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Security and Exchange Commission moves against Jay Peak ownership

post #1 of 16
Thread Starter 

Wow!

 

SEC Case Freezes Assets of Ski Resort Steeped in Fraudulent EB-5 Offerings
FOR IMMEDIATE RELEASE
2016-69
Washington D.C., April 14, 2016 — The Securities and Exchange Commission today announced fraud charges and an asset freeze against a Vermont-based ski resort and related businesses allegedly misusing millions of dollars raised through investments solicited under the EB-5 Immigrant Investor Program. The SEC’s case was unsealed today in federal court in Miami, and the court has appointed a receiver over the companies to prevent any further spending of investor assets.
The SEC alleges that Ariel Quiros of Miami, William Stenger of Newport, Vt., and their companies made false statements and omitted key information while raising more than $350 million from investors to construct ski resort facilities and a biomedical research facility in Vermont. Investors were told they were investing in one of several projects connected to Jay Peak Inc., a ski resort operated by Quiros and Stenger, and their money would only be used to finance that specific project. Instead, in Ponzi-like fashion, money from investors in later projects was misappropriated to fund deficits in earlier projects. More than $200 million was allegedly used for other-than-stated purposes, including $50 million spent on Quiros’s personal expenses and in other ways never disclosed to investors.

According to the SEC’s complaint, Quiros improperly tapped investor funds for such things as the purchase of a luxury condominium, payment of his income taxes and other taxes unrelated to the investments, and acquisition of an unrelated ski resort.

“The alleged fraud ran the gamut from false statements to deceptive financial transactions to outright theft,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement. “As alleged in our complaint, the defendants diverted millions of EB-5 investor dollars to their own pockets, leaving little money for construction of the research facility investors were told would be built and thereby putting the investors’ funds and their immigration petitions in jeopardy.”

The SEC’s complaint charges Quiros, Stenger, Jay Peak, and a company owned by Quiros called Q Resorts Inc. as well as seven limited partnerships and their general partner companies with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Four other companies are named as relief defendants in the SEC’s complaint for the purpose of recovering investor funds transferred into their accounts. The SEC seeks preliminary and permanent injunctions, financial penalties, and disgorgement of ill-gotten gains plus interest. The agency also seeks conduct-based injunctive relief against Quiros and Stenger along with an officer-and-director bar against Quiros.

The SEC’s investigation was conducted by Brian Theophilus James, Trisha D. Sindler, Michelle Lama, and Mark Dee, and the case was supervised by Chedly C. Dumornay of the Miami Regional Office. The SEC’s litigation will be led by Christopher Martin and Robert K. Levenson of the Miami office. The SEC appreciates the assistance of the Office of the Vermont Attorney General and other authorities in Vermont.

post #2 of 16

wtf - the entire idea of this sucks.  These mountains deserve to be wonderful resorts to be celebrated and enjoyed.  I can only hope this does not hurt the mountains or the ability for them to be utilized 

post #3 of 16

I'm seeing that Q Burke ski resort is also involved. Apparently some of the misappropriated funds went to buying Q Burke instead of for the projects that they were dedicated to at Jay. 

post #4 of 16

Also an update from the JayPeak blog that they don't expect day to day operations to be impacted. 

post #5 of 16
Thread Starter 

The only good news here is that Steve Wright is the new GM now. By all accounts he is a stand up guy and will do his best to keep the focus on skiing. I have family members who work on the mountain so I hope there is some continuity for their sake.

 

A more local focus on the day's events can be found over here: http://forums.alpinezone.com/showthread.php/138202-Stenger-and-Quiros-Ousted-from-Management-of-Jay-Peak-and-Burke

post #6 of 16

Stealing EB-5 money was brilliant.  There is a bit of wink-wink, "you are getting a green card, do you expect a return on your investment too?" about the whole program.  They just got greedy and skimmed off too much.

post #7 of 16
Thread Starter 
Quote:
Originally Posted by mdf View Post
 

Stealing EB-5 money was brilliant.  There is a bit of wink-wink, "you are getting a green card, do you expect a return on your investment too?" about the whole program.  They just got greedy and skimmed off too much.


That's it in a nutshell... I think I remember reading somewhere that the program specifically tells the investors that there is no guarantee that any of their principal will be returned. One of those "contractual language" things that no one expects to have to deal with. But just how surprised could anyone be that money went missing with 500 million dollars swimming around in a shark infested pool?

post #8 of 16
Quote:
Originally Posted by tylrwnzl View Post
 

I'm seeing that Q Burke ski resort is also involved. Apparently some of the misappropriated funds went to buying Q Burke instead of for the projects that they were dedicated to at Jay. 

I read that a big chunk of money earmarked for other projects went to pay off old loans/mortgage at Jay Peak.  Seems like Quiros used the money for whatever he wanted to.

 

I am guessing Jay Peak's West Bowl expansion, which has been "Planned" for at least a decade now will not be happening for another decade or so.  I would also say that the focus at Jay Peak has not exactly been on the skiing for a long time.  That said, it is still a great mountain and I hope for the local folks sake they continue to be successful and continue their growth as a multifaceted four-season resort.

post #9 of 16
Exactly. Selling green cards is morally wrong to begin with. The rich foreign investors knew they weren't getting any money back and didn't care. They just wanted protection of US laws for their other probably ill gotten assets. Quiros just skimmed too much. I thought he and his son were shady from day 1. Will be interesting to see how dirty Stenger was.

At least the Jay and Burke upgrades were built and we can still enjoy. But the later projects, such as Butke hotel, were built with money intended for (absurd) biotech center in Stengers hometown of Newport. They bulldozed a historic city block which won't come back. Nor the businesses they displaced. People in Newport are deservedly crushed these new jobs aren't coming

Plus, the builder is owed $3.5m

At least they'll likely drop the Q from Burke and restore the old logo, which is classic
post #10 of 16
Quote:
Originally Posted by tylrwnzl View Post
 

I'm seeing that Q Burke ski resort is also involved. Apparently some of the misappropriated funds went to buying Q Burke instead of for the projects that they were dedicated to at Jay. 

 

This whole shebang is actually much more focused on Burke (I refuse to use the Q, it's just Burke) than it actually is on Jay. The initial rumbles of an issue came last summer when the contractors on the new Burke Hotel weren't getting paid, and ended up stopping work, which is the major reason the hotel wasn't open this season. That's what started the whole snowball rolling.

 

My understanding is that Quiros and Stenger were misappropriating EB-5 funds from the beginning. When they needed more funds to complete the Jay projects, they acquired Burke, and started a new EB-5 program which they then used to pay off the outstanding money on the Jay project. Meanwhile, they were continuing to skim off the Burke EB-5 money, so between feeding Burke money over to Jay, and skimming all along, they inevitably fell short on the Burke project. And that's when the wheels came off. 

 

In typical entitled millionaire fashion, Quiros made a motion in court to have $150 million of his $200 million in assets unfrozen by the government, "for day-to-day expenses and his legal defense." Really? You need $150mil to feed yourself and keep a roof over your head? And last I checked, if you're indigent, a public defender will be provided. 

post #11 of 16
Quote:
Originally Posted by freeski919 View Post
 

And last I checked, if you're indigent, a public defender will be provided. 

 

The supreme court recently ruled (in Luis v. United States) that any "untainted" funds in criminal fraud cases can be unfrozen to allow for spending on defense of your case. The issue then is whether or not the money is really "untainted" - i.e. has nothing at all to do with the court case - or not. (In fact, the dissenting opinion mentioned that the ruling may enable sophisticated criminals to make their money look untainted, even if it's not.)

 

They used to be able to legally freeze ALL your assets in cases like this, but that ruling is probably what prompted Quiros' motion.

post #12 of 16
Thread Starter 
post #13 of 16
Quote:

 

TGR (not the forums there) has a write up about the whole thing that is well done. The whole being forced to close thing appears to just be click-bait journalism; here's a relevant excerpt from their article.

 

Quote:
 The Burlington Free Press publishes an article today claiming that cash flow issues will force Jay Peak and Q Burke Hotel (not the mountain, mind you) to close. But it seems the receivership of both properties – Q Burke Hotel was added to the receivership as well – was floated a $750,000 loan to keep the doors open for the next three months. Chill, people! Title is suggested to TGR that reads "Burke Mountain and Jay Peak Plan to Operate Normally In Opposition to Media Yelling 'Closed!' For Clicks."

 

In fact Jay Peak is reopening this weekend for a bonus end of year $20 skiing weekend. 

post #14 of 16

The VT Digger is staying on top of all the developments as they unfold.  Does not sounds good for Stenger based on the 4/30/16 article about the Tram House Lodge project, one of six EB-5 projects at Jay.  The "Q" is being removed from signs at the Burke hotel, but doesn't sound like it's going to open for the summer season even though the bike trails may be open.

 

http://vtdigger.org/2016/04/30/investor-says-stenger-cut-him-a-special-deal/

 

http://vtdigger.org/2016/04/30/burke-now-in-full-control-of-sec-receiver/

post #15 of 16

Seems pretty clear that as of 4/27, the idea is to keep Jay open during the summer and fall.  Michael Goldberg is the court-appointed receiver who is working to sort out the mess at Jay and Burke.

 

http://vtdigger.org/2016/04/27/goldberg-obtains-funds-to-keep-jay-peak-going/

 

Jay Peak now has enough money to cover basic operating expenses at the resort, and Goldberg said he has located cash to fix the tram and they are going to bring in an independent engineer to assess whether it needs repair.

The resort is hiring for the summer and anticipates hosting 65 weddings, dozens of concerts and the annual Porsche Club of America parade in June.

“If need be, we have other funds that are frozen,” Goldberg said. “If need be, we will request the court to take a loan from those funds to fund the operations, but I don’t think that will be a problem. I don’t think we’ll ever get there. I think we will have sufficient cash liquidity to operate the hotel anyway.”

post #16 of 16

For discussion about the future of Jay and Burke, go here:

 

http://www.epicski.com/t/146764/jay-peak-and-burke-2016-issues

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