Crime and Justice

Quiros’ ex-legal team slams Jay Peak receiver for ‘avarice’ in $260M suit

Michael Goldberg
Michael Goldberg, the court-appointed receiver in the EB-5 fraud case, speaks at a Statehouse news conference April 13, 2017. Photo by Michael Dougherty/VTDigger

Former attorneys for the alleged mastermind of a multi-million dollar fraud scheme in northern Vermont say a lawsuit accusing them of allowing their client to bilk hundred of investors is driven by “avarice.”

Jay Peak receiver Michael Goldberg filed a $260 million lawsuit earlier this year against Ariel Quiros’ ex-lawyer and his firm for failing to act against the alleged fraud that has landed Quiros, Jay Peak ski resort’s former owner, and three of his associates under federal criminal indictment.

Now, attorney David Gordon of New York City and the firm where he works, Mitchell Silberberg & Knupp, LLP, are slamming that lawsuit brought against them by Goldberg, calling the man now overseeing Jay Peak and other properties at the center of EB-5 investment scandal greedy.

“(Goldberg’s) avarice cannot be overstated,” Jonathan Osborne, an attorney representing Gordon and the MSK law firm, wrote in a recent filing in the case.

“The Receiver crosses the line of zealous advocacy and seeks to gain advantage in this civil case by trying to link a defense lawyer to his former clients’ alleged criminal conduct,” Osborne wrote.

Goldberg on Friday referred questions about the case to attorney Jeffrey Schneider of the Miami, Florida-based firm, Levine Kellogg Lehman Schneider + Grossman, who is representing him in the lawsuit.

“I thought the characterization of the receiver as avarice was misplaced and overly aggressive — nothing is going into his pocket,” Schneider said late Friday afternoon.

“He is pursuing this case for the benefit of the victims. There may be many things you could call him, but selfish and avarice is really not one of them,” Schneider added. “I think that was a poor choice of words by the defendants and I would hope that they would apologize.”

As to the $260 million Goldberg is seeking in the lawsuit, Schneider said, “Those are the current losses to the Jay Peak receivership and the law in Florida is that a late, but active, participant in a fraud or a conspiracy is nevertheless on the hook for all the damages associated with a conspiracy.”

“We’re just trying to make the investors whole from the fraud,” the attorney added. 

Schneider said that $260 million loss figure already factors in expected proceeds from the sale of the many assets Goldberg now controls as part of his receivership, including the two biggest, Jay Peak and Burke Mountain ski resorts in Vermont’s Northeast Kingdom, that Quiros formerly owned.

The receivership is estimating the value of Jay Peak at around $90 million to $100 million and Burke Mountain at between $10 million and $20 million, according to Schneider. Jay Peak is currently on the market, while Burke Mountain isn’t expected to be put up for sale until next year.

Osborne, with the Florida-based law firm Gunster, did not return a message Friday seeking comment. 

Osborne is calling on a federal judge in Miami where the case was filed to throw out the lawsuit. Goldberg brought the case in Florida because that’s where Quiros lives and many of his businesses are based. 

The lawsuit includes claims of legal malpractice and breach of fiduciary duty against Gordon and his firm.

“MSK’s and Gordon’s conduct fell below the standard of care for any attorneys, let alone those holding themselves out as experts in the areas of securities and corporate law, and breached fiduciary duties owed to the Receivership Entities,” the lawsuit alleged.

Goldberg was appointed to his receivership post in April 2016 when state and federal civil investor fraud allegations were brought against Quiros and his then business partner, Bill Stenger, at the time Jay Peak’s CEO and president.

As receiver, Goldberg oversees and manages many of Quiros’ assets connected to the fraud allegations, including Jay Peak and Burke Mountain ski resorts.

Quiros, Stenger and William Kelly, described as a key advisor to Quiros, all pleaded not guilty to criminal charges brought against them by federal prosecutors in May. A fourth defendant, Jong Weon (Alex) Choi, the operator of AnC Bio Korea, remains “at large,” according to federal prosecutors.

The indictment accuses the four men of fraud and making false statements to the government regarding a failed biomedical research facility, AnC Bio Vermont, proposed for Newport. Federal regulators had earlier described the project as “nearly a complete fraud.”

Private property no trespassing sign
“The hole” in downtown Newport, where a Stenger-Quiros development was planned but never built, in May 2019. Photo by Mike Dougherty/VTDigger

More than three years earlier, in the spring of 2016, the state and the U.S. Securities and Exchange Commission brought their civil lawsuits against Quiros and Stegner. Those filings allege the two men missued $200 million of $350 million raised through the EB-5 program.

The money, raised over nearly a decade from immigrant investors, was expected to fund redevelopment projects, including hotels and waterparks at Jay Peak, in Burke and in Newport.

Two weeks before the criminal indictment was returned by a federal grand jury this spring, Goldberg filed his lawsuit against Gordon and the MSK law firm.

According to Goldberg’s lawsuit, shortly after signing up to serve as counsel, Gordon and the firm learned that “Quiros had directed the commingling of tens of millions in investor funds among the projects’ various phases and entities in an effort to cover construction shortfalls.”

MSK and Gordon, the lawsuit stated, also learned about the misuse of funds related to AnC Bio Vermont “no later” than May 2014, when Quiros testified during an “investigative session” conducted by the U.S. Securities and Exchange Commission.

Quiros fired Gordon and other members of his legal team in March 2017, claiming they kept him in the dark and overbilled him.

Osborne, the attorney for Gordon and MSK, in a motion filed last week to dismiss the lawsuit, stated that Goldberg’s legal action uses terms like “concoct,” “mislead,” and “cover-up” to ascribe “nefarious” intent to Gordon and MSK where none exists.

“In reality, the MSK Defendants did exactly what attorneys are hired to do: vigorously defended the clients against potential government overreach,” Osborne wrote.

(The lawsuit) is a rapacious attempt,” he added, “to transform a garden-variety legal malpractice lawsuit into an unsubstantiated criminal indictment of an attorney and law firm that acted at all times within the scope of representing clients.”

Osborne also takes issue with Goldberg’s allegations that MSK and Gordon failed to take action to stop the fraud after hearing Quiros describe what he had been doing in that May 2014 “investigative session” with the SEC.

“The Receiver fails to recognize,” Osborne wrote, “the obvious fact that the SEC too learned of the alleged wrongdoing by Quiros on that day, yet the SEC did not bring an enforcement action until almost 2 years later.”

At the time of investigations by the SEC and Vermont regulators, according to Goldberg’s lawsuit, MSK and Gordon represented not only Quiros, but Stenger and Kelly as well.

Goldberg’s legal action seeks to hold the law firm and Gordon responsible for the alleged investor fraud committed by Quiros and his associates dating back from when Quiros purchased the Jay Peak ski resort with investor funds in 2008 through the nearly decade-long scheme. 

Those investor funds used to buy the resort, the filing stated, were supposed to be kept in an escrow account and not used for such a purpose.

In total, court filings in the case state, Goldberg alleges that Gordon and MSK should be on the hook for more than $260 million. 

Osborne, the attorney for MSK and Gordon, calls that number absurd, writing in his motion to dismiss that Gordon and the firm were only paid about $800,000 for their legal services, adding that Goldberg is looking back at what had occurred with 20/20 hindsight.

“The Receiver’s allegations that the MSK Defendants had to withdraw — or risk becoming alleged co-conspirators — also fly in the face of a defendant’s right to counsel; and an attorney’s obligation of zealous advocacy,” Osborne added.

Goldberg has pursued other legal action on behalf of investors and other entities associated with Jay Peak since taking on the role of receiver in 2016. 

Those legal actions include reaching a nearly $150 million settlement with Raymond James & Associates, a financial services firm used by Quiros.

It’s unclear if Judge Marcia Cooke, who is presiding in the latest case brought by Goldberg against Quiros’ former lawyers, will hold a hearing on the motion to dismiss the lawsuit, or rule on the written filings. 

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Alan J. Keays

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