The Securities and Exchange Commission told a South Florida federal court judge on Tuesday that Ariel Quiros has no business running two resorts in Vermont.
Properties seized by the federal government last month should remain in the hands of a court-appointed receiver, SEC attorneys said, in order to protect the interests of 700 immigrant investors from 74 countries who were defrauded by Quiros as part of a massive “Ponzi-like” scheme in the Northeast Kingdom.
At a two-day “cause” hearing in Miami, SEC lawyers detailed how Jay Peak developers Quiros and his partner Bill Stenger systematically defrauded investors.
Federal regulators interviewed expert witnesses who explained that the two men padded project budgets and used elaborate bank transfers to cover up the misappropriation of $200 million in EB-5 immigrant investor funds. Quiros was additionally charged with using $50 million for personal expenses.
Attorneys representing Quiros argued that Jay Peak Resort, Burke Mountain Resort and commercial properties in Newport, Vt., should be returned to Quiros. The Miami businessman was not responsible for offering documents and did not communicate with investors, defense attorneys said. They allege that Stenger was the one who made misrepresentations to investors.
Attorney David Gordon told the court that Quiros did not make representations to investors and therefore did not violate securities laws. Gordon, a lawyer with Mitchel Silberberg and Knupp in New York City, said the SEC had no jurisdiction in the case. Ownership of the resorts should be returned to Quiros, Gordon said, and the receiver who was appointed by the court to run the companies should be replaced by a corporate monitor who would oversee the properties.
Federal regulators took control of all of Stenger’s and Quiros’ bank accounts, companies, and properties on April 12. Michael Goldberg was immediately appointed as the receiver in the case, and took over as CEO of all of the companies associated with Jay Peak, Burke Mountain and AnC Bio Vermont. He is responsible for running the company operations and salvaging what he can for investors.
Goldberg testified for more than an hour at the end of the two-day hearing in Miami. Bob Levenson, an SEC attorney, asked him to explain what condition he found the companies in, how much money was needed to continue operating the resorts and how the alleged fraud could impact investors’ immigration status.
“Ariel Quiros says the receivership is not necessary,” Levenson said. “Do you agree?”
“No,” Goldberg said. “Because what I inherited was nothing more than a disaster and to put it back in the hands of the individual who made this mess would be a mistake. A corporate monitor doesn’t have the authority to prevent money from being diverted.”
“Has the federal receiver done more harm than good?” Levenson asked.
“It stopped the diversion of money from corporate accounts,” Goldberg replied. Later he added, “It’s time to remedy wrongs, so I think the receivership is necessary.”
Goldberg must find enough money to finish a $20 million condo development and address cash flow problems at the two ski resorts. Jay Peak, for example, has $5.9 million in unrestricted cash to fund operations right now. Goldberg needs $7 million to $11 million to run the hotels, water park and mountain operations through the off season, and more than $5 million to repair the tram system.
The toughest challenge, though, is figuring out what to do with the AnC Bio Vermont project, which was never built and most of the money has disappeared.