Crime and Justice

Raymond James battles Jay Peak receiver over millions he ‘desperately’ needs

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

Raymond James & Associates wants a big chunk of the $5.2 million the man overseeing Jay Peak and Burke Mountain says he “desperately” needs for the two ski resorts. 

The dispute is between the financial services firm and Michael Goldberg, a court-appointed receiver overseeing Jay Peak and Burke Mountain as they work to emerge from a massive investor fraud scandal.

It also involves arguments spread over two separate settlements tied to fraud allegations that have since led to criminal charges against Ariel Quiros, former owner of Burke and Jay Peak, as well as Bill Stenger, former Jay Peak president, and two of their associates. 

At issue in the legal fight are proceeds from a recent proposed lawsuit settlement and the receiver’s share of that money, about $5.2 million. 

Deborah Corbishley, a Florida attorney for Raymond James, argued in court papers that the firm is entitled to 75% of that money, based on the terms of an earlier $150 million settlement it had reached with the receiver for its alleged role in the investor fraud scandal. 

Goldberg, in court documents, contends Raymond James has it all wrong, is relying on a “tortured” reading of the settlement, and the financial investment firm is not entitled to anywhere near as much money it is seeking. 

The receiver said he already has plans to use the money to help prop up both Jay Peak and Burke Mountain as each copes with the economic hardship of the Covid-19 pandemic that has stretched over one ski season and part of another. 

“This is particularly critical now,” Goldberg’s filing stated of the funds, “where the receiver is desperately in need of liquidity to support the operations of the Jay Peak Resort and the Burke Mountain Hotel during these unimaginable times involving (i) a global pandemic; (ii) the closing of the American/Canadian border (through which many of the Jay Peak Resort and Burke Mountain Hotel patrons cross); and (iii) the off-season for both properties.”

Raymond James points to a clause in the previous settlement with the receiver, which entitles it to 75% of all proceeds from settlements where the proceeds are not going directly to defrauded EB-5 investors.

Investors defrauded

More than 800 investors put money into a series of development projects headed by Quiros and Stenger over a decade, including massive upgrades at Jay Peak and a new hotel and conference center at Burke Mountain. 

Federal and state regulators say the two developers misused $200 million of the more than $400 million raised through the EB-5 federal visa program to fund their projects, with Quiros looting $50 million to pay for personal items, from his taxes to two Manhattan condos.

Quiros has since pleaded guilty to federal criminal charges and is awaiting sentencing. Stenger has denied the criminal charges against him and is awaiting trial. 

Goldberg has been the court-appointed receiver overseeing Jay Peak and Burke Mountain since the U.S. Securities and Exchange Commission brought civil enforcement actions against Stenger and Quiros in April 2016.

Since that time, Goldberg has worked to recover money for the investors, who each put $500,000, plus administrative fees, into the projects headed by Quiros and Stenger with the hope of receiving green cards if their investments met job-creating requirements.

Many of the investors are not only at risk of losing money, but their hopes for permanent U.S. residency have been dashed by the fraud allegations surrounding the projects.

Among the settlements Goldberg has reached is one with Raymond James in 2017 for $150 million. According to a lawsuit brought by Goldberg, the financial services firm had played a role in Quiros improperly using investor funds to buy Jay Peak, the first step in the alleged fraud scheme that stretched over several years. 

In that agreement, Raymond James admitted no wrongdoing. 

$8 million settlement

Another proposed settlement has been reached in a lawsuit brought by a group of investors against immigration attorneys Carroll & Scribner. That lawsuit alleged Ed Carroll and Mark Scribner had a conflict of interest in serving as the corporate lawyers for Jay Peak as well as the attorneys for the investors. 

In the $8 million tentative settlement reached late last year, the attorneys admitted no wrongdoing.

A breakdown of the proceeds of the settlement has the largest chunk of that money, $5.2 million, going to the receiver. The settlement also included about  $2.8 million for refunds for immigration fees paid by 23 investors to Carroll & Scribner and to pay for their attorney fees in bringing the case. 

The settlement still needs the approval of a federal court judge in Miami, where the SEC case against Quiros and Stenger was brought, because Quiros lived there and incorporated many of his businesses in Florida. 

Raymond James has now filed an objection to the proposed settlement, claiming the clause in its agreement entitled it to 75% of recovered proceeds from the receiver in legal actions brought against third parties where the money doesn’t go to investors. That’s the $5.2 million going to finance the operations of Jay Peak and Burke Mountain, Raymond James claims in its court filings. Seventy-five percent of $5.2 million is $3.9 million. 

But, Goldberg’s filing stated, Raymond James isn’t entitled to 75% of the full $5.2 million, since the lawsuit against Carroll & Scribner was not brought by Goldberg, but by attorneys for the investors. 

And besides, according to the filing, that money will help keep Jay Peak and Burke Mountain operational, which is a benefit for the investors. 

The investors brought Goldberg into the settlement to help “disburse the proceeds of their settlement on their behalf,” according to his filing.

“Raymond James incorrectly argues that the settlement agreement with the receiver requires that the funds be distributed directly to investors for the exception to apply,” the filing stated. “That is simply not correct. The settlement agreement does not say that. It merely requires that the funds be distributed ‘on their behalf,’ and using the funds to support and maintain the receivership estate and its assets — from which all investors will eventually benefit — is a perfectly acceptable and, indeed, reasonable use of their funds.”

A hearing on the matter is set for April 6 in federal court in Miami.

Neither Goldberg nor Corbishley could be reached Thursday for comment. 

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Alan J. Keays

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