Updated at 9:10 p.m.
Federal prosecutors are disputing former Jay Peak Resort President and CEO Bill Stenger’s argument that he was “duped” by his former business partner Ariel Quiros in the largest fraud case in Vermont history.
They also say that while Stenger, unlike Quiros, may not have made off with millions in cash, the well-known businessman’s ego appeared to be a driving force behind his actions, as he “wanted to be the savior” of Jay Peak and the Northeast Kingdom.
“This is a case about greed, glory and desperation,” Assistant U.S. Attorneys Nicole Cate and Paul Van de Graaf wrote in a filing submitted in federal court in Burlington on Tuesday.
It all came crashing down in April 2016.
That’s when state regulators and the U.S. Securities and Exchange Commission brought a halt to a series of developments the two men financed with hundreds of millions of dollars in funding from foreign investors through the EB-5 visa program.
“Stenger had multimillion dollar financial stakes in the success of the scheme,” the prosecutors wrote. “The SEC suit, however, extinguished his hope for financial rewards beyond the high salary he had enjoyed for years. Stenger’s most obvious motive, though, was ego.”
The projects that were promoted as bringing thousands of jobs to an economically depressed region of the state, according to the filing, came from a vision put forth by Stenger, who had once had been named Vermont Chamber of Commerce’s Citizen of the Year.
“He could not fail,” the prosecutors wrote. “He became desperate to keep the projects going forward. Even when he knew he was in the wrong, he furthered the fraud, to keep his place on the high pedestal of public perception.”
In preparation for Stenger’s sentencing hearing next month, Cate and Van de Graaf submitted the 100-page document that lays out their case that Stenger was much more than a bit player taken in by Quiros, a Miami businessman who became the owner of the Jay Peak ski area.
“The facts show that Stenger was not just a bystander to the fraud that occurred, but an integral part of the sweeping fraud scheme, which could not have happened without his involvement,” they wrote.
Stenger’s attorneys, Brooks McArthur and David Williams, could not be reached Tuesday for comment.
Stenger pleaded guilty last month in federal court in Burlington to making a false statement to the government in connection with a failed $110 million project to build a biotechnology research center in Newport known as AnC Bio Vermont.
Stenger, Quiros and William Kelly, a key adviser to Quiros, were indicted in May 2019 for their alleged roles in that development, which never got off the ground, despite raising more than $80 million from over 160 foreign investors.
Each investor had put at least $500,000 into the project, hoping to obtain green cards if their investment through the federal EB-5 visa program met job-creating requirements. Federal regulators later termed the AnC Bio project “nearly a complete fraud,” dashing the investors’ hopes of obtaining permanent U.S. residency and getting their money back.
The AnC Bio project was part of a series of developments throughout the Northeast Kingdom — including at Jay Peak and Burke Mountain Resort — that Quiros and Stenger financed through the EB-5 program in what regulators described as a “Ponzi-like” scheme.
In a plea deal with Stenger, federal prosecutors agreed not to seek a sentence of more than five years in prison. His attorneys can argue for a reduced sentence, and they have said they intend to seek one without a prison term attached.
Prosecutors, in Tuesday’s filing, stated that they will submit their sentence recommendation in a later document.
A hearing ahead of Stenger’s sentencing is set for next month, during which his attorneys and prosecutors are expected to present competing accounts of how much or how little he knew about the AnC Bio fraud.
Quiros and Kelly have already pleaded guilty to federal charges and are awaiting sentencing.
Stenger’s attorneys have argued that their client was “duped” by Quiros, whom they argue was the mastermind behind the scheme to bilk foreign investors.
Stenger’s legal team recently submitted their own filing on their client’s behalf, seeking to mitigate his role in the EB-5 fraud scandal. The document argues state officials appeared to help perpetuate the fraud and knew what was going on, having learned about the fraudulent actions but not telling the investors and the public.
Cate and Van de Graaf stated in Tuesday’s filing that Stenger’s role was far from a minor one.
“The court should reject any suggestion that Stenger was duped by his co-defendants, or that he was powerless to uncover answers to essential questions about the handling of investor money or the plans for the AnC Vermont business,” the filing stated.
“Throughout the life of the scheme, Stenger held himself out as a knowledgeable businessman in control of the EB-5 projects. He traded on the trust that people had in him,” the prosecutors wrote. “Even if he did not have answers to questions about the money, or about the AnC project, he had the power to demand them. When Stenger failed to seek or provide answers, it was because he knew the answer.”
Despite the fact that the AnC Bio facility and the products it was to provide had neither patents nor the approval of the Federal Drug Administration, the filing stated, Stenger continued to pitch the project as if it did or soon would.
“From the beginning,” prosecutors wrote, “Stenger appreciated the importance of FDA approval to the project’s timing and legitimacy.”
The filing quotes notes from Quiros’ son from a July 2009 meeting with Stenger that stated, “[w]e need to show that this project has the potential to obtain [FDA] approval. We would not be able to develop this project if there is no potential to success.”
According to prosecutors, the notes reflect that Stenger appreciated the marketing power of portraying success as opposed to actually achieving success.
The prosecution’s document paints a picture of Stenger as a driving force behind the biotech project, even submitting filings to the FDA himself to move the process forward.
“Unsurprisingly, Stenger’s meager and uninformed effort failed,” prosecutors wrote in their filing.
The FDA told him to use someone with more technical expertise, according to the filing.
The filing also laid out inflated job projection claims Stenger had made to investors, bogus information he pitched about the “clean rooms” the biotech facility would house for researchers and project audits he reportedly said took place that never occurred.
One section of the prosecutors’ document is titled “The Clean Rooms Mirage,” with another part headed, “The AnC Vermont Project Had No Stem Cell Product.”
Stenger also “pedaled” misleading narratives to investors and the Vermont press, according to the filing.
Cate and Van de Graaf wrote that when VTDigger learned of the SEC inquiry and questioned Stenger about the nature of it, he wrote in June 2015: “The SEC review is fully voluntary and is something that many large projects are participating in nationwide.”
Prosecutors wrote that the SEC investigation was in fact mandated, as Stenger, Quiros, Kelly and others had been subpoenaed to provide documents and sworn statements and that the probe focused solely on the Jay Peak projects. There was no nationwide review.
“Stenger knew that the SEC was investigating particular wrongdoing in connection with the Jay Peak projects,” prosecutors wrote. “And Stenger knew that the SEC was right to investigate: the defendants had lied to investors and misused their funds.”
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