“If Quiros continues to be unable to pay his legal fees, the attorneys representing him in the actions are likely to withdraw and Quiros is likely to default,” his lawyer Derek León wrote in the lawsuit against Ironshore Indemnity Inc.
Defaulting will lead to Quiros’ “financial ruin,” León added in the filing made this week in U.S. District Court in Miami, where Quiros lives and many of his businesses are located.
And for Quiros, the attorney added, the stakes are exceedingly high.
“Collectively, when taking into account disgorgement, compensatory damages, interest, attorneys’ fees, costs, punitive damages, treble damages, and civil money penalties,” León wrote, “the potential monetary exposure Quiros faces under the actions exceeds $1 billion.”
Attorneys for Ironshore Indemnity, a Minnesota corporation with its principal office in New York City, could not be reached Friday for comment. León also did return a call seeking comment.
The state of Vermont and the U.S. Securities and Exchange Commision filed lawsuits in April against Quiros accusing him of investor fraud totaling hundred of millions of dollars in a series of Northeast Kingdom development projects.
The legal actions have resulted in a judge freezing the Miami businessman’s assets, preventing him from accessing them to pay for his defense.
The lawsuit against the insurance company follows a hearing in October when a federal judge let Quiros use only $80,000 from a mortgage he took out on a $2 million condo in New York City to pay his legal bills, which at that time amounted to $1.5 million.
“While that seems like an insignificant amount as to the defendant considering the litigation involved, it may seem to be quite a large amount to the investors,” District Judge Darrin P. Gayles said at that hearing.
The judge added in making the ruling that he was trying to balance the protection of assets for investors with Quiros’ ability to defend himself.
A month later, Gayles agreed in a strongly worded order to grant the SEC’s request for a preliminary injunction that keeps Quiros’ assets frozen while that case against him remains pending.
In the filing this week against his onetime insurance company, Quiros’ attorney seeks a preliminary injunction ordering Ironshore to immediately begin covering his client’s legal bills, which now total about $2 million.
“The injury Quiros will suffer if an injunction is not issued outweighs any injury that would be sustained by Ironshore by the issuance of an injunction,” Quiros’ attorney wrote.
The lawsuit says two consecutive policies with a $10 million liability limit each were taken out with Ironshore to insure Q Resorts, Quiros’ holding company that includes Jay Peak. The policies, which covered the company as well its officers and directors, ran from July 7, 2013, to Aug. 7, 2015, followed by an identical one that continued coverage through Aug. 7, 2016, the lawsuit states.
“As a director or officer of Q Resorts or one of its subsidiaries, Quiros is both an ‘Insured Person’ and an ‘Insured’ under the Policies,” León wrote.
Quiros’ lawsuit points to a section of the policy that states the insurance company covers claims during the dates the policy was in effect for a “wrongful act.”
The policy, according to the filing, defines a claim to include “a civil, criminal, governmental, regulatory, administrative, or arbitration proceeding made against any insured.” And, the lawsuit adds, a “wrongful act” includes an alleged “act, omission, error, misstatement, misleading statement, neglect or breach of duty.”
Under the policy, according to the lawsuit, Quiros is entitled to “reasonable and necessary” legal fees to cover his defense.
“Ironshore has claimed that it owes Quiros no duty to advance the costs of defending the actions against him,” the lawsuit states. “Quiros disagrees and asserts that under the directors and officers liability insurance policies issued by Ironshore, Ironshore has a duty to advance such defense costs.”
In addition to the cases brought in April by the state of Vermont and the SEC, Quiros faces four more lawsuits, including a class-action legal case on behalf of investors, led by Alexandre Daccache, of Brazil.
All the lawsuits closely mirror allegations brought by the SEC. That case accuses Quiros and Bill Stenger, Jay Peak’s former CEO, of operating a “Ponzi-like” scheme to defrauded investors. Those investors through the federal EB-5 immigrant investor program put up $500,000, plus an administrative fee, and if projects they invested in created the required jobs they become eligible for permanent U.S. residency.
The federal regulators claim Quiros and Stenger misused $200 million of the $350 million raised over an eight-year period for the series of projects in northern Vermont. Those projects included a hotel and several other developments at Jay Peak as well as a proposed $110 biomedical facility, AnC Bio Vermont, in Newport, which never materialized.
The SEC case also alleges Quiros “looted” more than $50 million to pay for personal expenses, including the purchase of a $2.2 million condo in New York City.
Quiros has denied wrongdoing. Stenger has settled his case with the SEC, agreeing to cooperate with investigators. He still faces a possible monetary penalty, based on his ability to pay and level of cooperation. Other legal action remains pending against him, including the state’s lawsuit.
