Courts & Corrections

Jay Peak receiver seeks $1.35M

Michael Goldberg
Michael Goldberg at a Statehouse news conference in April. Photo by Anne Galloway/VTDigger

Lawyers with a stake in the massive fraud case involving Northeast Kingdom projects have revised their proposal for divvying up $25 million in settlement proceeds after a judge raised concerns that the first plan had a big omission.

The group of attorneys will set aside about $1.35 million to cover six months’ worth of expenses for the court-appointed receiver overseeing the properties at the heart of the alleged “Ponzi-like” scheme.

Initially, the attorneys representing investors had sought to divvy up the $25 million among themselves. However, after federal Judge Darrin P. Gayles pointed out that none of the receiver’s legal bills were covered, the latest proposal does just that.

“All participating firms” have agreed to “voluntarily contribute” enough to cover the receiver’s second fee application if their latest proposal is approved, says a filing submitted Monday on the receiver’s behalf.

That brings the total renumeration so far to $3.3 million for Michael Goldberg, the court-appointed receiver, and members of his firm, Akerman LLP.

The latest proposal is included in a flurry of filings in recent days dealing with payments to attorneys in the EB-5 immigrant investor case involving Jay Peak owner Ariel Quiros and his business partner, Bill Stenger, the resort’s former CEO and president.

Goldberg has overseen operations at the properties, including Jay Peak and Burke Mountain ski resorts, for more than a year.

On Friday an attorney for the receiver asked Judge Gayles to approve $1.35 million to pay for legal and other professional services expenses for the receivership spanning Nov. 1 to April 30.

In December, the judge approved using money from the receivership to pay about $1.95 million in legal and professional expenses accrued since Goldberg was appointed to his role in April 2016. That fee request included expenses from April 1, 2016, through Oct. 31.

The money to cover those bills came from assets within the receivership itself, specifically from a share of a $13.3 million settlement between the receiver and Citibank, a financial institution Quiros had used to take out a line of credit.

The recent filings follow a hearing late last month where Gayles approved a nearly $150 million settlement the receiver had negotiated with Raymond James & Associates Inc., a financial services firm Quiros had used.

As part of that settlement, a $25 million fund had been set up to pay attorneys who had represented investors in actions against Raymond James in exchange for dropping their cases. The settlement included a bar order, which protected Raymond James from fraud litigation by investors.

The $25 million fund, according to court filings, also “obviates” the need for investors to compensate attorneys themselves.

A breakdown of the legal and professional expenses for the receivership from Nov. 1 to April 30 includes:

  • The receiver and his firm Akerman LLP: $585,405.
  • Law firm Levine Kellogg Lehman Schneider + Grossman LLP: $385,978.
  • Kapila Mukamal, accountants: $293,860.
  • Klasko Immigration Law Partners: $83,464.
  • Two other firms are listed at amounts of less than $3,000 each. The total represents 4,782 hours, at nearly $1.27 million, plus $82,973 in expenses.

As in the filing for fees and expenses approved in December, the latest motion states that firms have agreed to reduced fees and expenses.

For example, the latest filing states, Goldberg and his firm, Akerman, agreed to reduce his billing rate and the rates of his professionals.

Instead of their standard hourly rates, which range from $440 to $7,250, all partners are billed at $395; associate rates are capped at $260; and paraprofessionals are billed at $175, resulting in a blended rate of $320.

In addition to the rate reduction, the filing says, all time billed to long distance travel is reduced by an additional 50 percent.

“These discounts,” according to the filing, “equate to a $310,000 reduction from Akerman’s standard billing.”

A federal judge appointed Goldberg to the post of receiver when the U.S. Securities and Exchange Commission sued Quiros and Stenger in April 2016, accusing them of investor fraud.

The SEC alleged the two developers misused $200 million in immigrant investor funds brought in through the federal EB-5 visa program. Federal regulators say the two men used investor money to purchase Jay Peak Resort in a deal facilitated by Raymond James.

Goldberg could not be reached Monday for comment.

The latest filings provide a hint that more settlements, in addition to the ones with Raymond James and Citibank, may be coming.

“The Receiver continues to review potential causes of action against the principals of the Receivership Defendants and various third parties. These claims may include common law claims and claims under fraudulent transfer statutes,” one of the motions filed Monday says.

“While the Receiver cannot yet predict the likelihood, amount or cost-effectiveness of particular claims or the claims as a whole, the Receiver continues to diligently evaluate claims against third parties.”

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Alan J. Keays

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  • William Cheney

    I think of all the contractors, subcontractors and others that only received pennies on the dollar for what they were really owed and the usual payout to the lawyers far exceeds what the lawyers have for expenses. The rich get richer and the poor get poorer! But justice was done???

  • Michael A. Stahler

    I’ve got to think that was a typo and was really $725. Your point is still valid though.

    • jan van eck

      Billing out at $725 for a 2,000 hr. year brings in one million four hundred fifty.

      Don’t underestimate the ability of lawyers to equate their billing rate with their ego.

  • Steve Baker

    The payoffs are almost done. The contractors will be hurt. But the Construction has Started up again! Imagine that, the construction has started again.
    As receiver, is Goldberg responsible for the new construction projects?
    Are those involved with the past fraud involved in the new construction?
    Who’s money is being used for the new construction?
    Has the State Over site been corrected?

    The “Ski Area/Mountain” seemed to run pretty well this past year with new leadership and staffing….But will the construction lead to the same Rat Hole?

  • DougHoffer

    The Receiver’s firm (Ackerman) was paid $585,405 for six months work. That works out to $563 per hour. That’s a hefty hourly rate, but nothing like your figure.

    • jan van eck

      Not my figure. VT Digger’s figure. Check the text.

  • Steve Baker

    Now that Construction has stated again…..What is the Auditor’s Office and /or the State Government going to do correctly to ensure the same lousy over site doesn’t happen and all parties are protected from the Fraudsters?