Former Jay Peak exec raised concerns in 2010
A former Jay Peak financial executive told the Securities and Exchange Commission he resigned in 2011 after Bill Stenger, Jay Peak's CEO, failed to address concerns about the use of money from foreign investors under a government visa program.
John Carpenter stated in a sworn document filed in federal court that he raised issues with program finances but saw his warnings go unaddressed.
"Ultimately, Mr. Stenger failed to alleviate my concerns about the additional cost growth and how it would be funded," Carpenter stated in his declaration. "When presented with an employment opportunity at New Hampshire-based Waterville Valley Holdings, I resigned my position at Jay Peak and left in March 2011."
Carpenter's statement was included in thousands of pages of SEC documents the state of Vermont released Tuesday. The documents had been submitted to federal court in Miami as exhibits in a civil complaint against Jay Peak Inc., Stenger and Ariel Quiros, the owner of Jay Peak and other Northeast Kingdom developments. Quiros lives in Miami.
Carpenter served as Jay Peak's controller from 2009-11 and oversaw financial accounting for the resort's various operations, including limited partnerships paid for through the federal EB-5 program. That program provides foreign nationals who invest $500,000 in a project in a economically struggling region of the country the ability to receive U.S. residency if the project creates a specified number of jobs.
The documents released Tuesday include hundreds of pages of testimony from Stenger and Quiros, dating from May 2014, along with sworn statements from investors in the EB-5 program, corporate filings and other material.
The SEC alleges Quiros and Stenger perpetrated a "Ponzi-like" scheme in which they diverted more than $200 million in investor money to pay for unrelated projects and, in the case of Quiros, for personal use.
While Carpenter was employed at Jay Peak, he had access to some of the company's accounts, but not the cash investment accounts at Raymond James bank for the Jay Peak-related EB-5 limited partnerships.
In his written declaration, Carpenter said he repeatedly asked Stenger for the monthly statements for the various Jay Peak EB-5 accounts and was told to ask Quiros. Often, Quiros and Stenger failed to provide him with the statements.
"When I needed money to pay bills for the various EB-5 partnerships, I would ask Mr. Stenger to move money into People's Bank, and he said he would first have to ask Mr. Quiros," Carpenter said in his SEC declaration.
In 2010, Carpenter became concerned about the use of money from the second phase of EB-5 projects to pay for costs associated with the first phase after he reviewed accounting records and spoke with Stenger, according to Carpenter's sworn statement.
"There has been so much co-mingling of the funds via transfers which has been compounded by the accounting entries that this has become quite a mess," Carpenter wrote in an Aug. 13, 2010, email to Stenger and Douglas Hulme. Hulme at the time was raising money from investors through the EB-5 program for Jay Peak while working for a company called Rapid USA. A copy of the email was attached to Carpenter's statement.
At a news conference last week, Department of Financial Regulation Commissioner Susan Donegan showed a poster she called "the spaghetti map," — a mass of swirling lines connecting a dizzying number of financial accounts that "allegedly facilitated improper commingling, misuse and diversion of funds between EB-5 projects, related companies and personal accounts."
Carpenter said he raised concerns with Stenger on several occasions.
Carpenter could not be reached for comment late Tuesday afternoon. Stenger and Quiros did not return calls from the Burlington Free Press. In court papers filed Tuesday, Quiros denied wrongdoing.
The Vermont Department of Financial Regulation also has been investigating the fraud allegations.
Scott Coriell, a spokesman for Gov. Peter Shumlin, said there was nothing to indicate Carpenter had raised his concerns with the state. Jim Douglas, Shumlin's predecessor, was governor at the time. Shumlin became governor in 2011.
"The state started to hear investor complaints and concerns in summer 2014," Coriell said.
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