Stenger, Quiros indicted on multiple fraud counts

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Stenger, Quiros indicted on multiple fraud counts

Wed, 05/22/2019 - 3:35pm -- Anonymous

Bill Stenger, left, listens as his attorney, Brooks McArthur, gives a statement to the press at noon Wednesday outside the federal courthouse in Burlington. VBM photo.

by Timothy McQuiston, Vermont Business Magazine With his attorney saying, “This is a good day,” William Stenger, 70, stood stoically outside the federal courthouse in Burlington just after noon Wednesday – black suit, blue shirt, no tie, though he had arrived at court with one – and he did not look like he believed this was a good day. When he was brought into court just a half-hour earlier, he was in handcuffs.

Brooks McArthur qualified his statement to the press by adding that now Stenger, whom everyone calls Bill, will be able to tell his side of the story in court.

McArthur, of Jarvis McArthur & Williams of Burlington, also vehemently denied that Stenger engaged in any wrongdoing. Stenger did not speak.

McArthur said there is "zero evidence" against Stenger and that he "unequivocally" denies all charges and they will "vigorously defend this."

"Bill Stenger did not commit any criminal conduct," McArthur said. (See video of statement and PDF of indictment below)

The 10 counts against Stenger (of the 14 total brought by a federal grand jury) include conspiracy to commit fraud, wire fraud and making false statements regarding the Food & Drug Administration.

He was released on $100,000 bond and a pre-trial hearing was scheduled for August. Among other conditions of release, he had to surrender his passport, not leave the country, and he was restricted from speaking to any other defendants or witnesses in the case, with the exception of certain work associates like Michael Goldberg. Even then he is forbidden to discuss the case.

When asked by US District Court Judge John Conroy what his occupation was, Stenger said he was a consultant to Michael Goldberg, the receiver at Jay Peak, and “until April 13, 2016” he was president and CEO of Jay Peak Resort. Goldberg cut ties with Stenger on May 31 in deference to the criminal case.

When asked how he pleaded, Stenger said in a clear voice, “Not guilty, your honor.” The arraignment took just under 20 minutes. In the audience were a dozen members of the media, other lawyers, at least one FBI agent and a man described as Stenger’s son, though no one in the press corps knew which of his son’s it was.

Stenger’s side of the story promises to be an enlightening one, which stretches back to before fellow defendant Ariel Quiros bought Jay Peak Resort in 2008.

It also promises to offer insights on the original EB-5 investments with the previous Canadian owners.

Stenger will be able to describe what he knew of Quiros’ financing of the many developments at Jay and Burke Mountain, including the hotels, water park and ice rink.

He can also explain his interaction with Vermont state officials. What did they know and when did they know it?

The EB-5 foreign investor program at Jay Peak stretches back to the Dean Administration and now a fourth governor is trying to clean up the mess. Governors Douglas and Shumlin joined Stenger on trips to China, as Stenger sought investors from the newly wealthy Far East.

But focus of this federal criminal case against Stenger, Quiros, Quiros associate William Kelly and Korean partner Jong Weon “Alex” Choi, largely centers on alleged fraud at the proposed AnC Bio (aka, AnC Vermont) facility in Newport. Kelly, Quiros and Stenger were arraigned separately in Burlington. Choi did not appear in court.

At a separate press conference held by US Attorney Christina Nolan Wednesday afternoon in Newport, she said only that Choi was "at large."

Choi and Quiros are at the center of the allegations involving a scheme to transfer AnC EB-5 funds into their own pockets.

AnC was intended to be a high-end biotechnology laboratory and clean room. It was to offer stem cell products and even artificial organs. It would bring a high-tech economic engine to the tourism-related developments featured in the other Jay Peak-related developments.

The $110 million project got no farther than a bit of site work at the former Bogner plant. Most of the money raised, the US government alleges, went into Quiros’ pocket or to pay off debts and taxes.

The Securities & Exchange Commission and the state of Vermont charged in April 2016 that $200 million had been “looted” from the many projects.

Court-appointed receiver Michael Goldberg from Miami, where the SEC case was filed, has been able to restore over $150 million of that, build out the unfinished projects at Jay Peak, pay off investors (to a large extent) and offer AnC Bio foreign investors a separate project in New York City in which to invest.

The large part of the scheme involving AnC was what the government called in the indictment as a fraudulent business plan presented to investors.

With the goal of raising $110 million from 220 EB-5 investors, from November 2012 to April 2016, defendants raised $85 million from 169 investors. Those investors also each paid a $50,000 administrative fee, allowing defendants to raise another $8 million.

But Quiros and Choi schemed in 2012 to put $34 million directly into their pockets. Kelly was to get $4 million and Stenger $1 million. Payments were to run through intermediary firms.

But because of a loan that came due at Raymond James in Florida in March 2014, Quiros had to use about $21 million of investor funds to satisfy the loan.

Despite an SEC investigation which began in mid-2013, USCIS approved the first AnC plan in June 2014.

In late 2013, the state of Vermont Regional Center (VRC, which administered EB-5 projects here) began investigating whether Quiros and Stenger had violated federal securities laws in connection with their marketing of EB-5 projects and their use of EB-5 investor funds.

In the spring of 2015, the VRC allowed the project to go back into the investor market with several restrictions.

But money had mostly been diverted by that point and the number of jobs needing to be created to reach USCIS requirements (about 2,200) was wildly out of scale to the actual number of clean rooms actually planned. So, the indictment reads, defendants created a “fraudulent party line” regarding every aspect of AnC.

The government maintains that defendants maintained the party line until it all came crashing down in April 2016.

The announcement in September 2012 of a major plan to use EB-5 funds for a $500 million development in the Northeast Kingdom, including at Jay Peak and in Newport, brought Vermont's political leaders to Newport's waterfront: Congressman Peter Welch, Bill Stenger, Senator Patrick Leahy, Senator Bernie Sanders, Governor Peter Shumlin, Ariel Quiros and William Kelly. Courtesy photo.

The EB-5 Immigrant Investor Program was created in 1990. It’s administered by the USCIS and allows for foreigners to invest $500,000 into a qualifying US project in an under-developed area.

There have been many complaints about the program long before this fraud case. For instance, even in Manhattan, developments have been gerrymandered into so-called under-developed areas. There’s also been questions about oversight and who has that responsibility, which the Jay Peak case exemplifies.

But if a project achieves its goals (because of the scale of AnC, 2,200 direct and in-direct jobs would have to have been created), the immigrant investor gets a permanent green card for him and his immediate family and, if all goes well, his money back with interest.

In the case of the Burke Mountain Hotel, those employment goals have not yet been met. Goldberg is in the process of finding a buyer for Jay Peak, but has indicated that the sale of Burke will have to wait until the EB-5 requirements are met.

RELATED STORIES

Grand Jury indicts four over Jay Peak fraud

Jay Peak receiver Goldberg suing Quiros law firm

Receiver terminates Stenger's job at Jay Peak

Case Summary

5:19-cr-00076-gwc-4 USA v. Quiros et al
Date filed: 05/21/2019
Date of last filing: 05/22/2019

William Stenger (4)

Office: Rutland     

Filed: 05/21/2019

   

County: Orleans

Terminated:     

Reopened:

 

Other Court Case: None

                 

Count: 1

Citation: 18:1349.F    

Offense Level: 4

           

     18:1349.F ATTEMPT AND CONSPIRACY TO COMMIT FRAUD - knowingly conspired to devise a scheme to defraud investors in the AnC Vermont EB-5 project through interstate and foreign wire communications including the state of Vermont

     

Count: 10

Citation: 18:1001.F    

Offense Level: 4

           

     18:1001, 2.F STATEMENTS OR ENTRIES GENERALLY- knowingly concealed a material fact in a matter within the jurisdiction of the Executive Branch of the United States re: AnC Vermont investor funds

     

Count: 13

Citation: 18:1001.F    

Offense Level: 4

           

     18:1001, 2.F STATEMENTS OR ENTRIES GENERALLY- knowingly made a materially false statement in a matter within the jurisdiction of the Executive Branch of the United States re: marketing of AnC Vermont project

     

Count: 14

Citation: 18:1001.F    

Offense Level: 4

           

     18:1001, 2.F STATEMENTS OR ENTRIES GENERALLY- knowingly used false writing and document to contain materially false statements and entries in a matter within the jurisdiction of the Executive Branch of the United States re: a letter about the FDA approval process

     

Count: 2

Citation: 18:1343.F    

Offense Level: 4

           

     18:1343, 2.F FRAUD BY WIRE, RADIO, OR TELEVISION - devised the scheme to defraud and obtain money fraudulently transmitted by wire communication an email with subject line "Jay Peak Biomedical Research Park LP General Partner's Authorizations for Payment"

     

Count: 3

Citation: 18:1343.F    

Offense Level: 4

           

     18:1343, 2.F FRAUD BY WIRE, RADIO, OR TELEVISION - devised the scheme to defraud and obtain money fraudulently transmitted by wire communication an email with subject line "What should be the final workbook attached"

     

Count: 4

Citation: 18:1343.F    

Offense Level: 4

           

     18:1343, 2.F FRAUD BY WIRE, RADIO, OR TELEVISION - devised the scheme to defraud and obtain money fraudulently transmitted by wire communication an email with subject line "FW: ACCD Ltr to Kelly"

     

Count: 5

Citation: 18:1343.F    

Offense Level: 4

           

     18:1343, 2.F FRAUD BY WIRE, RADIO, OR TELEVISION - devised the scheme to defraud and obtain money fraudulently transmitted by wire communication an email with subject line "FW: Revised Spreadsheet"

     

Count: 6

Citation: 18:1343.F    

Offense Level: 4

           

     18:1343, 2.F FRAUD BY WIRE, RADIO, OR TELEVISION - devised the scheme to defraud and obtain money fraudulently transmitted by wire communication an email with subject line "Letter to the Malek Brothers"

     

Count: 7

Citation: 18:1343.F    

Offense Level: 4

           

     18:1343, 2.F FRAUD BY WIRE, RADIO, OR TELEVISION - devised the scheme to defraud and obtain money fraudulently transmitted by wire communication an email with subject line "FW: $980,000 wire transfer from $ Citibank"

     

Defendant Custody Status: Released

     

Defendant: William Stenger

 represented by 

Brooks G. McArthur, Esq.(Designation Retained) 

 

Defendant: William Stenger

 represented by 

David J. Williams, Esq.(Designation Retained) 

 

Plaintiff: USA

 represented by 

Nicole P. Cate, AUSA(Designation Assistant US Attorney) 

 

Plaintiff: USA

 represented by 

Paul J. Van de Graaf, AUSA(Designation Assistant US Attorney) 

 

Click PDF below to see full indictment.

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