by Mike Donoghue, Correspondent, Vermont Business Magazine A Florida man, who helped facilitate an $85 million investment fraud in the Northeast Kingdom, was sentenced in U.S. District Court in Burlington to 18 months in prison on Wednesday.
The sentence for William Kelly, 73, of Fort Lauderdale, Fla. for his part in the EB-5 scandal matched the prison term imposed last week on co-defendant William Stenger, 73, of Newport the former president of Jay Peak Resort.
Chief Federal Judge Geoffrey Crawford noted Kelly and the three co-defendants were part of a scam that provided nothing to investors for their $85 million.
“The project was fiction from beginning to end,” Crawford noted.
Kelly was a key adviser to the mastermind, co-defendant Ariel Quiros, 66, of Key Biscayne, Fla., the former owner of Jay Peak.
Crawford told Kelly, a law school graduate, that he would be under federal supervised release for three years after he is discharged from prison.
The judge also ordered Kelly, formerly of Weston, FL, to pay $8,338,661 in restitution.
“No comment. Just, I’m sorry,” Kelly said as he walked out of the courtroom with his wife, Kelly Kelly.
He will report June 21 to a federal prison camp in Miami.
Defense lawyer Robert Goldstein had proposed a 6-month prison sentence with 3 months being served in home detention. He called Kelly “an extraordinary human being.” Goldstein said the crime was unlike anything in his client’s life. He said Kelly had done volunteer work to help visually impaired people with literacy.
Assistant US Attorney Paul Van de Graaf said 6 months was not a long enough sentence and that it should be closer to 18 months – the penalty given Stenger.
Van de Graaf said Kelly was a willing participant and a leader in the fraud.
“He was involved because he needed the money,” Van de Graaf said.
He said Kelly was in a difficult financial situation at the time and was willing to join with Quiros, who officials have said was the architect of the biggest fraud in Vermont history.
Goldstein said after the hearing that his client is looking to move forward in his life and that he was sorry for his conduct
Kelly had struck a plea deal in June 2021 that had capped his proposed sentence at 3 years in prison and allowed the lawyers to argue for less.
Kelly pleaded guilty to conspiring with Stenger, Quiros and Jong Weon “Alex” Choi in a multi-year wire fraud scheme to defraud immigrant investors seeking green cards through the EB-5 program. He also admitted concealing material facts from the U.S. Citizenship and Immigration Services, which oversaw the EB-5 program.
A project proposed for Newport and known as AnC Vermont was designed to raise $110 million from 220 immigrant investors to build a biotechnology facility. By investing $500,000 in the EB-5 project and promising to create jobs, foreign investors could qualify for permanent resident status.
Between 2012 and 2016, about 169 investors invested around $85 million in the AnC Vermont project, in addition to paying about $8 million in associated administrative fees.
Quiros, who is facing more than 8 years in prison when he is sentenced next week, received “tens of millions,” according to Stenger’s lawyer Brooks McArthur. Quiros pleaded guilty in August 2020 to charges of conspiracy to commit wire fraud, money laundering and the concealment of material information.
The fourth defendant, Choi, who is from South Korea, remains on the run, officials have said. Choi was convicted in South Korea for financial fraud in 2016 in connection with AncBio Korea, the Vermont indictment noted. The proposed Vermont venture was tailored after the project in Korea, officials said.
The defendants had claimed the project would create at least 2,200 jobs for the economically deprived Northeast Kingdom. Newport has one of the highest unemployment levels.
Between 2012 and 2016, Kelly and his co-conspirators maintained the jobs numbers in spite of the fact that no one associated with the AnC Vermont project was making progress toward identifying customers for clean room rentals, acquiring commercially viable stem cell products, or developing the potential artificial organs, the U.S. Attorney’s Office has said.
William Kelly enters federal court in Burlington in May 2019. VBM photo.
Fundraising was never completed, and the AnC Vermont facility was never constructed.
When he pleaded guilty, Kelly admitted that he and his co-conspirators misled AnC Vermont investors about how investor funds would be used, about how many jobs would be created by the project, and about the timeline for this job creation.
The jobs report for the project was directly based on hiring and financial projections generated by Kelly, Choi, and Stenger to justify the job creation number required for EB-5 approval.
Kelly also admitted that between March 2013 and October 2014, he helped Quiros and Stenger pay over $47 million in AnC Vermont investor money to Jay Construction Management (JCM), a Quiros-controlled entity that was designated as a pass-through corporation for approximately $52 million that was to be paid to a Korean company created and controlled by Choi.
During this period, Kelly knew that Quiros forwarded less than $6 million from JCM to Choi’s company. Kelly knew that Quiros used approximately $21 million of the AnC Vermont investor funds sent to JCM to pay off a Raymond James loan that was used for expenses unrelated to the AnC Vermont project.
In addition to the wire fraud conspiracy charge, Kelly admitted helping conceal from the VRC that Quiros had used the $21 million in AnC Vermont investor funds for purposes unrelated to the AnC Vermont project.
As part of his plea agreement, Kelly agreed to cooperate in the government’s ongoing matters related to this case. The plea agreement signed by Kelly and the government capped Kelly’s potential jail sentence at 36 months, so long as he abided by the terms of the agreement.
In connection with Kelly’s sentencing proceeding, the government informed the Court that Kelly had abided by the agreement’s terms and would be called as a witness at any trial of Kelly’s co-defendants.
Co-defendant Quiros pleaded guilty to wire fraud conspiracy, money laundering, and concealment charges in August 2020 and is scheduled to be sentenced on April 29, 2022.
Co-defendant Stenger pleaded guilty to submitting false documents to the VRC and was sentenced to 18 months’ imprisonment and 3 years of supervised release, and ordered to pay $250,000 in restitution, on April 14, 2022. Co-defendant Choi remains at large.
Nikolas P. Kerest, United States Attorney, expresses his gratitude for the outstanding investigation assistance by the Federal Bureau of Investigation, IRS Criminal Investigation, the FDA Office of Criminal Investigations, and for the assistance of the Justice Department’s Fraud Section and Office of International Affairs.
The prosecutors handling the case are Assistant U.S. Attorneys Nicole Cate and Paul Van de Graaf.
William Kelly is represented by Robert Goldstein, Esq. and Mary Kehoe, Esq. Ariel Quiros is represented by Neil Taylor, Esq. and Robert Katims, Esq. William Stenger is represented by Brooks McArthur, Esq. and David Williams, Esq.
