Assurances aren’t enough: Pressure mounts on ski resort owners in Vermont’s largest fraud

For those who looked closely in 2012, the cracks in Ariel Quiros's scheme began to show.
The first public sign of trouble at the Jay Peak ski area came from Douglas Hulme, a UK broker who had given exclusive marketing rights to the resort's first EB-5 projects.
Hulme released a statement denouncing the grandiose claims made by Quiros, the resort owner and its CEO, Bill Stenger. He stated that his company no longer had confidence in "the accuracy of the representations made by Jay Peak".
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The two business partners had drawn millions for four years in a chain of transactions that investigators would later describe as something like a Ponzi scheme. Although Hulme's statement caught public attention, Quiros and Stenger had asked nasty questions about their finances on several occasions since the partnership began.
Stenger, Quiros shakes off financial questions when doubts arise.
During the summer that Quiros bought Jay Peak, his CFO attempted to obtain bank statements for the money earmarked for the resort expansion, which Quiros moved to an account with Raymond James in Florida. After several months of frustration, Mike Dupont pointed to a lack of cash management controls and said it did not appear to be taking EB-5 investor funds into account. He resigned in protest.
Years later, in a Securities and Exchange Commission statement, Stenger dismissed Dupont as "a depressed character" having a "hissing fit."
The next year, the resort's controller, John Carpenter, emailed Stenger to indicate that there had been "so much mingling of funds ... that this has become quite a mess". And officials at a state business development organization who loaned Jay Peak money ran into a "confusing" delay while searching for the resort's audited financial statements.
Stenger blamed the late CFO and stood on hold until Quiros finally settled the issues by paying off the loan with $ 3 million investor money.
Before the IPO, Hulme Stenger had asked about the resort's financial records, including statements from the secret Florida accounts. Hulme also wanted written assurances that Jay Peak would comply with all federal and state laws and not use investors' money as collateral for loans.
Stenger knew the investors' money had been used as collateral for an arrangement known as a margin loan, but tried to reassure his longtime marketer. Stenger promised Hulme that the investors' money would be safe “to the best of their knowledge”.
The insurance company could not convince Hulme that everything was overboard. In February 2012, he resigned as a marketer.
Hulme declined to tell journalists his departure, but his attorney privately disclosed to a Vermont state official that the split was caused by Jay Peak financial and legal compliance concerns.
Stenger worked overtime to limit the damage.
Stenger told a local newspaper that Hulme's announcement was simply a conflict between a company and a seller. "We have solid financials for each of the projects," Stenger said, according to Newport Daily Express.
However, Jay Peak's internal auditors had found that the quick pursuit of foreign money opened the company to the risk of going wrong on critical matters. They also pointed out other issues, such as the lack of fraud checks, CPAs in the resort's bookkeeping, or a formal ethics policy.
As problems increased, Quiros enjoyed growing wealth.
In December 2011, Quiros and his wife, Okcha, bought a condo on Fifth Avenue in New York City for $ 4.8 million using funds investigators traced back to investor money for the Jay Peak ski area in Vermont.
Less than two years later, they bought another apartment on Trump Place for $ 2.5 million. Investigators would also conclude that Quiros used $ 6 million stolen investor money to cover his 2014 IRS tax debt.
At least one investor was so shocked by Hulme's decision to cut ties with the project that she pulled out. When another investor asked for audits on each project, Stenger replied that Jay Peak didn't have them because they had already provided so much information to the U.S. Citizenship and Immigration Service: “There's no doubt that the funds of the Investors have fully spent the projects. "
Quiros is digging a deeper hole with the fake new AnC Bio project
The public spat with their lead marketer, Hulme, threatening to get into a bigger problem that wasn't easy to explain. But state and federal officials were still on board Jay Peak's vision, lining up for a massive press conference that fall.
Quiros launched a new project - the brashest phase of the scam - to bring a biomedical company to the small town of Newport, on a lake on the Canadian border. Known as AnC Bio, the project had murky origins in South Korea and would benefit one of Quiros' long-time employees, Alex Choi.
“I really can't believe it all started on a napkin,” Quiros wrote to his son-in-law and business partner Joel Burstein as they worked out their plans. He warned Burstein to adhere to the "NO TALKING" protocol and to ignore attacks from jealous people.
This image, shared Friday by AnC Bio Vermont, shows a biotechnology facility developers are looking to build in Newport, Vt. AnC Bio Vermont is part of a year-long northern Vermont economic development initiative led by Jay Peak Resort President Bill Stenger and partner Ariel, which includes expanding Jay Peak and Burke Mountain ski areas, rebuilding a block in downtown and the Quiros Include building a waterfront hotel. (AP Photo / AnC Bio Vermont)
At the end of the year, the New York Times featured Jay Peak in a glowing article on the region's transformation. The article reiterated a false claim that Vermont state officials “monitor and audit” the EB-5 projects.
Furthermore, the article states that Quiros and Stenger "raise $ 90 million themselves" - a key factor in influencing investors who wanted developers to be involved in the project. It was wrong.
Stenger was thrilled with the package released: "This piece will help us so much with potential investors."
The promises piled up. AnC Bio would make Newport a technology hub strategically located between Boston and Montreal. A new hotel and conference center would house the north-wandering scientists and entrepreneurs, and well-paid biotech workers would usher in a new era of prosperity for the city.
"The proposed project is a win-win for investors, the community and AnC Bio Vermont," wrote Senator Patrick Leahy, Vermont's influential senator, in a letter of support. "Keep it up."
Stenger and Quiros bought commemorative shovels for the breakaway AnC Bio.
Investigators later found that the AnC Bio project was fake.
"They spent $ 270 on those stupid shovels to break a ground that they all should have known was nowhere," said Michael Pieciak of the Vermont Treasury.
The SEC and Vermont officials begin to ask questions
The SEC opened an investigation into the Jay Peak projects in May 2013. The Vermont government would follow a year and a half later, commissioning Pieciak's team of financial experts to help AnC Bio overcome regulatory hurdles.
Pieciak recalls asking for a specific arrangement about Quiros' accounts that would use the EB-5 investor's money as collateral for a loan - something that shouldn't have been necessary. Quiros' lawyers waved this off, saying it was a smart move by Quiros but did not explain how. The first red flag.
State investigators encountered questions and excuses at every turn and eventually stopped helping AnC Bio. Instead, their project became a partnership with the SEC to track down every penny of Jay Peak's investment.
"We had to let all of these traps go until we were confident of saying, yes, this is a highly complex Ponzi program and not someone who is loose with the way they manage their accounts," said Pieciak.
Burstein's supervisors at Raymond James were contacted by the SEC and began to grow suspicious. In June 2014, Burstein, who divorced Quiros ’daughter, asked Quiros to move his business elsewhere.
"I'll be glad never to speak to him again!" Burstein wrote to his colleagues at Raymond James, his former father-in-law. “All in all, I think we're all happier. Goodbye forever!"
It was several months before Quiros removed his money from the institution that had made his complicated financial operations possible, keeping Quiros in touch with Burstein.
"Everything is going very well with the investigation, as expected," Quiros wrote to Burstein in September 2014 after being interrogated in the SEC's Miami office. He promised to send new instructions for money transfers.
When rumors of the investigation emerged, Stenger disclosed to anyone who asked it was a "review" even though the SEC told him directly that it was an investigation into Jay Peak's securities law violations act. “We don't expect anything to come of it,” Stenger told the Free Press.
The SEC never publicly disclosed what sparked its investigation in 2013, but Pieciak, the Vermont investigator who worked with the SEC, believes Douglas Hulme had something to do with it.
Quiros believed Hulme was to blame and told the SEC.
"When this SEC is done, I'll follow up on this man, I promise you," Quiros told federal investigators. "I'm going to kill this man for what he did."
This was the second part of our three-part investigation.
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 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 and analyze the 155,000 documents.
Contact Dan D’Ambrosio at 660-1841 or Follow him on Twitter @DanDambrosioVT. Contact April McCullum at 802-660-1863 or Follow her on Twitter at @April_McCullum.
This article originally appeared in Burlington Free Press: Pressure on Jay Peak Owners Will Rise As Fraud Program Dissolves

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