Banks Blamed for Visa-Based Ponzi Scheme

 A $500 million plan to redevelop Jay Peak Resort in Northern Vermont was a Ponzi scheme that bilked people through the EB-5 investor visa program, three foreign citizens claim in a RICO class action.

The SEC filed six lawsuits across the country in April with similar allegations against Jay Peak's owner-operators, Ariel Quiros, William Stenger, et al., and financial institutions involved in the project, including Raymond James Financial and People's United Bank.

Jay Peak is 5 miles from the Canadian border in Vermont's Northeast Kingdom, three sparsely populated counties known for their wild, scenic beauty, and not particularly strong economic base.

Residents of the Kingdom viewed the Jay Peak project as an economic lifesaver, as Quiros and Stenger promised to invest $500 million in the project, raising much of the money through the EB-5 program. The claimed the project would create 5,000 construction jobs that would lead to 5,000 permanent jobs in 10 years.

An EB-5 investor visa allows a foreign citizen to qualify for permanent U.S. residency if he or she invests $500,000 or more into jobs in specified U.S. areas, and/or create 10 more U.S. jobs.

In the May 17 federal class action, lead plaintiff James B. Shaw, of England, says he invested more than $500,000 in a Jay Peak project. His co-plaintiffs, from the Netherlands and Canada, say they did so too.

Quiros and Stenger claimed they would revitalize the Jay Peak ski resort with hotels, penthouse suites, lodges, townhomes, resort amenities, an 18-hole golf course, and they'd throw in a biomedical research facility too.

But it didn't happen that way, the investors and the SEC say. They claim the defendants spent a lot of the money on themselves: $13.5 million of it to buy Jay Peak, $5.5 million for their legal fees, $100 million to pay down a loan, commingling accounts, paying off old investors with new money, and using money to support Quiros's "lavish lifestyle," according to the new complaint.

"Quiros and Stenger were operating an elaborate Ponzi-like scheme," the complaint states. "Investors in the EB-5 projects were told they were investing in project-specific hotels, cottages, a biomedical research facility or other projects. While some of the funds were used for those projects, the majority of the funds were commingled, misused, and diverted to pay for unauthorized project, payments to earlier investors and personal luxuries."

Raymond James & Associates enabled it, the plaintiffs say.

"The Raymond James defendants helped structure and execute this deceptive scheme on behalf of Quiros in exchange for lucrative fees and commissions," according to the complaint. "As Quiros testified before the SEC, the Raymond James defendants were 'the one who designed this whole program.'"

They accuse People's United Bank of mismanaging the escrow account by allowing Quiros and Stenger to transfer money into their Raymond James accounts, which were not controlled by the general partners of the project.

They seek class certification and punitive damages for RICO conspiracy, aiding and abetting breach of fiduciary duty, negligence and breach of contract.

They are represented by Patrick Bernal of Witten, Woolmington, Campbell & Bernal of Manchester Center, and Kathleen Donovan-Maher with Berman-DeValerio, of Boston. 

http://www.courthousenews.com/2016/05/23/banks-blamed-for-visa-based-ponzi-scheme.htm

Mentions

• Vermont EB5 Regional Center
• UNITED STATES SECURITIES AND EXCHANGE COMMISSION
• Ariel Quiros

Litigation Cases

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

States

• Vermont