William Kelly has admitted taking part in a massive EB-5 fraud, joining his longtime friend and business partner Ariel Quiros, Jay Peak’s former owner, in entering guilty pleas.
A federal prosecutor during a hearing Wednesday in federal court in Vermont held via video also outlined the movement of millions of dollars of investor funds meant for a $110 million biomedical research project in Newport that instead were siphoned off for other purposes.
Kelly entered guilty pleas during the hearing for his role in the fraud. The Florida resident agreed to plead guilty to two of the 10 charges brought against him — conspiracy to commit wire fraud and concealment of material information.
As part of the plea deal, the remaining counts against him will be dismissed.
Judge Geoffrey Crawford asked Kelly during the hearing how he wanted to plead to the two charges outlined in the plea agreement.
“Guilty, your honor,” Kelly told the judge twice, once for each count.
Crawford also walked Kelly through the rights he was giving up by entering guilty pleas, including his right to a trial. Kelly said he had consulted with his attorney, Robert Goldstein, and was willingly giving up those rights.
Quiros reached his plea agreement with prosecutors in August 2020.
Kelly and Quiros had both earlier filed motions to dismiss the charges against them, but Crawford rejected those bids in June 2020.
As part of their plea deals, Quiros and Kelly agreed to cooperate with prosecutors.
Sentencing dates for Kelly and Quiros have not yet been set. Kelly faces up to three years in prison as part of a plea deal with prosecutors, though his attorney can argue for a lesser sentence.
An earlier agreement reached by Quiros allows prosecutors to ask for up to a 97-month sentence for him, though his lawyer can seek a lower prison term.
Bill Stenger, Jay Peak’s former CEO and president — a former business associate of Kelly and Quiros — was named in the same May 2019 criminal indictment as those two men. Stenger has maintained his innocence and is set for trial in October, when Quiros and Kelly could be called as witnesses.
All three were charged in connection with a failed biomedical research facility proposed for Newport.
It never got off the ground, despite raising more than $80 million from about 160 foreign investors. Those investors had each put up at least $500,000 through the federal EB-5 visa program and, in exchange, hoped to receive permanent U.S. residency if the project met job-creating requirements.
However, when the project collapsed, many of the foreign investors lost not only their money and their hope for a green card.
A fourth defendant in the case, Alex Choi, a relative of Quiros, is from South Korea and has not attended any of the court proceedings since the indictments were returned in May 2009, with prosecutors saying only that he remains at large.
The Newport project was pitched by the developers as a replica of a South Korean development. Choi was convicted in South Korea in 2016 of financial fraud associated with AnC Bio Korea.
According to the federal prosecutor and the charges to which he pleaded guilty, Kelly admitted that between March 2013 and October 2014 he assisted Quiros and Stenger to pay $47 million in investor funds to Jay Construction Management.
Jay Construction Management, according to the charge against Kelly, is a Quiros-controlled entity designed “as a pass-through corporation for approximately $52 million that was supposedly to be paid to AnC Biopharm, a company created and controlled by Choi in part to conceal Choi’s legal and financial problems.”
Also, Kelly admitted as part of his plea to knowing that Quiros provided less than $6 million of those funds from Jay Construction Management to AnC Biopharm.
Kelly also admitted knowing, according to the prosecutor, that Quiros used approximately $21 million of the AnC Vermont investor funds sent to Jay Construction Management to pay off an earlier loan he had at Raymond Jamesand Associates for expenses not related to the biomedical research center development.
Kelly, said prosecutor Nicole Cate, helped hide from the state-run EB-5 Regional Center — which was supposed to oversee the project — that Quiros diverted the $21 million in investors meant for the biomedical research facility to use for other purposes.
Prosecutors have described Quiros as the leader of the scheme to defraud investors in the Newport project. Kelly, a longtime friend and key adviser to Quiros for three decades, was termed a key adviser for the development.
Stenger’s role was in “marketing” the projects to investors and others, according to the indictment against him.
In mid-2012, according to documents filed in the case, Kelly “took the lead in developing the details for the fraudulent business plans,” which became part of the document provided to potential foreign investors in AnC Bio Vermont.
“The plan was fraudulent in various ways,” the indictment stated, “including two major deceits: 1) secret embezzlement of investor funds; and 2) deceptions about the number of jobs to be created by the project.”
Kelly and the others, Cate said, knew they needed a plan to create at least 2,200 jobs to meet the requirements of the U.S. Citizenship and Immigration Services for investors to receive their green cards.
The job-creation projections relied on three lines of business, according to the prosecutor: clean room rentals, sales of stem cell products and sales of artificial organs.
From 2012 to 2016, Kelly, Stenger and Quiros maintained the job numbers despite evidence showing otherwise, Cate said. During that same time, she said, no one associated with the AnC Bio Vermont project had made any progress toward identifying customers for those clean room rentals, acquiring commercially viable stem cell products or developing the potential artificial organs.
Federal regulators termed the AnC Bio Vermont project “nearly a complete fraud” in bringing a civil enforcement action against Quiros and Stenger in April 2016. That enforcement action by federal regulators, as well as another brought on the state level, accused Quiros and Stenger of misusing $200 million of the more than $350 million they raised from foreign investors for massive upgrades at Jay Peak and other projects in Vermont’s Northeast Kingdom.
Those civil actions brought a halt to the biomedical research facility project in Newport, one of the final proposed EB-5-financed developments.
Kelly and Quiros have been free since their arraignments in May 2019 after each posted $100,000 appearance bonds.
Read the story on VTDigger here: Second EB-5 fraudster admits guilt, faces up to 3-year prison term.