Uh oh...Jay Peak owner pulls a fast one on EB-5 investors

[Mister Moose]

Pretty obvious there was lax oversight. It's a federal program so blame the feds, but to a certain extent I think it was inevitable. Lot of hen houses, lot of hens, can't watch 'em all. Who's going to notice if a few hundred million of immigrant's money goes missing? They're in kind of an awkward legal position to begin with anyway.

So, what will Jay Peak go for at auction? And who are the contestants? POWDR? Vail? Intrawest? Boyne? Peak? Or a dark horse....

Not that many hens. Feds designate "Regional Centers". Vermont Regional Center is run by Vermont.

Established in 1997, the Vermont EB5 Regional Center is a USCIS Designated Regional Center. The regional center is run by Vermont Agency of Commerce & Community Development (ACCD); in partnership, with the Vermont Department of Financial Regulation (DFR) (collectively “Vermont Regional Center” or “VRC”).

VRC provides the oversight and infrastructure required by USCIS allowing businesses located in Vermont, or seeking to locate in Vermont, to access the EB-5 program without added cost or administrative burden

Here's where you look for the hens.

Investors are ensured that Vermont EB5 Regional Center projects are monitored by an independent and qualified regulatory authority - DFR.

Monitoring likely consisted of counting jobs, visiting the construction site, and attending ribbon cutting ceremonies.

Why EB-5 Investors Choose Vermont?

State Oversight — VRC monitors all Vermont EB-5 projects for compliance with USCIS EB-5 regulations and policy guidance. This partnership reaffirms Vermont’s dedication to first-rate regulation and exceptional oversight in all aspects of financial services.

Here's the hens that bear looking into:

The investors first complained to the Vermont EB-5 Regional Center, which oversees developments under the program, in May 2014. But Brent Raymond, the head of the center, and Patricia Moulton, the secretary of commerce and community development, didn’t act on their emails.

The disgruntled investors say they worry that state officials, including Gov. Peter Shumlin, are so intent on job creation that they are not holding Stenger accountable enough. For example, the governor made comments about the state’s level of oversight of the investment program that were inaccurate and needed to be removed from a promotional video produced by Jay Peak. Shumlin incorrectly said the projects are audited by the regional center.

What??? So no audits were done? Obviously the answer is no audits were done, otherwise the spaghetti map would have come to light sooner.

Credibility — VRC has a long record of success and takes a long view for multiple successful projects, rather than seeking a single lucrative project.

Why favor a multiple project developer over a single new developer, especially one that promises to be lucrative? This statement from the State of Vermont makes no sense, and in this case resulted in pouring hundreds of millions down Quiros's rat hole, instead of diversifying elsewhere.

To sum up, the State of Vermont did a dismal job from 2008 through mid 2014 in proving oversight and protection to the EB-5 program. From late 2014 on, the State of Vermont did a reasonable, albeit slow job. 18 months is a long time to get around to freezing assets to prevent further damage.

Jay Peak may never go to auction. The EB-5 investors of each project will vote on liquidation vs operation, and if continued operation has a reasonable chance of recovering more money, no auction of the hotels et al will occur. The mountain itself is owned by Quiros, and that asset will likely be sold to recover missing EB-5 funds. Since there are at least 7 different EB-5 projects at Jay, that group of investors have a huge interest in seeing control of Jay remain stable and close to home. A negotiated settlement may result using an appraised value for Jay itself, title transfers to yet another larger combined investor partnership in lieu of pilfered investment dollars, and with control residing in an appointed general partner that runs the resort. 5 to 10 years from now, the entire complex gets sold and the investors get (most of) their equity out.

http://accd.vermont.gov/business/relocate_expand/eb5" onclick="window.open(this.href);return false;
http://vtdigger.org/2014/10/05/document ... -response/" onclick="window.open(this.href);return false;

[madhatter]

Pretty obvious there was lax oversight. It's a federal program so blame the feds, but to a certain extent I think it was inevitable. Lot of hen houses, lot of hens, can't watch 'em all. Who's going to notice if a few hundred million of immigrant's money goes missing? They're in kind of an awkward legal position to begin with anyway.

So, what will Jay Peak go for at auction? And who are the contestants? POWDR? Vail? Intrawest? Boyne? Peak? Or a dark horse....

Not that many hens. Feds designate "Regional Centers". Vermont Regional Center is run by Vermont.

Established in 1997, the Vermont EB5 Regional Center is a USCIS Designated Regional Center. The regional center is run by Vermont Agency of Commerce & Community Development (ACCD); in partnership, with the Vermont Department of Financial Regulation (DFR) (collectively “Vermont Regional Center” or “VRC”).

VRC provides the oversight and infrastructure required by USCIS allowing businesses located in Vermont, or seeking to locate in Vermont, to access the EB-5 program without added cost or administrative burden

Here's where you look for the hens.

Investors are ensured that Vermont EB5 Regional Center projects are monitored by an independent and qualified regulatory authority - DFR.

Monitoring likely consisted of counting jobs, visiting the construction site, and attending ribbon cutting ceremonies.

Why EB-5 Investors Choose Vermont?

State Oversight — VRC monitors all Vermont EB-5 projects for compliance with USCIS EB-5 regulations and policy guidance. This partnership reaffirms Vermont’s dedication to first-rate regulation and exceptional oversight in all aspects of financial services.

Here's the hens that bear looking into:

The investors first complained to the Vermont EB-5 Regional Center, which oversees developments under the program, in May 2014. But Brent Raymond, the head of the center, and Patricia Moulton, the secretary of commerce and community development, didn’t act on their emails.

The disgruntled investors say they worry that state officials, including Gov. Peter Shumlin, are so intent on job creation that they are not holding Stenger accountable enough. For example, the governor made comments about the state’s level of oversight of the investment program that were inaccurate and needed to be removed from a promotional video produced by Jay Peak. Shumlin incorrectly said the projects are audited by the regional center.

What??? So no audits were done? Obviously the answer is no audits were done, otherwise the spaghetti map would have come to light sooner.

Credibility — VRC has a long record of success and takes a long view for multiple successful projects, rather than seeking a single lucrative project.

Why favor a multiple project developer over a single new developer, especially one that promises to be lucrative? This statement from the State of Vermont makes no sense, and in this case resulted in pouring hundreds of millions down Quiros's rat hole, instead of diversifying elsewhere.

To sum up, the State of Vermont did a dismal job from 2008 through mid 2014 in proving oversight and protection to the EB-5 program. From late 2014 on, the State of Vermont did a reasonable, albeit slow job. 18 months is a long time to get around to freezing assets to prevent further damage.

Jay Peak may never go to auction. The EB-5 investors of each project will vote on liquidation vs operation, and if continued operation has a reasonable chance of recovering more money, no auction of the hotels et al will occur. The mountain itself is owned by Quiros, and that asset will likely be sold to recover missing EB-5 funds. Since there are at least 7 different EB-5 projects at Jay, that group of investors have a huge interest in seeing control of Jay remain stable and close to home. A negotiated settlement may result using an appraised value for Jay itself, title transfers to yet another larger combined investor partnership in lieu of pilfered investment dollars, and with control residing in an appointed general partner that runs the resort. 5 to 10 years from now, the entire complex gets sold and the investors get (most) of their equity out.

http://accd.vermont.gov/business/relocate_expand/eb5" onclick="window.open(this.href);return false;
http://vtdigger.org/2014/10/05/document ... -response/" onclick="window.open(this.href);return false;

yep if assets are seized or it goes to auction it will be a nightmare for everyone, thus it won't...more too big to fail...

[hillbangin]

This makes not signing the lease in Park City the 2nd biggest mistake in the ski business.........

[Bubba]

Pretty obvious there was lax oversight. It's a federal program so blame the feds, but to a certain extent I think it was inevitable. Lot of hen houses, lot of hens, can't watch 'em all. Who's going to notice if a few hundred million of immigrant's money goes missing? They're in kind of an awkward legal position to begin with anyway.

What is going to be interesting going forward is who gets indicted, who cops a plea, and who sings like a canary to save their ass. They've put Steve Wright in charge, and while I genuinely believe him to be a straight shooter, shouldn't all of the top brass be under a cloud of suspicion, including Steve? Obviously they have to trust someone who knows the system in order to keep the doors open. At this point you can be sure everyone in the organization, down to the lifties, have lawyered up, and won't be saying much in public. Still, Bernie Madoff's Ponzi scheme makes the Jay Peak practitioners look like pikers, and as far as I know, only Bernie is doing time.

So, what will Jay Peak go for at auction? And who are the contestants? POWDR? Vail? Intrawest? Boyne? Peak? Or a dark horse....

I'm working on the assumption that each project funded through EB-5 money was set up as a separate LLC. At issue, from what I can tell, is that EB-5 money for LLC project #2 was used in part to fund LLC project #1, funds for #3 were used for #2, and so on through the whole series, along with mixing funds further among projects, taking an unreasonable management fee, etc. and Stenger and Quiros basically tapping the whole thing as their private piggy bank. With the Jay Peak projects completed and open, investors in those projects have an income stream to support their investments. It's the Burke project and Newport development project investors that will innitially get screwed by this. If the Burke hotel project opens, then those investors will have an income stream, leaving the Newport project investors holding the bag. How they then try to reach back to the other revenue generators, plus Stenger, Quiros and Jay Peak Resort itself will be interesting and that will determine the future fate of Jay. In the meantime, Stenger and Quiros have a sh*t load of legal troubles with the SEC and the State of Vermont and are looking at possible criminal cases as well.

[rogman]

It's in federal receivership. Expecting a rationale outcome is a bit "optimistic". All of Quiros' assets, personal and professional, have been seized. The (alleged) "diversion and commingling" of assets will ultimately make it impossible to sort this out cleanly. This is only the beginning, and only the civil indictment. Criminal indictments will be forth coming. And yeah, Jay will end up on the auction block.

[SnoBrdr]

Pretty obvious there was lax oversight. It's a federal program so blame the feds, but to a certain extent I think it was inevitable. Lot of hen houses, lot of hens, can't watch 'em all. Who's going to notice if a few hundred million of immigrant's money goes missing? They're in kind of an awkward legal position to begin with anyway.

What is going to be interesting going forward is who gets indicted, who cops a plea, and who sings like a canary to save their ass. They've put Steve Wright in charge, and while I genuinely believe him to be a straight shooter, shouldn't all of the top brass be under a cloud of suspicion, including Steve? Obviously they have to trust someone who knows the system in order to keep the doors open. At this point you can be sure everyone in the organization, down to the lifties, have lawyered up, and won't be saying much in public. Still, Bernie Madoff's Ponzi scheme makes the Jay Peak practitioners look like pikers, and as far as I know, only Bernie is doing time.

So, what will Jay Peak go for at auction? And who are the contestants? POWDR? Vail? Intrawest? Boyne? Peak? Or a dark horse....

I'm working on the assumption that each project funded through EB-5 money was set up as a separate LLC. At issue, from what I can tell, is that EB-5 money for LLC project #2 was used in part to fund LLC project #1, funds for #3 were used for #2, and so on through the whole series, along with mixing funds further among projects, taking an unreasonable management fee, etc. and Stenger and Quiros basically tapping the whole thing as their private piggy bank. With the Jay Peak projects completed and open, investors in those projects have an income stream to support their investments. It's the Burke project and Newport development project investors that will innitially get screwed by this. If the Burke hotel project opens, then those investors will have an income stream, leaving the Newport project investors holding the bag. How they then try to reach back to the other revenue generators, plus Stenger, Quiros and Jay Peak Resort itself will be interesting and that will determine the future fate of Jay. In the meantime, Stenger and Quiros have a sh*t load of legal troubles with the SEC and the State of Vermont and are looking at possible criminal cases as well.

So you basically think it was a pyramid scheme.

[Bubba]

It's in federal receivership. Expecting a rationale outcome is a bit "optimistic". All of Quiros' assets, personal and professional, have been seized. The (alleged) "diversion and commingling" of assets will ultimately make it impossible to sort this out cleanly. This is only the beginning, and only the civil indictment. Criminal indictments will be forth coming. And yeah, Jay will end up on the auction block.

In all probability, yes. Stenger and Quiros will be forced to sell their holdings in Jay and Burke, whether to set up a fund to repay EB-5 investors who have not yet gained the benefit they paid for (a green card) or to offset legal fees or, simply, because they are ordered to by the court for no other reason than a sale will be part of a plea deal at the end.

[Bubba]

Pretty obvious there was lax oversight. It's a federal program so blame the feds, but to a certain extent I think it was inevitable. Lot of hen houses, lot of hens, can't watch 'em all. Who's going to notice if a few hundred million of immigrant's money goes missing? They're in kind of an awkward legal position to begin with anyway.

What is going to be interesting going forward is who gets indicted, who cops a plea, and who sings like a canary to save their ass. They've put Steve Wright in charge, and while I genuinely believe him to be a straight shooter, shouldn't all of the top brass be under a cloud of suspicion, including Steve? Obviously they have to trust someone who knows the system in order to keep the doors open. At this point you can be sure everyone in the organization, down to the lifties, have lawyered up, and won't be saying much in public. Still, Bernie Madoff's Ponzi scheme makes the Jay Peak practitioners look like pikers, and as far as I know, only Bernie is doing time.

So, what will Jay Peak go for at auction? And who are the contestants? POWDR? Vail? Intrawest? Boyne? Peak? Or a dark horse....

I'm working on the assumption that each project funded through EB-5 money was set up as a separate LLC. At issue, from what I can tell, is that EB-5 money for LLC project #2 was used in part to fund LLC project #1, funds for #3 were used for #2, and so on through the whole series, along with mixing funds further among projects, taking an unreasonable management fee, etc. and Stenger and Quiros basically tapping the whole thing as their private piggy bank. With the Jay Peak projects completed and open, investors in those projects have an income stream to support their investments. It's the Burke project and Newport development project investors that will innitially get screwed by this. If the Burke hotel project opens, then those investors will have an income stream, leaving the Newport project investors holding the bag. How they then try to reach back to the other revenue generators, plus Stenger, Quiros and Jay Peak Resort itself will be interesting and that will determine the future fate of Jay. In the meantime, Stenger and Quiros have a sh*t load of legal troubles with the SEC and the State of Vermont and are looking at possible criminal cases as well.

So you basically think it was a pyramid scheme.

Pyramid, Ponzi, or some other descriptive word or phrase - the choice is yours.

[SnoBrdr]

It's in federal receivership. Expecting a rationale outcome is a bit "optimistic". All of Quiros' assets, personal and professional, have been seized. The (alleged) "diversion and commingling" of assets will ultimately make it impossible to sort this out cleanly. This is only the beginning, and only the civil indictment. Criminal indictments will be forth coming. And yeah, Jay will end up on the auction block.

In all probability, yes. Stenger and Quiros will be forced to sell their holdings in Jay and Burke, whether to set up a fund to repay EB-5 investors who have not yet gained the benefit they paid for (a green card) or to offset legal fees or, simply, because they are ordered to by the court for no other reason than a sale will be part of a plea deal at the end.

Has there been anything new on the criminal side?

[Big Bob]

Money from project #1 went to purchase Jay Peak Resort, therefore how can they retain ownership of the resort if funds were misappropriated to purchase it. The investors prime reason for investing in EB 5 was to obtain a green card, so they will either move to reclaim their money or make the projects eligible for obtaining a green card. There were jobs created with the money for all but the Burke Hotel and the Newport projects. The Burke hotel will open at some point, hopefully soon. The lien needs to be paid off to obtain the CO on the property.

[Bubba]

Money from project #1 went to purchase Jay Peak Resort, therefore how can they retain ownership of the resort if funds were misappropriated to purchase it. The investors prime reason for investing in EB 5 was to obtain a green card, so they will either move to reclaim their money or make the projects eligible for obtaining a green card. There were jobs created with the money for all but the Burke Hotel and the Newport projects. The Burke hotel will open at some point, hopefully soon. The lien needs to be paid off to obtain the CO on the property.

Not sure that you're referring to with that statement. EB-5 money went to pay for the various hotel projects, waterpark, etc. growth at Jay but not into Stenger's ownership.

[Bubba]

It's in federal receivership. Expecting a rationale outcome is a bit "optimistic". All of Quiros' assets, personal and professional, have been seized. The (alleged) "diversion and commingling" of assets will ultimately make it impossible to sort this out cleanly. This is only the beginning, and only the civil indictment. Criminal indictments will be forth coming. And yeah, Jay will end up on the auction block.

In all probability, yes. Stenger and Quiros will be forced to sell their holdings in Jay and Burke, whether to set up a fund to repay EB-5 investors who have not yet gained the benefit they paid for (a green card) or to offset legal fees or, simply, because they are ordered to by the court for no other reason than a sale will be part of a plea deal at the end.

I just re-read the press release. I'd overlooked the fact that Jay Peak Resort was specifically named in the complaint, not just Stenger and Quiros.

[Bubba]

Documents Show Feds Were Onto Quiros Long Before State Launched Probe

By Peter Hirschfeld

http://digital.vpr.net/post/documents-s ... 7#stream/0" onclick="window.open(this.href);return false;


Federal authorities launched an investigation into Jay Peak’s EB-5 projects nearly a year before state officials had their first inkling that something illegal was afoot. And documents on file at the Securities and Exchange Commission indicate that the agency had strong forensic evidence of a massive fraud well before the changes in state regulatory oversight that Gov. Peter Shumlin now credits for taking down the “Ponzi-like” scheme.


Schubart: The EB-5 tragedies... deregulation, really?

Here's an excerpt:

Watching politicians backpedaling furiously in the media is, to me, a most shameful charade. The scramble to distance themselves from the brewing scandal rather than acknowledging that their enthusiasm for basking in the “job creation” limelight overwhelmed their leadership obligations to regulate and monitor. Naiveté will be no defense here either.

No justice will be done until the regulators are as fully investigated as those being charged – including Governor Shumlin, his Secretary of Commerce and Community Development, Pat Moulton, and Commissioner Susan Donegan of the Department of Financial Regulation. It would have been refreshing for our politicians and executive branch heads to step forward and acknowledge that they mishandled the whole affair.

http://vermontbiz.com/news/april/schuba ... -286323177" onclick="window.open(this.href);return false;

[ANGUS]

I guess the west bowl project won't be happening anytime soon.

[Big Bob]

Money from project #1 went to purchase Jay Peak Resort, therefore how can they retain ownership of the resort if funds were misappropriated to purchase it. The investors prime reason for investing in EB 5 was to obtain a green card, so they will either move to reclaim their money or make the projects eligible for obtaining a green card. There were jobs created with the money for all but the Burke Hotel and the Newport projects. The Burke hotel will open at some point, hopefully soon. The lien needs to be paid off to obtain the CO on the property.

Not sure that you're referring to with that statement. EB-5 money went to pay for the various hotel projects, waterpark, etc. growth at Jay but not into Stenger's ownership.

From the law suit document filed by the Florida court:

https://www.sec.gov/litigation/complain ... 016-69.pdf" onclick="window.open(this.href);return false;

4. Since 2008, Quiros has misappropriated more than $50 million in investor money
to, among other things: (1) finance his purchase of the Jay Peak resort; (2) back a personal line of
credit to pay his income taxes; (3) purchase a luxury condominium; (4) pay taxes of a company
he owns; and (5) buy an unrelated resort. He improperly used additional investor funds to pay
down and pay off margin loans (including paying nearly $2.S million in margin interest) he set
up in the name of the Defendants companies at a brokerage firm.