Editor’s note: This story was updated at 8:15 a.m. and 10:31 a.m. April 21
[A]s an attorney, Michael Goldberg has worked to recover money for people hurt by some of the largest Ponzi schemes in U.S. history.
Goldberg, who works for the Florida firm Akerman LLP, represents investors in the Bernie Madoff scandal. He’s also the court-appointed receiver in a case in which concert promoter John Utsick is accused of defrauding roughly 3,300 investors out of $300 million.
His latest challenge comes as the receiver in the Northeast Kingdom EB-5 fraud case, filed by the Securities and Exchange Commission last week. The feds allege that Ariel Quiros and Bill Stenger misused $200 million of immigrant investors’ money and that Quiros pocketed as much as $50 million.
VTDigger sat down for an interview Wednesday with Goldberg and Jeffrey Schneider, a Miami attorney similarly experienced in fraud liquidation and recovery, whom Goldberg brought in to work on the recovery process.
“It’s a large case. Not the largest (I’ve handled), but on the larger side,” said Goldberg, 52, over lunch at the Windjammer Restaurant in South Burlington. The receivership could last years, he added.
Both men said they understand the intense interest investors, employees and people who live in the region have in knowing what will happen to Jay Peak, Q Burke and Quiros’ other holdings in the Kingdom.
Goldberg has made two trips to Vermont in the week since a federal judge in Florida granted him receivership in the case. He’s working with a team of close to 15 attorneys, accountants and representatives of a hospitality management company to wrap his arms around Quiros’ sprawling holdings.
The court order making Goldberg receiver says he and his team are “entitled to reasonable compensation” from the corporations involved in the case.
Goldberg is being paid an hourly rate of $395, less than his normal rate of $675. His team is working at similar discounts, he said, and their rates must be approved by the court.
In the short term, Goldberg hopes to keep Quiros and Stenger’s businesses running smoothly, while the long-term goal will be to sell them off and use that money to pay back the investors and other creditors.
Operating those businesses profitably will help Goldberg pay back the more than 700 foreigners who invested at least $500,000 each with Stenger and Quiros to earn U.S. residency through the EB-5 immigrant investor program.
Goldberg said it’s going to be “better than business as usual” at Jay Peak while he’s in charge. The bad winter was hard on the resort, but the management team from Kansas-based Leisure Hotels & Resorts has already found hundreds of thousands of dollars in operating efficiencies, he said.
As a result, Goldberg doesn’t anticipate layoffs due to the resort being placed under receivership. It’s still a business, he said, and one that he needs to run prudently.
Control of Q Burke at issue
Goldberg hopes to do the same for Q Burke Mountain Resort and the newly built but still unopened Q Burke Hotel and Conference Center. In a motion filed in federal court Tuesday, Goldberg asked the judge to place both entities under his receivership.
The Q Burke holdings were part of the fraud scheme, according to the filing, which states that Quiros used $7 million from a margin loan obtained using investor money to buy the land where the hotel was built. Investor money used to build the hotel was also improperly commingled with money from other EB-5 projects, the filing says.
Motions already granted by the court, including a temporary restraining order and asset freeze, prevent Quiros and Stenger from involvement with Q Burke, leaving the resort as a “rudderless ship” unless Goldberg is allowed to step in, he writes in the filing.
“If (Q Burke) is allowed to go dark, it will deteriorate and lose value,” he added Wednesday. That would ultimately hurt investors’ prospects of recouping their money, he said.
The motion to place Q Burke under Goldberg’s control has the support of Gov. Peter Shumlin and Attorney General William Sorrell, according to the filing. The filing also says that an attorney for Stenger said Stenger “does not oppose” the motion to place Q Burke into receivership, while an attorney for Quiros said the Florida businessman could not be reached to discuss the motion.
Schneider said Stenger was at Q Burke Hotel when he and other officials arrived April 13 and that Stenger gave them access to the property. Stenger is being cooperative and helping them get up to speed, Goldberg said, but he has “no management position or control whatsoever.”
Residents of Burke say they continue to see Ary Quiros Jr., Quiros’ son, at the resort. The younger Quiros, who managed the resort for his father, has a frosty relationship with locals, who have expressed concern that he still appears to be involved with Q Burke operations.
Goldberg said he’s not in charge at Q Burke until the judge grants his motion. If it’s granted, Goldberg said, he will make a decision about who should run the place based on what’s in the business’s best interest. He did not say if Ary Quiros Jr. would be allowed to stay on.
Goldberg said he anticipates opening Q Burke Mountain Resort for the next ski season. The virtually completed hotel and conference center will open “probably after the summer,” in an effort to avoid opening during the off season, he said — provided the judge in Miami allows him to take charge.
“There’s oil in the fry cookers, and the time is set on the alarm clocks in the rooms,” he said of the hotel, hoping to give an indication of its readiness.
While the hotel is done, court filings say that not all the EB-5 funded work at Q Burke is finished, and no money is available for their completion. A tennis center, aquatics center and mountain bike park are still unfinished.
Goldberg said he’s in touch with officials at Burke Mountain Academy and hopes to work closely with the school and community groups, such as Kingdom Trails Association, when it comes to operating the ski slopes and resort.
“We look forward to working with them, because our interests are aligned,” he said.
In another motion filed Tuesday, Goldberg asked the court to approve a $750,000 emergency loan from assets already placed in receivership, so he could make payroll at Q Burke and cover insurance costs.
“These people worked hard, and they deserve to get paid,” Goldberg said.
However, subcontractors who have placed liens against Q Burke Hotel won’t see their money right away. Previous court orders amount to injunctions blocking those liens. Goldberg said his team is still analyzing the liens to make sure each is valid, and those who placed them will be included as creditors going forward.
“We can’t just pay people because they say they’re owed money,” he said.
Newport property remains with Quiros
Down the road, Goldberg said, he plans to sell both resorts and any other assets or properties placed under his control. Those sales will happen through a competitive bidding process similar to an auction, he said.
That includes the Newport property where Stenger and Quiros promised to build the AnC Bio facility — a project that the SEC has described as “nearly a complete fraud.” It does not include the Renaissance Block in downtown Newport that was cleared in preparation for redevelopment. That property isn’t currently under receivership, Goldberg said.
“We know it’s very important to the people of Newport, and we hope to deal with it quickly so they can move forward,” Goldberg said.
The problem, according to Schneider, is that while Ariel Quiros used a corporation he owns called G.S.I. of Dade County — which is named as a defendant in the SEC lawsuit — to purchase the downtown property, it’s unclear whether that corporation still holds the title to the land.
“You have to follow the money, and you have to follow the chain of title,” Schneider said. Ultimately, if they can show that Quiros used EB-5 investors’ money to finance the land deal, then they’ll be able to ask the court to place the property under receivership, he said.
If not, the property will stay with Ariel Quiros. A state environmental permit requires the owner to fill the land and convert it to a green space if construction doesn’t start before September 2017.
Ariel Quiros is currently unable to buy even “a cup of coffee,” according to his attorney, so it’s unclear how he would pay to have the massive hole in downtown Newport filled unless his circumstances change.
Investors’ concerns
Goldberg said he’s spoken with several investors or their attorneys and learned their priority is being granted permanent U.S. residency, although they say the money is important. Many investors in the incomplete Stateside development at Jay Peak and the nonexistent AnC Bio biomedical research center have not received green cards.
“We’re hopeful that eventually the government will understand that (the investors) did nothing wrong and work with them to help them through the process, but that’s really up to the United States,” Goldberg said.
His job is to locate and secure assets that were obtained using EB-5 investors’ money, monetize those assets and then distribute the proceeds to the investors and any other creditors, Goldberg said.
As assets are sold, Goldberg will make distributions to investors, as long as the payments are approved by the court. He said he has similar cases that are up to their eighth and ninth rounds of distribution.
Goldberg cautioned investors against filing lawsuits seeking damages or to recoup their losses, noting that court injunctions would prevent them from suing entities placed under his receivership. Suing Ariel Quiros could be a dead end too, as his assets are currently frozen.
All investors and creditors will be treated equitably, he said, and there won’t be any benefit to being first in line.
“This is not going to be what’s called a ‘rush to the courthouse,’” he said.
Goldberg will work with the court to set a date by which all claims from investors and creditors must be filed. Each one filed by that date will be treated the same as any other.
In addition to money from the sale of assets, it is typical in such cases for money collected through “disgorgement” — the government taking control of ill-gotten gains — to be disbursed to creditors as well, Goldberg said. The SEC has accused Ariel Quiros of stealing $50 million from his EB-5 projects.
The SEC is also seeking unspecified monetary penalties from Quiros, Stenger and the corporations named in its lawsuit. In most cases, the SEC works with the receiver to funnel that money back to investors as well, Goldberg said.
Quite often, however, after disgorgement, the defendants have no money left to pay penalties, he said.
To keep investors, residents and others informed, the lawyers plan to launch a website, jaypeakreceivership.com, this week where they will post court filings, periodic reports on their work and basic information about receivership. The website also will be a tool for the public and investors to raise questions or concerns.
“If you can’t find an answer there, it’s probably because we don’t know yet,” Goldberg said of the website.
