BURLINGTON — A defense lawyer said he plans to argue for no prison time for embattled former Jay Peak president William J. Stenger after Stenger pleaded guilty in federal court Friday to making false statements during a failed effort to build a biotechnology plant in Newport with use of EB-5 money.
Stenger, 72, could face up to 5 years in prison when sentenced in U.S. District Court, but defense lawyer Brooks McArthur said his client was victimized by two co-defendants, Ariel Quiros and William Kelly, both of Florida.
McArthur called Quiros and Kelly career con men and fraudsters and said both took advantage of Stenger, who is from Newport.
“His heart is broken,” said McArthur, who had harsh words for the co-defendants.
“Ariel Quiros is a clown and a fraudster,” McArthur said. He said Quiros, who was considered the mastermind of the plan, and Kelly plotted a major international fraud in the EB-5 case. Stenger got caught up in the case, he said.
McArthur said he expects to get Quiros and Kelly, who have admitted their guilt in the case, on the witness stand before Stenger is sentenced.
Quiros, the former owner of Jay Peak and Burke Mountain ski resorts, pleaded guilty last August to charges of conspiracy to commit wire fraud, money laundering and the concealment of material information. Prosecutors have said they will drop 9 other felony charges when he is sentenced.
The government said it will seek more than 8 years in prison for Quiros, 65, of Key Biscayne, Fla.
Kelly, 72, of Weston, Fla. has pleaded guilty to two felony counts: conspiracy to commit wire fraud and concealment of material information. A written plea agreement proposes a sentence of up to 3 years in prison.
The fourth federal defendant in the Vermont case is Jong Weon Choi, also known as Alex Choi, of South Korea. Officials have said he remains on the run in the international fraud case.
McArthur noted that all of the fraud charges initially filed against Stenger will be dropped by the government in the plea agreement. The single felony count Stenger admitted was for willfully submitting false documents on Jan. 9, 2015, to the Vermont Regional Center (VRC).
Assistant U.S. Attorney Nicole P. Cate said Stenger specifically submitted a letter representing that a third party had analyzed the sales projections for the Jay Peak Biomedical Research Park (also called the AnC Vermont project) when, in fact, the third party had never looked at them. Stenger also submitted a timeline about product commercialization that omitted uncertainty about the Food and Drug Administration (FDA) approval process, Cate said.
Stenger also normally might face up to a $250,000 fine, but the plea agreement notes that instead of a court fine or any forfeiture the parties will focus on a restitution order for the victims.
Federal prosecutors said they will offer evidence about Stenger’s broader involvement in the fraud scheme as outlined in the 33-page indictment.
Chief Federal Judge Geoffrey W. Crawford agreed to allow Stenger to remain free pending sentencing.
Stenger stood for most of the 35-minute court hearing flanked by his defense lawyers David J. Williams and McArthur answering a long series of question from Crawford. They centered on understanding the seven-page signed plea agreement and giving up his constitutional rights, including the possibility of a jury trial.
Officials have been planning for a trial lasting eight weeks for Stenger starting in October in federal court in Rutland, but earlier this week negotiations on a plea deal were completed.
Stenger told reporters after court that he has worked hard throughout his life trying to improve the Northeast Kingdom and that Jay Peak is now “a world class resort” with 1,500 employees during the winter.
“I live there. I care about that city, and I have done everything I possibly have been able to do in my own way since 2016. And I dare say that the community would agree with that.”
The Vermont Chamber of Commerce named Stenger the winner of the 48th annual Citizen of the Year in 2011. The chamber said the award highlights the work of a Vermonter who has improved the state through self-sacrifice, service and volunteerism.
Stenger and three co-defendants were indicted by a federal grand jury in May 2019 for their part in the EB-5 debacle.
Assistant U.S. Attorney Paul J. Van de Graaf said lawyers on both sides are proposing that the court have hearings, possibly in October, to help Crawford in his fact-finding mission about the total details of the criminal case before a presentence report could be completed.
McArthur said after the hearing that he will likely also call Michael Pieciak, commissioner of Financial Regulation for the state, as a witness in the pre-sentence hearing. Pieciak was “grandstanding” when he said recently Stenger should get a 5-year sentence and “will have to answer questions.”
During the hearing, Cate, the co-prosecutor, outlined Stenger’s conduct leading to the criminal conviction. The case is a federal crime because the EB-5 program was overseen by United States Citizenship and Immigration Services (USCIS). Foreign investors were told they could qualify for permanent resident status — also known as immigrant green cards — by investing $500,000 in a commercial enterprise.
Cate explained the AnC Vermont project was designed to raise $110 million from 220 immigrant investors in order to construct and operate the Newport facility. In order to obtain a green card, each investor needed to show to USCIS that the investment had created, or would create within a few years, 10 jobs. The AnC Vermont project had a target of 2,200 jobs in the economically depressed Northeast Kingdom.
The VRC was part of the Vermont Agency of Commerce and Community Development (ACCD) until late 2014, when the Vermont Department of Financial Regulation (DFR) joined ACCD as a partner in VRC.
“These financial projections impacted both the potential that investors would have their investments repaid, and the predicted number of jobs that the project would create,” she said.
In the end of June 2014, Stenger agreed with the VRC to suspend offering and marketing the AnC Vermont project due to the center’s concerns about the project. Stenger understood that to resume marketing the AnC Vermont project, he needed to provide answers to the VRC about the financial projections and about the status of the FDA approvals needed for commercialization of the products, Cate said.
The written materials about the AnC Vermont project, which were provided to investors, to the VRC, and to CIS, included a business plan. The business plan was based on materials from Alex Choi, who also was indicted, but remains on the run.
The AnC Vermont project would include three lines of business: clean room rentals, sales of stem cell products, and sales of artificial organs, Cate explained. The financial projections for the three lines of business would produce over $40 million in revenue within three years, and would generate over $300 million in revenue in six years.
Stenger made a number of submissions to the VRC in an effort to convince the center to allow continued marketing of the AnC Vermont project, including a submission on Jan. 9, 2015. That submission consisted of a cover letter from Stenger with a number of attachments. The submission addressed, among other things, the AnC Vermont financial projections and the timeline for commercialization of the products.
“As to the financial projections, the VRC had repeatedly asked Stenger for information supporting the financial projections in the business plan, beginning at least as early as October 2013. After various unsuccessful efforts to have individuals associated with the AnC Vermont project address the VRC’s questions about the financial projections, Stenger engaged a third-party consulting firm in October 2014,” Cate said.
“Stenger asked the consulting firm to conduct a market demand study to analyze the potential market size of the AnC Vermont products and services, if the products and services were developed and FDA approved. Throughout the rest of 2014, the consulting firm, which spent many hours working on the market demand analysis and had regular update meetings with Stenger and his team, was never asked to review, analyze, or opine on the project’s financial projections. Instead, the process of working with the consulting firm made clear to Stenger that the AnC Vermont project had no stem cell products, and that the artificial organs either did not exist yet or required updating,” she said.
In the waning days of December 2014 and beginning of January 2015, Stenger asked the consulting firm to write a letter stating the AnC Vermont project’s business projections were reasonable. Although the consulting firm had not assessed the project’s financial projections, the company ultimately signed a letter that falsely asserted that, based upon the consulting firm’s market analysis, the financial projections in the AnC Vermont business plan appeared reasonable.
“Stenger knew that the consulting firm had not analyzed the financial projections. Nonetheless, Stenger provided the letter to the VRC as part of his January 9, 2015, package of materials,” Cate told the court.