The Securities and Exchange Commission has charged Ariel Quiros and Bill Stenger with fraud. The federal regulators accuse the developers of Jay Peak and Q Burke of diverting $200 million in investor money.
Of that amount, the SEC says Quiros spent $50 million on personal expenses and in “other ways never disclosed to investors.”
The state filed a similar complaint in Washington County Superior Court.
Ariel Quiros. File photo
According to the federal complaint, Quiros improperly tapped investor funds for the purchase of a luxury condominium, payment of income taxes and other taxes unrelated to the investments, and acquisition of an unrelated ski resort.
The SEC alleges that Quiros and Stenger ran a “Ponzi-like” scheme using money from one set of investors to fund deficits in earlier projects.
The charges were laid out in a federal court case in Miami, where Quiros lives.
Meanwhile in Vermont, U.S Attorney Eric Miller said his office is investigating whether federal criminal charges should be filed. The SEC violations are civil charges, he said.
“My office has been conducting and will continue to conduct an investigation designed to determine whether or not there have been violations into federal criminal law in connection with EB-5 projects in the Northeast Kingdom,” Miller said.
Miller would not say how long his investigation has been going on or how long he thought it would last. He said as of yet, no criminal charges have been filed.
In the 82-page complaint filed by the SEC, the federal regulatory body said it was taking action to “stop an ongoing, massive eight-year fraudulent scheme” in which Quiros and Stenger “systematically looted more than $50 million of the more than $350 million that has been raised from hundreds of investors” to construct resort facilities and a biomedical research facility.
“The alleged fraud ran the gamut from false statements to deceptive financial transactions to outright theft,” said Andrew Ceresney, director of the SEC’s Division of Enforcement, in a news release.
The developers solicited funding through the federal EB-5 program, which allows overseas investors to move to the United States in return for creating jobs.
“As alleged in our complaint, the defendants diverted millions of EB-5 investor dollars to their own pockets, leaving little money for construction of the research facility investors were told would be built and thereby putting the investors’ funds and their immigration petitions in jeopardy,” Ceresney said.
According to the complaint, “Quiros orchestrated and Stenger facilitated an intricate web of transfers between the various Defendants and Relief Defendants to disguise the fact that the majority of the seven projects were either over budget or experiencing shortfalls. These shortfalls were due in large part to Quiros pilfering tens of millions of dollars of investor money for his own use.”
State officials, including Gov. Peter Shumlin, Attorney General William Sorrell, Department of Financial Regulation Commissioner Susan Donegan and Patricia Moulton, Secretary of the Agency of Commerce and Community Development, briefed reporters on the developments.
The Securities and Exchange Commission raided the offices of Q Burke Resort on Wednesday as part of an investigation of six projects at Jay Peak Resort and a hotel in East Burke.
The SEC locked down the administrative offices of Q Burke and seized computers and other property.
The financial regulatory agency put Jay Peak and Q Burke resorts under the management of Leisure Hotels & Resorts, of Prairie Village, Kansas.
In an email Wednesday, Jay Peak’s employees were told the resort would continue to operate normally and their jobs are not at stake. The resort’s communications director, JJ Toland, told employees that Quiros and Stenger remain the owners but “have no authority to conduct business or direct operations of the resort until the SEC matter is concluded.”
Toland told employees that the outside managers would oversee the daily resort operations.