Quiros admits to federal crimes in EB-5 fraud

Ariel Quiros, center, leaves federal court in Burlington after being arraigned on charges pertaining to the EB-5 fraud case on May 22, 2019. 

The accused mastermind of the largest fraud in Vermont history admitted Friday he committed crimes in carrying out a massive Northeast Kingdom development scheme that defrauded foreign investors out of $200 million.

Ariel Quiros, 64, a Miami businessman, was indicted last year on federal fraud charges tied to the failed development of a biomedical research facility in Newport known as AnC Bio Vermont.

Though Quiros and other developers raised more than $80 million from more than 160 investors through the federal EB-5 immigrant investor program, that project never got off the ground.

Quiros, the former owner of Jay Peak and Burke Mountain ski resorts, pleaded guilty Friday to three of the 12 charges brought by federal prosecutors in Vermont.  The hearing was conducted by video.

Federal Chief Judge Geoffrey Crawford asked Quiros how he wanted to plead to each of the charges that were part of the plea agreement.

“Guilty,” Quiros replied to each of the three counts.

Quiros, wearing a black suit, white shirt and dark tie, entered those guilty pleas from an office in Florida as he stood next to his attorney, Neil Taylor. 

Crawford presided from a federal courtroom in Burlington, wearing a black robe and a face mask as a Covid-19 precaution. 

Quiros admitted to federal counts of conspiracy to commit wire fraud, money laundering and concealing material information.

He will remain free on conditions until he is sentenced. A sentencing hearing hasn’t yet been scheduled.

‘It’s a step forward’

Under the plea deal, prosecutors can ask for a prison sentence of up to 97 months — just over eight years — for Quiros. His attorney can argue for a shorter prison term.

In total, the three charges Quiros admitted to on Friday carried a possible maximum penalty of 35 years in prison. 

Crawford told Quiros a pre-sentence investigation report will outline where the crimes fit within federal sentencing guidelines. The judge can decide that the sentence should be shorter or longer than what the guidelines call for.

Gov. Phil Scott, speaking Friday at one of his twice-weekly press conferences, said it had taken a long time to get to the point of a plea in the case.

“In some respects, maybe we all knew that he was guilty, he finally admitted to that,” Scott said of Quiros. “From that standpoint, it’s a step forward.” 

The living room of the 5th Avenue apartment that formerly belonged to Ariel Quiros.

Michael Pieciak, commissioner of the state’s Department of Financial Regulation, also speaking at the press conference, talked about how money diverted from EB-5 investors went to fund Quiros’ “lavish” lifestyle.

“His guilt was never beyond a doubt,” the commissioner said. “We were happy to see that Mr. Quiros has taken responsibility for his actions.”

Assistant U.S. Attorney Nicole Cate, a prosecutor in the case, told the judge during the court hearing Friday the federal government and Quiros had reached agreement on another matter. 

“If we learn of another criminal investigation of Mr. Quiros regarding Jay Peak, we will use our best efforts to request that the other investigating prosecutor forgo pressing charges,” Cate said. 

In addition to the criminal charges, Quiros settled more than two years ago a civil enforcement action brought against him in April 2016 by the U.S. Securities and Exchange Commission linked to EB-5 financed projects he led in Vermont.

In reaching that settlement, Quiros agreed to surrender to the federal government an estimated $81 million in assets, including his interests in both Jay Peak and Burke Mountain ski resorts.

Also, Quiros had reached a resolution to civil action filed by Vermont securities regulators two years ago, turning over another estimated $2 million in properties to the state. 

Quiros’ guilty plea Friday to criminal charges had been anticipated for several weeks. Taylor, the attorney for Quiros, announced during a hearing last month that his client intended to admit his guilt.

Quiros has also agreed to cooperate with prosecutors as they pursue criminal cases against his former business partners charged in the EB-5 investment scandal. 

Those defendants include former Jay Peak president Bill Stenger, who worked with Quiros in a series of massive upgrades at the resort and other projects. The developments involved more than $400 million raised from over 800 EB-5 investors.

Stenger, who was well-connected to powerful state political figures, was the front man for the scheme, soliciting immigrants from all over the world to invest in Jay Peak Resort, Burke Mountain and AnC Bio Vermont.

The federal EB-5 initiative allows foreign investors to receive permanent U.S. residency in return for a $500,000 investment in qualified projects, provided those investments meet job creation requirements.

VTDigger broke an investigative series about the fraud in 2014, two years before the state and the SEC brought charges against the developers.

Former Gov. Peter Shumlin, Sen. Patrick Leahy and the commerce agency were deeply involved in promoting the projects to investors overseas. The head of the Vermont Agency of Commerce and Community Development castigated VTDigger and defended Stenger and Quiros in a commentary published in October 2014. The state did not pursue a probe of the misconduct until nine months after misconduct was made public.

The state has yet to release 3 million pages of records pertaining to the case. Officials claim they can withhold the documents because of a relevant litigation exemption in the public records act. Last year, VTDigger sued and discovered as part of a settlement that four months of records produced by a key state figure were missing.

‘Investors were deceived’

Stenger and two other Quiros associates in the AnC Bio Vermont development were all named in a federal indictment in May 2019 that charged each with fraud and making false statements to the government in connection with that project.

Stenger and another defendant in the case — William Kelly, described by prosecutors as a key adviser to Quiros in the AnC Bio project — are both set to stand trial in April. 

Quiros has been accused of being the architect of the “Ponzi-like” scheme. At Friday’s hearing, Cate, the prosecutor, outlined the specifics of the criminal offenses. 

She said Quiros pleaded guilty to conspiring with Stenger, Kelly, and another defendant in the case, Jong Weon “Alex” Choi, over several years to defraud the EB-5 investors.

Choi, who is from South Korea, has not attended any of the court proceedings since the indictment was returned last May, with prosecutors saying only that he remains at large.

The site on Bogner Drive in Newport where AnC Bio Vermont was planned but never built. 

Choi was convicted in South Korea in 2016 of financial fraud associated with AnC Bio Korea. The Newport biomedical project was pitched by developers as a replica of a South Korean development Choi headed. 

“AnC Vermont would supposedly rent clean rooms, market stem cell therapies, and manufacture artificial organs,” according to the U.S. Attorney’s Office. “Quiros admitted that investors were deceived in regard to all three facets of the future business.”

Cate said there were never any final designs for the project despite all the money raised. 

She added that, as EB-5 money was raised, Quiros siphoned off funds for other purposes, including paying off a loan and making a $6 million tax payment to the Internal Revenue Service. He then took part in covering that up, the prosecutor added.

Stenger’s attorneys have filed paperwork with the court stating that no matter when Quiros is sentenced they want an opportunity to grill him on the stand without him balking by citing Fifth Amendment rights against self-incrimination. 

They claim their client is innocent of any crime and that Quiros left Stenger in the dark about the criminal activity.  

Unanswered questions 

Quiros’ guilty pleas Friday marked a change in legal tactics for his defense.

Following his arraignment in May 2019, his attorney at that time, Seth Levine of New York City, said the charges against his client should never have been filed.

“The fact is the story, the full story, has not been told by the government,” Levine said at that time. “We look forward to the truth coming out, we look forward to Mr. Quiros’ vindication.”

Levine in earlier hearings in the case and in court filings raised the specter of the state’s role in the fraud cases as well as top Vermont political leaders. 

He said during one hearing that exculpatory documents released in discovery could reveal the involvement of the state’s congressional delegation, former employees and past governors.

Levine didn’t name names. 

However, U.S. Sen. Patrick Leahy and former Govs. Peter Shumlin and James Douglas were big backers of the EB-5 projects headed by Quiros and three of his former business partners. 

The politicians flocked to voice their support for the developments and the hundreds of jobs they were expected to bring to northern Vermont, particularly in Newport.

Rep. Peter Welch, Bill Stenger, Sen. Patrick Leahy, Sen. Bernie Sanders, Gov. Peter Shumlin, Ariel Quiros and Bill Kelly.

The involvement of politicos and state government in the scandal was raised by Quiros’ attorney in the civil enforcement actions brought by state and federal regulators years ago.

Attorney Melissa Visconti used an “unclean hands” argument to mitigate civil fraud allegations brought by the Vermont Attorney General’s Office and the U.S. Securities and Exchange Commission against her client.

Then, last summer the U.S. Citizenship and Immigration Services shuttered the state-run Vermont EB-5 Regional Center. In its notice of termination, USCIS wrote that the state made “material misrepresentations” when it signed off on AnC Bio Vermont.

Levine appeared ready to put some of the highest ranking figures in the state on the stand to testify about what they knew and when.

But, Levine withdrew from the case earlier this summer when Quiros ran into financial problems and could no longer afford to pay him. 

Quiros’ new lawyer, Taylor, entered the case only two months ago. Soon after, he pronounced his client’s willingness to plead guilty and cooperate with federal prosecutors. 

Pieciak, the state’s commissioner of the Department of Financial Regulation, said at the governor’s press conference Friday that he was not aware of any criminal activity by state officials related to the EB-5 developments. 

If he became aware of such actions, Pieciak said, he would notify prosecutors at once.

Meanwhile, the commissioner said, the estimated $2 million in property Quiros agreed to turn over to the state last year is targeted to help boost economic development in the Northeast Kingdom.

“The hole” in downtown Newport, where a Stenger-Quiros development was planned but never built, in May 2019. 

In addition to a nearly barren site that was expected to be home to AnC Bio Vermont in Newport, another EB-5 project headed by Stenger and Quiros in the city’s downtown fizzled.

That project stalled after just getting started, leaving the remains of a razed building and a large hole in the center of town. 

The state, Pieciak said, has yet to secure money for the economic development effort because none of the properties that Quiros agreed to surrender have yet been sold off.  

“The market in Vermont is quite hot,” the commissioner said, referencing the move by some people to buy real estate in the state as means to escape Covid-19 hot spots. 

Pieciak said a real estate agent had been brought on to sell the Quiros properties.

“It would be a good time to double-down on those efforts,” he added.  

https://vtdigger.org/2020/08/14/quiros-admits-to-federal-crimes-in-eb-5-fraud/

Mentions

• Ariel Quiros
• UNITED STATES SECURITIES AND EXCHANGE COMMISSION
• Vermont Agency of Commerce and Community Development RC
• Bill Stenger
• U.S. Citizenship and Immigration Services
• Jay Peak - AnC Bio Vermont
• Jay Peak - Q Burke Mountain Resort, Hotel and Conference Center L.P.
• Peter Shumlin
• Patrick Leahy

Litigation Cases

• United States of America vs Ariel Quiros & Bill Stenger
• Michael I. Goldberg vs Ariel Quiros
• 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