Six years ago, federal regulators revealed the largest financial fraud in Vermont’s history. The owners and developers of Jay Peak ski resort were accused of misappropriating more than $200 million that they’d raised for development projects in the Northeast Kingdom.
In the years since, the men involved have pleaded guilty to federal criminal charges and last month, three of them were sentenced to time in prison.
While the sentencing of the central figures in the scandal marks the end of a chapter, the men leave behind a legacy of EB-5 projects – both finished and unfinished – in the Northeast Kingdom. Residents of the region have mixed feelings about the men, and the projects they left behind.
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The indoor water park at Jay Peak ski resort was closed on a recent afternoon in April, but when the resort is busy, about 3,000 people a day will come through, according to JJ Toland, the director of communications at the resort.
The 55,000-square-foot facility is packed with water features, including a surf pool and four massive slides.
“One that drops you into a vertical free-fall before shooting into an upside down loop — that's called ‘La Chute’,” Toland said, pointing across the park.
The waterpark is one of several major infrastructure improvements at Jay Peak, built using money from the federal EB-5 program, which offers foreign investors citizenship if they put $500,000 into development projects in economically-depressed regions.
"It's impossible to walk this campus, especially for those who have walked it in 2003, and not see hundreds of employees and thousands of guests and lots of new buildings and infrastructure, and not look at that through a positive lens."Steve Wright, Jay Peak Resort general manager
The program funded a slew of improvements, including hotels, condos, a movie theater and hockey arena. All together, about $500 million was poured into Jay Peak, a remote resort, four miles from the Canadian border.
The EB-5 investments helped make Jay Peak a four-season resort – which is crucial as climate change shortens Vermont winters, said Steve Wright, Jay Peak's general manager. The added infrastructure meant hundreds of new jobs, including life-guards, rock climbing instructors and chefs.
“It's impossible to walk this campus, especially for those who have walked it in 2003, and not see hundreds of employees and thousands of guests and lots of new buildings and infrastructure, and not look at that through a positive lens,” Wright said. “At the same time, you're being cognizant of the folks who may have been hurt through it.”
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In a sense, Jay Peak and surrounding areas benefited from what regulators say was ultimately a Ponzi-like scheme. The Securities and Exchange Commission in 2016 filed a civil complaint against former Jay Peak president Bill Stenger and owner Ariel Quiros, alleging that they were embezzling EB-5 funds. The resort went into receivership and is currently for sale.
There are two or three potential buyers of Jay Peak, and they’re nearing the final stages, according to Wright.
“I equated this to a baseball game with the first eight and two-thirds innings going very fast, and that last third, those last three outs, take forever to grind out, '' he said. “So we're into that last inning.”
While Jay Peak got a finished project from the EB-5 program, Newport, 20 miles to the east, wasn’t as fortunate. Federal authorities filed criminal charges against Quiros and Stenger over a biotech facility that was supposed to be built in Newport. It never materialized, and prosecutors say it was almost a total fraud.
Stenger will serve 18 months in prison, and Quiros will serve 5 years — both for their roles in the scheme.
The AnC Bio project isn’t the only promised development that never happened. Quiros and Stenger also demolished a block in downtown Newport to make way for a mixed-use development that never got built, leaving a pit in the middle of downtown.
“When you come down and you look at Main Street, Newport, and you look at … the projects that were supposed to happen down here that never did, it really is kind of disheartening,” said Tracy Russell, who owns Inked Arches and Main Tattoo, a tattoo and piercing shop in Newport.
Russell recently got $20,000 through a business grant program the state set up using money from a settlementwith Qurios. The money will help Russell expand her business and set up a permanent makeup training program.
But state and local leaders need to do more to help Newport recover, she said.
“I think they need to step up, and they need to show up to Newport and show us that they're going to invest as well,” she said. “It can't just be independent business owners like myself that are trying to still run the business day-to-day and rebuild Main Streets.”
"When you come down and you look at Main Street, Newport, and you look at … the projects that were supposed to happen down here that never did, it really is kind of disheartening."Tracy Russell, owner of Inked Arches and Main Street Tattoo
The city of Newport wasn’t the only place hurt by the fraud. Investors who put $500,000 each into projects that weren’t finished were at risk of losing money and not getting their citizenship. A group of investors last year filed a class action lawsuit against the state of Vermont, alleging officials allowed the fraud to continue because it was benefiting local businesses.
While they’re not trying to downplay the criminal cases, scandalous headlines, and harm done to defrauded investors, some leaders in the Northeast Kingdom can't help but note that, in some ways, the whole EB-5 saga was a net positive for the Northeast Kingdom, which has long been the region in Vermont that has struggled economically.
Essex-Orleans Sen. Russ Ingalls said his biggest concern was that the region was growing too quickly because of the EB-5 investments.
“Fortunately for us, the best thing in the whole world happened, is that the fraud happened — they were forced to stop,” he said. “It allowed checks and balances to make sure that this animal didn’t get so big.”
Ingalls credits Bill Stenger for seeing the possibility in the EB-5 program and using it effectively to help the region.
“I've known Bill Stenger for a long, long time, he lived and breathed the area, he lived and breathed Jay Peak,” Ingalls said. “Ultimately, he saw the benefit of what was being provided, and whatever happened along the way, happened.”
"I've known Bill Stenger for a long, long time, he lived and breathed the area, he lived and breathed Jay Peak. Ultimately, he saw the benefit of what was being provided, and whatever happened along the way, happened.”Essex-Orleans Sen. Russ Ingalls
Ingalls says Stenger’s 18 months prison sentence is appropriate given his criminal conduct, but Ingalls' colleague in the state senate, Bobby Starr, disagrees.
Starr draws a distinction between Stenger, a local who spent decades working to develop the Northeast Kingdom, and Quiros, a Miami businessman. He thinks that Stenger’s jail sentence is too much.
“If they’d put [Stenger] on community service for the full five years, we would have been a lot better off,” Starr said.
There is hope that the vacant properties in Newport will eventually be filled. The receiver has agreed to sell the AnC Bio property to the Northeast Kingdom Development Corporation for $950,000. The nonprofit will use money it was awarded from the state grant program funded by Quiros' settlement.
David Snedeker, who’s on NEKDC’s board, said the organization plans to lease the building to Track Inc, a company that sells snow groomers and equipment.
“We're estimating in year one, we can create 25 new jobs, and well-, good-paying jobs for the Newport area,” Snedeker said.
Stenger said in 2015 that the biotech facility would create 400 jobs in the region. If Track Inc grows as expected, Snedeker said it could bring as many as 100 new jobs to the area in the next five years.
Have questions, comments or tips? Send us a message or get in touch with reporter Liam Elder-Connors @lseconnors.
