A paltry payment for a massive fraud

Over the years, I have pointed out that it can be quite lucrative to be an embezzler in Vermont. All too often, deferred or suspended sentences have been given to those convicted, little or no restitution ordered, and, rarely, if ever, is there a demand for the state and federal income taxes due on the ill-gotten gains. The consequences for taking an eight-point buck out of season would be greater.

I have now changed my mind. Being an embezzler is not as lucrative as I had been led to believe. A much better career would be to become a fraudster – stealing from others via false pretenses.

On July 12, VTDigger reported that Gov. Phil Scott and Attorney General TJ Donovan announced that the state of Vermont had accepted a settlement of $2 million and $100,000 from the two developers of Jay Peak and Newport, Vermont.

By way of background, the developers were at the center of one of the largest real estate development in Vermont history. Also, they were alleged to have swindled over 800 foreign investors out of hundreds of millions of dollars and one personally absconded with over $50 million. The massive fraud was executed under what is known as a federal EB-5 program.

For over six years, the federal government and, eventually, the state of Vermont investigated the massive fraud – leading to the removal of the developers and closing the state-operated Regional EB-5 Center.

At the federal level, $81 million in assets were turned over to the government by Ariel Qurios, one of the developers. His partner, Bill Stenger, the CEO of Jay Peak, was assessed a penalty of $75,000. The investment firm in Florida that was alleged to have funneled the funds was also fined over $130 million by the federal government.

In Vermont, the fraud consumed tens of thousands of personnel hours of five state offices – the Department of Economic Development, the Attorney General, the Department of Banking and Finance, the Department of Taxes, and the Governor’s Office (of three governors).

At the Newport event, Scott and Donovan announced specifics of the state’s arrangement with Ariel Quiros and Bill Stenger. The former will turn over five of his in-state properties to be sold by the state and Stenger, over a four-year period, is to pay $25,000 per year to the state. And that is it. The settlement is shocking and unbelievable.

According to the VTDigger piece, the state was hoping to receive over $8 million in a settlement. It is reasonable to estimate that with the consultants, attorneys brought in, and state staff time, the cost to Vermont government to deal with the fraud was far and above the $2.1 million it will be receiving. Ironically, the state will turn over the funds collected to the city of Newport, to restore its downtown area, which was to have been a part of the EB-5 development project.

What exactly is the message to Vermont’s citizens from all that has happened in the EB-5 scandal? Furthermore, why was the state so anxious to bring a financial settlement of such paltry amounts?

Melissa Visconti, the attorney for Ariel Qurios, stated in court, as noted in the VTDigger piece, “the state had ‘unclean hands’ and was liable for the fraud because the state officials who had knowledge of financial improprieties at Jay Peak did nothing to stop the Miami businessman from perpetrating the fraud.”

The investigation of the role the state played in this scandal should not be closed. Instead, the state owes it to the investors, citizens, and vendors to bring an impartial and independent investigation. Quiros’ attorney makes an interesting point. The EB-5 scandal has touched too many in government – both at the federal and state level.

If nothing is done, Vermont will continue to be fertile ground for additional fraud – and the bigger, the more lucrative.

https://vtdigger.org/2018/08/05/don-keelan-paltry-payment-massive-fraud/

Mentions

• Vermont EB5 Regional Center
• Ariel Quiros
• Bill Gresser

Litigation Cases

• MICHAEL I. GOLDBERG vs The AM Wealth Management Group of Raymond James & Ariel Quiros & Joel Burstein
• JAMES B. SHAW, JOHANNES EIJMBERTS, and LORNE MORRIS Individually and On Behalf of All Others Similarly Situated, vs The AM Wealth Management Group of Raymond James & Bill Stenger & Joel Burstein & Ariel Quiros
• ALEXANDRE DACCACHE, on behalf of himself and all others similarly situated vs Ariel Quiros & Bill Stenger & The AM Wealth Management Group of Raymond James & Joel Burstein
• State of Vermont vs Bill Stenger & Ariel Quiros
• UNITED STATES SECURITIES AND EXCHANGE COMMISSION vs Ariel Quiros & Bill Stenger

States

• Vermont