr get some of the material he is seeking from the state.

“While the government has no objection to Stenger investigation of his criminal defense theories,” Van de Graaf wrote in a filing, “he should not be permitted to use the criminal case to assist civil litigants in obtaining discovery.”

Quiros, a Miami businessman, has already pleaded guilty to charges against him and is awaiting sentencing. Stenger has pleaded not guilty to the charges against him.

Barr, in a filing this week, moved to intervene in the criminal case, blasting the federal prosecutor for attempting to control what Stenger’s attorneys may do with the records.

“Mr. Stenger’s defense may well align with the defrauded-investor’s claims,” Barr wrote, “and defrauded investor’s claims may well align with Mr. Stenger’s.”

He added, “As such, counsel’s due diligence in each advocacy role may well mean conferring with, meeting with, and developing theories which advance their case as may be advisable and, in fact, mandated by the profession.”

The prosecutor’s move, according to Barr’s filing, would only have the effect of inflicting more harm on the investors and Stenger’s defense.  

“In the Government’s request, up is down and down is up. Their request is the opposite of one seeking to further legitimate interests,” Barr’s filing stated. 

The only “hazard,” the filing added, “is in cratering the theory that the responsible parties are a Miami businessman (the only one who has pled guilty) and the manager of a ski and golf resort; rather, than the State Government agency who was responsible for and internationally promoted for its superlative ‘oversight.’”

The federal government, according to Barr, should understand that the investors and Stenger would both have a common interest in understanding the actions the state took in overseeing AnCBio and other Jay Peak projects.

“The Government,” he added in the filing, “should be asking itself if and why that is (the) case; but, it has no legitimate interest in curtailing, hamstringing, or restricting either parties’ endeavors to seek justice and advancement of their positions.”

Barr has argued in his lawsuit that but for the security of the state oversight of the projects headed by Stenger and Quiros, his client would never have invested in the developments.

The state has a lot at stake in Barr’s lawsuit as he has termed the potential damages that could be awarded to his client as “substantial.” 

The federal government has not brought any criminal charges against any state official in the case, alleging that they were duped by Quiros, Stenger and other project officials who were the masterminds of the fraud scheme. 

Allowing additional information about the state’s alleged role in the fraud to become public could undermine their theory of the criminal case.

McArthur, an attorney for Stenger, said during the hearing Friday that while he is not teaming up with Barr, the Stowe attorney has “educated” Stenger’s defense team on the state’s actions in operating the EB-5 regional center. 

He said not permitting Stenger’s defense to do that did not make sense since the records at issue are likely public records.

“I just don’t understand,” he said of the prosecution’s position. “It just seems offensive.” 

After hearing McArthur said he even wasn’t sure at this stage if he would share any information he obtained through subpoena with Barr, but it didn’t think it was proper that he be prohibited from doing so if the material stems from his own investigation.

McArthur also said that Barr and Stenger have differing views about the actions of the regional center. McArthur said part of Stenger’s defense is that Stenger relied on the state oversight to ensure fraud didn’t occur.

Meanwhile, Barr has argued in his civil suit that state officials overseeing the EB-5 regional center either acted in cahoots with those committing the fraud or were inept in catching it.  

Barr said after the hearing Friday that he doesn’t understand the prosecution’s position. “We are just at a loss why the government would be taking an adverse position to the victims,” Barr said. 

A spokesperson for the U.S. Attorney’s Office in Vermont said Friday after the hearing that its attorneys declined comment on the case.

Stenger and Quiros had led a series of projects of massive upgrades at Jay Peak funded with money from EB-5 investors, including a water park, ice rink, hotels and condos. 

The U.S. Securities and Exchange later termed their fundraising a “Ponzi-like” scheme, and brought 52 civil counts of fraud against them nearly five years ago which were eventually resolved with monetary settlements and no admissions of wrongdoing.

It was in May 2019 that the criminal hammer fell on Quiros, Stenger and William Kelly, a key adviser to Quiros. A federal grand jury indicted them on charges related to a failed biotech medical research facility in Newport. 

More than 160 foreign investors seeking green cards in exchange for their investments each put at least $500,000 into the planned facility, known as AnC Bio Vermont, that never got off the ground.

A joint trial in the cases against Stenger and Kelly is set for October.

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