Jay Peak Ponzi Scheme: Immigrant Investors File Class Action Against Vermont

Jay Peak Ponzi Scheme: Immigrant Investors File Class Action Against Vermont

Seven foreign citizens have filed a proposed class action lawsuit in which they allege Vermont and several state officials took Burke Mountain hotel investors’ money and used it to pay contractors and facilitate the state’s tax revenues at the tail-end of the now-infamous, decade-long Jay Peak Ponzi scheme. 

The case, filed on behalf of 121 investors, contends that Vermont and its co-defendants took steps to ensure the QBurke hotel project was completed despite being aware as early as 2015 that its construction was part of the last phase of the greater Jay Peak Ponzi scheme and failing to provide this and other material information to foreign investors.  

The allegations in the 35-page lawsuit are rooted in the transaction that saw Miami businessman Ariel Qurios steal in 2007 millions from immigrant investors to buy the Jay Peak ski resort in Jay, Vermont. At the time, the suit provides, investors had no knowledge of Qurios’s involvement and saw only the “outward facing” actors linked to various Jay Peak investment opportunities, chief among them Bill Stenger, the long-time steward and manager of Jay Peak; the Vermont Regional Center, a state-run group designated by U.S. Citizenship and Immigration Services; and a bevy of government officials the lawsuit says championed the Jay Peak projects as a way to bring needed investment into Vermont’s “Northeast Kingdom.”

The proposed class action says that although the partnership between Jay Peak and the Vermont Regional Center would see hundreds of millions of dollars flow into the state, exorbitant amounts of money within the broader project were also “misspent, misused, and flat-out stolen” in connection with the Ponzi scheme, which “touched every dollar invested,” the plaintiffs state. 

“The Vermont contractors were paid. The Burke hotel continues to generate revenue for the State of Vermont. Both were paid for by the Burke Investors who have nothing left of their investment and have not been compensated in any way.”

Filed by immigrant investors from Chad, Columbia, Brazil, Nigeria, Mexico, Vietnam and Canada seeking U.S. residency through the EB-5 visa program, which enables immigrant investors to invest up to $500,000 into U.S.-based projects in the hopes of obtaining green cards, the lawsuit alleges that in 2015, during the final phase of the Ponzi scheme, Vermont and its co-defendants took money from those who invested in a hotel to be built at Burke Mountain and used the funds to complete the hotel, pay contractors and “facilitate the tax revenues that the State continues to enjoy today.” 

The suit claims, however, that there “was absolutely no legitimate investment-interest in QBurke,” which the complaint refers to as “the final Jay Peak project,” a nod to Qurios’s involvement. Indeed, while Vermont and its co-defendants raised money for the Burke Mountain hotel, including an additional $43 million once the project was greenlit, they simultaneously had plans to liquidate the Burke resort “as soon as the hotel was built.”

Specifically, the case says, the defendants in 2015 drafted a complaint detailing the fraud and securities violations throughout the Jay Peak projects, including the Burke Mountain hotel. The complaint states that although there was no investment interest from the standpoint of an immigrant investor such as the plaintiffs, Vermont’s primary concern was that the ski resort at Burke Mountain would not turn out like a failed project in Newport, which saw an old building torn down in 2015 and a “hole the size of a city block” left in its place. The state aimed to ensure that dozens of Vermont contractors, materialmen and suppliers would be paid for the contracts to build the Burke hotel, the lawsuit relays. 

Despite having no legitimate investment interest left, Vermont “embarked on a series of actions” to ensure the Burke Hotel was built and that “the immigrant-investors paid for it,” the case alleges.

According to the complaint, the defendants, for instance, ignored the recommendations in a report from an outside firm that questioned the accuracy and completeness of certain offering documents, material misstatements in the private placement memorandum shared with EB-5 investors, the misuse of funds in the later phases of the Jay Peak Projects, and “material omissions” concerning certain liabilities related to impermissible transactions. 

“The recommendations of the Wildman Report were not followed. Perversely, the Wildman Report served only to highlight issues that would be concealed from investors moving forward.”

Moreover, the defendants touted as a selling point an element of regulatory control over the Jay Peak projects to ensure compliance with EB-5 regulations, U.S. immigration laws and federal and state securities laws, the case says. Instead, the immigrant investors were provided with “just the opposite,” as the defendants, over the next 15 months, worked to ensure that at least an additional $40 million would be spent within Vermont “at the expense of every single QBurke investor,” the suit alleges. 

Around the same time, an early draft of what came to be known as the “Spaghetti Map,” a graphic depicting the illegal flow of money amid the Jay Peak Projects and misuse of investor funds, was circulated among both the administrators of the Vermont Regional Center and the governor’s office, the case says. Per the complaint, this documentation would not be revealed to the public or investors until April 2016, after every Jay Peak project had been placed into receivership for liquidation. 

Named as defendants in the case alongside Vermont are the former general counsel of the state’s Department of Financial Regulation (DFR) David Cassetty; former DFR Commissioner Susan Donegan; former executive director of Vermont’s EB-5 visa projects Eugene Fullam; former Vermont Chief Assistant Attorney General William Griffin; former Agency of Commerce and Community Development (ACCD) general counsel and principal administrator of the Vermont Regional Center John W. Kessler; former Secretary of the ACCD Patricia Moulton; and Deputy Commissioner of the DFR Michael Pieciak. 

On September 7, 2021, Quiros dropped his appeal of a settlement expected to pay immigrant Jay Peak Resort investors more than $30 million. The appeal was dropped after U.S. District Judge Darrin P. Gayles issued an order requiring Quiros to post a $250,000 bond if he wished to appeal the court’s approval of the settlement before the Eleventh Circuit, though Quiros’s attorney had reportedly already filed paperwork to dismiss his appeal. 

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