$150M settlement reached in Jay Peak resort fraud case
Financial institution agrees to settle but does not admit to any wrongdoing
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.