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Feds Charge Northeast Kingdom Developers With 'Ponzi-Like' Fraud

Feds Charge Northeast Kingdom Developers With 'Ponzi-Like' Fraud

The Securities and Exchange Commission says that two Northeast Kingdom developers and their companies have defrauded foreign investors in the federal EB-5 program.

Federal and state authorities raided the Jay Peak and Q Burke resorts Wednesday.

The investigation is being led by the Securities and Exchange Commission out of the commission’s Miami office.

The SEC alleges that Ariel Quiros and William Stenger made false statements and misled foreign investors as they raised hundreds of millions of dollars for resort projects and a biomedical research facility in the Northeast Kingdom.

Read the SEC lawsuit here.

The feds charge Stenger and Quiros with telling investors that they were investing in several projects at Jay Peak. Instead, the commission said, the money was "misappropriated” in a “Ponzi-like” fashion to fund deficits in earlier projects.

More than $200 million was allegedly used for these other purposes, including $50 million spent on Quiros’ personal expenses and in other ways never disclosed to investors.

The SEC said in a news release that Quiros improperly tapped investor funds to buy a luxury condominium, pay his income taxes and to purchase an unrelated ski resort.

Stenger and Quiros used the federal EB-5 immigrant investor program to attract foreign investors to the project. The project allows foreigners and their families to gain residency status in the U.S. if they invest at least half a million dollars in a project that creates or preserves 10 jobs in the U.S.

Gov. Peter Shumlin has been a major supporter of the EB-5 program. He said in a statement that it was a difficult day for the Northeast Kingdom. 

“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," he said. "My commitment as governor is to do everything I can to protect these Vermonters’ jobs, protect the investors who are victims of these allegations, and ensure that we do all we can to make the very best of a terrible situation.” 

In a statement, Lt. Gov. Phil Scott, also a candidate for governor, expressed concern about the economic impact the investigation will have on the economy of the Northeast Kingdom and the hundreds of workers who have benefited from development.

Scott also called for accountability and transparency.

"What steps, if any, did the Administration take to prevent this from happening? This is obviously very troubling at a time when faith and trust in government is extremely low," Scott said. "We should be taking steps to restore Vermonters’ confidence in state government."

The governor's office said that the federal court has appointed Michael Goldberg, a lawyer from Miami, as the receiver to oversee and administer the assets of the EB-5 projects at issue in the federal and state complaints.

The receiver will act as a neutral party who will work to preserve all assets and property at issue while the litigation is pending and to keep the resorts operational with minimal, if any disruptions, to employment and services. 


Source: http://digital.vpr.net/post/feds-charge-northeast-kingdom-developers-ponzi-fraud#stream/0

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