Memos raise new questions why Vt. regulators didn’t shut down ‘Kingdom Con’ earlier

BURLINGTON, Vt. (WCAX) - Jay Peak’s former president is asking a federal judge to rescind a $250,000 restitution order, saying that newly released documents show that Vermont regulators failed to shut down the Kingdom Con EB-5 projects when they allegedly knew it was a Ponzi-scheme.

The allegations were raised in an 18-page motion that raises new questions about what state officials knew about the fraud and when? Lawyers for former Jay Peak president Bill Stenger contend that state officials not only allowed the Northeast Kingdom project to continue but were actively marketing it to foreign investors

The new evidence comes in the form of memos that are part of a separate civil action by foreign investors against state officials. They show that as early as February 2015, federal regulators had notified state officials about emerging financial problems with AnC Bio, a proposed South Korean biomedical facility in the heart of downtown Newport that prosecutors in Stenger’s trial called “a fiction.”

“It’s clear to us that the state knew the problems and greenlit the project to let it go forward,” said Brooks McArthur, Stenger’s attorney. He says the Securities and Exchange Commission warned then Financial Regulation Commissioner Susan Donegan and current Treasurer Mike Pieciak about some $20 million that appeared to be part of a shell game. McArthur also questions whether this information made it to Governor Peter Shumlin. He says the info came at the same time as Donegan, Pieciak, and investigators within DFR were still collecting evidence and building their case against Stenger and others involved in the fraud, including the convicted mastermind, Ariel Quiros. The feds brought charges in the spring of 2016.

In a statement, Pieicak said, “This would have allowed the fraud to continue and ultimately jeopardize the continued operation of the resort, its many jobs and the foreign investments.”

“Mr. Stenger and his co-conspirators actively and intentionally impeded DFR’s investigation with lies and withholding of information, which led to Stenger’s federal criminal conviction; that conviction was directly tied to making false statements to DFR,”

Donegan did not respond to requests for comment.

McArthur says the state continued marketing the EB-5 program to foreign investors while the investigation was ongoing, and that while Stenger takes responsibility for a false statement he made about job creation, restitution to the investors should be the state’s responsibility. “What’s so explosive about these memos is that Bill Stenger’s January 2015 statement played no part in the state’s decision to allow that project to go forward,” he said.

Up to the point that fraud was discovered, the EB-5 program was championed as an investment boon for the region championed by Vermont’s Congressional delegation and the governor. It allowed foreign investors to receive green cards in exchange for $500,000 in investments in economic development projects.

David North, a fellow at the Center for Immigration Studies think tank, says the program is flawed and ripe for abuse.

“I have a moral objection to the very act of buying your way into citizenship, North said. “People should be admitted on their merits whatever they are, whatever Congress thinks should be done.”

North says he has concerns with people buying citizenship and says EB-5 is flawed because the U.S. Citizenship and Immigration Service is focused on immigration, not economic development.

“These guys are about as far from Wall Street and money matters as you can get,” he said.

Stenger is out of federal prison after serving nine months out of an 18-month sentence. At the same time, there’s a civil lawsuit on behalf of foreign investors heading to trial as early as this summer where these and other documents are expected to play a central role.

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