A ski resort, a dream and greed: How a $350M fraud happened in Vermont’s poorest region

Jay Peak Resort as seen on Thursday January 17, 2020. The resort got about 8 inches of snow between Wednesday and Thursday with more expected over the weekend of MLK day.
No one would have recognized the icy-eyed man with a military demeanor who drove through rural Vermont in 2007 with his lawyer in tow.
Few people would know the Floridian's name years later, even if his plans worked and money flowed in abundance until it all collapsed in the greatest fraud the state had ever seen.
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In anonymity, Ariel Quiros took his real estate attorney Fred Burgess on a tour of the mountainous region near the Canadian border known as the Northeast Kingdom. The kingdom, as the locals call it, is a silent fortress of natural beauty, tenacious dairy farms, and people seeking a return to prosperity.
Quiros had bought property here for years. He drove and showed Burgess farmland and a piece of land on which he wanted to build a house with a view of a picturesque valley.
Quiros was an extraordinarily private person, Burgess recalls, but shared with his attorney that some of his fondest memories were of a summer vacation in Vermont. Quiros, half retired and around 50 years old, knew the area well.
The main event was a tour of Jay Peak ski area, which was on sale after the previous owner's death. One buyer would get more than the land and buildings: by the time the deal was finalized in 2008, the resort had $ 18 million in the bank earmarked for planned expansion.
Quiros did not have the funds, government officials later discovered, but found a way to buy the resort through a shell game that took investigators years to understand.
But the theft didn't stop there. Before investigators woke up and spent months tracking down the missing money, Quiros went on a shopping spree.
Twelve years later, Quiros pleaded guilty to charges including conspiracy to commit cable fraud. He admitted that investigators said they had extracted $ 50 million from a federal economic development program while also convincing Vermont's poorest region that it was all for them.
Burgess has not been in contact with Quiros in years but has watched the fall from Florida.
"I can't imagine that there was this whole master scheme," Burgess recalled in a recent interview. "I do not know what happened."
This report is based on more than 155,000 documents released by the state of Vermont following civil lawsuits. Together with interviews, the documents create the most detailed picture yet of how Quiros built an illusion that left a hole in the ground for locals.
The partnership between Quiros and Stenger began with a handshake deal
It was winter and there was a power vacuum on Jay Peak. The previous owner, a Canadian, had died. The ski area was about to expand, but his family and business partners weren't ready for the project. They wanted to outsource the ski resort, their only American property.
South Florida resident Ariel Quiros had traveled north for years to enjoy his ski-in and ski-out condo on Jay Peak and was long friends with the resort's general manager, Bill Stenger.
He initially offered to find a buyer for the resort. While Quiros became acquainted with Jay Peak, including the resort's $ 18 million in investor money already in the bank, Quiros and Stenger decided that his Korean business contacts would not go well with the culture.
"We rejected this idea and dealt with it ourselves," Stenger told the Free Press in 2013.
The resort is in the northeast corner of Vermont, where spruce trees are dense and jobs are difficult to find. Though calm and humble, Quiros would show a willingness to support any expansion or embellishment, regardless of the price. Politicians and business people hailed him as the savior the region needed.
Stenger would be an important partner in Quiros' new company. The two found a related business spirit in each other.
Quiros had approached Stenger in the late 1990s and said he wanted to buy a house at Jay Peak Resort - if Stenger could put the most beautiful piece of land aside. There was no contract, just a handshake between the two men for a $ 300,000 deal.
"I knew when he bought this house with a handshake, here's a guy I can make a deal with," Stenger recalled in a 2013 interview.
Stenger was a leader in the local community, combining resort management with entrepreneurship. At one point, Stenger had studied to become a priest but instead got married and worked as an insurance salesman before moving into the ski business.
At Jay Peak, he'd become adept at selling expansion plans to investors - and to local politicians, including a Vermont governor who sang his praises when he was named Citizen of the Year, and the powerful longtime U.S. Senator Patrick Leahy, who considered him a personal friend.
Ariel Quiros (second from right), Bill Kelly (right) and Bill Stenger (second from left) pose at a press conference on September 27, 2012 with Vermont's governor and congressional delegation, including Senator Patrick Leahy and Senator Bernie Sanders, was in documents from the photo State of Vermont released.
Quiros had a reputation as a wealthy businessman - with a background in U.S. Army overseas service, more than a decade in South Korea, and a business he described as importing wire, blue jeans, and other items from South Korea - but in recent years we tried a handful of entrepreneurial endeavors that never got off the ground.
He'd paid to restore three World War II jeeps and told the man who did the job that he wanted to drive around the world with his son and daughter, which was documented by television crews. The jeeps never left the camp.
Most recently, he invested in a Korean medical company called Bioheart.
Quiros 'language patterns and mannerisms almost made him appear like a foreigner, said Fred Burgess, who was acting as Quiros' real estate attorney, when he was about to buy Jay Peak. He appeared to be a professional businessman: "A used car dealer, this is not Ari," said Burgess.
Quiros' downtown Miami office would have been big enough for 50 to 60 employees, Burgess recalled, but Quiros worked alone or with someone most of the time. From there, Quiros directed a dizzying series of business ventures, usually relying on his close associates and a strict chain of command.
The Miami office served as the showroom for one of the initiatives called Q Mirror, Burgess recalled. The mirror was a motion-activated device that would display an advertisement and dissolve in a mirror if someone got close enough to look closely.
Buy Jay Peak with (stolen) investor money
Quiros reached out to his son-in-law, Joel Burstein, who worked at the Miami real estate firm Raymond James & Associates, to figure out how to buy Jay Peak in 2008. It would cost $ 26 million - and Quiros' net worth was roughly $ 4 million, consisting mostly of his beachfront home, he would report the following year.
"There was a perception of Quiros that he was very rich," said Michael Pieciak, who was investigating the pattern that was about to unfold on behalf of the State of Vermont, "and I think the perception persisted throughout the cheating."
Burstein had married Quiros' daughter two years earlier and was eager to impress his father-in-law. The young broker first tried to convince Raymond James Bank - an independent unit of the financial company - to finance the purchase with a loan. They refused.
"I hate these simple-minded people," Burstein complained to his boss. He tried again, this time explaining that the resort had money as collateral. The bank again declined, citing the complexity of federal regulations and lack of experience with ski resorts' finances.
Even so, Burstein assured Canadian sellers that Raymond James was on board to fund the deal.
Quiros convinced Stenger and his Canadian bosses to transfer Jay Peak's $ 18 million expansion fund to Raymond James & Associates five days before the deal was officially closed. The new Raymond James accounts would remain under Canadians' control until the day of purchase. at what point would Quiros have the keys.
Jay Peak co-owner Ariel Quiros listens during a press conference on Thursday, July 11, 2013 at which Quiros and Jay Peak co-owner Bill Stenger announced that FlightDesign, a manufacturer of light aircraft, has an assembly and distribution facility in Newport State will open the airport.
Burstein promised that no money would be used to buy Jay Peak. But that's exactly what happened.
On the day of the purchase, eight minutes after sole control of the money, investigators concluded that Quiros had transferred the money through a number of his Florida accounts. Then he turned back to pay the Canadians with their own money. (The Canadians were later charged by investors who claimed they did not conduct due diligence on the deal.)
When asked about the transaction, Quiros later falsely claimed he was entitled to use investor money for this purpose: "I used your own money to buy Jay Peak," he told the Securities and Exchange Commission. "When you think about what I did and how I did it, you will say Quiros, you are a genius."
Now under control, Quiros put his team together: Stenger would act as a front man, smear government officials and raise millions of investors.
Quiros was happy in his Florida office and rarely visited. "I don't need that," Quiros told the Free Press in 2013. "Bill Stenger is my chain of command."
Burstein would manage the transfers from Florida.
Quiros urged Burstein not to communicate with Stenger about Raymond James's accounts: "YOU AND I WILL ADVISE THE BILL FOR ANY AND ALL AFFAIRS OF THESE ACCOUNTS," Quiros wrote in an email.
Quiros would also rely on Bill Kelly, a longtime Florida sailing buddy with a friendly character who has been involved in many of Quiros' businesses over the years. He would become the resort's chief operations officer and, at Quiros' request, set up a company to oversee part of the construction.
Quiros had the ski resort and the millions of its investors - and a hole in the resort's bank account to fill.
"We are in a cloud that is protected by the government."
Jay Peak has the most snow of any ski mountain on the east coast - but the key to Quiros' cheating game was that it was connected to a unique source of capital: the federal economic development program, EB-5.
EB-5 allowed foreigners to bypass the immigration lottery by investing $ 500,000 in job creation in needy areas in the United States. Slightly regulated and little known, the program became for both Quiros and Jay Peak's snow guns: a reliable, seemingly inexhaustible geyser of success. The resort's initial $ 18 million came from these overseas investors.
Documents show that Quiros was tied to the EB-5 program and briefly considered using it to fund his own projects in Florida, such as student housing at a university.
Instead, after purchasing Jay Peak, Quiros and Stenger used the program to create new cash pools for projects in and around the ski area - for a hotel, condominiums, water park, mountain top restaurant, cottages on the edge of a golf course, and more .
The state of Vermont was tasked with overseeing Jay Peak and other EB-5 projects through its commercial agency, but in practice acted as a cheerleader rather than a regulator.
Documents show that state politicians desperate for a fairy tale hadn't put in place effective regulation to hold Quiros and Stenger accountable until at least six years after the purchase. A full account of the role of state officials in exposing the fraud is not yet known. The state is holding important documents to the public until it fends off an ongoing lawsuit from EB-5 investors.
In total, Quiros would set up eight projects under the EB-5 program. Stenger helped him raise more than $ 400 million from overseas investors who had signed up to receive a U.S. visa upon completion of each project. For Quiros, every new initiative was a stream of investor money that could fill the balance sheet with money that had disappeared in a previous project.
"It's not like a traditional Ponzi program that has nothing to show that is like Bernie Madoff." Bernie Madoff didn't build anything, he gave you a false statement, ”said Pieciak. "Here they showed you, here is the hotel, here is the new hotel, here is the new building, so it was a more complicated way of covering up the fraud."
Jay Peak Resort owner and president Bill Stenger looks out over the view from one of the new hotel suites under construction on Wednesday 5th August 2009.
Pump House indoor water park at Jay Peak Resort is a humid oasis away from the cold skiing conditions in Jay's Mountains on Wednesday February 8, 2012. Jay opened the water park to offer year-round resort options to skiers and non-skiers.
It was an exhilarating time. In late 2008, construction workers transformed Jay Peak and added hundreds of new beds for visitors.
Stenger, the most affable face of the projects, received letters of support from state regulators and politicians eager to believe his promises that these projects would bring thousands of jobs to the oppressed region. He then traveled abroad and sold the projects to investors in China, Vietnam, South Africa, Venezuela, Egypt, Portugal and beyond.
Investors continued to sign up, attracted by Jay Peak's high success rate in approving immigration and the reassurance that state officials had approved the projects and were monitoring their progress.
“We are currently the most successful EB-5 project in the USA,” Stenger wrote in an email to Quiros in September 2011. "We need to keep that momentum while the market is so interested in Jay Peak and everything related to us."
The empire grew when Quiros bought a rival resort, Burke Mountain - again with investor money earmarked for other projects -, renamed it Q Burke, and hired his son Ary.
As progress continued, the reality sometimes fell short of the dream Quiros and Stenger sold to investors. One hotel was 193 rooms short of what had been promised. 15 rooms were missing in a residential complex and in the hotel.
Inconsistencies and missing deals frustrated a handful of experts inside and outside the company, but Jay Peak's operations were able to get the questions through without causing major alarms.
"They raised money with their fists," said Pieciak.
From the outside, Jay Peak represented everything that Congress intended for the EB-5 program. A rural company gained access to international capital. The region with the highest unemployment in Vermont was on the way to 5,000 new jobs.
"What we are seeing today is extremely important," Senator Bernie Sanders said at a press conference in September 2012 about the projects. This comes from a report in the Orleans County Record.
Quiros sat with stone faces on the podium during the press conference and hardly spoke a word.
Senator Leahy, the oldest member of the US Senate and a supporter of the EB-5 program, added, "It won't cost taxpayers a penny."
Everyone who was there in 2012 seemed convinced of the success of the projects, and Quiros triumphed.
"We are in a cloud that is protected by the government," Quiros wrote to Burstein earlier this year when they were putting their plans together. "READ BETWEEN THE LINES. ONCE IN A LIFETIME OPPORTUNITY. FOR ALL OF US."
This is the first of a three-part investigation by the USA Today Network that examines how massive fraud resulted in the overthrow of a man, disappointment in a community, and a blemish in Vermont's state program to allow disadvantaged communities to raise development funds from overseas Investors.
How this article was reported
The Burlington Free Press reported on this article from the following sources:
More than 155,000 documents released by the state of Vermont in response to public interest in the Jay Peak case. This includes filings from the Securities and Exchange Commission, emails from Quiros and Burstein, financial records for Quiros' and Jay Peak's accounts, and some state government records. (The state continues to withhold records related to the role of state officials in overseeing and regulating the projects as legal disputes against the state are pending.)
Records from federal and state courts in civil proceedings against Ariel Qurios and Bill Stenger in U.S. District Court in Miami, Florida and Vermont Superior Court.
Federal Court records in the criminal cases against Quiros, Stenger, Kelly, and Choi in the US District Court in Rutland, Vermont.
Interview with Jeffrey Schneider, a lawyer who oversaw the 2016 raid on Jay Peak.
Interview with Michael Pieciak from the Vermont Department of Financial Regulation.
Interview with Fred Burgess, former Quiros real estate attorney.
Interviews with local officials in Newport, Vermont.
Interview with Eric Flachbert, former owner and founder of Numia in Newport, Vermont.
An unpublished 2013 interview with Ariel Quiros and Bill Stenger at Quiros in Jay Peak.
Quiros, through his attorney, Neil Taylor, declined to be interviewed or to email a detailed list of questions. Quiros' personal tax attorney, Ken Strauss, declined to comment. Stenger declined to be interviewed for this story and, through his attorney Brooks McArthur, declined to respond to a written list of questions. Joel Burstein and Bill Kelly did not respond to requests for comment.
Peter Shumlin, the governor of Vermont from 2011 to 2017, declined to comment, citing pending litigation, as did John Kessler, an attorney with the Vermont Agency of Commerce and Community Development.
Frank Esposito, data specialist at Journal News in White Plains, New York, completed the technical work to enable the search and analysis of the 155,000 documents.
Contact Dan D’Ambrosio at 660-1841 or ddambrosio@freepressmedia.com. Follow him on Twitter @ DanDambrosioVT.Contact April McCullum at 802-660-1863 or amccullum@freepressmedia.com. Follow her on Twitter at @April_McCullum.
This article originally appeared in the Burlington Free Press: For example, the Jay Peak ski resort scam was for greed and improper oversight

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