A group of Jay Peak investors is suing two Vermont lawyers, contending the attorneys had a conflict of interest.
Edward Carroll and Mark Scribner, formerly of Carroll & Scribner, represented both the foreign investors and the resort, the lawsuit alleges.
The plaintiffs, 21 EB-5 immigrants who invested $10.5 million in the Tram Haus, a hotel at Jay Peak, also allege Carroll & Scribner failed to alert them of potential red flags that would have indicated that the developers of the resort were engaged in a massive fraud involving hundreds of EB-5 investors. The lawsuit against Carroll & Scribner is pending in U.S. District Court in Vermont.
The Tram Haus investors lost ownership of the hotel in August 2013 when Ariel Quiros, the former owner of the resort, and Bill Stenger, the CEO and president, seized possession of the property in violation of a limited partnership agreement with the investors. In 2014, the investors filed complaints with officials at the state-run Vermont EB-5 Regional Center and the commerce agency, which oversaw the Jay Peak projects. Instead of helping the investors, state officials spurned the investors and told them to seek recourse with Quiros and Stenger.
In April 2016, the Securities and Exchange Commission filed a lawsuit alleging 52 counts of fraud against Quiros and Stenger. The SEC investigation showed that the developers had used money from Tram Haus investors to purchase the resort in 2008. Quiros and Stenger raised more than $350 million from 800 investors from 2008 to mid-April 2016 for seven projects in northern Vermont.
The Tram Haus investors who are suing Carroll & Scribner say they hired the two attorneys to represent them in immigration filings with the U.S. Citizenship and Immigration Service. They say they were not aware that the lawyers also represented Jay Peak and that Scribner written the limited partnership agreement for the project. That agreement included many conflicting clauses and became the vehicle Stenger used in July 2014 to claim in an interview with VtDigger that he and Quiros had the right to seize the hotel.
In addition to the limited partnership agreement, the firm also provided legal services to the partnerships for projects led by the Jay Peak developers, including, the lawsuit states, “Investor compliance issues, business model matters and related business and real estate matters.”
And that alleged conflict, according the lawsuit, came to a point on Feb. 28, 2012.
That’s when Carroll & Scribner received correspondence from Douglas Hulme, president and CEO of Rapid USA Visas Inc.
Rapid USA Visas Inc., a business that provides assistance to foreign citizens seeking visas to enter and reside in the United States, had been providing assistance to EB-5 program investors in Jay Peak projects.
Hulme notified Carroll & Scribner and 100 immigration lawyers that Rapid USA had “terminated its relationship with Jay Peak Inc. including related web sites because RAPID USA no longer has confidence in the accuracy of representations made by Jay Peak, Inc. or in the financial status of and disclosures made by the various limited partnerships.”
The 21 Tram Haus investors allege that Carroll & Scribner did not share that information with them.
The three-count lawsuit alleges breach of contract, breach of fiduciary responsibility, and negligence on behalf of the law firm toward to the investors.