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.