How a Vermont ski area roared back from a financial scandal

We board the first tram of the morning at Vermont’s Jay Peak Last month I looked down and saw a young boy in a neon helmet pressed against the window, with his father next to him, just as excited as I was to ski across the fresh snow. The boy told me he was 10 years old. I asked him why he liked coming to Jay Peak.

“Because of the Jay Cloud,” he said matter-of-factly, as if it were obvious. “It has the best snow.” As if on cue, the world outside the aerial tram car suddenly turned from blue to white. Sixty of us on the ascending tram sat in our own personal snow globe.

The mystique of Jay Peak, Vermont’s northernmost ski area, is closely tied to the Jay Cloud, a mythical thundercloud that hovers above the rocky summit. The resort, eight kilometers from Quebec, claims to receive more snow – about 350 centimeters on average – than any resort east of the American Rockies, and even more than many Western ski resorts, including Park City, Utah and Steamboat Springs, Colorado. .

But another cloud hung over Jay Peak Resort for years: its former owners committed the largest financial fraud in the history of the ski industry – and also the largest fraud in the state of Vermont.

In 2016, Securities and Exchange Commission officials seized the ski area and accused its owners, Jay Peak’s longtime president Bill Stenger, and a Miami businessman named Ariel Quiros, of defrauding foreign investors of $200 million in a Ponzi-like scheme. Both men ended up in prison. The ski area remained open while under federal receivership, emerging from it in the fall of 2022 when the area was purchased by Park City-based Pacific Group Resorts for $76 million.

When the cloud of scandal finally lifted, perhaps paradoxically, a sparkling modern resort was revealed. Since 2009, three hotels, an ice skating rink, a 60,000-square-foot indoor water park, a climbing gym, a movie theater, several apartment complexes and numerous bars and restaurants have been built, largely with money from defrauded investors. The buildings and attractions are teeming with visitors.

“If you haven’t visited Jay Peak in ten years, you literally won’t recognize the place you arrive,” said Steve Wright, general manager of the resort.

But the cloud has been slower to clear from other parts of the state’s northeastern kingdom. While the resort is buzzing with new lodging and amenities, associated promises to bring thousands of jobs and expanded development to the region, Vermont’s most impoverished, have fallen far short. In the nearby city of Newport, a twenty-mile drive from Jay Peak, there is still a hole in the heart of downtown.

Powder, challenge and scandal

Jay Peak opened for skiing in 1957, and the distinctive, steep summit became accessible to skiers in the mid-1960s with the opening of a chairlift and Vermont’s only tram line. In the 1970s, Hotel Jay opened with 48 rooms on the slope side.

In the early 2000s, Jay Peak Resort was known among hardcore skiers for its powder and challenge. Half the skiers were Canadian, with Montreal just a two-hour drive away. But the elevator and hotel infrastructure “was pretty broken,” said Mr. Wright, who was hired in 2004 by Mr. Stenger, who had run the resort since the mid-1980s. The Tyrolean-themed base lodge and hotel were dated, and the ski area was described in one news report as shabby, unchic and seedy.

Then came the prospect of seemingly easy money: Mr. Stenger turned to a federal initiative called the EB-5 Immigrant Investor Program, which offers foreign investors a faster path to obtaining green cards in exchange for a $500,000 job-creating investment if the project is located in an economically depressed area such as the Northeast Kingdom.

In 2008, Mr. Stenger purchased the Jay Peak Resort with Mr. Quiros and they acquired the nearby Burke Mountain Resort a few years later. They have raised a whopping $350 million from EB-5 investors to upgrade and transform the facilities at both resorts.

But the couple didn’t limit their vision to skiing. In their most ambitious – and bizarre – effort, they also proposed establishing a biotechnology company in Newport, a working-class town of 4,400, and redeveloping the city’s downtown core, including building a boutique hotel, a conference center and a new marina on the lake. Memphremagog. They said the project would directly or indirectly employ 10,000 people, transform its ski areas into four-season resorts and help revitalize the struggling Northeast Kingdom, which has the highest poverty rate, lowest household income and highest median age in Vermont has.

It turned out that Mr. Quiros had purchased the resort with investor funds intended to build hotels, and then improperly diverted money from subsequent projects in a Ponzi-like scheme to cover this original sin. When SEC and Vermont officials caught up with him, they revealed that Mr. Quiros, along with Mr. Stenger, had misused $200 million of the money they raised, 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 nonetheless accused by the SEC of being part of an “eight-year massive fraudulent scheme” that “systematically plundered” foreign investors.

“I am outraged by what he has done and I feel abused,” Mr. Stenger said recently.

Mr. Quiros was sentenced to five years in prison for bank fraud and money laundering, and Mr. Stenger was sentenced to 18 months for filing forged documents. He served nine months and was released from prison in March 2023. “I’m ashamed I didn’t see it sooner,” Mr. Stenger said.

Got caught

Michael Goldberg, a prominent trustee who has handled hundreds of Ponzi cases and represented many clients of Bernie Madoff, the financier and architect of the largest Ponzi scheme in history, was named federal trustee of Jay Peak in 2016.

Jay Peak was “at one point the poster child for all that was good about the EB-5 program,” Mr. Goldberg said. “When it collapsed, it became the epitome of everything bad in the EB-5 world.”

Mr. Wright, Jay Peak’s general manager, worked with Mr. Goldberg to guide Jay Peak through a different kind of storm.

About 836 investors from 74 countries were duped by the Kingdom Con, as the scandal was later coined. While Mr. Goldberg’s job was to ensure that defrauded investors were made whole again, Mr. Wright understood that Jay Peak “needed to be successful not only so that the staff kept their jobs, but because the investors who visas were based on the company being successful.”

The stakes were high: Jay Peak’s workforce had grown from 350 to 1,200, making it the largest employer in the region.

“We were nervous that no one would ever buy a Jay Peak season pass or book a holiday here again,” Mr Wright said. To his surprise, as word spread about the improvements at the ski area, skier visits set records.

After the fraud

Then the pandemic shut everything down. The Canadian border closed to non-essential travel for 19 months. For the entire winter of 2020-2021, Jay Peak was inaccessible to half of its clientele and subject to strict health restrictions by the state of Vermont. Annual ski visits dropped from about 300,000 to 75,000.

In a curious way, weathering the EB-5 scandal prepared the resort to survive the pandemic. “We can probably get through this,” Mr. Wright recalled thinking during the height of the pandemic. “A lot of it was due to the resilience we built by surviving the receivership.”

Jay Peak has set records in revenue and lift ticket sales annually since 2006, said Mr. Wright, who would not reveal exact sales figures. One reason is the many non-ski options available to visitors, evident from the bustling water park I saw when I visited on a crisp January day. Another is Jay Peak tree skiing. Nearly a third of the 385 hectares of ski area consists of glades and the mountain has an old-world feel, giving skiers a mix of narrow natural snow trails and wide boulevards. Skiing at Jay Peak feels like a safari, with skiers roaming freely through the snowy landscape, unlike the domesticated feel of other resorts.

Jay Peak’s new owners are not planning any major changes. “We are very aware of the loyal customer base and the unique atmosphere it radiates,” says Mark Fischer Pacific Group Resorts. “We don’t want to change that culture.”

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

“I don’t think the Jay vibe has changed at all. If anything, it has gotten better,” he said.

But the wounds of the scandal are still visible in the area. Burke Mountain Resort, where Mr. Quiros and Mr. Stenger built a hotel, remains under federal receivership (Mr. Goldberg expects the ski area to be sold this year). In Newport, there is a gaping, weed-filled hole in the center of downtown. In 2015, an entire block was razed to make way for what Mr. Stenger and Mr. Quiros promised: a multimillion-dollar hotel and conference center. The hole is like a scarlet letter from a cheating lover. The plot is awaiting sale by the federal trustee.

The outcome for the foreign investors was decidedly mixed. Eighty percent of EB-5 investors in Jay Peak have received a green card, Mr. Goldberg said, but none of the 121 investors in Burke have received one. Getting green cards for investors is one of his remaining priorities, he said. Many investors have lost money.

Is it ironic that one of the fruits of the fraud is that Jay Peak is a thriving modern resort?

“Having fraud and having a nice end product are not inconsistent,” Mr. Goldberg joked.