Four individuals were charged with conspiring in a
multi-year wire fraud scheme to defraud immigrant investors seeking green cards
through the EB-5 program, among other charges, announced United States Attorney
for the District of Vermont Christina E. Nolan.
Ariel Quiros, 63, William Kelly, 70, both of Florida; Jong
Weon Choi, aka Alex Choi, 58, of South Korea; and William Stenger, 70, of Newport,
Vermont, were indicted by the federal grand jury on criminal charges in
connection with their management of the Jay Peak Biomedical Research Park EB-5
investment project, also called the AnC Vermont project. In addition to the
wire fraud conspiracy count, the defendants face other charges, including six
separate counts of wire fraud and various counts of concealing material facts
or presenting false statements in a matter within the jurisdiction of a federal
agency, namely United States Citizenship and Immigration Services (USCIS),
which oversaw the EB-5 process. Quiros is also charged with two counts of money
laundering. The indictment alleges that the defendants misrepresented facts to
the SEC, which investigated the Jay Peak EB-5 offerings while the defendants
were seeking new AnC investors. A civil action by the SEC ended the defendants’
control of the EB-5 projects.
U.S. Attorney Christina E. Nolan stated: “As alleged in this indictment, this scheme
defrauded hopeful immigrant investors in what may be the largest financial
crime in our state history. I commend our prosecutors and our partners in the
FBI, IRS, and FDA-OIG for their dogged investigation of this complex fraud that
shook our small state. This indictment
demonstrates that the U.S. Attorney’s Office is determined to address the most
challenging cases, and that we have the talent, will, and resources in our
office and law enforcement agencies to meet those challenges.”
The charges against the defendants are only allegations. The
defendants are presumed to be innocent unless and until proven guilty beyond a
reasonable doubt in a court of law. The defendants face a maximum penalty on
the most serious charges of 20 years in prison, three years of supervised
release, a $250,000 fine or twice the gross gain or loss, and restitution to
the victims. The indictment also alleges forfeiture against the defendants.
“This case is about greed and deceit. The fraud alleged in
this indictment and the related fraud alleged by the SEC and the State of Vermont
have affected many Vermonters,” stated James N. Hendricks, Special Agent in
Charge of the Albany Field Office of the Federal Bureau of Investigation. “The
defendants’ broken business promises have left not only a physical scar on the
city of Newport, but also an intangible scar on the promise of economic
development for the Northeast Kingdom and on the dreams of many hopeful
immigrants. By seeking to hold accountable those who break the law and cause
such harm, we hope to help to heal these scars. The dedicated work and
cooperation among the FBI, IRS, FDA and U.S. Attorney’s Office have resulted in
the arrests today. The FBI will continue working with our law enforcement
partners to stop those who abuse government programs for their own gain.”
“As alleged in the indictment, the defendants obtained tens
of millions from investors in connection with an EB-5 offering that was based
on misleading statements and involved a misuse of the money raised,” said
Kristina O’Connell, Special Agent in Charge of IRS Criminal Investigation,
Boston Field Office. “IRS-CI’s tracing
of the investors’ funds helped investigators uncover the breadth of the alleged
fraud and we are proud of our role in this collaborative law enforcement effort.”
The indictment alleges a scheme conceived in 2011 and
carried through until the defendants lost control of the project in April 2016.
The AnC project was the seventh EB-5 project managed by Quiros and Stenger, but
the first involving a business outside a ski resort. The defendants designed
the project to raise $110 million from immigrant investors in order to build
and operate a biotechnology company, AnC Vermont, on a property in Newport.
From 2012 to 2016, the defendants obtained over $80 million from over 160
immigrant investors in the AnC project. Under the EB-5 program created by
Congress, immigrant investors could obtain lawful permanent residency (green
cards) by investing $500,000 each in a United States business that would create
ten jobs per investment. Pursuant to federal law, the AnC project was regulated
and monitored by USCIS and the Vermont Regional Center, a part of state
government.
According to the indictment, the defendants’ scheme involved
both secret embezzlement of immigrant investor funds and deceit about the AnC
project’s jobs and revenue. The defendants designed the project so that Quiros
and Choi, who were secret partners, could siphon millions of dollars in
investor funds into their pockets. As the defendants raised investor money,
Quiros used the money for his own purposes instead of using it to build the
project. The defendants then concealed this misuse of funds.
The indictment also charges that the defendants created a
fraudulent AnC business plan based on a “party line” conceived to misrepresent
the number of jobs that would be created by the project and the business
revenue that would be generated from the project. Marketing the project to
immigrant investors depended on job creation and future revenue, since the
defendants emphasized their ability to satisfy the job creation standards under
EB-5 law and repay immigrant investors. The indictment charges that the
defendants devised job and revenue projections based on the number of jobs
needed to obtain project approval from USCIS without regard to a viable plan to
actually create those jobs or achieve those revenues. AnC Vermont would
supposedly rent clean rooms, market stem cell therapies, and manufacture
artificial organs. The defendants made fraudulent statements in regard to all
three facets of the future business, in particular with regard to how soon the
project would generate jobs and revenue. Rather than disclose that they were
creating a start-up business that would need large capital reserves to operate
in the early stages, the defendants falsely represented that they had a plan
where AnC Vermont would successfully market its products as soon as
construction was complete.
In addition to the wire fraud and wire fraud conspiracy
charges, the indictment charges Quiros with two money laundering counts relating
to two transactions where he used AnC investor funds for personal expenses,
specifically a $6 million payment to the IRS and the purchase of a vehicle.
Further, the indictment contains five concealment or false
statement counts. First, it alleges that the defendants concealed from the
Vermont Regional Center how Quiros used approximately $21 million in investor
funds to pay off a loan unrelated to the AnC Vermont project. Next, the
indictment alleges that Quiros, Kelly, and Choi concealed that Choi was being
investigated in Korea for financial
crimes, and falsely represented that AnC Korea, a company they claimed would
supply the technologies that AnC Vermont would market, was not in financial
distress.
Finally, the indictment charges Stenger with presenting
false documents and statements to the Vermont Regional Center. One of these
counts focuses on a misrepresentation by Stenger that he had followed the
Regional Center’s direction to stop marketing the AnC project in mid-2014. The
other charges as false a written presentation Stenger made to the Regional
Center in January 2015 as he was seeking permission to continue recruiting
investors for the AnC project.
Quiros, Kelly, and Stenger surrendered to the custody of the
United States Marshals Service this morning and are scheduled to appear for
arraignment on the charges in federal court later today. Choi remains at large.
The United States Attorney expresses her gratitude for the
outstanding investigation leading up to these charges by the Federal Bureau of
Investigation, the Criminal Investigation Divisions of the Internal Revenue
Service, the Food and Drug Administration and for the assistance of the Justice
Department’s Office of International Affairs. The prosecutors handling the case
are Assistant U.S. Attorneys Nicole Cate and Paul Van de Graaf. Ariel Quiros is
represented by Seth Levine, Esq. William Kelly is represented by Robert
Goldstein, Esq. William Stenger is represented by Brooks McArthur, Esq.
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