William Kelly takes plea agreement with federal prosecutors and faces to up to 3 years in prison for two felony counts
by Mike Donoghue, correspondent, Vermont Business Magazine Vermont's chief federal judge has agreed to quash two court-ordered subpoenas on behalf of former Jay Peak executive William Stenger after learning many of the documents have been provided – possibly without the knowledge of the state and a law firm.
Judge Geoffrey W Crawford in Rutland had initially approved in April the subpoena requests by the defense, but both the Vermont Attorney General's Office and a private Burlington firm representing the state wanted the court orders blocked to try to ensure Stenger does not get to see or use records about possible fraud in the Northeast Kingdom.
Lawyers David Groff of the Vermont Attorney General’s Office and Joseph Farnham of Burlington, on behalf of the law firm Locke Lord of Boston, said they believed there were issues of attorney-client privilege and confidentiality that should be maintained. They asked for both subpoenas to be quashed.
Crawford noted it appeared, based on recent defense filings under seal, that some things have "tumbled out" as federal prosecutors turned over records to the defense as normally required during a criminal case.
Some were marked as "confidential" or "privileged," but it was unclear if they really subject to withholding.
Defense lawyer David WIlliams, on behalf of Stenger, agreed it may be too late.
"We already have them," Williams said.
Williams said all or most of the records that Groff and Farnham argued about had lost any claim of confidentiality when federal prosecutors shared them with investigators.
Bill Stenger, right, with Ariel Quiros at the ribbon cutting for the AnC Vermont facility in Newport in May 2015. The plant was never built. The immigrant investor funding and alleged fraud involved with the plant is at the heart of the criminal cases. VBM photo.
Stenger – one of four co-defendants – is charged in connection with the massive fraud case that involves the EB-5 investment program. The program allows foreign business interests to obtain green visa cards for making major investments in Vermont.
Stenger, 71, of Newport pleaded not guilty to 10 felony counts in May 2019. The former president and CEO of Jay Peak has continuously maintained his innocence in the Ponzi-like scam.
Crawford said he believed the two subpoenas issued by the court were moot for the time being. There are still some possible legal arguments over the use of some records at trial, Crawford noted.
"We'll have to deal with it at some point," Williams said.
The main question is when and what oversight, if any, the state of Vermont had on EB-5 projects in Newport and at Burke Mountain.
Stenger, Quiros indicted on multiple fraud counts
Williams said one of the key issues is the various documents that passed through the hands of Sarah London, the legal counsel for then-Governor Peter Shumlin.
WIlliams said there will be several state employees at the time that will be key witnesses. The fraud allegations were revealed in April 2016.
Groff said the state provided 300,000 pages of documents to the US Attorney's Office.
Williams and fellow defense lawyer Brooks McArthur also were trying to learn if Locke Lord had completed a final report for the state on its work.
The defense had been provided a draft report from Edwards Wildman Palmer, which later became part of Locke Lord, lawyers said. Crawford was told no final report was submitted.
State files suit alleging investor fraud at Jay Peak, Inc EB-5 Projects
Two other co-defendants are in the process of resolving their federal criminal cases.
William Kelly, 71, of Weston, FL, recently struck a written plea agreement with federal prosecutors in Vermont that proposes he be sentenced to up to 3 years in prison for two felony counts: conspiracy to commit wire fraud and concealment of material information.
Defendant William Kelly enters the federal courthouse in Burlington in May 2019. VBM photo.
Kelly, who pleaded not guilty to 10 felony counts in May 2019, is due to formally admit his guilt in federal court in Rutland next Wednesday, records show.
Ariel Quiros, 64, who officials say was the chief organizer of a multi-million-dollar fraud involving EB-5 investment projects in the Northeast Kingdom, pleaded guilty last August.
Quiros, of Key Biscayne, FL, is awaiting sentencing on three felony charges.
Prosecutors can request up to 8 years and one month in prison, while the defense can seek a lower penalty.
Quiros pleads guilty to Jay Peak EB-5-related fraud, faces 8 years
Quiros, the reported mastermind, 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.
Williams and McArthur have said they want Quiros, the former owner of Jay Peak, to testify at any trial for Stenger.
They want the government to call Quiros to outline the case, or that the defense gets to call him in an effort to clear their client.
Federal prosecutors are seeking to block his testimony. Crawford has not made a final decision on the motion.
A fourth defendant, Jong Weon Choi, a South Korean businessman and partner to Quiros, has been indicted, but remains on the run from the US charges, officials have said. Choi is named in 10 counts.
The US government has said Choi, who operated AnC Bio in Korea, was a “hidden partner” in the Green Mountain state investment deal, also known as the AnC Vermont. It turned into a failed biomedical research facility project planned for a Newport plant.
AnC Vermont would supposedly rent clean rooms, market stem cell therapies, and manufacture artificial organs.
Quiros admitted investors were deceived regarding all three facets of the future business.
The Vermont indictment noted after Choi’s arrest in Korea in early 2013, 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.