Bill Stenger did not know of the “shenanigans” his onetime business partner Ariel Quiros was doing with millions of dollars in investor funds in Florida that had been raised for development projects in northern Vermont, his attorney says.
Stenger also has not spoken to Quiros for several months, added the attorney, who is tight-lipped on whether his client will sue Quiros.
Stenger and Quiros are at the center of what regulators have termed the largest fraud case in the state’s history.
“(Regulators) broadly alleged because (Stenger) permitted — and he did — permitted Quiros to be in charge of the funds while they were in Florida, that he, as the general partner of the various EB-5 projects, shouldn’t have done that. He should have been baby-sitting,” David Cleary, an attorney representing Stenger, said last week.
“Bill’s only answer is, ‘I trusted the guy,’ ” Cleary added, saying his client was not aware of the “shenanigans that Quiros was conducting” with the investor funds in Florida, where Quiros lives.
Quiros has said Stenger was aware of the details of what he was doing, claiming Stenger regularly initiated or approved transfers of investor funds to Quiros’ many accounts.
Quiros and Stenger have pursued different strategies in the legal actions filed against them that appear to be on course to make courtroom opponents out of the onetime business partners.
Stenger is the former Jay Peak Resort president and CEO. Quiros is a Miami businessman and owner of Q Resorts, a holding company that includes Jay Peak.
Lawsuits filed in state and federal courts in April allege the two men misused hundreds of millions of dollars intended for development projects in the Northeast Kingdom, including money for a hotel at Jay Peak and a proposed biomedical research center in Newport.
Cleary, Stenger’s attorney in the state case, said the last time his client spoke to Quiros was sometime before the Vermont attorney general and the U.S. Securities and Exchange Commission filed their cases against the pair in April.
“Zero. No conversation. No communication. Nothing,” Cleary quickly responded when asked to describe the relationship between his client and Quiros since the filing of the lawsuits.
“At a point in time weeks prior to the SEC taking their action, Mr. Stenger became very concerned because he was being told by Quiros and his representatives that (Stenger) needed to slow down on construction,” Cleary said, “and there was an inference there was a shortage of money, which (Stenger) didn’t understand because funds had been raised for these projects.”
That’s when Stenger stopped talking to Quiros, Cleary said. Asked if his client is considering legal action against Quiros, Cleary replied, “No comment at this time.”
Stenger settled with the SEC, agreeing to cooperate with investigators. He still faces the possibility of a monetary penalty. Quiros is challenging the allegations against him, and his attorneys have filed motions to dismiss the case.
In the state case, attorneys for Quiros have also disputed the allegations, and again filed a motion to dismiss. Stenger did not file a similar motion.
Instead, he submitted an answer to the complaint, denying he committed wrongdoing and asking that the case proceed to trial.
“It would be a waste of Bill’s money, and he doesn’t have a ton of it, to go file motions to dismiss,” Cleary said. “We don’t think there is any evidence whatsoever that Bill was ever involved in, participated in, or engendered any fraud of any kind.”
Assistant Attorney General Jon Alexander, representing the state in the Vermont case, did not return a phone call Friday seeking comment.
The state and federal lawsuits allege the two men used money from later EB-5 immigrant investor-funded developments to cover costs and overruns in earlier projects, improperly mixing together funds that were to be kept separate.
EB-5 investors who put up $500,000, in addition to a $50,000 administrative fee, became eligible for permanent U.S. residency if that investment created 10 jobs.
Many investors have been left in limbo as later projects, like the biomedical center, lacked the money to go forward due to financial “back-filling” of earlier projects, according to the lawsuits.
The state lawsuit portrays a relationship breaking up between Quiros and Stenger for some time and states that actions by both men led to the investor fraud allegations.
“Although Quiros complained about his relationship with Stenger, saying that Stenger was ‘going crazy’ on him to purchase land in the Northeast Kingdom, that, at times, Stenger would not give him data, and that Quiros took away Stenger’s part ownership in Jay Peak because of disagreements,” the lawsuit states, “Quiros masterminded the long-standing fraudulent scheme with substantial assistance from Stenger.”
When asked if settlement talks have taken place between Stenger and the state, Cleary said, “Not yet” and declined to comment further.