Courts & Corrections

SEC seeks to depose Canadian executives over Jay Peak sale

Jay Peak, Hotel Jay
The Hotel Jay at Jay Peak Resort. VTDigger file photo
Federal regulators are asking a U.S. judge to assist them in obtaining the testimony of two top executives at the Canadian company that sold Jay Peak ski resort to a Miami businessman who now faces investor fraud allegations.

Robert Levenson, an attorney for the Securities and Exchange Commission, filed a motion Friday afternoon stating that he wants to secure the testimony of two officials with Quebec- based Saint-Sauveur Valley Resorts Inc.

That company was known as Mont Saint-Sauveur International Inc. when it sold the resort to Ariel Quiros in 2008. Quiros is facing a federal SEC lawsuit alleging he improperly used EB-5 immigrant investor money, starting with the resort’s purchase.

Levenson wants to take depositions of Louis Philippe Hebert, company president, and Louis Dufour, the firm’s CEO and chairman. Both men were in the same roles at the time of the ski resort sale in 2008.

In his motion filed Friday, Levenson asks District Judge Darrin P. Gayles to issue a document, termed a “letter rogatory,” to a Superior Court in Quebec to “compel the deposition testimony” of the two men who have “important information” relevant to the investor fraud case against Quiros. A letter rogatory is used to make a formal request of a court in another country to obtain information, evidence or testimony from a person residing in that country.

Ariel Quiros
Ariel Quiros at the opening of Jay Peak resort’s Stateside Hotel in December 2013. File photo by Hilary Niles/VTDigger
“Because of their role in negotiating MSSI’s sale of Jay Peak to Quiros and Q Resorts in 2008, and their knowledge of the Phase I EB-5 offering and its terms and conditions,” Levenson wrote in the filing, “Dufour and Hebert have relevant information about Quiros’ actions in purchasing Jay Peak and whether he used EB-5 investor funds improperly that is necessary for the trial of this case.”

Levenson added, “The Commission therefore has an interest in securing their testimony and it is in the interests of justice that their testimony be secured.”

Hebert and Dufour could not be reached Friday for comment. Levenson, the SEC attorney, also could not be immediately reached.

Michael Goldberg, the court-appointed receiver overseeing Quiros’ assets at the center of the fraud case, including Jay Peak, said Sunday that while it is the SEC’s motion, not his, it should not signal anything regarding the depositions of the two Canadian executives.

“Even if someone is agreeing, you always dot the i’s and cross the t’s anyway,” the receiver said. “In no way assume that they are not cooperating whatsoever.”

If Judge Gayles agrees to send the document, Levenson writes, “local Quebec counsel and the (SEC) will then confer with attorneys for Dufour and Hebert to attempt to arrange a convenient day and time to take the depositions.”

According to court filings, MSSI had collected $24.5 million from investors for an EB-5 program to pay for improvements at Jay Peak. Those upgrades included the Tram Haus Lodge project, known as Phase I, and the Hotel Jay, known as Phase II.

In the spring of 2008, court records state, Quiros negotiated a stock transfer, with MSSI moving the assets of Jay Peak to his company, Q Resorts.

Jay Peak: Tram Haus Lodge
Jay Peak’s Tram Haus Lodge. File photo
Quiros had earlier asked MSSI to open brokerage accounts for the Tram Haus Lodge and Hotel Jay projects at the financial services firm Raymond James, the SEC states in filings.

MSSI, at the time of the bank transfers, said in a letter that money for those EB-5-funded projects “may not be used in any manner, including as collateral or a guarantee, to fund the purchase of the Jay Peak Resort.”

The SEC has alleged that Quiros used $21.9 million of the EB-5 investment funds to purchase Jay Peak.

Quiros and his past business partner, Bill Stenger, Jay Peak’s former CEO and president, are accused in federal and state lawsuit of misusing $200 million out of the $350 million they raised through the federal EB-5 program to fund developments at the resort as well as projects in Newport.

Foreign investors in the EB-5 program put at least $500,000 into a qualified project. If that development leads to the creation of 10 permanent U.S. jobs, the investor is eligible for permanent U.S. residency.

The move by the SEC to secure the testimony of the two Canadian executives comes on the heels of a federal lawsuit filed last month against the Quebec company. The lawsuit alleges that the company knew about the scheme to use EB-5 funds held in escrow from investors to pay for the resort.

Two investors, one in the Tram Haus Lodge and the other in Hotel Jay, brought the case.

A proposed document for the judge to send to the Canadian court is attached to Friday’s SEC filing. It states that Levenson and co-counsel Christopher Martin would take part in asking questions during the depositions of the Canadian executives along with Quiros’ attorney Melissa Visconti.

Those attorneys, according to the motion, want to ask Hebert and Dufour about their knowledge of the 2008 sale of Jay Peak to Q Resorts and Quiros, as well as the discussions and negotiations leading up to it.

Goldberg, the receiver, said there wasn’t a connection regarding the timing of the SEC’s request and the investors’ lawsuit.

“It’s completely separate,” he said Sunday.

Visconti, Quiros’ attorney, said Friday that she does not object to the request from the SEC for the judge to send the document to the Canadian court.

“We also want to hear what [the two Canadian executives] have to say,” the defense attorney said.

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Alan J. Keays

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  • Steve Baker

    This is great news! The SEC is doing their job….
    I don’t believe this bodes well for Bill or Quitos!

  • Pete Novick

    Inspector Clouseau (Peter Sellers): Does your dog bite?

    Hotel clerk (Graham Stark): That is not my dog.

    – The Pink Panther Strikes Again (1976)

    Here are Paragraphs 62, 63 and 65 from the SEC civil complaint filed against Quiros and Stenger:

    “62. In preparation for the closing, Quiros asked MSSI representatives to open brokerage accounts at Raymond James with his former son-in-law, in the names of Suites Phase I and Hotel Phase II limited partnerships. MSSI representatives agreed, and Stenger opened a Suites Phase I account at Raymond James on May 20, 2008. A month later on June 20, 2008, he opened a Hotel Phase II account at Raymond James.

    63. Both the Suites Phase I and Hotel Phase II limited partnership agreements provided that the general partners could only put investor money in FDIC-insured bank accounts. As a brokerage firm, Raymond James was not a bank and not FDIC-insured. On May12, 2008, eight days before he opened the Suites Phase I Raymond James account, Stenger signed an amendment on behalf of the general partner removing the requirement of an FDIC-insured bank account from the Suites Phase I limited partnership agreement. This cleared the way for the transfer of investor funds to Raymond James accounts. No such amendment was ever signed for the Hotel Phase II limited partnership agreement. Thus, Stenger’s subsequent transfer of the $75 million raised from 150 Hotel Phase II investors in 2008, 2009, and 2010 from People’s Bank to Raymond James and Quiros’ control violated the Hotel Phase II limited partnership agreement.

    65. In conjunction with those transfers, MSSI representatives on June 18 [2008] wrote a letter to the Raymond James broker and to others, explaining that the funds in the MSSI Raymond James Suites Phase I account were investor funds. The letter further stated the investor money could only be used in the manner specified in the Suites Phase I limited partnership agreement and could not be used in any way to pay for Q Resorts’ purchase of Jay Peak.”

    Does your dog bite, indeed.

    • Steve Baker

      But Bill was unknowing, in the dark, oblivious, caught napping, uninformed. It was just his signatures and e-mails….