The federal court in Miami gave Michael Goldberg the authority to seize the property last week, and over the past few days he has taken steps to secure key assets at the resort, including the hotel.
Ary Quiros, who had been president of Q Burke Mountain Resort, was asked to leave Thursday morning. His father has been accused of orchestrating a Ponzi-like scheme with his partner, Bill Stenger. The two men allegedly diverted $200 million from developments at Burke and Jay Peak resorts and a biotech project.
Quiros, the son of Ariel Quiros, was cooperative, Goldberg said, and has helped Leisure Hotels and Resorts with the transition.
Employees in interviews with VTDigger have said Quiros was difficult to work for, and he became more unpopular earlier this month when he laid off 180 workers at the ski area.
The departure of Quiros cleared the way for Leisure and Goldberg to begin “de-Quing” the ski area. The letter “Q” was added to Burke Mountain when Quiros took over the resort in 2012 and is affixed to beds, fireplaces and signs.
Employees began removing the letter yesterday, and Steve Olson, the CEO of Leisure, who is directing management of the resort, said the gesture was “an extremely important symbolic move.”
Steve Sherer, of Leisure, will be in charge of operations at Burke until the ski area is sold to a new owner.
Leisure will work with Kingdom Trails to reconnect a network of biking trails that had been abandoned under Q Burke ownership. The company has also made arrangements with Burke Mountain Academy to ensure the training area for student skiers has a base of 15 inches of snow next winter.
Olson said they plan to open the hotel by Nov. 1, and perhaps earlier. But the facility won’t be open this summer because he and Goldberg say they would take an operating loss in the off-season, even with biking traffic.
“My job is to stabilize the resort and move it forward, rather than overpromise and under deliver,” Olson said.
Leisure, with the help of staff at Burke, has found $300,000 in operational savings at Burke, and has identified $1 million at Jay Peak. Operational staff won’t be affected, Olson said. Most of the savings comes from elimination of EB-5 related staff and contractors. The resorts, under Stenger and Quiros, were so focused on development that there was little emphasis on efficient operations, Olson said.
The savings, he said, will make the resorts more attractive to potential buyers. “It’s like finding Easter eggs all over the park,” Olson said.
The receiver also has in hand the certificate of occupancy for a brand new hotel on the site and has worked out a deal with PeakCM, the contractor who is still owed money for the construction.
Jerry Davis, president and CEO of Peak CM, held the fire and safety permit in escrow through an agreement with Stenger in lieu of perfecting a lien on the property.
But the escrow agreement was meaningless because the certificate of occupancy was issued to the owner of the hotel (formerly Stenger and Quiros). “There is no such thing as escrowing a certificate of occupancy,” Goldberg said.
The state has a digitized copy of the certificate on file and it now belongs to the receivership.
“The whole certificate of occupancy was a fictitious issue,” Goldberg said. “I could open it [the hotel] tomorrow if I wanted to.”
Davis says the escrow agreement with Stenger was a way to sidestep litigation.
PeakCM is owed $3.9 million for construction-related costs, the majority of which is owed to subcontractors, Davis said. The bills owed to 30-plus subcontractors range between $1,000 and $800,000. Conrad Construction, Mike’s Electric, Jeffords Steel, Gosselin Concrete, Hutchins and Vermont Heating and Ventilating are among the companies who have outstanding bills from construction of the hotel at Burke.
Davis had been in dispute with the state over more than $1 million in costs PeakCM had charged for legal work, travel and construction delays. From July 2015 until the SEC case was filed on April 12, the Vermont Department of Financial Regulation approved invoices for construction through a special agreement with the developers.
Davis says he believes the receiver wants to “do the right thing” and pay the subcontractors.
“We’re trying to work with the receiver to get paid,” Davis said. “As of right now, they’ve got a hold on all litigation and liens. We can’t do anything – we’re basically cut off.”
Goldberg says he’s not sure what the real number is.
“We’re in the process of coming to an arrangement and verifying numbers,” Goldberg said. “We’ll do our best to pay what we can. It’s going to be less than what’s reported.
For now, he said “every dollar I have needs to go to operate the resort as we generate cash we’ll work on that as we go.”
Davis says he was “shocked” by the SEC allegations. A week before the court filing, Stenger sent him a spreadsheet detailing payments for the outstanding balance for the Burke hotel. Davis had expected to be paid by the end of the month.
In the news reports that followed, the focus was on investors and employees, and the contractors and subcontractors who hadn’t been paid “weren’t even mentioned.” “That was a little disappointing,” Davis said.
PeakCM was preparing for the construction of the $40 million AnC Bio Vermont biomedical facility in Newport, which was slated to begin this summer. Davis says he shut down planning for the project immediately, but is owed well over $1 million for AnC Bio for sewage and design fees. Freeman French Freeman was the architect for the building.
“They have money at AnC Bio that they aren’t using anywhere else,” Davis said. “They should the pay bills that are owed [at Burke and AnC] and figure out what to do after that.”
