The former president of Jay Peak Resort said in a court filing this week that he was an “unknowing pawn” as the state “covered up” a $200 million fraud in the EB-5 scandal that sent him and two others to federal prison.
In a six-page affidavit, Bill Stenger accused state officials, including then-Gov. Peter Shumlin, of concealing a plan to keep the Ponzi-like scheme going for several years. Stenger is currently serving an 18-month sentence for his role in the fraud.
By 2015, state regulators and commerce agency officials were aware of the extent of the fraud but did nothing to stop it, Stenger said. Instead of shutting down Jay Peak, state officials continued to promote the program, lied to investors and covered up what they knew, Stenger said in the sworn testimony. Ultimately, the U.S. Securities and Exchange Commission cracked down on the scam in April 2016.
In his affidavit, filed in support of a pending civil case brought against the state, Stenger said the state “disregarded” its enforcement responsibilities even when whistleblowers raised red flags. He also blasted what he called “misrepresentations” of the state-run Vermont Regional Center, which was responsible for administration and management of the Jay Peak projects.
Shumlin was “our most powerful and effective investment solicitor,” Stenger said. The governor attended EB-5 immigrant investor events in the United States and internationally. In those meetings, Shumlin made it a practice to “describe the state’s role in the VRC-Jay Peak relationship as that of an auditor,” Stenger said. That was a lie, the former Jay Peak CEO said. The Jay Peak projects were never audited.
Stenger’s broadside marks the first time he has publicly criticized the state.
The filing prompted one attorney for a former state official being sued in the case to slam Stenger’s credibility, pointing out that the former Jay Peak chief had been convicted of providing a false document to a government agency.
Shumlin struck a similar note when reached for comment Thursday.
“It’s standard for defense lawyers after their client pleads guilty to a crime and is headed to prison to attempt to shift the blame for criminal activity to everyone that they can think of in an attempt to reduce their time behind bars,” the former governor said. “This is a classic example of that strategy.”
Brooks MacArthur, who represented Stenger in the criminal case, challenged that assessment. He said Friday that Stenger’s affidavit was taken after he was sentenced to serve 18 months.
“Bill Stenger is not engaging in any effort to shift blame,” MacArthur said. “His account of what occurred is his honest recitation of the facts. There is no effort on his part to use this information to reduce the sentence imposed on him by the court. Anyone who would suggest otherwise is mistaken.”
In his affidavit, Stenger castigated commerce agency employees and state regulators for allegedly lying to immigrant investors and to the public about the state’s much-vaunted oversight of the Jay Peak projects.
Stenger said he had taken responsibility for his actions. He pleaded guilty to making a false statement to a federal agency in August 2021 and was sent to jail last summer for 18 months. He said he did not participate in misappropriations and had “no nefarious intentions.”
“It is incomprehensible that my mistakes have landed me in jail, reputation tarnished, while the State of Vermont and state officials continue to absolve themselves of any misdeeds or liability whatsoever,” Stenger said. “Beyond unfair, these are lies. As I have, the state must also own up to its role bringing harm to these trusting and innocent immigrants.”
Stenger’s former business partner, Ariel Quiros, used EB-5 investor accounts like a personal piggy bank, according to the Securities and Exchange Commission. In May, Quiros was sent to prison for five years. One of Quiros’ associates, Bill Kelly, was also jailed for 18 months.
Stenger said from 2014 to 2016, “the VRC certainly knew more about the breadth and depth of the fraud than I did,” but state regulators continued to allow him to solicit investors.
“I am deeply saddened by my role in leading these good people astray, but the reality is that – during this final chapter of the Jay Peak Projects — I was the VRC’s unknowing pawn,” Stenger said.
He also alleges that by early 2015, state officials were well aware of Quiros’ theft of investor funds.
“Nevertheless, they hid their knowledge of Quiros’ misconduct from me, the investors, and other regional center projects so that they could complete the Jay projects before the scheme became public,” he said.
From 2008 to 2016, state officials — including two governors — along with two members of Congress promoted Jay Peak to foreign investors at events overseas, effectively giving the state’s stamp of approval to the company. Those endorsements enabled Stenger to recruit hundreds of immigrants to the investment scheme.
Stenger maintained that the VRC had not been held to account, and placed blame on Lawrence Miller, the state’s former commerce secretary, and Brent Raymond, who was then serving as the regional center’s director.
Benjamin D. Battles of the Vermont Attorney General’s Office, which is representing the state in the lawsuit, said Thursday the office “will respond in court when we file the State’s reply pursuant to the litigation schedule.”
Miller, in an email Thursday, declined comment citing the pending litigation.
Attorney Heather Ross, in an emailed statement Thursday on behalf of Raymond, who is one of the parties investors are suing for gross negligence, stated that Stenger’s affidavit is “replete with falsehoods.”
“Mr. Stenger has been convicted of lying to the Vermont Regional Center. He lied to the State on multiple occasions and misled investors and others, as has been detailed by the federal government,” the statement read.
“There is no evidence that Brent Raymond engaged in any wrongdoing,” Ross wrote. “If anything, Mr. Raymond did, or tried to do, more than what was required of him or the Vermont Regional Center, such as recommending financial audits, which Mr. Stenger refused to undertake. It is a shame that Mr. Stenger continues to try to blame everyone else for his own criminal conduct.”
Stenger’s sworn testimony was filed by Barr Law Group in opposition to the Vermont attorney general’s motion for summary judgment in Sutton v. ACCD, the state Agency of Commerce and Community Development. Tony Sutton and more than 60 other investors are suing the state for financial damages.
Russell Barr, lead attorney for the Stowe law firm, first lodged a civil complaint against the state in 2017 on behalf of the Jay Peak immigrant investors. A lower court dismissed the Sutton case in 2018. On appeal, the Vermont Supreme Court allowed four counts to go forward: negligence, breach of contract, breach of good faith and fair dealings against ACCD, as well as gross negligence claims against two former directors of the Vermont Regional Center, James Candido and Raymond.
The case was remanded to the Lamoille County Superior Court, where Judge Mary Miles Teachout broke up the large number of investors into four groups. The trial for the first group of plaintiffs is scheduled for June.
“This is the largest fraud in our state’s history,” Barr said. “Multiple state officials have pulled every lever in their reach to protect themselves from accountability and responsibility and finally someone is speaking truth to power.”
‘Little or no due diligence’
Stenger saw the potential of raising money from foreign investors for an expansion of the Jay Peak ski area. In exchange for a $500,000 investment in the development, investors were eligible for green cards through U.S. Citizenship and Immigration Services.
Together, the state and Jay Peak “had something that no competing project/regional center could offer: a public-private partnership that would provide independent governmental oversight of these major capital infusions,” Stenger said. Their mutual goal was to create thousands of jobs and boost the economy of the impoverished region.
VRC employees touted the state’s oversight as a “unique advantage” over private nonprofit EB-5 programs in the United States.
With the state’s backing, Stenger attracted more than $400 million in capital for eight developments across the Northeast Kingdom, including a biotech center, a small airport and the expansion of the Jay Peak and Burke Mountain ski areas. About 800 immigrant investors participated in the EB-5 offerings.
In testimony and in his affidavit, Stenger said the fraud could have been stopped as early as 2012, when a whistleblower raised suspicions about missing funds. Douglas Hulme, who sought out immigrant investors for Jay Peak, warned the state about financial improprieties at the resort.
At a sentencing hearing last April, U.S. District of Vermont Judge Geoffrey Crawford called Stenger the public face of the fraud scheme. Stenger’s attorneys, however, have been quick to point out that their client did not financially benefit from the illegal conduct. Prosecutors have countered that Stenger could have cashed out for millions down the road.
“I got lost along the way,” Stenger said at the time. “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, Quiros and Kelly, a key adviser to Quiros, were indicted on federal charges in May 2019 related to a failed $110 million project to build a biomedical research facility, known as AnC Bio Vermont, in Newport, later described by regulators as “nearly a complete fraud.”
According to his plea deal, 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.
Despite raising $80 million from 160-plus foreign investors seeking permanent U.S. residency through their investments, little was done to make the AnC Bio project a reality. As a result of the fraud, about half of the investors have not been able to obtain temporary visas to stay in the United States. Most have not gotten their money back.