Alleged EB-5 Fraudster Settles Federal Lawsuit For $81 Million
The alleged perpetrator of a major financial fraud in Vermont's Northeast Kingdom will pay tens of millions of dollars to settle a federal lawsuit.
The federal Securities and Exchange Commission (SEC) announced Friday that Miami businessman Ariel Quiros will pay back $81 million in investor funds. The money was intended for projects in the Northeast Kingdom, including the Jay Peak ski resort and a proposed biomedical facility in Newport, but the SEC alleged that Quiros misappropriated millions of dollars and used investor funds for personal expenses.
In 2016, the SEC alleged that Quiros misused $50 million raised from foreign investors through the federal EB-5 program. That program offers investors a path to obtain a green card if their investments reach specific criteria, intended to spark development in economically depressed regions.
Along with a $1 million penalty and interest on the allegedly misused funds, Quiros will pay close to $84 million in total, according to a court filing; Quiros' business partner Bill Stenger will pay $75,000. Quiros must also give up over a dozen properties to a court-appointed receiver, including his entire interest in Jay Peak Resort.
Under the settlement, Quiros and Stenger neither admit nor deny the charges against them. But Michael Pieciak, the commissioner of Vermont's Department of Financial Regulation, says the high settlement figure is significant.
"Even though you do not admit nor deny, your checkbook often does the talking," Pieciak says, "and when you have a high settlement figure, that says something."
Pieciak says a separate state-level lawsuit in this matter is currently pending in Washington County Superior Court.
“We will continue to litigate our case because the defendants, in particular Mr. Quiros, retains significant assets and we want to ensure that we bring as much financial justice to the people that were affected by this alleged fraud as possible,” Pieciak says.
On top of the civil cases, it’s unclear when or if criminal charges may be filed over the alleged fraud. Reached on Friday, a spokesman for Vermont’s U.S. Attorney Christina Nolan would not discuss the status or existence of a criminal investigation into the Jay Peak case. However, he referred VPR to a April 2016 statement in Seven Days by Nolan’s predecessor, Eric Miller.
"My office has been conducting, and continues to conduct, an investigation designed to determine whether or not there have been violations of federal criminal law in connection with EB-5 projects in the Northeast Kingdom,” Miller said in that April 2016 statement.
As part of the SEC settlement, both Quiros and Stenger are barred from participating in future EB-5 offerings. Quiros is also barred "from serving as an officer or director of a public company," according to the court filing.
Update 3:58 p.m. This post was updated to include comment from Michael Pieciak and the Vermont U.S. Attorney's Office, as well as further information available in the court filing.