Valley News – Jay Peak wide receiver reaches $ 32.5 million settlement with former Quiros legal team

Jay Peak catcher Michael Goldberg has reached a $ 32.5 million settlement in a lawsuit he has filed against former attorneys for Ariel Quiros, the former owner of the resort.

The lawsuit alleged that these lawyers allowed millions of dollars to be diverted from investors in projects in the northeastern kingdom of Vermont led by Quiros.

The proposed settlement outlined in a Friday court file is among the largest ever reached in the financial scandal with various parties associated with it, including other law firms, banks and developers.

Other bigger ones include a $ 150 million settlement with Raymond James & Associates, a financial institution that was used by Quiros to commit the alleged fraud.

The latest proposed settlement stems from a lawsuit filed almost two years ago in Miami, where Quiros lives and where several of his businesses are based. The lawsuit was brought against New York attorney David Gordon and the firm he works for, Mitchell Silberberg & Knupp, LLP.

The proposed settlement agreement calls for the company to pay the receiver $ 32.5 million. After fees and other expenses, according to the record, about $ 10 million will go to the receivership operations, which includes the management of properties at the center of the fraud scandal, the ski resorts of Jay Peak and Burke Mountain.

About $ 20 million will go to investors investing in development projects led by Quiros and his former business partner Bill Stenger, the former CEO and chairman of Jay Peak, who “cleared the claims.”

The investor group that exactly understands was not clear on the record, and Goldberg could not be reached for comment. The amount each investor would receive would be determined by the court, according to the settlement agreement.

More than 800 foreign investors have invested at least $ 500,000 each in a series of projects led by Quiros and Stenger over a decade.

Investors have invested under the federal EB-5 visa program in hopes of obtaining green cards or permanent residence in the United States, if the money invested in the projects creates the required number of jobs.

Many investors have been shut out of their investments and their chance to get green cards after regulators halted projects in 2016, calling developer funding a “Ponzi-type” program.

The proposed settlement filed on Friday indicated that Golberg and its receivership may not need the full $ 10 million set aside to keep the resorts afloat, in which case additional funds may go to investors with “claims. eligible “.

“Given the uncertainties associated with the COVID19 crisis, funds will be held for such purposes at this stage with great caution,” the file says.

The deal is conditional on a federal judge being granted a restraining order, which would protect the law firm from any future lawsuits brought by investors linked to the Jay Peak EB-5 projects. The prohibition order would not apply to any legal matter brought by federal or state agencies.

“In colloquial terms,” ​​read the proposed settlement agreement, “MSK’s willingness to settle – for $ 32,500,000 – is subordinate to” world peace “with respect to any claims that might be raised against the released parts of MSK relating in any way to the EB -5 Shares, the Escrow Entities or the Activities of MSK.

Gordon and MSK could not be reached for comment.

Michael Pieciak, commissioner of the Vermont Department of Financial Regulation, called the deal an “important settlement” that will benefit Jay Peak investors as well as resorts facing financial uncertainty due to the Covid-19 pandemic.

“The fraud in the Northeast Kingdom,” Pieciak said in a statement on Friday, “has caused significant harm to investors and the community and today’s settlement is another big step forward towards the healing and financial restitution “.

Goldberg’s lawsuit against MSK accused the law firm of playing a role in the scandal.

“The conduct of MSK and Gordon fell below the standard of care for all lawyers, let alone those who present themselves as experts in the fields of securities and corporate law, and violated fiduciary duties to receivership entities, ”the lawsuit said.

The lawsuit included claims against Gordon and the firm for legal malpractice and breach of fiduciary duty. The law firm, under the proposed settlement, denied any wrongdoing in entering into the deal.

Gordon represented Quiros and other entities related to Quiros from mid-2013 to March 2017 and, according to the lawsuit, had racked up with the “local lawyers” nearly $ 3 million in legal bills.

In March 2017, Quioros fired Gordon and other members of his legal team representing him at the time, accusing them of keeping him in the dark and overcharging him.

According to the receiver’s lawsuit, shortly after hiring as counsel, Gordon and the firm learned that “Quiros had led the blending of tens of millions of investor funds among the various phases and entities of the projects with the aim of to cover construction deficits “.

Further, according to the lawsuit, “MSK also learned that Quiros financed its purchase of the Jay Peak complex in 2008 by embezzling millions of dollars of EB-5 investor funds held by certain receivership entities.”

These receivership entities included other EB-5-funded projects that foreign investors had invested in, including hotels and condos in Jay Peak as well as a water park and ice rink.

“The defendants did not notify the receivership entities that violations of the private placement memorandum and securities laws were occurring,” the lawsuit said.

“Due to the violations committed by the defendants,” the lawsuit added, “investor money continued to flow, increasing the exposure of the receivership entities. This exposure increased by tens of millions of dollars afterwards. that the defendants began to represent Quiros and the receivership entities in mid-2013. ”

MSK and Gordon learned of the misuse of funds linked to AnC Bio Vermont, a failed project to build a $ 110 million biomedical research center in Newport, “no later than” in May 2014, according to the lawsuit. It was then that Quiros testified during an “investigative session” conducted by the United States Securities and Exchange Commission.

In this testimony, according to the lawsuit, Quiros testified about transferring $ 18 million of investor funds into this biomedical research facility project to help cover debt from previous projects. Although he was aware of the action, the lawsuit said, Gordon did not warn “decision makers” associated with the other entities of what Quiros was doing.

“Quiros testified that once [an individual] invests, now it’s my money. It’s totally my money, ”according to the lawsuit. Quiros further stated that once investors’ funds were transferred to an account controlled by Quiros, he could “do whatever I wanted” with them.

Gordon and MSK hit back at Goldberg in a case response to the lawsuit, calling Goldberg, the man who now oversees Jay Peak and other properties at the center of the EB-5 investment scandal, as greedy.

“[Goldberg’s] Greed cannot be overstated, “the record reads, adding:” Receiver crosses the line of zealous plea and seeks to gain an advantage in this civil case by trying to link a defense lawyer to the criminal conduct alleged from his former clients.

Further, according to this record, Goldberg’s lawsuit uses terms such as “concoct”, “deceive” and “cover up” to ascribe an “infamous” intention to Gordon and MSK where none exists.

“In fact,” according to the file, “the MSK defendants have done exactly what lawyers are hired to do: vigorously defend clients against possible government excesses.”

Goldberg filed a lawsuit in 2019 two weeks before criminal charges against Quiros and Stenger and two of their associates under the AnC Bio Vermont project who, despite raising more than $ 80 million from around 160 EB-5 investors, never got off the ground.

Quiros has since pleaded guilty and is awaiting sentencing. Stenger has maintained his innocence and is expected to stand trial in the fall.


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