Quiros pleads guilty to Jay Peak EB-5-related fraud, faces 8 years

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Quiros pleads guilty to Jay Peak EB-5-related fraud, faces 8 years

Fri, 08/14/2020 - 1:33pm -- tim
Ariel Quiros listens to remarks during the groundbreaking at the proposed AnC Vermont facility in Newport in May 2015. The plant was never built and prosecutors claimed he simply used the immigrant investor proceeds earmarked for the facility for personal gain. VBM photo.

by Mike Donoghue, Correspondent, Vermont Business Magazine After a one-week delay, the chief organizer of a multi-million dollar fraud involving federal EB-5 investment projects in the Northeast Kingdom entered guilty pleas in federal court in Burlington to three felonies on Friday.

Ariel Quiros, 64, of Key Biscayne, Florida, admitted to conspiring to commit wire fraud to obtain money through false pretenses for his involvement with the Jay Peak Biomedical Research Park in Newport.

He also admitted to money laundering in April 2015 by using investor funds for personal expenses, including writing a $6 million check to the Internal Revenue Service.

The third guilty count was for concealment of material information from the government in connection with the fraud that began in 2008.  Quiros failed to disclose that one of his partners, Jong Weon Choi, a South Korean businessman, was detained by authorities in his home land in early 2013, records show.

The US government has said Choi, who operated AnC Bio in Korea, was a “hidden partner” in the Vermont investment deal also known as the AnC Vermont project.

The Vermont indictment noted after Choi’s arrest in Korea, Quiros and others sought to further conceal Choi’s participation in the project.  Quiros and two other co-defendants falsely stated Choi was not under investigation for financial crimes in Korea, the Vermont indictment noted.

Their claims were made even though Choi was detained for part of 2013 and for most of 2014 as the criminal investigation against him in Korea proceeded, prosecutors in Vermont said.

Choi is named in 10 criminal counts in the federal indictment in Vermont, but he remains at large.

Two other defendants, William Stenger, 71, of Newport, the former president and CEO of Jay Peak and William Kelly, 71, of Weston, Fla., an adviser to Quiros, pleaded not guilty in May 2019 to 10 criminal counts.

They are due to go on trial in U.S. District Court in April.

Quiros could go to prison for more than 8 years for being the mastermind behind the scandal under the signed plea agreement reached with prosecutors.  The defense can ask for less.

After the hearing, Vermont Commissioner of Financial Regulation Michael S. Pieciak issued a statement that the state was glad Quiros finally admitted his guilt.

“Mr. Quiros’ guilt was beyond doubt. Our department’s ten-month investigation traced every penny of investor money and determined that much of it had inappropriately been funneled to support Mr. Quiros’ lavish lifestyle.”

“I am pleased Mr. Quiros is now accepting that reality and is taking responsibility for his actions.”

“The fraud in the Northeast Kingdom caused significant harm to the community, and although a guilty plea will not undo that harm, it will help the community heal and continue to move forward.”

Quiros, who owned the Jay Peak Ski Resort, was due to plead guilty a week ago, but Chief Federal Judge Geoffrey W. Crawford wanted to ensure the pleas were fully investigated.

The government has cited two possible conflicts for defense lawyer Neil Taylor of Florida, who took over the last earlier this summer.  Crawford made sure that Quiros had time to discuss the issues with another lawyer before going forward.

“It’s a non-issue,” said Quiros, who appeared by video from Florida with Taylor.  “That’s fine. I don’t see it as a problem.” Quiros had offered the plea last week.

Prosecutors have agreed not to seek any forfeitures if the court imposes a restitution order.

One sticking point is whether Quiros will be sentenced before the trial for Stenger and Kelly or after.  The co-defendants are insisting they want to have the government call Quiros to outline the case, or that the defense gets to call him in an effort to clear their clients.

Crawford said he would not set a date for sentencing until that defense request was resolved.

Quiros initially pleaded not guilty to 12 felony charges, including 7 counts of wire fraud and 3 counts of false statements.  Those other nine pending charges will be dropped at sentencing.

Assistant U.S. Attorney Nicole Cate of Burlington outlined a lengthy statement of facts in court showing the extensive involvement of Quiros in the EB-5 fraud.  The U.S. Attorney’s Office, after the hearing, later issued a news release with additional details.  Court records, Cate and the news release noted:

Quiros admitted participating in a scheme conceived in 2011 and carried through until he lost control of the Vermont project in April 2016.

The AnC Vermont project, managed by Quiros and Stenger,

was designed to raise $110 million from 220 immigrant investors in order to build and operate a biotechnology company on a property in Newport. From 2012 to 2016, Quiros and his codefendants obtained approximately $85 million, plus approximately $8 million in “administrative fees,” from approximately 169 immigrant investors in the AnC project.

Under the EB-5 program created by Congress, immigrant investors could obtain lawful permanent residency (green cards) by investing $500,000 each in a United States business that would create ten jobs per investment.

Pursuant to federal law, the AnC project was regulated and monitored by USCIS and the Vermont Regional Center, a part of state government.

Quiros admitted the scheme involved misleading AnC investors about important information, including how investor money would be used, the timing of job creation for the project, and Choi’s role in the project.

Quiros knew investors were given a use-of-funds chart that contained a number of misrepresentations about the amount of funds Quiros and Choi planned to receive. As the defendants raised investor money, Quiros used those funds for purposes unrelated to the project, including the payoff of a loan at Raymond James and as collateral for a separate loan at Citibank. Quiros also acknowledged he participated in concealing this misuse of funds.

Quiros further admitted the scheme included misrepresentations about the timing of the jobs that would be created by the project and the business revenue that would be generated. Marketing the project to immigrant investors depended on job creation and future revenue, since the defendants emphasized their ability to satisfy the job creation standards under EB-5 law and repay immigrant investors.

Quiros understood his co-defendants devised job and revenue projections based on the number of jobs needed to obtain project approval from USCIS, and Quiros did not inquire whether they had a viable plan to actually create those jobs or achieve those revenues.

AnC Vermont would supposedly rent clean rooms, market stem cell therapies, and manufacture artificial organs. Quiros admitted investors were deceived in regard to all three facets of the future business.

DFR, on behalf of the state, has been investigating the Jay Peak fraud case since 2015.

Pieciak said at Governor Scott’s press briefing Friday that DFR has tracked down how the money has been spent and culpability of the state, which promoted the EB-5 developments.

Most of the EB-5 funded projects were at ski resorts in the state, but the Quiros-related investments were by far the largest.

Pieciak said the investigation into what happened regarding the state’s actions or inactions is ongoing. He said this does not involve any criminal investigations.

As for downtown Newport which still has a large hole in its downtown where buildings were demolished as part of a proposed Quiros-related development, Pieciak said the state wants to work with local officials on how to proceed.

He said about $2 million worth of property was forfeited by the defendants in the cases but which has not been liquidated.

Pieciak acknowledged that this might be the right time to sell the properties, given the hot real estate market currently in Vermont.

“The fraud in the Northeast Kingdom caused significant harm to the community,” Pieciak said, “and although a guilty plea will not undo that harm, it will help the community heal and continue to move forward.”

The prosecutors handling the case are Assistant U.S. Attorneys Nicole Cate and Paul Van de Graaf and Trial Attorney Jessee Alexander-Hoeppner, from the Department of Justice Criminal Division.

Ariel Quiros is represented by Neil Taylor, Esq and Robert Katims, Esq. William Kelly is represented by Robert Goldstein, Esq and Mary Kehoe, Esq. William Stenger is represented by Brooks MacArthur, Esq and David Williams, Esq.