Previously in this space, I questioned if it was possible that an experienced businessman like Bill Stenger could actually be clueless to the rampant looting of his own project, and remain that way for several years running.
My conclusion: No, he could not.
Which brings us to this: If he knew what was going on, why did he let Ariel Quiros (who had illegally used EB-5 investor money to become Stenger’s boss) pursue this crooked scheme? Why did he put his own finances and reputation on the line, even when the signs of trouble became impossible to miss?
Two possibilities. First, he was getting a cut. Could be.
Second, he was in severe financial straits and needed a Quiros to bail him out. Call Quiros a “devil investor,” if you will. Certanly not an angel.
We tend to think of ski resorts as luxurious playgrounds for the well-to-do, spinning off great quantities of cash almost as quickly as their snowmaking machines blanket the slopes with artificial white stuff. In truth, ski areas are financially marginal — especially those with few or no amenities to carry them through the snow-deficient times.
How marginal? Well, in January of last year, ski industry veteran Bill Jensen told an industry conference that the business was facing huge challenges, “and at least 150 of the current 470 ski resorts in the United States are going to fail and turn off the lifts.”
There’s an eye-opener.
One of the primary facets of Stenger’s massive EB-5 project, you may recall, was to transform Jay Peak into the kind of amenity-rich, four-season resort most likely to survive the Jensen Cull. Indeed, as I wrote in my last post, the Jay transformation was the first part of the project to proceed. Other aspects were left unfinished, or even unbegun.
Here’s another eye-opener, from a Stenger/Quiros timeline posted by Teton Gravity Research. It says that the 1990s and 2000s were a time of persistent financial difficulties for what was then Burke Mountain Resort, with…
“…seven successive and unsuccessful owners since a 1991 foreclosure, a public auction of the resort in 2000, and a $674 million default with Credit Suisse by the mountain’s Florida-based owner, real estate developer Ginn Co.”
That, my friends, is the resort purchased in 2012 by Quiros and Stenger — with the illegal use of EB-5 investor money. Quiros installed his son Ary as operator of Burke Mountain; since then, Ary has made few friends and many enemies. It was he who renamed the resort Q Burke, a move that earned the Ski Area Management award for Worst Name Change of 2013-14.
It was also he who cut ties with Kingdom Trails Association, which had greatly contributed to the growth of Q Burke thanks to its system of mountain biking trails. And it was he who made significant staff cutbacks in 2013, “including many long-term members of upper management with institutional knowledge.”
Getting a little off track here, but the point is, both Jay Peak and Burke Mountain/Q Burke faced financial challenges. Jay Peak needed an influx of capital to ensure its existence, and Burke needed a new lease on life after a string of management failures.
Stenger found Quiros and brought him into the hunt for EB-5 money. Quiros brought some initial capital and then (cough) allegedly took advantage of the pyramidal potentialities of the EB-5 structure. The foundation of the alleged scheme was siphoning off investor money for unrelated purposes (including millions in Quiros’ living expenses) and commingling the funds to cover up the losses.
And for his purposes, the bigger and more complicated the project was, the greater the opportunity for theft. Of course, the longer it went on, the greater the chances it would all come crashing down. Which it now has.
I don’t have any special insight into the finances of the players. But as I read the tea leaves, it looks like Stenger needed Quiros or somebody like him, somebody with a supply of fresh money; and in the process of bringing Quiros on board, Stenger gave up financial control. Once the arrangement got going, Stenger could do nothing but ride the tiger as long as he could.
That, I remind you, is the charitable interpration. The other possibility is that Stenger and Quiros were co-conspirators, and that Stenger is now preparing to throw his partner slash boss under the bus.
There are many stories remaining to be told about this. As I wrote last time, the shitstorm is only just beginning.