Judge Mary Miles Teachout handed down the ruling Tuesday in Washington Superior Court.
“Whether the law better supports characterizing any particular claim as founded on a misrepresentation or a scheme,” the judge wrote, “and whether Mr. Quiros may, with regard to any particular claim, qualify as an aider and abettor, maker or control person, need not be resolved now.”
“These are potentially nuanced issues that will be more effectively ‘explored in the light of facts as developed by evidence,’” Teachout added.
With that, the Vermont Department of Financial Regulation lawsuit filed in April alleging 15 counts of securities violations against Quiros continues.
Ritchie Berger, Quiros’ attorney, contended in the motion that the state “grossly overreached,” failed to “allege actionable fraud in connection with the sale of any security”; and had filed the claim under the Consumer Protection Act, which doesn’t govern securities.
The attorney also argued in the filing that five of the seven projects Quiros and his business partner at the time — Bill Stenger, the former CEO of Jay Peak — promised were completely constructed, and the other two were under construction.
The legal arguments over the law, and whether it applies in a specific case, don’t appear to be over.
“To the extent that Mr. Quiros seeks dismissal based on the argument that there are no grounds for Securities Act violations, the motion must be denied,” Teachout wrote. “Once a more specific set of facts has been developed, legal issues may be addressed in the context of motions for summary judgment.”
Teachout summarized the state’s 57-page lawsuit in a nine-page decision that lays out the allegations against Quiros. They include commingling investor funds raised for specific projects and siphoning off some of the money for his personal use.
The state lawsuit brought in April against Quiros, owner of Q Resorts, a holding company that includes Jay Peak, and Stenger stems from their work as business partners and developers in a series of projects in Vermont’s Northeast Kingdom.
The projects ranged from hotels built at Jay Peak and Burke Mountain ski resorts to a proposed $110 million biomedical research center, AnC Bio Vermont, to be constructed in Newport. While the hotels were eventually built, the biomedical research center never materialized.
The state’s lawsuit claims that in raising money through the federal EB-5 immigrant investor program to pay for the projects, the two men misused $200 million.
New money raised for specific projects, the lawsuit alleges, was used to cover funding gaps in earlier ones. And, the lawsuit adds, Quiros “misappropriated” $50 million in investor funds to pay for such expenses as his personal taxes and a $2.2 million luxury condo in Trump Tower.
“In short,” the judge wrote in her ruling, “the allegations in (the lawsuit) describe a pattern of deceiving and defrauding investors that took place from the time Mr. Quiros incorporated Q Resorts and took over Jay Peak.”
The ruling involving the state case comes on the heels of a strongly worded decision last month in a federal case against Quiros brought by the U.S. Securities and Exchange Commission, also filed in April and alleging investor fraud.
In the federal case, Judge Darrin P. Gayles denied Quiros’ bid to dismiss that lawsuit and agreed to grant the SEC a preliminary injunction against Quiros, prohibiting him from selling securities and continuing a freeze of his assets while the case remains pending.
Gayles, in his decision, called Quiros’ actions “egregious” and termed him the “architect” of the investor fraud scheme.
Stenger settled the SEC case against him, but he still faces the state lawsuit. Stenger did not file a motion to dismiss that case. Instead, his attorney filed a motion requesting a trial.
Berger, Quiros’ attorney in the state case, could not immediately be reached Tuesday for comment.
Mike Pieciak, commissioner of the state Department of Financial Regulation, praised the decision Tuesday evening.
“It’s the first major legal hurdle,” Pieciak said. “It was great to see that the judge recognized that so much detail went into the complaint.”
The next step in the case is likely to be filing of motions for summary judgment and moving forward with discovery, where the parties can gather additional evidence.
A possible trial, if there is one, is still many months away, Pieciak said.
“There are no talks with either of the defendants regarding settlement at this time,” he said.
