Merrill Lynch has settled with the Vermont Department of Financial Regulation and the federally appointed receiver for Jay Peak over its handling of accounts used in the “Ponzi-like” scheme that defrauded millions from foreign investors.
Under the EB-5 visa program, foreign investors could obtain permanent resident status in the United States, provided that they invested at least $500,000 in a U.S. business that plans to create or save 10 permanent full-time jobs for U.S. workers. The Jay Peak investors were denied green cards because their defrauded investments did not apply.
“This is another good settlement for the Jay Peak investors and provides further restitution to help mitigate the financial impact caused by Ariel Quiros and Bill Stenger,” Financial Regulation Commissioner Michael Pieciak said in a press release.
Quiros is Jay Peak’s former owner. Stenger is Jay Peak’s former CEO and president.
Merrill Lynch has agreed to pay $4.5 million to the receiver, who oversees the properties. The receiver and his attorneys would keep $1.16 million in fees, and $2.14 million would go to the investment firm Raymond James, which settled lawsuits against it for $150 million in 2017. As part of that settlement, Raymond James was entitled to recover a portion of settlements with other financial institutions used by Stenger and Quiros to defraud foreign investors.
The remaining $1.2 million would go to foreign investors who lost their money.
“This is one of a series of settlements that seeks to hold financial firms that were involved accountable financially to help provide restitution to investors,” Pieciak told VTDigger.
Pieciak said Merrill Lynch was the last firm to be the target of an investigation by his office involving the EB-5 case, the largest fraud case in Vermont history.
The settlement is subject to approval by the U.S. District Court for the Southern District of Florida. The case is being litigated in South Florida because that is where Quiros lives and where many of his businesses are located.
Stenger, Quiros and William Kelly, an adviser to Quiros, have all pleaded guilty to federal crimes in connection with a failed EB-5-financed project they headed to build AnC Bio Vermont, a biotech research facility that had been planned for Newport. All three are awaiting sentencing.
Despite raising $80 million from more than 160 foreign investors, the Newport project barely got off the ground.
The project’s failure ended the hopes of the foreign investors of living legally in the United States and left them out of at least $500,000 each. Federal regulators later called the project “nearly a complete fraud.”
Foreign EB-5 investors filed a civil lawsuit in 2017 against the state of Vermont and state officials — including some in former Gov. Peter Shumlin’s administration — responsible for the oversight and monitoring of a series of EB-5-financed projects headed by Quiros and Stenger, including the failed Newport plan. That suit is still pending.
