Six years ago, federal regulators exposed the biggest financial fraud in Vermont history. Owners and developers of the Jay Peak ski resort have been accused of misappropriating more than $200 million they raised for development projects in the North East Kingdom.
In the years since, the men involved have pleaded guilty to federal criminal charges and last month three of them were sentenced to prison.
As the sentencing of the scandal’s central figures marks the end of a chapter, the men leave behind a legacy of EB-5 projects – both completed and unfinished – in the Northeast Kingdom. Locals have mixed feelings about the men and the projects they left behind.
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Jay Peak Ski Resort‘s indoor water park was closed on a recent April afternoon, but when the resort is busy, around 3,000 people a day will drop by, according to JJ Toland, the resort’s communications manager.
The 55,000 square foot facility is packed with water features, including a surf pool and four massive slides.
“One that drops you in a vertical freefall before shooting into an upside-down loop – it’s called ‘The Chute,'” Toland said, pointing across the park.
The water park is one of many major infrastructure improvements at Jay Peak, built with money from the federal EB-5 program, which offers citizenship to foreign investors if they invest $500,000 in construction projects. development in economically disadvantaged regions.
“It is impossible to walk on this campus, especially for those who walked it in 2003, and not see hundreds of staff and thousands of guests and many new buildings and infrastructure, and not look at it with a positive eye.”
Steve Wright, General Manager of Jay Peak Resort
The program funded a multitude of improvements, including hotels, condos, a movie theater and a hockey arena. In total, about $500 million has been paid to Jay Peak, a remote resort town four miles from the Canadian border.
EB-5 investments have helped make Jay Peak a four-season resort — crucial as climate change shortens Vermont’s winters, said Steve Wright, Jay Peak’s chief executive. The extra infrastructure meant hundreds of new jobs, including lifeguards, climbing instructors and chefs.
“It is impossible to walk on this campus, especially for those who walked it in 2003, and not see hundreds of staff and thousands of guests and many new buildings and infrastructure, and not look at it with a positive eye,” Wright said. “At the same time, you are aware of the people who may have been hurt because of this.”
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In a sense, Jay Peak and surrounding areas have benefited from what regulators say is ultimately a Ponzi-like scheme. In 2016, the Securities and Exchange Commission filed a civil lawsuit against former Jay Peak chairman Bill Stenger and owner Ariel Quiros, alleging they misappropriated EB-5 funds. The station has gone into receivership and is currently for sale.
There are two or three potential Jay Peak buyers, and they’re nearing the final stages, according to Wright.
“I likened it to a baseball game with the first eight and two-thirds of the innings going really fast, and that last third, those last three outs, taking forever to grind,” he said. “So we’re in that last round.”
While Jay Peak got a finished draft from the EB-5 program, Newport, 20 miles to the east, wasn’t so lucky. Federal authorities have filed criminal charges against Quiros and Stenger for a biotechnology facility that was 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 is not 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 was never built, leaving a pit in the middle of downtown.
“When you walk down and look at Main Street, Newport, and look at…the projects that were supposed to happen here and never happened, it’s really kind of disheartening,” said Tracy Russell, owner of ‘Inked Arches and Main. Tattoo, a tattoo and piercing shop in Newport.
Russell recently secured $20,000 through a business grant program the state set up using money from a settlement with Qurios. The money will help Russell expand her business and set up an ongoing makeup training program.
But state and local leaders must do more to help Newport recover, she said.
“I think they need to step up and they need to come to Newport and show us that they’re going to invest as well,” she said. “It can’t just be independent business owners like me trying to continue to run the business day to day and rebuild the high streets.”
“When you walk down and look at Main Street, Newport, and look at … the projects that were supposed to happen here and never happened, it’s really kind of disheartening.”
Tracy Russell, owner of Inked Arches and Main Street Tattoo
The town of Newport wasn’t the only place affected by the fraud. Investors who invested $500,000 each in projects that were not completed risked losing money and not obtaining their citizenship. Last year, a group of investors filed a class action lawsuit against the state of Vermont, alleging authorities allowed the fraud to continue because it benefited local businesses.
While they don’t try to downplay the criminal cases, outrageous headlines and damage to defrauded investors, some Northeast Kingdom leaders can’t help but note that in some ways the whole saga EB-5 was a net positive for the Northeast Kingdom, which has long been the region of Vermont that has struggled economically.
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Essex-Orléans Senator Russ Ingalls said his biggest concern was that the area was growing too quickly due to EB-5 investments.
“Fortunately for us, the best thing in the world happened was that the fraud happened – they were forced to stop,” he said. “It allowed for checks and balances to make sure this animal didn’t get so big.”
Ingalls credits Bill Stenger for seeing the opportunity 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. “In the end, he saw the benefit of what was 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 provided, and all that was happened along the way, happened.”
Essex-Orléans Senator Russ Ingalls
Ingalls says Stenger’s 18-month prison sentence is appropriate given his criminal conduct, but Ingalls’ state Senate colleague Bobby Starr disagrees.
Starr draws a distinction between Stenger, a local who has spent decades working to develop the Northeast Kingdom, and Quiros, a Miami businessman. He thinks Stenger’s prison term is too much.
“If they put [Stenger] on community service for the full five years, we would have been much better off,” Starr said.
It is hoped that vacant properties in Newport will eventually be occupied. The receiver has agreed to sell the AnC Bio property to the Northeast Kingdom Development Corporation for $950,000. The nonprofit will use money awarded to it through the state grant program funded by the Quiros settlement.
NEKDC board member David Snedeker said the organization plans to lease the building to Track Inc, a company that sells snow groomers and equipment.
“We estimate that in the first year we can create 25 new jobs and 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 planned, Snedeker said it could create up to 100 new jobs in the area over the next five years.
Do you have questions, comments or advice? Send us a message or contact the journalist Liam Elder-Connors @lseconnors.