By Francisco Alvarado, FloridaBulldog.org
For eight years, Ariel Quiros lorded over a slate of Vermont real estate projects that raked in more than $350 million in capital from rich foreigners aiming to obtain green cards for themselves and their family members through the U.S. government’s EB-5 visa program.
Now the Key Biscayne-based entrepreneur is set to relinquish what’s left of his stake in ski resorts Jay Peak and Burke Mountain and six other New England developments to settle a U.S. Securities and Exchange Commission civil complaint that accused him of misusing $200 million of those foreign investments, including $50 million on personal use.
On Oct. 19, U.S. District Judge Darrin Gayles granted preliminary approval of the proposed settlement which calls for Quiros to waive any rights in entities that still partially own the projects. The waiver will “pave the way” for the projects to be sold so the proceeds can be used to repay duped investors, according to a motion filed by the court-appointed receiver, Akerman shareholder Michael I. Goldberg. Quiros has already turned over $81 million in assets he was ordered to surrender in February, the motion states.
“My client’s position is that he has been working hard with the SEC and the receiver to put everything behind him to the best extent possible,” Quiros’ lawyer, Melissa Damian Visconti, told Florida Bulldog. “Our efforts have been directed in cooperating and settling.”
The settlement signals one of the most high-profile scandals involving the EB-5 visa program is coming to an end as Congress and the EB-5 cottage industry continue hammering out reforms that aim to make it harder for developers to use foreign investors’ monies for unauthorized purposes. Attorney Ronald Fieldstone, a partner with Saul Ewing Arnstein and Lehr who specializes in EB-5 projects, said the Jay Peak case aggravated concerns by EB-5 naysayers on Capitol Hill.
“The industry as a whole has been proposing reforms since 2015,” Fieldstone said. “When the SEC case got filed, it definitely accelerated reforms. And investors and brokers are definitely more conscientious about integrity measures.”
In June 2008, Quiros, a businessman who has owned a flight school and a biotech company according to Florida corporate records, got into the Vermont real estate business when his company, Q Resorts, purchased the Jay Peak property and other assets from the ski resort’s original owner, Mont Saint-Sauveur International Inc. By then, Mont Saint-Sauveur had raised more than $20 million to redevelop the resort from 35 foreign investors seeking permanent U.S. residency using the EB-5 program, according to the SEC complaint. To qualify for a green card, an investor must provide at least $500,000 to a project in a targeted employment area that creates at least 10 direct jobs.
Quiros and Stenger
The SEC alleges Quiros was heavily involved in all aspects of the Jay Peak project five months before closing the deal to buy the ski resort. During that time, William Stenger — Quiros’ then-son-in-law and Jay Peak’s then-general manager — unlawfully transferred $21.9 million in EB-5 investor funds into accounts controlled by Quiros at the Coral Gables branch of brokerage Raymond James and Associates, the SEC complaint states.
The money was subsequently used to finance Q Resorts’ purchase of Jay Peak, a direct violation of the agreements with the EB-5 investors that the funds would be used only for construction of the new phases. Quiros made four additional payments totaling $5.5 million using EB-5 investor construction funds that were fraudulently transferred to his Raymond James accounts.
Between 2008 and 2016, Quiros, Stenger and Raymond James “made numerous misrepresentations and material omissions” to more than 700 foreign investors spanning 74 countries they courted into financing Jay Peak and the seven other projects, including a $110- million biomedical research center that the “defendants have operated as nearly a complete fraud,” the SEC complaint claims.
Instead, Quiros secretly sucked up most of the money raised for the research facility’s construction to pay off and pay down margin loans, and approximately $30 million for his own use, including the $2.2-million purchase of a luxury condo at Trump Palace in New York City.
On the surface, Quiros and his team were leading an ambitious redevelopment plan that was going to create more than 10,000 jobs to one of New England’s poorest areas, according to Vermont news reports. And there were some initial success stories. For instance, Jay Peak’s first EB-5 project, the 57-suite Tram Haus Lodge, opened on Dec. 18, 2009 and two years later, Jay Peak inaugurated a $27-million indoor water park called Pump House.
Fieldstone, who has no connections to Quiros and his Vermont real estate holdings, said the Jay Peak projects started off as success models for getting investors’ green cards approved. It then became one of the worst examples of developer mismanagement of EB-5 funds, he added.
By 2012, investors began filing complaints that Q Resorts had changed the terms of their investments. The SEC, as well as Vermont state agencies, launched inquiries into how Quiros and his associates were managing the EB-5 funds.
“They were the gold standard for EB-5 projects at one time,” Fieldstone says. “The developer had an impeccable track record from both a financial and immigration standpoint. That is what made the scandal so shattering.”
On April 12, 2016, the SEC sued Quiros, 19 companies he controlled, Stenger and Raymond James for violating federal securities laws by making false or materially misleading representations to EB-5 investors. The following day, Gayles appointed Akerman’s Goldberg as the receiver and froze all of Quiros’ assets. In addition to the SEC complaint, at least 11 other civil lawsuits have been filed against Quiros, Stenger, Raymond James and Jay Peak-related companies, including two federal class action suits, one of which was recently dismissed.
In 2017, Raymond James reached a $150-million settlement with the SEC and a year later Quiros agreed to repay $81 million by selling off his assets. Stenger was required to pay a $75,000 penalty, but was not found to have personally profited from the Jay Peak debacle.
Visconti, Quiros’ attorney, said her client is eager to resolve the SEC lawsuit and move on with his life. “He has given and continues to give back everything everybody alleged was tainted,” she said. “He is just trying to finish every single lawsuit against him and we are almost done with that.”
Tim Ho / November 6, 2018 11:03 am
The immigration and migration laws of the EB-5 program create massive opportunity for these types of ponzi schemes. Want a peak: a complete visa mill industry has been created that is facilitated by American Immigration LLC outfit puts on ‘(Get your bank book together then come to America’ shows worldwide. http://www.ILW.com (“The leading immigration law publisher”)
Only Congress can provide an effective fix but that would require legislation for the people not the purse.