From left, Congressman Peter Welch, Bill Stenger, Senator Patrick Leahy, Senator Bernie Sanders, Governor Peter Welch, Ariel Quiros and William Kelly. Everyone is all smiles in September 2012 in Newport when the EB-5 projects in the Northeast Kingdom were announced. They ultimately would result in $450 million in development and a $200 million fraud case that would send Stenger, Quiros and Kelly to prison. Courtesy photo.
by Mike Donoghue, Vermont Business Magazine Correspondent The former president of Jay Peak resort is asking the federal court to strike a $250,000 restitution order in his EB-5 fraud case because he says newly provided evidence shows Vermont officials failed to act when told about serious investment problems for a proposed bio-medical facility in Newport.
Defense lawyers for William Stenger of Newport say in newly filed court records that state documents finally made available last month clearly confirm earlier beliefs that Vermont authorities were alerted in early 2015 about financial concerns by the U.S. Securities and Exchange Commission.
Department of Financial Regulation officials at the time, including then-Commissioner Susan Donegan and her deputy, Michael Pieciak, should never had allowed for the resumption of the marketing for a biomedical research facility planned for Newport, according to defense lawyers Brooks McArthur and David Williams of Gravel & Shea law firm in Burlington.
The SEC and the Food and Drug Administration had deep concerns, Williams and McArthur wrote in their 18-page motion, which has 291 pages of attached exhibits.
“The newly disclosed memos prove that when the DFR commissioner lifted a hold imposed on the marketing of the ANC Bio VT project in April 2015, high ranking DFR officials were aware that the project was mired in fraud and that disclosures related to the project’s job projections and FDA approval of medical devices that were going to be manufactured at the project’s Newport facility were not reliable,” McArthur and Williams wrote.
The motion notes former DFR General Counsel David Cassetty admitted he prepared a special memo on April 13, 2015, for Donegan for a private meeting with Elizabeth Miller, chief of staff for Gov. Peter Shumlin.
At a grim-faced press conference on April 14, 2016, Governor Peter Shumlin announces the EB-5 fraud case involving the Jay Peak projects. With him, from left, are Financial Regulation Commissioner Susan Donegan, Attorney General William Sorrell and Development Secretary Pat Moulton. VermontBiz photo.
Attempts to reach Donegan, who lives out of state, and Pieciak, who was elected Vermont State Treasurer in November, were unsuccessful.
Stenger was released from federal prison March 22 after serving about 9 months of an 18-month sentence for his part in the massive foreign investor fraud case. The early release to home confinement in Newport was related to health and COVID considerations and was made by the Bureau of Prisons over objections from federal prosecutors in Vermont, officials have said.
Stenger pleaded guilty in August 2021 to a felony charge of knowingly and willfully submitting a false document in January 2015 to the Vermont Regional Center (“VRC”) as part of his promotion of the Jay Peak Biomedical Research Park EB-5 investment project, also known as AnC Vermont.
The AnC Vermont project was expected to raise $110 million from 220 immigrant investors to construct the biotechnology facility in Newport. EB-5 immigrant investors could qualify for permanent resident status – also known as seeking a “Green Card” -- by investing $500,000 in a commercial venture to create jobs.
The proposal was placed on hold by the Vermont Department of Financial Regulation in June 2014 after learning details about the SEC investigation that began in May 2013, records show.
The hold caused grief as unpaid contractors made the life of then-Gov. Shumlin miserable because they could not pay workers or purchase supplies for the project, the motion noted.
DFR eventually gave the venture the green light to further market the project.
Williams and McArthur said the DFR approval came even knowing that co-defendant and mastermind Ariel Quiros had misappropriated and misdirected investment funds.
“What I find remarkable about the memos is what the SEC told Deputy Commissioner Pieciak, and that Quiros was running a Ponzi in early February 2015, yet his department saw fit to approve the project 3 months later,” Williams said in a phone interview.
The newly disclosed evidence demonstrates that the SEC investigators warned Pieciak as early as Feb. 4, 2015, McArthur and Williams wrote.
“Quiros had misappropriated $20 million in ANC Bio VT investor funds to repay a margin loan Quiros had taken out to disguise his use of EB-5 investor funds to purchase the Jay Peak Resort in June 2008,” they wrote.
SEC investigators also told Pieciak, who served as the state’s liaison for the EB-5 project, that they had other concerns beyond the $20 million. The concerns included “the job projections, the anticipated FDA approval for medical products, the ownership of certain equipment and the real estate deal for the land in Newport,” the motion said.
The $250,000 restitution order for Stenger was directed for a group of 36 investors that got swindled by making investments into the EB-5 program that provides residential immigration cards in exchange for $500,000.
Chief Federal Judge Geoffrey W. Crawford said during the sentencing in April 2022 that the AnC project in Vermont was “complete fiction” and was never built. “The project was a ghost,” Crawford said. He noted the defendants still raised $85 million from 169 investors between 2012 and 2016.
Commissioner of Financial Regulation Susan Donegan explains the "spaghetti map" of how Jay Peak finances were shifted around as part of the EB-5 fraud. VermontBiz photo.
Stenger had helped develop several businesses in the Northeast Kingdom based in part on false claims made to government officials in conjunction with the immigration enhancement program.
Williams, during the sentencing hearing, focused on the false job claims. He called Donegan to the stand to review documents and emails and grill her about the state not protecting investors.
Many of the emails centered on communications with Stenger, Pieciak, former Commerce Secretary Patricia Moulton, and other members of Gov. Shumlin’s staff, including Chief of Staff Liz Miller and legal counsel Sarah London.
McArthur, reached at his office on Sunday, reaffirmed the points made in the motion filed in U.S. District Court on Thursday.
McArthur has continuously maintained Stenger’s co-defendants, Quiros, 67, of Key Biscayne, Fla. and most recently from Puerto Rico and William Kelley, 74, of Weston, Fla. were the ones to enrich themselves. McArthur has said Quiros received “tens of millions.”
McArthur repeatedly said throughout the case that Quiros and Kelley were career con men and fraudsters.
Crawford sentenced Quiros to five years in prison and has since denied a request for a reduced sentence. Kelly received an 18-month sentence.
Quiros and Kelly also have been directed by the court to make more than $8.3 million in restitution.
A fourth defendant, Jong Weon Choi, also known as Alex Choi of South Korea, remained on the run in the federal case from his indictment in May 2019 until the U.S. Attorney’s Office in Vermont gave up and dismissed his 10 charges in June 2022.
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 Vermont project would create at least 2,200 jobs for the economically deprived Northeast Kingdom. Newport has one of the highest unemployment levels.
Attorney Brooks McArthur, left, with Bill Stenger, August 2021. VermontBiz photo by Mike Donoghue.
Assistant U.S. Attorney Paul J. Van de Graaf had wanted Stenger to pay $1.6 million in restitution for the administrative fees the investors had paid originally. Van de Graaf said many people got scammed by Stenger, including the New York Times that produced a 5-minute video that was used to market the fraudulent program.
Van de Graaf, a 35-year prosecutor, had rejected a proposal by the defense for Stenger to serve any sentence under home confinement.
Stenger had about 120 pages of supportive letters coming from all across Vermont, including current and former legislators, former chamber of commerce officials, educators and lawyers. Van de Graaf said few, if any, fully understood the specifics of Stenger’s conduct.
The federal sentencing guidelines had recommended a prison sentence somewhere between about 11 and 14 years, but under the plea agreement with Stenger the maximum sentence was capped at 5 years.
Bill Stenger back home after release from prison
Bill Stenger pleads guilty to false document charges
