EB-5 immigrant investor program hit by massive fraud investigation

Businessmen behind Jay Peak and Q Burke ski resorts have been charged with fraud for alleged misuse of more than $200 million in investor money raised through the federal EB-5 program.

According to announcements from the Securities and Exchange Commission and the Vermont’s governor’s office, businessmen Ariel Quiros, of Miami, and William Stenger, of Newport, Vermont, raised more than $350 million through the federal EB-5 Immigrant Investor Program, but diverted $200 million of that money for unapproved purposes, including $50 million spent on Quiros’ personal expenses.

The money came from about 700 overseas investors through a program administered by U.S. Citizenship and Immigration Services, which allows foreign nationals to obtain green cards in exchange for investing at least $1 million in new developments, or at least $500,000 for developments in rural or high-unemployment areas.

“This is obviously a difficult day for Vermont and for the many people, myself included, who are so invested in growing jobs and economic opportunity in the Northeast Kingdom,” said Gov. Peter Shumlin. “Most of all, this is a difficult day for the hundreds of employees in the Northeast Kingdom who rely on Jay Peak, Q Burke, and the related projects that appeared to hold so much promise.”

Vermont is filing suit against the two developers after a year-long investigation by the Department of Financial Regulation into the pair’s complex financial dealings, which spanned across about 100 accounts and 10 financial institutions. The lawsuit has been filed in Washington Superior Court.

Quiros and Stenger started planning new resort developments around 2008. The funds raised through the EB-5 program were intended to be used for constructing the new Jay Peak Hotel Suites L.P. (known as Tram Haus Lodge) and Jay Peak Hotel Suites Phase II L.P. (known as Jay Hotel). Federal and state authorities allege that Quiros instead used $20 million to purchase Jay Peak Resort in 2008, and another $30 million was spent on personal uses.

The future of Jay Peak resort projects is uncertain. A document known as a Private Placement Memorandum originally set the guidelines for the projects and use of investment money. However, all EB-5 projects and assets at issue in the federal and state complaints have been handed over to a court-appointed lawyer from Miami for administration and oversight.

“We allege that since 2008, the defendants have defrauded hundreds of millions of dollars from hundreds of investors,” said DFR Commissioner Susan Donegan. “The duty of my department is to ensure that Vermont’s securities laws are followed, and that investors are protected.”

Quiros allegedly used the $50 million to purchase a luxury condominium, pay off millions in income taxes and buy a $2 million apartment at Trump Place in New York City. The SEC has placed a temporary freeze on Quiros’ assets.

The SEC has issued a temporary restraining order on the men to prevent them from any involvement with the EB-5 projects while the litigation is pending.

“Vermont law prohibits unfair and deceptive acts and practices in commerce,” said Vermont Attorney General William Sorrell. “There is no different standard when the marketing is to those residing overseas.”

Lt. Gov. Phil Scott issued a statement on Thursday expressing concern about the workers and families associated with the resorts.

“Based on information from the Securities and Exchange Commission this project is in jeopardy, and this will be devastating to the workers, their families, the community and many businesses in the region. I’ve reached out to the Northeast Kingdom’s Senate delegation and will be working closely with them on this ongoing matter.”

http://watchdog.org/262521/vermont-eb5-projects-fraud/

Mentions

• UNITED STATES SECURITIES AND EXCHANGE COMMISSION
• U.S. Citizenship and Immigration Services
• Jay Peak - Q Burke Mountain Resort, Hotel and Conference Center L.P.
• Jay Peak Resort - Hotel Jay & Conference Center
• Jay Peak Resort - Tram Haus Lodge
• Peter Shumlin
• Ariel Quiros
• Vermont EB5 Regional Center

Litigation Cases

• UNITED STATES SECURITIES AND EXCHANGE COMMISSION vs Ariel Quiros & Bill Stenger

States

• Vermont