Updated at 8:18 p.m.
Federal prosecutors are asking a federal judge to lock up Bill Stenger for five years for his role in a failed project to build a massive biomedical research facility in Newport that never got off the ground. Regulators have called it “nearly a complete fraud.”
That prison term is the maximum allowed under a plea agreement prosecutors reached with Stenger.
“The criminal conduct committed by Stenger and his co-defendants caused more widespread harm than any criminal case in this district’s history,” Assistant U.S. Attorney Paul Van de Graaf, a prosecutor in the case, wrote in a recent filing.
The prosecution’s prison recommendation is part of a sentencing memorandum submitted late Monday afternoon in federal court in Burlington in the criminal case against the former Jay Peak Resort president, who was once named citizen of the year by the Vermont Chamber of Commerce.
“All Vermonters should know that engaging in a massive fraud like this one will come at a heavy price,” Van de Graaf wrote.
The prosecutor wrote that Stenger’s conduct warranted a prison term of more than 10 years, though five years is the maximum allowed under the plea deal.
“Considering all the relevant circumstances,” Van de Graaf wrote, “a five-year jail sentence is sufficient but not greater than necessary.”
In addition to the five-year prison term, prosecutors are calling on the judge to require Stenger to pay $1.66 million in restitution.
As part of the plea agreement, Stenger’s attorneys are permitted to ask for any lesser sentence. They filed their own sentencing documents late Tuesday afternoon, asking the judge to sentence Stenger to home detention and to waive any restitution.
Brooks McArthur, one of Stenger’s attorneys, couldn’t be reached for comment Tuesday. David Williams, another of Stenger’s attorneys, declined comment on sentencing recommendations when reached Tuesday afternoon.
‘Knowingly and willfully’
The plea agreement was reached Aug. 13, 2021, when Stenger pleaded guilty to a federal criminal charge of submitting false information to the government about the Newport biomedical research project, known as AnC Bio Vermont.
Specifically, according to that charge, Stenger “knowingly and willfully” submitted a document to the government on Jan. 9, 2015, containing false statements related to the proposed AnC Bio Vermont’s sales projections and business plan.
Also, according to the charge, that filing “omitted uncertainty about the FDA approval process.”
Judge Geoffrey Crawford will hand down Stenger’s sentence.
Stenger, a Newport resident, has been under criminal indictment since May 2019, stemming from the proposal to construct a $110 million biomedical research facility in Newport.
Though more than $80 million was raised from 160-plus foreign investors seeking permanent U.S. residency through their investments, little work was done to make the project a reality.
The investors invested their money through the federal EB-5 program, which allows them to receive green cards for investments of at least $500,000 in a qualified project. If that project creates the required number of U.S. jobs, that investor then becomes eligible for permanent U.S. residency.
The AnC Bio project was part of a series of developments in the Northeast Kingdom — including at Jay Peak and Burke Mountain Resort — that Ariel Quiros, Jay Peak’s former owner, and Stenger financed through the EB-5 program over more than a decade.
Prosecutors agreed as part of the plea deal with Stenger to dismiss the remaining charges against him, including several other false document and fraud counts.
The indictment against Stenger also named his partners in the business venture, including Quiros and Bill Kelly, a key adviser to Quiros.
Both Quiros and Kelly have also reached plea deals with federal prosecutors. Quiros is facing a little more than eight years in prison while Kelly is facing up to three years. Their attorneys will be allowed to argue for any lesser prison terms during their sentencing hearings later this spring.
‘Toxic mix’
The 20-page filing submitted by the prosecution Monday wastes no time taking aim at Stenger, stating in the opening paragraph that he “championed” the AnC Bio Vermont project “despite evidence it did not legitimately qualify” for the EB-5 program.
Stenger lied to investors, state and federal officials, and regulators with the U.S. Securities and Exchange Commission about the revenue and job projections associated with AnC Bio Vermont in order to raise money and get the project approved, prosecutors stated in the first page of the filing.
Stenger also “covered up the misuse” of investors’ money to the investors, the SEC and the Vermont EB-5 Regional Center, the state-run entity overseeing EB-5 projects in the state, Van de Graaf wrote.
“He held himself out as the architect of EB-5 success,” he said of Stenger. “Now he should be held responsible for the EB-5 fraud.”
Stenger’s attorneys have contended that their client was “duped” by Quiros, who they have termed the mastermind behind much of the scheme to rip off foreign investors.
Seeking to mitigate Stenger’s role in the scandal, his defense team argued in earlier filings that state officials appeared to help perpetuate the fraud, having learned about the fraudulent actions but failing to tell investors and the public.
McArthur has subpoenaed at least three former state officials to testify at his client’s sentencing hearing. All were in office when some of the Quiros/Stenger EB-5 finance developments were moving forward.
They include Patricia Moulton, former secretary of the Agency of Commerce and Community Development; David Cassetty, former general counsel for the state Department of Financial Regulation; and Susan Donegan, former commissioner of the Department of Financial Regulation.
In his filing this week, Van de Graaf stated that Stenger’s role was greater than that of a mere bit player.
The prosecutor said Stenger’s criminal conduct was “wide-ranging, complex, and nuanced,” involving lies by all of the defendants about revenue and job-creating projections for Anc Bio Vermont.
“This fraud was managed in large part by Stenger,” Van de Graaf wrote. “Indeed, Stenger has admitted that he lied to the VRC about job creation and future revenues in January 2015. These lies alone justify a lengthy prison sentence.”
The SEC had referred to the developers’ actions as a “Ponzi-like” scheme, though Van de Graaf wrote in his filing that term fails to capture the “causes and true execution” of what took place.
The prosecution called the case more like a “lapping scheme,” using other people’s money to cover debt that couldn’t be legitimately covered.
“In contrast, a classic Ponzi scheme involves inducing investors with false claims about high returns and paying such returns using funds from prior investors,” Van de Graaf wrote. “Both schemes involve ‘stealing from Peter to pay Paul,’ but the misrepresentations to investors and the flow of misused money differs between the two kinds of schemes.”
The filing stated that the crimes could not have occurred without the “toxic mix” of the strong personalities of Stenger, Quiros and Kelly.
Stenger was the “visionary, the deluded optimist, the trusted Vermonter” motivated in large part by “glory and desperation,” Van de Graaf wrote. Stenger saw himself as the “savior” of the Northeast Kingdom, an economically depressed part of the state.
Quiros was the “wheeler-dealer” in it for the money, who wanted the “gravy train” to keep moving forward, Van de Graaf wrote. Kelly was the “consummate fixer,” who worked at trying to “outwit” the regulators.
‘Magical thinking’
The filing also highlights an article published in The New York Times on Dec. 30, 2012, which Van de Graaf referred to as a “puff piece” that included a nearly five-minute video “that speaks volumes about Stenger’s ego and his capacity for magical thinking.”
In that video, the prosecutor wrote, Stenger “leaned into his role as a savior” for the Northeast Kingdom even though his plans at the time were “little more than nascent ideas.”
Van de Graaf included that New York Times video as an exhibit in his filing, submitted to the court on a CD.
Van de Graaf wrote that, in considering the appropriate sentence, the prosecution took into account Stenger’s age of 73, as well as the fact he did not profit financially “anywhere near the extent” of Quiros and Kelly.
“Many eyes are cast on the sentencing here,” he wrote. “The Court should send a loud and clear message that this type of fraud will not be tolerated.”
