“When I was a teenager, my dad gave me an engraved silver bracelet from his days at Westminster College, a tiny Division III liberal arts school in Western Pennsylvania. I wore the bracelet for years — it’s made to stretch over any size hand. It’s engraved with Dad’s name: ‘Herb Niles: Co-Captain 1965 Titans.
“Growing up, this was one of the key things I knew about my dad’s life before he became my dad: He didn’t just play college football. He was co-captain of his college football team …”
* * *
This spring and summer, I had the honor of interviewing not only my father, but also one of his former teammates and their college football coach, Dick Bestwick, about the lasting bonds from their undefeated season in 1964. This is their story.
Buckle up your chinstraps and get ready for the za-zu-zaz.
I met him outside, in a garden in the Washington, D.C., area, after Vermont Public Radio agreed to grant him anonymity.
“I don’t want to mention my name because I’m — let’s say, a former politically exposed person,” he says. “And one of the reasons why I was looking for EB-5 was political persecution in my home country.”
He is one of many foreign investors in Jay Peak’s EB-5 developments now scrambling in the wake of charges that the resort orchestrated a massive securities fraud with their money. But it’s more than just money riding on the outcome for some.
This individual is a former high-ranking official in what used to be the Soviet Union. His children, like those of many other investors, were attending college in the U.S.
But, perhaps unlike some other investors, this one needed to leave his home country for his family’s safety.
And EB-5 could provide it: In the federal program, foreigners invest a half-million dollars in an American business. If 10 jobs are created within two years, conditional visas for the investors and their families turn into green cards — permanent U.S. residency.
It’s a scheme Jay Peak began using in 2006 to bankroll $350 million worth of developments at the resort and at the newly acquired Burke Mountain ski area. Other projects in Newport were promised, too.
The Russian investor visited Jay. He never met resort owner Ariel Quiros, but his impression of president Bill Stenger was good.
“He was rather open, answering let’s say difficult questions, for example what happens if you pass away, what’s going with the project? So, we had really a long discussion, maybe an hour and a half,” he says.
And the business case was simple math — reasonable and attractive, the investor says. In late 2010, he went for it. He visited Jay again and saw the construction. He got updates and, slowly, started to earn back his investment.
“So in my view it was a really big surprise when I got the news that there was a massive fraud,” he says.
It was a grand plan. Jay Peak was a modest ski area transformed to a year-round destination. Now the resort would lead the biggest private investment Vermont’s Northeast Kingdom had ever seen – about a half billion dollars to revive the region’s rural economy with tourist developments, plus manufacturing from windows to airplanes to biotech.
Now the U.S. Securities and Exchange Commission and state regulators say Jay Peak’s EB-5 scheme was a fraud. Stenger and resort owner Ariel Quiros face 62 civil charges of misleading investors and misusing more than $200 million of their money, including $50 million for Quiros’s personal benefit. Stenger has denied wrongdoing to local press. Neither could be reached for comment. The two are locked out of their resorts, which will stay open under an appointed receiver. Quiros says assets are frozen. Criminal charges may follow.
By Hilary A. Niles
GLOBE CORRESPONDENT APRIL 21, 2016
MONTPELIER — The news was stunning: Two of Vermont’s most prominent businessmen, Jay Peak Resort owner Ariel Quiros and president Bill Stenger, were accused last week of securities fraud and misuse of more than $200 million raised from investors since 2008.
But red flags had been waving for years over their use of a controversial federal program that grants US residency to foreigners in exchange for job-creating investments.
Some of the warnings dated to 2012, when an immigration attorney involved in Jay Peak’s securities deals publicly severed his relationship with the developers, implying their financial disclosures were misleading.
Construction delays mounted, and a crucial real estate deal was canceled for lack of payment. Investors complained that Quiros and Stenger had changed the terms of their payouts.
Other alarms rang later, heard only within state government: An approved business plan didn’t pass legal muster. Jay Peak withheld information about a key business partner. Quiros and Stenger resisted the state’s requests for documentation.
But state officials overseeing the visas-for-investment program largely allowed the Jay Peak executives to proceed — a testament to the developers’ promise of much-needed spending in Vermont’s most economically challenged counties and the strong political support from two governors and Vermont’s congressional delegation.
“You had a sense something wasn’t right here, just on the questions we weren’t getting answered,” said the state’s commerce secretary, Patricia Moulton, whose agency runs Vermont’s immigrant investor program. She eventually became suspicious of Jay Peak.
Quiros and Stenger’s designs were as audacious as the fraud they are accused of committing. In 2012, the duo unveiled a half-billion-dollar plan for Vermont’s Northeast Kingdom. It would sweep from the Jay Peak ski resort, near the Canadian border, to the newly acquired and renamed Q Burke Mountain.
Jay Peak would build a biotechnology campus, window manufacturing plant, mixed-use hotel, conference center, and marina known as Renaissance Block.
Q Resorts, Jay Peak’s parent company, wholly owned by Quiros, even took over management of the Newport State Airport
in a flurry of promises that saw the facility renamed Northeast Kingdom International Airport.
But only expansion of the ski resorts came to pass. At the airport, international flights have yet to land or take off.
Development money was to come from the federal EB-5 visa program. EB-5 offers permanent residency to foreign investors and their family members if at least 10 jobs’ worth of economic activity can be attributed to an investment of at least $500,000 in a qualified US business.
The investment offerings are exempt from the federal securities registration that’s common for stocks and bonds, but otherwise subject to federal and state securities laws.
Vermont’s EB-5 office has worked with about a dozen developers since 2006, but none more than Jay Peak. Quiros, who is based in Miami, and Stenger raised more than $350 million from over 700 investors in at least 74 countries, according to an April 12 lawsuit filed by the Securities and Exchange Commission.
Neither man could be reached for comment.
Vermont runs its EB-5 program through an entity owned and operated by the state. It’s an unusual setup adopted by only one other state, Michigan. Hundreds of other regional centers, as the EB-5 offices are known, are for-profit outfits.
Even at a news conference to announce allegations of “massive” fraud leveled by the SEC and the state, Governor Peter Shumlin promoted the added assurance that state oversight affords.
Yet compliance with securities laws appears to have been an afterthought.
Moulton, the state commerce secretary, said that until Vermont financial regulators got involved in 2015, about a year after the SEC began investigating, the regional center conducted no systematic, independent, third-party reviews of projects’ business plans.
“We can all sit back now and say there are probably 18 things we should have done. But we were not required in our position as a regional center to do that level of analysis. We’re required as a regional center to market projects,” she said.
Moulton said this is a weakness in the whole EB-5 system, and one Vermont corrected after bringing in financial regulators. She said the commerce agency’s due diligence previously amounted to a review of applicants’ business plans and the reputations of their principals. With Jay Peak, Bill Stenger carried the case. The longtime president of the iconic ski area was a known entity in Vermont well before Quiros bought the operation in 2008.
And with Jay Peak, as with other projects, state officials mostly took the word of attorneys who had drafted the securities offerings, Moulton said.
The econometric forecasts on which job-creation projections were based — the heart of EB-5 — were taken at face value, even though they were paid for by developers. Market analyses also were trusted, but never verified beyond EB-5 approval by US Citizenship and Immigrant Services.
That federal green light remains the only required business plan review in the EB-5 process.
In 2012, Doug Hulme, an immigration attorney who had worked with Jay Peak, cut ties with the resort over alleged financial misrepresentations. Hulme issued a news release saying his company, Rapid USA Visas, “no longer has confidence in the accuracy of representations made by Jay Peak.”
But Hulme himself was the cause of consternation in the state EB-5 office, because Rapid USA at the time was improperly marketing itself as the state regional center, Moulton said. The state chalked it all up to “sour grapes,” Moulton said.
No financial audit of Jay Peak was performed.
Not every project got a pass, though. The regional center did rescind agreements with other developers and has declined to work with at least one group it was “not comfortable with,” Moulton said.
The state does not appear to have applied such scrutiny to Jay Peak until early 2014, when a group of investors began complaining that Quiros and Stenger had converted investor’s equity shares in the resort’s Tram Haus Lodge to unsecured IOUs — without their knowledge or consent.
Prior to this, Moulton said, more-rigorous inspection hadn’t seemed necessary because there hadn’t been any visible problems.
“Projects were getting built. Jobs were being created. Money was being spent. There was nobody screaming and hollering, no question marks, until the first conversion of Phase I investors from equity into debt.”
After a brief suspension by the regional center, the state allowed Jay Peak to continue selling its EB-5 securities, with conditions set by the Department of Financial Regulation. Responsibility for compliance for all of Vermont’s EB-5 projects was moved to Financial Regulation, which exercised its subpoena power to demand over 300,000 documents from Jay Peak. Its investigation is one the commerce agency had neither the resources nor the authority to conduct. The resulting charges against Quiros and Stenger largely mirror the federal charges by the SEC.
Shumlin, who is finishing his third two-year term, deflects questions about whether Vermont’s EB-5 center should have been reformed sooner. He cited its structure as a legacy of prior administrations. “We made the change when we made it, and we found what we found,” Shumlin said by e-mail.
In December 2015, the City of Rutland, Vermont, settled a nearly $1 million lawsuit with a former police officer. Andrew Todd had alleged that two of his colleagues on the police force engaged in racial discrimination and multiple instances of improper conduct — including racial slurs and physical threats against him, racial profiling, and sometimes getting drunk or having sex while on duty.
By the time of the settlement, Sergeant John Johnson had retired and officer Earl “Frank” Post had already resigned. Although the two were never charged with any crimes, the civil settlement certainly was damning.
And despite the severity of the accusations against them, Johnson and Post walked away from their jobs with their police certification intact. That’s because, in Vermont, it’s really hard to lose your right to wear a badge.
This spring, state lawmakers are tackling a bill that would sharpen their teeth when it comes to dealing with bad cops.
Vermont’s student enrollment has declined steadily in recent years, leaving hundreds of small-town school districts serving fewer and fewer kids — some as few as 20. Meanwhile property taxes that fund education have steadily risen, along with the profile of education finance as a political lightning rod.
In 2015, the Vermont Legislature instituted a controversial program requiring school districts to consolidate, or else face stiff property tax penalties. Towns have three years to respond to Act 46, as it’s known.
Using CartoDB, I created a map to track the merger status of all districts. The map, embedded in stories published by Vermont Public Radio, is sync’d to data hosted on GitHub. This allows the most current data to be reflected in all online stories with the map embedded.
When they stop motorists in Vermont, cops don’t just collect licenses and registrations. As of September 1, 2014, all police officers in the state must record the race of every driver they pull over.
The new mandate for “roadside stop” data collection is just one step in a national movement to halt discriminatory law enforcement. “Throughout the country, there’s a crisis of legitimacy in policing,” said Burlington Police Chief Brandon del Pozo. “Part of that crisis stems from a belief that the police are biased in the way they use their discretion. And traffic stops are something that police have immense discretion over.”
But Vermonters are still waiting to see what the new statewide data collection reveals. That’s because, while technically public, the information remains largely inaccessible. In 16 months, no one has compiled the raw data — a necessary first step before analysis. In fact, no one even knows if all of law enforcement is complying with the mandate to collect the data in the first place.
Vermont’s state government is contemplating at least $1 billion of information technology projects in the coming years. The wish list is long, and some projects — even important ones — are likely to stay on it for a long time.
Consider the Medicaid information system: A big upgrade scheduled several years ago has been put off, a couple times, and it’s still on hold into the foreseeable future.
Meanwhile, the core system is not set up to compute all the information that policymakers need to build an accurate budget. This year, state officials are scrambling to fund $36 million more in Medicaid charges than they budgeted for — although they don’t have the data they need to understand how expenses ballooned the way they did, or how much the program will cost in the future.
Information technology projects like Medicaid’s get put off for various reasons, and throughout state government. Vermont’s Judiciary, its Departments of Motor Vehicles and Public Safety, the Public Service Board, the state’s accounting and procurement offices are all home to IT projects that face continual delays.
Dan Gauvin radios from his four-seat Cessna and aims for the sky. Gauvin lifts off almost every day. He had been running the Newport State Airport for almost decade when, in 2012, developers from Jay Peak ski resort took over management of the facility.
Jay Peak’s parent company, Q Resorts, kept Gauvin on to run airport operations. He’s seen a lot of changes since then. From 1,000 feet above ground, he points out some big ones: A thousand feet of fresh black-top caps the base of the airport’s north-south runway. Between it and a tiny white terminal building, construction vehicles criss-cross a new area for planes to park. Beyond that lies a massive new stormwater retention pond.
“The base of that’s the size of a football field, believe it or not. It’s 27 feet deep,” Gauvin says.
These and other infrastructure improvements were mostly paid for by federal grant money — a lot of it.
“$2.1 million is our usual program funding from the feds every year, and we brought in excess of $60 million in two years,” according to Guy Rouelle, who heads up Vermont’s Aviation Program.
Almost half that has gone to the Newport airport, for upgrades designed in conjunction Q Resorts’ plan to put the airport on the map: They’d build a new and improved terminal with customs service for international cargo and passengers, bonded warehouses for use by import-export businesses, an assembly plant for small aircraft and more hangars for private plane owners.
This year, the Legislature even renamed the airport the Northeast Kingdom International Airport.
To date, though, it’s mostly the publicly-funded projects that have come through. Q Resorts, which also has projects in limbo in nearby Newport and East Burke, hasn’t yet delivered its end of the bargain.
With a surface area of 435 square miles stretched over a length of 120 miles, Lake Champlain is one of the largest lakes in North America. Its waters support aquatic ecosystems, recreation, agriculture and public water supplies.
But high levels of phosphorus in the water threaten all these uses of the lake. A plan to clean up Lake Champlain proposes limiting phosphorous runoff, which causes potentially toxic blue-green algae to proliferate. The plan is called the Total Daily Maximum Load, or TMDL.
The limits apply not just to farms and developments (although those are the leading contributors of phosphorus to Lake Champlain), but also to wastewater treatment plants, back roads and even forests and streams. Runoff from all these sources throughout a 8,234-square-mile watershed in Vermont, New York and Quebec ends up in the lake.
A new proposal, referred to as Total Maximum Daily Loads (TMDL), is a choice between scenarios that allow different amounts of pollution from various sources to enter specific parts of the lake. It’s a long and technical document; this series of interactive graphs and charts explains the basics of the official plan — which is not without controversy.