Fraud scandal | The ascent of Jay Peak, after its descent into hell

One January morning, aboard a cable car at Jay Peak Station in Vermont, I noticed a young boy wearing a fluorescent helmet, next to his father. Like me, the little 10-year-old skier was eager to ski in the foot of powder that fell the day before. I asked him why he liked Jay Peak.

“It’s because of the Jay Cloud,” he replied, referring to the famous cloud that generously snows the mountain. “This is where the best snow is,” he said as if it were obvious. And as if it was arranged with the views guy, the blue of the sky turned white and the cable car found itself in a mini-snowstorm.

The reputation of Jay Peak, Vermont’s northernmost ski area, is closely linked to Jay Cloud. The resort, located 8 km from Quebec, claims to receive more snow – almost 9 meters, on average – than any other American resort east of the Rockies, and even more than many western resorts, such as Park City , Utah, and Steamboat Springs, Colorado.

But another cloud hung over Jay Peak for years: Its former owners perpetrated the largest fraud in the history of the ski industry and the largest fraud in Vermont history.

In 2016, the Securities and Exchange Commission seized Jay Peak Resort and charged its owners, Chairman Bill Stenger and Miami businessman Ariel Quiros, with bilking foreign investors out of US$200 million in a fraud Ponzi scheme. Mr. Stenger and Mr. Quiros were sentenced to prison. The resort remained open under federal receivership, before being sold for US$76 million in fall 2022 to Park City-based Pacific Group Resorts.

By then, Jay Peak had become a gleaming modern resort. Three hotels, an ice rink, a 60,000 square foot indoor water park, a climbing gym, a movie theater, several condo complexes and numerous bars and restaurants have been built since 2009, largely with investor money swindled. Buildings and attractions are teeming with visitors.

“If you haven’t been to Jay Peak in ten years, you won’t recognize the place,” swears Steve Wright, general manager of the resort.

But the cloud of scandal has been slower to dissipate elsewhere in the region. New accommodations and amenities are improving Jay Peak Resort, but the promise of bringing thousands of jobs to this part of Vermont – the poorest in the state – has fallen on deaf ears. In the neighboring town of Newport, a 30 km drive from Jay Peak, there is still a hole in the middle of town.

Powder, challenges and scandals

Skiing at Jay Peak began in 1957, with its steep summit becoming accessible in the mid-1960s with the installation of a chairlift and Vermont’s only gondola. In the 1970s, the Jay Hotel opened with 48 rooms overlooking the slopes.

In the early 2000s, Jay Peak was renowned among skiers for its powder and challenges. Half of the clientele is Canadian (Montreal is a two-hour drive). But the ski lifts and hotels were “in pretty bad shape,” says Mr. Wright, who was hired in 2004 by Mr. Stenger, who had run the resort since the 1980s.

The Tyrolean-style hostel was shabby, and a newspaper article had described the ski area as shabby, cheesy, and dingy.

That’s when someone smelled easy money: Mr. Stenger turned to a federal tax measure, the EB-5 Immigrant Investor Program, which offers foreigners resident status – the famous green card – in exchange for an investment of US$500,000 if it creates jobs in an economically disadvantaged area like the Northeast Kingdom in northern Vermont.

In 2008, Mr. Stenger partnered with Mr. Quiros to purchase Jay Peak Resort. A few years later, they acquired the nearby Burke Mountain Resort. They raised a whopping US$350 million from EB-5 investors to upgrade the facilities at both stations.

But the two men didn’t just have skiing on their minds. A more ambitious – and more far-fetched – project aimed to establish a biotechnology company in Newport, a working-class town of 4,400 inhabitants, and the redevelopment of the town center, with a boutique hotel, a conference center and a port. pleasure boat on Lake Memphremagog. They promised 10,000 direct and indirect jobs, the transformation of ski areas into four-season resorts and the revitalization of the Northeast Kingdom, Vermont’s poorest region and one with the highest median age.

It turned out that Mr. Quiros had purchased the resort with funds from investors intended for hotel construction, then continued to improperly redirect funds from subsequent projects under a scheme of Ponzi type, in order to cover yourself. When the SEC and Vermont police unmasked him, it was learned that Mr. Quiros and Mr. Stenger had embezzled $200 million, including $50 million that Mr. Quiros had spent on luxury purchases, such as an apartment in Trump Place New York.

Mr. Stenger, who was not accused of personally profiting from the scandal, was nevertheless indicted by the SEC for participating in a “massive, eight-year fraud scheme” that “systematically looted” foreign investors.

“I am outraged by what he did and I was abused,” Mr. Stenger said recently of Mr. Quiros, who was sentenced to five years in prison for wire fraud and money laundering. Mr. Stenger was sentenced to 18 months in prison for submitting falsified documents. He served a nine-month sentence and was released last March. “I’m ashamed I didn’t see it sooner,” Mr. Stenger said.

Attorney Michael Goldberg, who handled hundreds of Ponzi fraud cases and represented numerous clients of Bernie Madoff, the financier and architect of the largest Ponzi scheme in history, has been named federal receiver of Jay Peak in 2016.

Jay Peak was “at one point the example of everything that works well in the EB-5 program,” Mr. Goldberg said. “When everything fell apart, he became the example of everything that is bad in the EB-5 world. »

After the fraud

Jay Peak’s new owners don’t plan any major changes. “We are very aware of the customer loyalty and unique atmosphere here,” said Mark Fischer of Pacific Group Resorts. “We don’t want to change this culture. »

Chris Young, principal of nearby North Country High School, is a longtime Jay Peak skier.

“I don’t think Jay’s vibe has changed. On the contrary, it has improved,” he said.

But the wounds caused by the scandal are still visible in the surrounding area. Burke Mountain Resort, where Mr. Quiros and Mr. Stenger built a hotel, is still in federal receivership (Mr. Goldberg expects the ski area to be sold this year). In Newport, the gaping weed-filled hole still disfigures the city center. An entire city block was razed in 2015 to make way for the hotel and conference center promised by Mr. Stenger and Mr. Quiros. The parcel is to be sold soon by the federal receiver.

The result for foreign investors was mixed: 80 percent of Jay Peak’s EB-5 investors received a green card, Mr. Goldberg said, but none of Burke’s 121 investors received one. He’s working to get them a green card, he said. Many investors lost money.

Isn’t it ironic that one of the fruits of the Jay Peak fraud is a thriving modern resort?

“There is no incompatibility between fraud and the beauty of the final product,” Mr. Goldberg said jokingly.

This article was published in the New York Times.

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