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Explore our coverage of government and politics.

An Alleged Fraud Fiasco In Vermont's Northeast Kingdom: What You Need To Know

Clockwise from top left: Vermont Department of Financial Regulation; Alden Pellet/AP; Freeman/French/Freeman; Steve Legge/AP
The state is reeling from news of an alleged "Ponzi-like" scheme in the Northeast Kingdom. From upper left: A flow chart of allegedly misused funds, Bill Stenger at Jay Peak in 2006, a rendering of renovations at Coventry Airport, Burke Mountain.

The news on Thursday of major, alleged fraud in the Northeast Kingdom was a punch in the gut for Vermonters who had nurtured dreams of economic revitalization in the area. But the story is pretty complicated. If you’re coming to it cold, here’s what you need to know.

The EB-5 program

If it weren’t for this federal program, hundreds of millions of dollars probably wouldn’t have begun pouring into an out-of-the-way corner of Vermont, and we wouldn’t all be talking about alleged fraud right now.

The purpose of the federal EB-5 Immigrant Investor program is to spur economic development in the United States. How does it do this? By recruiting foreign investors who will subsidize said development in exchange for a fast-tracked path to legal residency for both themselves and their families.

The requirements are pretty simple: Investors have to be providing money to newer, for-profit enterprises or existing troubled businesses, and their contributions have to “plan to create or preserve” at least 10 full-time jobs in the U.S.

The price tag: For ventures in rural, struggling regions like the Northeast Kingdom, investors have to fork over $500,000. In other EB-5 regions, the cost of admission is $1 million. (The most expensive green cards out there? Maybe.)

The developers

The two big names in this story are Bill Stenger and Ariel Quiros. They were the ones who championed the EB-5 program and got the state of Vermont excited about the possibilities for an economic renaissance in the NEK.

Stenger lives in the Northeast Kingdom town of Newport and is the CEO of Jay Peak. Quiros, a Miami businessman, owns Q Resorts, a company whose holdings include Jay Peak and Q Burke Mountain Resort.

The money

Beginning in 2006, Stenger, and later and Quiros, began recruiting EB-5 investors to pour hundreds of millions of dollars into the region with promises of big projects — these would come to include expansions at Jay, the transformation of Coventry Airport (which was later pulled from the EB-5 docket) and a $110 million Korean biomedical facility in Newport called AnC Bio.

Overall, they used the EB-5 program to raise more than $350 million from more than 700 investors in at least 74 countries.

Until this week, the most colorful example of EB-5 money at work was the gigantic indoor water park at Jay Peak. Now, that superlative probably goes to a $2.2 million luxury condo at the Trump Place in New York, which Ariel Quiros allegedly purchased with investor money.

The allegations

The Securities and Exchange Commission dropped an 81-page complaint on Thursday alleging that Stenger and Quiros defrauded their investors, beginning in 2008.

The allegation highlights:

  • Of the $350 million raised, $200 million was “misappropriated” and $50 million was “systematically looted”
  • Ariel Quiros used the money to pay off personal debts and income tax obligations
  • Quiros also used the money to purchase Q Burke Mountain Resort and a $2.2 million luxury condominium at the Trump Place in New York City
  • In a “Ponzi-like fashion, money from investors in later projects was misappropriated to fund deficits in earlier projects.”

The state has filed its own civil complaint against Quiros and Stenger in Washington County Superior Court (and has created a hypnotizing flowchart of the alleged money-shuffling).

The warning signs

State regulators were responsible for overseeing EB-5 projects, but they say that it wasn’t until the beginning of 2015 that Quiros and Stenger began to arouse suspicion. 

Meanwhile, our colleagues at VTDigger have been in the weeds on this story for a long time. For example, they’ve reported that in August, the state suspended approval for that biotech facility, AnC Bio. They’ve also revealed that investors on the project also asked for their money back in March. It’s worth checking out all their coverage, which is organized in this handy timeline.

If you’re looking for something more succinct, Alex Kaufman, the host of our Wintry Mix podcast and a ski industry expert, collaborated with Teton Gravity Research on a super useful overview.

The political connection

Stenger and Quiros were major political donors in Vermont in recent years, contributing directly and indirectly at least $51,800 to political parties and candidates in the state, records show.

In the 2014 election cycle, the pair sent $14,000 to Gov. Peter Shumlin’s reelection effortthrough family members and limited liability companies.

The Vermont Democratic Party got big money from Quiros. According to data from the Federal Elections Commission, Quiros paid the Vermont Democratic Party $10,000 in October 2012, then $12,000 in September 2014.

Another person with apparent connections to the EB-5 projects, George Gulisano of Miami, Florida, gave $10,000 to the Vermont Democratic Party in October 2014. In campaign finance filings, Gulisano listed his employer as Jay Peak Resort.

In 2014, Stenger also gave $2,500 to Republican Congressman Darrell Issa, who represents California’s 49th district. The donation came in July 2014, during Issa’s final months as chairman of the House Oversight Committee.

The next chapter

While government officials say they're optimistic about some EB-5 projects, including those at Q Burke and Jay Peak (where a "federal receiver" is now in charge of operations), others face more gloomy prospects.

The AnC Bio facility looks to be a complete bust, as does the "Renaissance Project" that was planned to revitalize downtown Newport with shops, hotels and apartment buildings. (Stenger and Quiros touted the project at a press conference in 2012, but never filed an EB-5 application for the project.)

But there are more questions than certainties right now. Who else might have been involved? How could something like this happen?

Many are asking if anyone will be going to jail — though neither the federal nor the state civil charges already filed against Stenger and Qurios would result in any jail time.

Meanwhile, it's too early to gauge the impact this scandal will have on the residents and businesses of the Northeast Kingdom — especially in Newport, where, in the middle of the downtown, there will be an all-too-symbolic hole.

This post has been updated for clarity.

Taylor was VPR's digital reporter from 2013 until 2017. After growing up in Vermont, he graduated with at BA in Journalism from Northeastern University in 2013.
Angela Evancie serves as Vermont Public's Senior VP of Content, and was the Director of Engagement Journalism and the Executive Producer of Brave Little State, the station's people-powered journalism project.
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