An AnC Bio Vermont investor filed a class action lawsuit Monday against Raymond James bank in Miami district court.
It’s the second class-action lawsuit filed in a week against the financial services company in Miami federal district court. Alexandre Daccache, an investor in the Penthouse Suites, Phase III project at Jay Peak Resort, launched a suit last week.
The plaintiff in this case, Carlos Enrizque Hiller Sanchez, is an investor in AnC Bio Vermont, and like Daccacche makes Raymond James the central target of his lawsuit.
Hiller alleges that Raymond James & Associates Inc. and Joel Burstein, a former branch manager, “knowingly designed a fraudulent scheme” for Miami businessman Ariel Quiros, who has been charged with defrauding investors in Vermont EB-5 projects. Burstein was Quiros’ son-in-law.
Hiller is one of the investors in a proposed biomedical facility in Newport, a remote town on the Canadian border. The project, AnC Bio Vermont, was never built, and the Securities and Exchange Commission in charges filed last month against the developers described the proposed stem cell research and artificial organ manufacturing plant as “nearly a complete fraud.”
AnC Bio Vermont is one of eight projects that Quiros and his partner, Bill Stenger, promoted to foreign investors. The two men are accused by the SEC of misappropriating $200 million out of about $350 million collected from immigrant investors in the EB-5 visa program. The state of Vermont has also sued the developers.
The SEC has called the biomedical facility “nearly a complete fraud,” and allege that Quiros took $30 million for his own use directly out of the project.
There are about 700 investors in the projects, which include the biomedical center and ski resort developments in the Northeast Kingdom. About 400 of the investors face possible deportation because their immigration status has been placed in jeopardy as a result of the fraud allegations. The investors come from 74 countries.
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A federal judge in Miami is hearing arguments today in the SEC case.
Neither Raymond James, nor Burstein were named as defendants in the state and federal cases.
Hiller, through his attorneys, argues that Raymond James helped to create the financial structure for the fraud and then implemented the scheme. Paul Aiello, a Florida lawyer, says the financial company caused damages of $71.7 million.
In 2008, Burstein, who was married to Quiros’ daughter at the time, worked with Frank Amigo, a colleague at Raymond James, to develop a system for Quiros to defraud investors, according to Aiello, an attorney for Hiller.
According to the allegations in the lawsuit, Amigo and Burstein agreed that Quiros could take control of capital from limited partnerships “without any regard for what the immigrant investors were told in the business plans and limited partnership agreements.” They also agreed to commingle assets and liabilities of separate entities, Aiello writes.
Quiros subsequently used immigrant investor funds in June 2008 to purchase Jay Peak Resort from Mont Sant Sauveur International (MSSI), according to the SEC. Quiros told SEC investigators that he demanded that MSSI place EB-5 funds in Raymond James accounts because he wasn’t sure the money really existed. On the day of the closing, Burstein facilitated the transfer of $17 million from the Phase I (Tram Haus) and Phase II (Hotel Jay) investor accounts to an account held by Quiros, the SEC alleges. Quiros then used that money to write a check to MSSI for the purchase of the resort, investigators say.
From there on out, Quiros and Stenger, used new investor money to backfill a suite of projects at the Jay Peak Resort, lawyers for the SEC say. They repeatedly transferred money from escrowed immigrant investor funds at People’s Bank to Raymond James, the SEC alleges. Quiros took out treasury bonds and then used the money as collateral for margin loans, the SEC says.
Hiller’s lawsuit alleges that Raymond James facilitated this process. In a deposition with the SEC, Quiros says the financial services company provided “great support” to him in all of his accomplishments at the Jay Peak Resort from June 2008 through March 2014. Aiello claims that Quiros opened and closed four margin loan accounts over that period. The margin loans, Aiello alleges, “were used for a variety of impermissible purposes, including, without limitation, commingling the assets and liabilities of the separate limited partnerships participating in the EB-5 program and the making of payments to or for Mr. Quiros to companies he controlled often for purposes unrelated to the limited partnerships.”
Burstein was subpoenaed by the SEC in March 2014 and Raymond James called in $18.4 million in margin loan debt from Quiros’ accounts.
Aiello alleges that Raymond James equipped Quiros with the financial structure to run a “Ponzi” scheme “run amok.”
“From the outset, the defendants knew that a multi-purpose margin loan crosscollateralized by the assets of disparate entities was impermissible as it would commingle the assets and liabilities of distinct entities, the assets of which would become collateral for a margin loan,” Aiello wrote.
AnC Bio Vermont was the last of the projects on the developers’ list and construction of the facility was repeatedly put off. Originally the biomedical center was slated to be completed in December 2014. There was a groundbreaking on the site in Newport last year, but the facility was never built.
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