The court-appointed receiver overseeing properties at the center of Jay Peak EB-financial scandal has reached a proposed $1.75 million settlement with People’s United Bank, which was accused in a lawsuit of misappropriating funds.
Seven EB-5 investors claimed the bank aided and abetted Ariel Quiros, Jay Peak’s former owner, in an alleged scheme to defraud investors.
People’s United Bank has denied wrongdoing.
The $1.75 million settlement figure is a paltry sum compared to other settlements the receiver had reached with some other parties, including one for $150 million with Raymond James & Associates for its role in the scandal.
Michael Goldberg was appointed receiver of the Jay Peak assets in April 2016 when federal and state and regulators brought investor fraud claims against Quiros and his former business partner, Bill Stenger, past CEO and president of Jay Peak.
Goldberg, in a filing seeking court approval of the settlement, wrote that it would end years of litigation between investors and the financial institution.
After attorneys fees and other costs for the investors who brought the suit, Goldberg said, the remaining almost $1.2 million of the settlement proceeds would go to the receivership to continue operating the properties tied to the scandal, including Jay Peak and Burke Mountain ski resorts.
“Based on the current outlook of the Receiver Estate’s financial situation, and given previous settlements,” the filing stated, “it is possible that the Receiver will not need these funds for general administration purposes and they can, instead, be distributed to holders of allowed claims, but given the uncertainties associated with the COVID-19 crisis, the funds will be held for such purposes at this juncture in an abundance of caution.”
The $1.75 million settlement with People’s United Bank is far lower than several other financial settlements Goldberg has reached in his role as receiver.
Recently, he reached an $8 million settlement in a lawsuit against attorneys Ed Carroll and Mark Scribner. The legal action accused the men of a conflict of interest: The firm both represented the Jay Peak corporation and provided immigration services for investors. Carroll and Scribner denied any wrongdoing.
Nearly four years ago, Goldberg reached a $150 million deal with Raymond James & Associates for its role in the alleged investor fraud case. In the settlement, the financial services firm did not admit to any wrongdoing.
Quiros was sued by federal regulators and agreed to surrender $81 million in assets, including both ski resorts he owned, Jay Peak and Burke Mountain.
In a Thursday email, Harley Tropin, a Florida attorney representing investors in the People’s United Bank case, said, “We are pleased this matter is in the process of being resolved.”
Asked how the $1.75 million settlement figure was arrived at, he replied, “I can’t comment further.”
Goldberg did not return phone and email messages Thursday seeking comment.
People’s United Bank, in a statement, said federal courts in Vermont and Florida have dismissed the Jay Peak investor lawsuit against the bank multiple times, except for a single claim that remained pending, which the bank believed was without merit.
“However, given the passage of time, and the fact that further litigation would require substantial time and expense, the Bank has decided to settle the matter,” according to the statement, adding, “The Bank does not admit any wrongdoing, and is settling simply in the interest of avoiding further litigation expense and to bring finality to this matter from several years ago.”
Filings in the case had alleged that People’s United Bank was on the ground floor of the alleged fraud scheme headed by the two developers, Quiros and Stenger.
Among the claims, investors alleged that People’s United Bank permitted Quiros to purchase the Jay Peak ski resort in 2008 using EB-5 investor funds that had been held escrow to fund specific development projects at the resort.
Prior to the transfer of those funds, Mont Saint-Sauveur International, a Canadian-based company, owned Jay Peak. According to investor filings in the case, the firm had sent a letter warning against the use of the EB-5 funds for the resort purchase.
Instead, the filings stated, the funds were meant for resort developments, such as Phase I, known as Tram House, and Phase II, known as Hotel Jay.
“In reality,” according to a filing, “Quiros diverted over $20 million in funds raised from investors in the first two Projects to purchase the resort, which rendered the Phase I and Phase II Partnerships insolvent.”
The filing added, “Each earlier offering depended on transfers of cash from later offerings to cover its insolvency — the hallmark of a Ponzi-scheme.”
At a hearing in the case more than a year ago, Tropin, the attorney for a group of investors, said several “red flags” had been raised over the years regarding the EB-5 projects led by Quiros and Stenger that should have alerted People’s United Bank of the developers’ alleged fraud.
Those red flags, according to Tropin, included concerns raised in February 2012 by Douglas Hulme, owner of Rapid USA and an EB-5 middleman, who sounded the alarm on the alleged Ponzi scheme, letting 100 immigrant attorneys know that Jay Peak’s finances were on shaky ground.
Quiros, Stenger and two of their business associates were indicted on federal criminal charges in May 2019. The charges included wire fraud and making false statements to the government regarding an EB-5 project they led, known as AnC Bio Vermont.
That development, which called for the construction and operation of a $110 million biomedical research center in Newport, collapsed before it got off the ground.
Quiros has since pleaded guilty to criminal charges and is awaiting sentencing. Stenger has pleaded not guilty and a trial is set for October.
More than three years before the criminal charges were brought, federal and state regulators in April 2006 filed civil enforcement actions against the two developments, accusing the two men of misusing $200 million of the more than $400 million they raised from EB-5 investors for the development projects.
Those development projects include massive upgrades at Jay Peak and Burke Mountain ski areas.
Foreign investors taking part in the EB-5 program put up at least $500,000 into a qualified project. If that investment meets job creation requirements, that investor becomes eligible for a green card, or permanent U.S. residency.
The proposed settlement with People’s United Bank calls for a bar order, which would protect the financial institution from any future lawsuits by investors related to the Jay Peak EB-5 projects. The bar order would not apply to any legal actions brought by federal or state agencies.
Bar orders have been part of other settlements Goldberg has reached with other parties, including in the deal he reached with Raymond James & Associates.
A federal judge in Miami on Wednesday granted preliminary approval of the settlement and set a hearing for July 1 to hear any objections. The case is pending in Florida because that is where Quiros lived and many of his businesses had been located.
