Updated at 10:31 p.m.
BURLINGTON — A federal judge on Thursday sentenced former Jay Peak Resort president Bill Stenger to 18 months in prison for his role in a massive financial scandal that defrauded foreign investors and dashed their hopes of permanent U.S. residency.
Judge Geoffrey Crawford handed down the sentence following a daylong hearing in federal court in Burlington. In addition to the prison time, Stenger also faces three years of supervised release and must pay $250,000 in restitution. He is to report to prison June 7.
The prison term was far less than the five years prosecutors were seeking for Stenger, the maximum allowed under a plea deal. His attorneys had sought home detention.
Prosecutors had also sought much more in restitution, calling on the judge to make Stenger pay $1.66 million.
In court, Stenger apologized to the employees of Jay Peak, the people of the Northeast Kingdom, the state of Vermont and investors. "I let you down," Stenger said. He told the court he was "extremely sorry for my conduct and my errors."
“I got lost along the way,” Stenger said. “I fell into the trap that the ends justifies the means and for that I am truly sorry. I have no one to blame but myself.”
Stenger pleaded guilty in August 2021 to submitting false information to the government.
The federal prosecution narrowly focused the criminal case on the AnC Bio Vermont project, a failed $110 million biomedical research facility in Newport. The development was one of eight funded through the EB-5 visa program. The seven other projects were ski area expansions at Jay Peak Resort and Burke Mountain in the Northeast Kingdom.
Stenger, a Newport resident, was indicted in May 2019 in connection with the fraud. Ariel Quiros and Bill Kelly, a close friend and adviser to Quiros, were named in the same criminal indictment. All three reached plea deals with prosecutors. Stenger was the first to be sentenced; hearings for Quiros and Kelly will be held later this month. A fourth defendant, Jong Weon “Alex” Choi of South Korea, remains at large.
In court, Stenger, 73, stood straight and looked forward, showing no emotion as the judge announced the prison term. His adult children wept quietly in the courtroom as the sentence was announced.
With earned good time, he will need to serve at least 85% of the 18-month prison term before he is released, or a little more than 15 months.
As he left the courtroom, reporters asked for comment. Stenger replied, “No.”
Exactly six years ago Thursday, the Securities and Exchange Commission accused Stenger and Quiros of using a "Ponzi-like" scheme to commingle investor funds from one EB-5 project to the next. By the time the AnC Bio and Burke projects were underway, Quiros had misused $200 million out of $450 million in money from foreign investors, federal prosecutors said. The resort immediately went into court-ordered receivership and a two-year civil case ensued.
Eventually, Quiros and Stenger reached monetary settlements with the SEC. Quiros was forced to surrender $81 million in assets to the government, including his stakes in Jay Peak and Burke Resorts. Stenger was fined $100,000.
The case rocked Vermont’s political world. The Jay Peak developers worked closely with then-Gov. Peter Shumlin and U.S. Sen. Patrick Leahy to promote the projects. The Shumlin administration’s support for the Jay Peak projects continued even as evidence of malfeasance grew.
Judge Crawford on Thursday called the case the largest financial crime in the state’s history.
“The project which lies at the heart of this criminal case is the AnC Bio project, the health science research park promoted as a life-changing project for Newport and the Northeast Kingdom,” the judge said.
“And that project, speaking very plainly, was a complete fiction from beginning to end,” he said. “The defendants led by Mr. Stenger raised $85 million from 169 investors and there is literally nothing to show for it. The money is gone, and little or nothing was ever built. The project was a ghost.”
The judge called Stenger the face of the project and its biggest cheerleader.
“It was his idea,” Crawford said, asserting Stenger brought “credibility” to the far-fetched Newport biomedical plant, which would be located two hours from the closest university research headquarters in the region. Few investors would have bought into the project if not for Stenger’s convincing pitches, the judge said.
“Mr. Stenger made this fraud possible because of his sterling business representation and his personal connections at so many levels of Vermont business and public life,” the judge said. “Reaching to the very highest levels of state government, he gave the fraud the credibility that we all know in hindsight it never should have had.”
Crawford said mitigating factors nevertheless weighed against the five-year prison term sought by prosecutors, including the fact that Stenger did not benefit financially from the fraud.
The judge said in considering the appropriate sentence he also took into account Stenger’s remorse, his age and his health problems — though he noted that none of them were “life-threatening."
‘An excellent salesman’
During his address to the court, Assistant U.S. Attorney Paul Van de Graaf wasted no time ripping into the defense’s contention that Stenger was duped by others, particularly Quiros, a Miami businessman.
“Stenger is an excellent salesman,” Van de Graaf said, and like other great salespeople he preyed on "the weakness of others."
The prosecutor said Stenger admitted to making a false statement to the government in January 2015. Van de Graaf said the state commerce agency, which was responsible for overseeing Jay Peak's EB-5 expansion, had asked Stenger in May 2014 to provide more information about the business plan for AnC Bio. In response, Stenger submitted a third-party report in January 2015 that confirmed the business plan was sound.
But the Frost and Sullivan report revenue projections were based on inaccurate information from the developers, according to the U.S. Attorney’s Office, which said Stenger had embellished revenue projections and inflated job creation numbers. That "lie" repeated to state regulators and investors was at the heart of the prosecution's case.
Stenger used the bogus revenue projections in his pitch to unsuspecting foreign EB-5 investors, according to Van de Graaf. An additional 36 investors in AnC Bio were caught in the web, he said.
The EB-5 program allows foreign investors who put at least $500,000 into a qualified project to receive permanent U.S. residency provided that investment can be linked to creating a certain number of jobs.
While Van de Graaf said Stenger didn't take money from investors as Quiros and Kelly did, the former Jay Peak CEO and president “basked in the glow” of being known as the economic savior and champion for the Northeast Kingdom.
“Mr. Stenger's been relying on his claimed goal of helping the community for years,” Van de Graaf said. “It's his trump card.”
It was time, he said, “to put that false narrative to death.”
The prosecutor, as part of his presentation, played a New York Times video from 2012 in which Stenger speaks glowingly about himself and the EB-5-financed projects at Jay Peak and in Newport he helped lead.
The video, Van de Graaf said, played into the “myth” of Stenger as the savior of the Northeast Kingdom. The New York Times, Van de Graaf said, fell for that “hype.”
And then, the prosecutor said, “Mr. Stenger used this precise video and this precise press from The New York Times to sell the AnC project to investors.”
He refuted the defense’s contention that Stenger did not benefit financially from his actions, saying that Stenger drew a salary of $200,000 a year, had a company car and traveled around the world on trips paid for with other people’s money.
Plus, he said, Stenger stood to gain financially down the road, expecting a 15% to 20% ownership stake in Jay Peak and the ability to cash out for millions if the resort were to ever sell.
‘I could use his help’
The defense brought in Michael Goldberg, the court-appointed receiver for Jay Peak, to testify on Stenger's behalf.
In video testimony, Goldberg said that he first met Stenger six years ago in the lobby of Hotel Jay. The two men had a heart-to-heart conversation. Goldberg said Stenger was remorseful and wept over the harm he'd done to the Northeast Kingdom and the state.
"I told him I could use his help," Goldberg recalled, if Stenger promised to be "fully cooperative" and “never lied."
Over six years of working together, Stenger was completely trustworthy, Goldberg told the court. Stenger was paid $50 an hour by the receiver to effectively run operations for the resort until the indictment was handed down in 2019. At that point, Goldberg said the optics weren't good and he terminated Stenger's employment. Without payment, the former CEO continued to assist Goldberg on important projects.
In his investigation of the misuse of Jay Peak funds, Goldberg said his team found no evidence that Stenger took money from investors.
‘King of the kingdom’
McArthur, one of Stenger’s lawyers, disputed the prosecutor’s claims that Stenger was driven by hubris. Stenger’s “primary” motivation, he told the judge, was the “betterment” of his community, unlike Quiros and Kelly, who he alleged were motivated by greed.
“The government may suggest that Mr. Stenger was driven by a different motive, driven by this, this motive of ego, kind of ‘king of the kingdom’ motive,” McArthur said. “I think that kind of misses the mark.”
Crawford then jumped in.
“I take your point,” the judge told McArthur. "If we were to look through state leadership and require all those with an ego to leave, we'd be left with a very small group.”
“I think that’s right, judge,” the defense attorney replied.
Punishment, McArthur said, comes in many forms, and Stenger had to deal with shame of his high-profile case playing out in the press. Due to the notoriety of the case, Stenger can go almost nowhere where someone doesn’t know about it, McArthur said.
“He's also somebody that's going to be looked at in the community as a convict,” he said.
According to McArthur, Stenger has little money and is barely able to “make ends meet” as he cares for his ailing 73-year-old wife.
A lengthy jail sentence, the defense attorney told the judge, would leave Stenger with little hope at his age.
Crawford asked McArthur what he would say to others convicted of financial crimes that he had sent to jail if he let Stenger go with only home detention, as the defense was seeking.
“What has been really troubling for me is I recognize the truth of what is in your presentation,” the judge said. “I recognize the — virtue is not quite the right word, but the goodness of Mr. Stenger's commitment to his community. But I also have $80 million with absolutely nothing to show for it.”
McArthur replied that each case is unique and that his client had no previous criminal record and didn’t gain financially.
“Follow the money,” the defense attorney told Crawford.
Crawford, as the hearing drew to a close Thursday, spoke to Stenger one last time.
“I just wish you the best,” the judge told him. “You know the worst now.”
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