$150M set­tle­ment reached in Jay Peak re­sort fraud case

Fi­nan­cial in­sti­tu­tion agrees to set­tle but does not ad­mit to any wrong­do­ing

Montreal Gazette - - CITY - HILARY NILES ‘PONZI-LIKE SCHEME’

A year af­ter of­fi­cials at the Ver­mont ski re­sort Jay Peak were ac­cused of mas­sive fraud, a $150-mil­lion set­tle­ment has been reached with a fi­nan­cial in­sti­tu­tion, Ver­mont Gov. Phil Scott an­nounced last week.

A re­ceiver ap­pointed by the U.S. gov­ern­ment had sought money from the firm Ray­mond James be­cause he claims the bank al­lowed Jay Peak owner Ariel Quiros, to mis­use and mis­ap­pro­pri­ate hundreds of mil­lions of dol­lars as part of an in­ter­na­tional se­cu­ri­ties fraud rooted in the north­east­ern United States.

The sweep­ing set­tle­ment, if ap­proved by the fed­eral judge in Mi­ami over­see­ing the case, will pay all con­trac­tors and cred­i­tors in full, will re­pay many in­vestors to the tune of more than $80 mil­lion, and will com­plete sev­eral projects at Jay Peak Re­sort.

Ray­mond James agreed to $150 mil­lion to set­tle the claim, but does not ad­mit any wrong­do­ing. The to­tal set­tle­ment in­cludes $4.5 mil­lion the bank al­ready paid the state pur­suant to a sep­a­rate set­tle­ment.

The Ray­mond James case stems from last April’s fed­eral and state se­cu­ri­ties fraud charges against Mi­ami busi­ness­man Quiros and Jay Peak’s long­time lo­cal pres­i­dent, Bill Stenger.

The re­sort, lo­cated about 140 kilo­me­tres south­east of Mon­treal, is a pop­u­lar des­ti­na­tion for Que­bec skiers.

Quiros and Stenger are ac­cused of mis­us­ing at least $200 mil­lion, more than half the money they raised from more than 700 for­eign in­vestors through the EB-5 Im­mi­grant In­vest­ment Pro­gram. That pro­gram grants per­ma­nent U.S. res­i­dency to in­vestors who fi­nance projects that cre­ate a cer­tain num­ber of jobs.

The EB-5 funds fu­elled mas­sive ex­pan­sions at Jay Peak Re­sort and the new ho­tel at Burke Moun­tain.

Quiros is fight­ing the civil fraud al­le­ga­tions, but Stenger set­tled with the fed­eral Se­cu­ri­ties and Ex­change Com­mis­sion last year. A crim­i­nal investigation into both men’s ac­tiv­i­ties is on­go­ing.

They are charged with run­ning what fed­eral pros­e­cu­tors called a “Ponzi-like scheme” in which money from later in­vestors was used to back-fill short­falls in ear­lier de­vel­op­ments.

Those short­falls, al­legedly, were caused by Quiros pil­fer­ing tens of mil­lions of dol­lars from the re­sort for his per­sonal ben­e­fit, in­clud­ing even us­ing in­vestor money in­stead of his own to pur­chase Jay Peak in the first place back in 2008.

Of­fi­cials say Quiros or­ches­trated the scheme, with Stenger ex­e­cut­ing it via nu­mer­ous fi­nan­cial trans­ac­tions. This put in­vestor money into Quiros’s hands rather than re­main­ing tied to spe­cific projects at Jay Peak, Burke Moun­tain and the pro­posed AnC Bio biomed­i­cal fa­cil­ity in New­port, Vt.

And this whole al­leged fraud, ac­cord­ing to the fed­eral re­ceiver, Michael Gold­berg, was fa­cil­i­tated by count­less trans­fers of money among nu­mer­ous Ray­mond James ac­counts.

Ac­cord­ing to Gold­berg’s law firm:

$67 mil­lion will re­pay re­main­ing un­com­pen­sated in­vestors AnC Bio.

$25 mil­lion will be set aside for at­tor­ney fees.

$19.6 mil­lion will fund re­main­ing con­struc­tion of the State­side devel­op­ment at Jay Peak. Up to $2.2 mil­lion of this will be used to sat­isfy ex­ist­ing con­trac­tor liens.

$15.3 mil­lion will re­pay the IOU to Jay Peak’s first in­vestors, who funded the Tram Haus Lodge.

$10 mil­lion will be posted in a sep­a­rate in­ter­est-bear­ing es­crow ac­count, for use if needed to re­pay up to 20 Burke Moun­tain in­vestors in the event they’re in­el­i­gi­ble for green cards due to com­pli­ca­tions re­lated to the case.

$6.6 mil­lion will sat­isfy con­trac­tor claims against the Burke Moun­tain project, and to re­pay other debt on the Burke Moun­tain Ho­tel.

$5.1 mil­lion will sat­isfy past-due debts at the re­main­ing Jay Peak projects and at the Burke Moun­tain Ho­tel.

$1 mil­lion will re­fund the $500,000 in­vest­ment of two in­vestors in Burke Moun­tain whose I-526 pe­ti­tions were de­nied prior to the date of the SEC Ac­tion.

The Ray­mond James set­tle­ment agree­ment in­cludes what’s known as a “bar or­der.” If ap­proved, the bar or­der would pro­hibit any fur­ther le­gal ac­tion against Ray­mond James re­lated to the al­leged Jay Peak fraud.

Stake­hold­ers, such as other in­vestors, con­trac­tors or ven­dors, likely will have a chance to weigh in on the set­tle­ment and bar or­der be­fore they’re fi­nal­ized.

Mean­while, an early in­vestor has filed his own law­suit against Jay Peak’s former par­ent com­pany, Saint-Sau­veur Val­ley Re­sorts. Tony Sut­ton charges that the com­pany ei­ther did know, or should have known, that Quiros was al­legedly us­ing in­vestor money to buy the re­sort.

JAY PEAK RE­SORT

If ap­proved, the set­tle­ment will pay all con­trac­tors and cred­i­tors in full, will re­pay sev­eral in­vestors to the tune of more than $80 mil­lion, and will com­plete sev­eral projects at the Ver­mont ski re­sort.

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