Vermont’s $200 million mountain of trouble
A receiver was appointed for Jay Peak in April, when the SEC filed a 52-count civil suit against its owner and former resort CEO.
MICHAEL GOLDBERG HASN’T SKIED in decades. Not that there’s been much opportunity since he graduated from Boston University Law School in 1990. He lives in Fort Lauderdale, Florida, where winter sports means donning a sweater to play bocce on the beach. “Besides,” the 53-year-old says, “I’m getting too old to start skiing now.”
Yet, perhaps no one is hoping — praying — more for lots of snow this year on New England’s ski slopes than Goldberg, and particularly at one mountain: Jay Peak. That’s because he now runs the place.
Until recently, Goldberg knew as much about operating a ski resort as he would about being the head coach of the Patriots. Which is to say: nothing. What he does know, maybe as well as anyone, is how to unwind complex cases of alleged fraud. When federal judges need to appoint a fixer in these types of situations, he’s the JD with an MBA on their speed dial. In his role as court-appointed receiver, he has been a soybean farmer, the head of a natural herbal remedy lab, and a concert promoter. Now Goldberg — a partner in Akerman LLP, one of the law firms that represented Bernie Madoff’s victims — is keeping Jay Peak afloat.
The 3,968-foot mountain, located a yodel’s distance from the Canadian border in northern Vermont, is a marvel of a modern winter destination. Drive to the foot of it and you won’t just see skiers and snowboarders climbing onto the lifts to 78 trails. You’ll first pass the golf course’s new clubhouse, then the recently built Ice Haus skating arena, which hosts hockey tournaments throughout the year. At the base of the mountain, you’ll find the sparkling Hotel Jay, all windows and wood beams, connected to the centerpiece of the mountain’s revitalization: the Pump House indoor water park, where guests can catch waves from the surf machine and rocket down the 65-foot La Chute slide. Goldberg obsessively monitors how business is going here and throughout the resort. “My main goal,” he says, “is keeping these assets alive.”
Goldberg was appointed receiver in April, when the Securities and Exchange Commission filed a 52-count civil suit against Jay Peak’s owner, Miami businessman Ariel Quiros, and former resort CEO Bill Stenger. The two had raised funds for an ambitious set of development projects in the area through an obscure federal program called EB-5, which lets foreign investors obtain permanent US residency if they invest $500,000 in a rural job-creating enterprise and meet other requirements. By early this year, more than 700 investors from 70 plus countries as far away as Argentina, China, and the United Arab Emirates had put down a combined $350 million.
But according to the SEC complaint, the development plans were instead an “ongoing, massive eight-year fraudulent scheme.” The agency charged Quiros and Stenger with misusing $200 million of the $350 million worth of investments, allegedly diverting them through a byzantine web of money transfers adding up to a “Ponzi-like scheme.” Investigators claimed Quiros siphoned off more than $50 million of the money for his personal use. The state of Vermont filed a similar complaint, claiming Quiros “masterminded” the scheme with “substantial assistance from Stenger.”
In early September, Stenger reached a settlement with the SEC, neither admitting nor denying the charges and agreeing to cooperate with the ongoing investigation. Meanwhile, attorneys for Ariel Quiros have denied the charges.
As the cases wind through the courts, Goldberg is scrambling to keep Jay Peak alive. “This is the most complicated case I’ve ever done,” he says. It involves a mysterious Miami money man, artificial organs, a rubble-filled crater, global warming, a condo in Trump Place, bigwig politicians, the financial futures of work-starved locals, and hundreds of foreigners dreaming of building better lives in the United States. But it’s also a familiar story in New England: a ski mountain struggling for survival and the people beneath its long shadow who are desperately staked to its fortunes.
Jay Peak owners Bill Stenger (left) and Ariel Quiros announced that on Thursday, July 11, 2013, that FlightDesign, a light plane manufacturer, will open an assembly and distribution facility at the Newport State Airport. Gov. Peter Shumlin (center) spoke at the news conference.
ON A LATE SEPTEMBER DAY in 2012, US Senator Patrick Leahy stood in front of a crowd assembled in Newport, Vermont, about a 20-minute drive from Jay Peak. The occasion: to celebrate $500 million in newly announced EB-5 developments planned by Bill Stenger and Ariel Quiros. Yes, a half-billion dollars, atop the roughly $200 million of foreign investment that had already flowed into the economically depressed region.
In his trademark husky voice, Leahy — the tall political titan then enjoying his seventh term in office — described how roughly a year earlier he’d attended a Vermont Chamber of Commerce ceremony honoring Stenger as its Citizen of the Year. “Today I am proudly wearing a pin from that night that proclaims, ‘I know Bill,’ ” said Leahy, flanked by fellow Senator Bernie Sanders and Vermont Governor Peter Shumlin. “After today’s announcement, there are going to be a few more people who know who you are and what you are doing.”
Bill Stenger had long been the snowy-haired, fleece-wearing public face of Jay Peak. On typical winter days, Stenger was seemingly everywhere — directing traffic in the parking lots, greeting guests by the lifts, even occasionally lending a hand in the kitchens. “I don’t go in and necessarily flip burgers, but I’ve done it many times in the past,” Stenger told SEC lawyers during a 2014 deposition.
Stenger was in his mid-30s when he arrived at Jay Peak in 1984, already possessed of a reputation as a ski industry whiz who had miraculously turned around the fortunes of Jack Frost mountain in Pennsylvania. At the time, Jay Peak was struggling to offer a compelling reason for Bostonians and New Yorkers to drive past the larger likes of Stowe, Killington, and Mount Snow. Under Stenger’s leadership, the mountain quickly improved its snow-making abilities and doubled its chairlift capacity. It began aggressively marketing its vast expanse of ungroomed glades and promoting its 400 inches of annual snowfall, which makes it one of the snowiest spots in New England.
Yet, as the ski industry entered the 21st century, it was changing rapidly. To cope with shorter, less predictable winters, ski mountains in New England and elsewhere began evolving into year-round sports theme parks, complete with luxury hotels, high-end shopping and restaurants, and indoor entertainment for the kids. “People call it the Disney-fication of ski areas, because they’re offering everything from ropes courses to conference centers,” says Daniel Scott, a ski industry researcher at the University of Waterloo in Ontario.
The larger, corporate-owned resort companies have easier access to the piles of money needed to make these changes. But smaller mountains often face a tougher climb, because banks are keenly aware of the climate trends and don’t see ski areas as strong long-term bets, Scott says. “If a resort comes [to a bank] to ask for a lot of money, even for upgrades, they’re going to have to make a very solid business case.” And if the case can’t be made, they’re in trouble: Consider that in the late 1960s, Vermont had more than 80 ski areas and today there are fewer than 20. If Jay Peak didn’t find the cash to evolve, it faced extinction.
Enter the EB-5 Immigrant Investor Program. Created by Senator Ted Kennedy’s Immigration Act of 1990, the program, in part, lets foreigners obtain permanent US residency if they invest at least $500,000 in a business venture in a depressed region and create at least 10 long-term jobs from that money.
Stenger first made use of the EB-5 program in 2006 when Jay Peak was owned by a Quebec-based resort operator. The plan called for raising $17.5 million to build the Tram Haus Lodge, a 57-suite slope-side hotel. But before that plan could really get going, Jay Peak’s owner died and his relatives decided to sell.
Suddenly, Stenger found himself tasked with finding someone with enough motivation and cash to buy a roughly $20 million ski resort. The likely candidate was an international businessman from Miami who had been coming to the mountain on vacations with his family for years.
In this Aug. 8, 2012 photo, people enjoy the Jay Peak Pump House indoor waterpark in Jay, Vt. Guests at Northern New England ski resorts are still enjoying waterparks and zip lines, but after a dismal, snowless winter, owners are looking ahead and trying to lock in skiers to season passes for the coming season.
Jay Peak’s indoor water park opened in 2011.
ARIEL QUIROS, A DIMINUTIVE MAN WITH keen blue eyes, was born in New York City, the son of a chocolate maker. He enlisted in the Army in 1975 after high school, and his first overseas posting sent him to South Korea, where he patrolled the Demilitarized Zone and met his wife of 35 years. Later, he was stationed in Berlin, where he says he guarded Rudolf Hess, Adolf Hitler’s deputy Fuhrer, at Spandau Prison. Quiros left the Army after five years, started a successful export business in South Korea, and eventually settled in Miami.
Quiros wasn’t especially eager to buy Jay Peak when he was first approached in 2007, he later told SEC investigators. The economy was heading south, he didn’t fully understand EB-5, and he didn’t want “to get caught in a trap.” But Stenger and local politicians begged him to do it, according to Quiros’s account, telling him: “Please Quiros, buy Jay Peak, buy Jay Peak, buy Jay Peak. It was every day, every day.” He eventually gave in, he said, agreeing to pay roughly $25 million for the resort and to give Stenger a partnership stake. The closing date was slated for June 2008.
By that time, the mountain was raising EB-5 foreign investment for two projects, the $17.5 million Tram Haus Lodge and a $75 million complex with the Hotel Jay, ice arena, and water park. In court documents, the SEC claims the Jay Peak sellers agreed to relinquish financial control of the EB-5 money to Quiros prior to the sale under one condition: The money couldn’t be used to actually purchase the resort. The SEC alleges that Quiros ignored the agreement and used $21.9 million from EB-5 to close on the sale. (He and Stenger are then accused of using cash from later projects to backfill the purchase money.)
The foreign money kept flooding in, and over time, Quiros and Stenger began unveiling bigger and more ambitious EB-5-funded development plans. They purchased the leasing rights to the local airport, intent on extending the runway and building a new terminal. They acquired a smaller ski resort, Burke Mountain, and raised cash to put a new hotel and condos on it. They bought and demolished much of a historic downtown block in Newport, Vermont, in anticipation of creating a commercial and residential complex. They said they were going to build a marina on the shore of nearby Lake Memphremagog, as well as a factory to make windows.
The magnum opus was what Stenger and Quiros called Phase VII of the master plan: a sprawling $110 million biomedical research facility where scientists would create artificial hearts, livers, and kidneys, and conduct stem cell research. They named it AnC Bio VT and predicted it would persuade scores of PhDs and other highly educated, upwardly mobile professionals and their families to settle in this rural area, where there are 39 people (and 54 cows) per square mile and the nearest Starbucks is a 90-minute drive.
For the most part, local politicians, business owners, and residents rejoiced. The EB-5 projects were expected to bring thousands of jobs to Vermont’s Northeast Kingdom, which suffers from the highest unemployment rates and lowest wages in the state. The investments were overseen by the state-run Vermont EB-5 Regional Center, which was tasked with helping lure the hundreds of millions of foreign dollars into the state, and then — in an apparent conflict of interest — monitoring how it was spent once it got there.
Vermont elected officials lent significant support to the projects, and Quiros and Stenger — together with the corporate entity Jay Peak Inc. — lent significant support to their elected officials. Stenger, for instance, donated thousands of dollars to Patrick Leahy’s election campaigns, according to public records. (Leahy has said that the donations did not influence his support and that he has given Stenger’s money to the Northeast Kingdom Fund, which hands out grants in the region.) Stenger and Quiros also each donated several thousand dollars to Peter Shumlin’s campaign, and Quiros gave more than $20,000 to the Vermont Democratic Party.
During his 2012 speech at Jay Peak, Leahy told the audience, “Even in matters of immigration policy, elected officials are capable of being fairly agreeable when matters of job creation and community improvement are at stake.” Shumlin, for instance, promoted Vermont’s foreign investor programs with Stenger on trade missions to China and Vietnam. Leahy successfully sponsored and shepherded an extension of the federal EB-5 program through Congress and traveled with Stenger and other businesspeople on a 2008 trip to Ireland touting the state’s EB-5 Regional Center.
“On that trade mission, Bill introduced me to a few hundred of his closest Irish friends interested in investing,” Leahy said during his speech. “They had confidence in Bill, but they also had confidence in Vermont.”
IN 2013, WARNING BELLS about the projects around Jay Peak finally began to ring. Plans for the window factory were abruptly canceled. Not long after that, EB-5 investors alleged that Quiros and Stenger had secretly turned the investors’ ownership stakes in the Tram Haus Lodge into IOUs. Starting in 2014, a statewide nonprofit investigative news site, VTDigger, began exposing problems with the projects. Plans for the marina fell through. The construction of the new 180,000-square-foot hotel and condo complex at Burke Mountain hit delays. The boosters for the projects seemed to go silent.
Yet Stenger and Quiros were still soliciting EB-5 investors. Among them was a Venezuelan named Pedro Brito, who sank $500,000 in the AnC Bio development in 2015, not including the additional $50,000 in administrative fees. The money was his family’s life savings, and then some, pooled from his wife’s career as a teacher and his nearly three decades as an administrator for a waste management company. “People think the [Jay Peak] investors are rich,” Brito says. “That is wrong.”
In the fall of 2015, the Britos emptied their bank and retirement accounts and worked with their lawyer through the Vermont EB-5 Regional Center. Yet no one told them that the Jay Peak projects were under a cloud of suspicion — and had been for some time.
By the time of Brito’s investment, Vermont had already been investigating the Jay Peak projects for nine months and the SEC had been investigating for nearly two years. After those investigations went public in April 2016, the SEC called AnC Bio “nearly a complete fraud.”
Today, Brito and his family wait in the Miami area, on temporary visas; his $500,000 investment in Jay Peak is frozen in an escrow account (he says the $50,000 he spent in administrative fees is lost altogether). Brito fears for his safety — and that of his wife and three daughters — if he’s forced to return, penniless, to his turbulent home country of Venezuela.
Brito says he understands that investments usually involve risk. “But this case is different,” he says. “This is fraud.” He feels let down not only by Quiros and Stenger but also by Vermont’s political leaders. Letters enthusiastically promoting the AnC Bio project, written by Patrick Leahy and Peter Shumlin and bearing the seals of their elected offices, were prominently included in the developers’ marketing materials — Brito calls them the “most important” factors in his decision to invest. “If a senator of the United States and the governor of the state where the investment was made are publicly supporting the project, you feel safe,” he says.
Leahy has said that he felt “betrayed” by Quiros and Stenger, and has worked with Michael Golderg on congressional efforts to help investors. Shumlin’s office referred questions to Michael Pieciak, the state’s lead investigator for the case who was recently named the commissioner of the Vermont Department of Financial Regulation.
Pieciak says that in the SEC and state’s scenario, Stenger was the front man. He’s accused of collecting the money and transferring it to Quiros, who allegedly kept portions of it under the names of two dozen entities in 100 different bank accounts. The SEC claims Quiros set aside more than $50 million for himself — using the cash to buy two condos in New York City, including one in Trump Place (which was recently renamed when tenants objected to being associated with the president-elect), and to pay personal income taxes, among other things. Other funds allegedly went to Treasury bills, and more than $100 million was used as loan collateral.
According to Pieciak, his research involved poring over more than 100,000 pages of financial documents from the Jay Peak developers and investigating 130,000 money transactions made over an eight-year period. “It was an extraordinarily complex set of financials to put together and shake out to find out what happened,” he says.
Making the best of what remains of the money and assets is now one of the chores of court-appointed receiver Goldberg. “If there is a positive outcome to be reached,” Pieciak says, “Mr. Goldberg will get it done.”
This April 18, 2006 photo shows a razed block in downtown Newport, Vt. Sweeping plans for development in an economically depressed area of northern Vermont brought the promise of jobs to a region that has some of the highest unemployment rates in the state. But new allegations that Bill Stenger, president of Jay Peak ski resort, and his partner Ariel Quiros, owner of Jay Peak, misused more than $200 million in foreign investors' money â��in Ponzi-like fashionâ�� has brought some of the development to a halt.
An April 2016 photo of a razed block in downtown Newport, Vermont, where redevelopment has stalled.
JAY PEAK OPENED FOR SKIING this year during Thanksgiving weekend, just as planned. But about 20 minutes away, very little is going as planned.
In downtown Newport, Vermont, Cinta Ahrens arrives at work each day before dawn to warm up the ovens at Jocelyn & Cinta’s Bake Shop. Her small business is tucked in the back of the Northeast Kingdom Tasting Center, an open marketplace re-purposed from an old department store. She shares the space with a restaurant, cafe, maple sugar shop, and cider tasting bar.
The bakery was located across the street until 2013, when Jay Peak’s developers tore the building that housed it down as part of its EB-5 plans. Ahrens was initially excited by the prospect of the new retail, office, and residential space, though, and didn’t mind moving. “It seemed like the Northeast Kingdom was finally getting a break,” she says. But then the filing of the SEC’s lawsuit in April froze development. All that’s left now is a rubble-filled crater that locals call “the hole in the ground” and an 8-foot-high chain-link fence that protects passersby. There’s no money to rebuild on the site.
Michael Goldberg alleges that when he was appointed receiver, he found the Jay Peak bank accounts “pretty much depleted from wrongdoing.” And given that the ski season had ended, there was no substantial revenue source to cover immediate expenses. Still, over the summer, he managed to scrape together $5 million for urgent repairs to the aerial tram, and trained staff of the new Burke Mountain Hotel. Along the way, Jay Peak hosted 80 weddings, a car show, and corporate events and concerts, but still opened the ski season with a $6.5 million shortfall, according to Goldberg.
Goldberg also worked with Congress in hopes of passing legislation to allow defrauded EB-5 investors to obtain permanent residency status. Of the 700 foreign citizens who put money into Jay Peak-related EB-5 projects, about 300 have received permanent green cards; 400 are still in limbo because of the ongoing litigation. But even those with the green cards aren’t necessarily safe. The government has five years to take back even an unconditional green card if, Goldberg says, there is “misreporting on the original project.”
Goldberg has been trying to show that the EB-5 conditions have been met. He argues that at least 10 jobs have been created for each investment in the various Jay Peak developments, even if the specific part of the project investors bought into hasn’t come to fruition, because indirect jobs have been created, too. “It’s not just the bellhop at the hotel or the housekeeper who cleans the rooms or the shuttle driver and the construction jobs,” he says. “When you walk into a [hotel] room, there are also bedspreads and curtains and alarm clocks that were made.”
To ensure Jay Peak runs smoothly, Goldberg hired a resort management company, Leisure Hotel and Resorts, to handle day-to-day operations. For a time, he also kept Stenger on staff — at a reduced salary and with no decision-making power — so he could mine Stenger’s three decades of experience running the mountain. “It would cost me three times as much money to hire someone else to do his work,” Goldberg explained earlier this year.
Goldberg relieved Stenger from his duties in September, around the time Stenger settled his court case with the SEC. Stenger neither admitted nor denied wrongdoing and agreed to continue cooperating with investigators (he also forfeited his right to appeal and may eventually also face a financial penalty). The state still has civil litigation pending against Stenger, and a criminal investigation looking into the Jay Peak case is reportedly being conducted by the US attorney of Vermont.
Ariel Quiros continues to fight the SEC charges against him. On November 21, a federal judge upheld the SEC’s asset freeze against him, pending trial, writing that there is compelling reason to believe that Quiros “acted with severe recklessness” with the intent to “deceive, manipulate, or defraud” investors. His lawyers, who did not comment for this article, have argued in court filings that “though the SEC might question Mr. Quiros’ business acumen or management decisions,” the facts don’t point to any “deliberate, fraudulent wrongdoing.” Besides, they add, many of the alleged misdeeds took place beyond the five-year statute of limitations. A trial isn’t expected to start for another year.
In the meantime, those caught beneath the long shadow of Jay Peak continue to adjust. In downtown Newport, locals have beautified the fence fronting the hole in the ground by weaving colorful murals on the chain links from strips of cloth. In Montpelier, Governor Peter Shumlin will soon enter the private sector, while, in Washington, Senator Patrick Leahy is crusading to improve (or do away with) the EB-5 program. In Miami, Pedro Brito and his wife continue fighting to find a better life for their family. And in Fort Lauderdale, Michael Goldberg — the man who hasn’t skied in decades — keeps watching the weather forecasts, hoping for a cold and very snowy winter.
- Vermont EB5 Regional Center
- UNITED STATES SECURITIES AND EXCHANGE COMMISSION
- Akerman LLP
- Bill Stenger
- Ariel Quiros
- Peter Shumlin
- Patrick Leahy
- Jay Peak - Q Burke Mountain Resort, Hotel and Conference Center L.P.
- Jay Peak Resort - Tram Haus Lodge
- State of Vermont vs Bill Stenger & Ariel Quiros
- UNITED STATES SECURITIES AND EXCHANGE COMMISSION vs Ariel Quiros & Bill Stenger
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