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Vt. resort built on immigrants’ investments used fraud, SEC says

A view of 3,862-foot Jay Peak.Hazen's Notch Association

With hotels, restaurants, a water park, and a wedding chapel, the developers of the Jay Peak Resort transformed a sleepy corner of Northern Vermont into a tourist destination and became the model for an immigration investor program. Now federal and state authorities allege it was built on a massive fraud.

The Securities and Exchange Commission on Thursday filed civil fraud charges and froze the assets of the ski resort’s owner, Ariel Quiros of Miami, and its president, William Stenger of Newport, Vt., along with seven of their partnerships.

Regulators also appointed a receiver to manage the projects and determine their future.


The US attorney’s office in Vermont is also considering whether criminal charges should be filed.

Securities regulators warned that investors, who poured millions into the project in the hope of also getting a US visa, could find their immigration petitions at risk, along with their money.

The allegations are also a setback for a part of Vermont where unemployment is close to 13 percent, more than three times the state average, and for a visa program that has been controversial. Vermont state officials heavily promoted the immigration-related projects as an economic engine and provided some oversight.

“I’m shocked and saddened by what state and federal investigators have found,” said Vermont Senator Patrick Leahy, a Democrat who has been a supporter of the EB-5 visa program. “I’m especially heartbroken for the people of the Northeast Kingdom [of Vermont], whose high hopes for these projects have been dealt a harsh blow.”

Under the visa program, foreigners who invest at least $500,000 in US projects that create jobs are provided green cards and a path to citizenship.

Quiros and Stenger used the program to raise more than $350 million from 700 investors worldwide. But more than half of the money was misused, and more than $50 million was “systematically looted” for personal uses, according to the SEC complaint, unsealed Thursday.


Stenger, Quiros, and the attorney for Jay Peak did not respond to calls and e-mails seeking comment.

According to regulators, Quiros and Stenger used 100 bank accounts at 10 financial institutions to move investor money around and disguise shortfalls and budget overruns in the seven projects in which they were involved. Money from investors in later projects was allegedly used to cover deficits in earlier projects, in what prosecutors called “a Ponzi-like scheme.”

Several of the projects have been completed and are operating, but the most recent venture, a biomedical research center, was a “complete fraud,” according to the documents, with bogus claims that products were in the pipeline for approval by the Food and Drug Administration.

Instead, Quiros used some of the $50 million in investor money to finance his initial purchase of Jay Peak in 2008, to pay his personal taxes, to purchase Burke Mountain Resort, and to buy a $2.2 million luxury condominium at Trump Place in New York in 2013, according to the documents.

“The alleged fraud ran the gamut from false statements to deceptive financial transactions to outright theft,” Andrew Ceresney, director of the SEC’s enforcement division, said in a statement.

State officials began receiving complaints from investors more than a year ago that the developers were changing the terms of their investment contracts and the repayment periods. Last year, the state moved oversight of all EB-5 projects from an economic development agency, which had been helping to attract investors and promote the developments, to Vermont’s financial regulator.


The Vermont Department of Financial Regulation launched its own inquiry into the Jay Peak project and required Quiros and Stenger to put new investor money into an escrow account.

Susan Donegan, commissioner of the department, said its investigation is ongoing.

When the state began participating in EB-5 projects as a way to jump-start the economies in depressed communities, the level of oversight was less rigorous, Donegan said. But as the projects have become more complicated, so has the state review, she said.

The SEC has filed fraud complaints against other EB-5 projects around the country and the attorneys involved in them. Critics deride the program as a quicker way for the wealthy to navigate the US immigration process.

It is unclear how many investors received green cards through Jay Peak-related projects. According to the Vermont EB-5 Regional Center, which supports other immigration investor developments in the state, 355 immigrant families have received unrestricted green cards through its projects in the past decade.

David Joyce, a British citizen who invested in the hotel and water park portion of Jay Peak in 2009, said the allegations were a surprise.

Joyce, who owns a golf store in Florida, where he lives, said the ski-resort investment offered him a faster route to getting a visa and staying in the United States.

Joyce hasn’t received any return on his investment yet, but hopes he will.


“We still own a hotel, a water park; there may be some assets we own that we can sell,” Joyce said. “I’m kind of shocked at the moment.”

Deirdre Fernandes can be reached