The Securities and Exchange Commission announced today that it has filed fraud charges against two owners of Jay Peak Resort, a ski area near the Canadian border in Vermont. The state of Vermont has filed similar civil charges.
The SEC alleges that owners Ariel Quiros, of Miami, and Bill Stenger, of Newport, Vermont, misappropriated more than $200 million of investor money intended for the construction of ski resort facilities and a biomedical research facility.
“In Ponzi-like fashion, money from investors in later projects was misappropriated to fund deficits in earlier projects,” the press release reads.
"The alleged fraud ran the gamut from false statements to deceptive financial transactions to outright theft," said Andrew Ceresney, director of the SEC's Division of Enforcement. "As alleged in our complaint, the defendants diverted millions of EB-5 investor dollars to their own pockets, leaving little money for construction of the research facility investors were told would be built and thereby putting the investors' funds and their immigration petitions in jeopardy."
The SEC alleges that Quiros, who also owns Burke Mountain, spent $50 million on personal expenses, tapping investor funds “for such things as the purchase of a luxury condominium, payment of his income taxes and other taxes unrelated to the investments, and acquisition of an unrelated ski resort.”
The owners were funding their projects with the EB-5 Immigrant Investor Program, which helps foreign investors gain U.S. residency in exchange for investments that create or preserve at least 10 permanent full-time jobs for U.S. workers.
"This is obviously a difficult day for Vermont and for the many people, myself included, who are so invested in growing jobs and economic opportunity in the Northeast Kingdom," Gov. Shumlin. said in a statement. "Most of all, this is a difficult day for the hundreds of employees in the Northeast Kingdom who rely on Jay Peak, Q Burke, and the related projects that appeared to hold so much promise. My commitment as Governor is to do everything I can to protect these Vermonters' jobs, protect the investors who are victims of these allegations, and ensure that we do all we can to make the very best of a terrible situation."
The Vermont lawsuit reportedly quotes Quiros saying under oath that he had “taken no investor’s money, not even a penny,” though it later states that he also “admitted under oath that he commingled funds between projects and used what he called a ‘one-window’ approach to consolidate all investor funds in one place.”
A Miami judge has granted the SEC’s request to temporarily freeze the resort’s assets while the litigation is pending, but a post on the Jay Peak Facebook page assures skiers that leadership will “continue managing Jay Peak same as it ever was… the [investment] process is distinct and not connected to the day to day operations of the mountain, indoor waterpark, golf course, lodging or any of our amenities that continue to be available on a daily basis here.”
The post admits that “it is an awkward time” and promises to “keep you in the loop as this takes more shape and [we] appreciate your support as we move toward a much more sustainable future.”
Jay will be open for skiing through April 24 and possibly longer, weather permitting.