Top state officials knew that portions of a long-running plan to develop areas of Vermont’s northeastern corner were part of a Ponzi scheme, but did nothing to stop the project's last phase, the construction of a hotel project at the Burke ski resort, a new lawsuit alleges.
The suit filed Tuesday in U.S. District Court in Burlington alleges that rather than warn foreign investors seeking U.S. residency through the EB-5 visa program the state allowed the completion of the QBurke hotel project.
“The State’s overriding interest was in ensuring that the ski resort at Burke would avoid the fate of Newport, Vermont... and ensuring that the dozens of Vermont contractors, materialmen, and suppliers would be paid for their contracts building Burke’s hotel," the suit said.
Charity Clark, a spokesperson for the state attorney general, said Wednesday the office is reviewing the complaint “and will respond in the coming weeks.”
The suit was referring to a failed project in Newport that resulted in the tearing down of an old building in 2015, leaving a large empty lot in the city's downtown.
The suit filed on behalf of 121 investors in the QBurke project came a week after former Vermont ski resort President William Stenger pleaded guilty to providing false documents during a failed plan to build a biotechnology plant in Newport using tens of millions of dollars in foreign investors’ money.
In 2019, Miami businessman Ariel Quiros, Stenger and others were indicted criminally over a failed plan to build the biotechnology plant in Newport using millions raised through the EB-5 program.
Quiros, who was accused of being the mastermind behind the biotechnology plant scheme, pleaded guilty last year to charges of conspiracy to commit wire fraud and other charges.
The biotechnology plant was never built.
In 2016, the federal Securities and Exchange Commission and the state of Vermont alleged that Quiros and Stenger took part in a “massive eight-year fraudulent scheme” for development projects that began at Vermont's Jay Peak ski resort. The civil allegations involved misusing more than $200 million of about $400 million raised from foreign investors for various ski area developments through the EB-5 visa program “in Ponzi-like fashion.”
The new lawsuit, filed by a number of the EB-5 investors, refers to the QBurke project as the eighth and final phase of the EB-5 investment projects that began at Jay Peak.
The lawsuit alleges that state officials became aware by 2015 that the Jay Peak projects were part of an illegal scheme. At that time state officials began preparing a “Spaghetti Map" as a “graphic description of the illegal money-flows at the Jay Peak Projects and misuse of investor funds.”
In the summer of 2015 an official also prepared and distributed to state officials a presentation that “outlined in detail how investor money had been stolen” and the foreign investors would have their “Immigration Status Likely Negated.”
Nevertheless, in the summer of 2015 the state approved the QBurke project and allowed the project to be marketed to investors. An additional $43 million was raised from the foreign investors and approved for expenditure.
“This money had no legitimate investment purpose," the suit said. “Its only purpose was in paying the Vermont contractors, building the Vermont based hotel at Burke, facilitating tax revenue and economic development, and staving off an incomplete project and eyesore on Vermont’s ledger.”
The lawsuit describes the state's actions as the taking of private property by the government without just compensation and says the investors are entitled to the money they invested plus interest.