EB-5: Quiros, SEC to Mediate in December in Miami

EB-5: Quiros, SEC to Mediate in December in Miami

EB-5 Visa, EB5 Visa, EB-5 Investment

Ariel Quiros will head to mediation with the SEC in December, at his attorneys' office, the two sides agreed to in federal court in recent days.

SEC Continues to Try to Narrow Quiros’s Defenses

The federal case against Ariel Quiros, the embattled alleged mastermind of Vermont’s largest case of securities fraud, will be the subject of mediation later this year, according to court documents.

Robert Levenson, the lead attorney for the federal Securities and Exchange Commission, on Friday filed a notice with the U.S. District Court in Miami, Florida, where the case is based, that the SEC and Quiros “have agreed to mediate this case on Tuesday, Dec. 19” at the law offices of Damian & Valori LLP, Quiros’s latest attorneys.

Some time ago, mediation was sought in the case, which is typically called for to try to find a resolution outside the court room, attorneys said.

The mediation, which could lead to settlement, is a routine step in the navigation toward trial.

If the case cannot be successfully mediated, Quiros will stand trial probably in the fall of 2018, attorneys for both sides have said.

“We continue to work with the SEC and the Receiver and are hopeful that we can resolve everything before mediation, but we have all agreed to work with a mediator in the event we are unable to resolve the case before that time,” stated Quiros counsel Melissa Visconti.

Quiros last April was accused by the SEC as well as by Vermont’s attorney general, of having allegedly misappropriated more than $200 million of investor funds in the EB-5 program which entices international investors who can earn permanent U.S. green cards when their funds can be linked to job creation through economic development projects.

In Quiros’s case, there were a series of significant development projects carried out at the Jay Peak Resort which investors pledged $500,000 apiece for, plus a fee of $50,000. Quiros also was the owner of the Burke Mountain Resort, where a $60 million hotel and conference center was built using investor funds.

Besides being accused of using funds across the projects to backfill shortfalls, where authorities say the program requires EB-5 investments to be used only for the project the funds were solicited for, Quiros also is accused by the SEC and State of Vermont of having used the investor funds to launch the original scheme, using EB-5 funds at Jay Peak which the earlier owner had courted, and buying Jay Peak itself with investor funds, not his own.

He stands accused of having used more than $55 million in investor funds as his “personal piggybank.”

Quiros’s associate, his former business partner Bill Stenger, the longtime CEO of Jay Peak, also was accused of the misappropriation allegations, but not of stealing any funds from investors. Stenger has reached a settlement with the SEC and has continued to assist Michael Goldberg, the federal receiver appointed not long after the scandal broke, to try to right the assets and prepare them for an eventual sale.

Michael Pieciak, commissioner of the Vermont Department of Financial Regulation, said this week, “As it did during the investigation, the State continues to work closely with the U.S. Securities and Exchange Commission in pursuing the civil cases against the defendants and achieving the best outcome for the investors and the Northeast Kingdom.”

SEC Continues to Fight Quiros’s Defense Strategy

Quiros has continued to fight to retain several defense strategies which the SEC balks at. Originally, Quiros had proposed through his earlier law firm more than 30 defenses, which now are pared back to three; the SEC is fighting two of them, and motions have been going back and forth between his attorneys and the SEC over that disagreement.

Late last week, the SEC filed its latest response to Quiros trying to retain two of his defenses, which lay the blame for the alleged ‘Ponzi-like’ scheme at the feet of his advisors, and try to create a buffer between him and the debts left in the wake of the fraud case.

Quiros’s latest effort to the SEC trying to strike his second and third affirmative defenses in the case “is riddled with factual mistakes and overt misstatements of the law, and ignores significant case law,” the SEC’s Levenson wrote in a reply on Friday in federal court.

The reply says Quiros’s argument is “devoid of details,” and “does not allege what ‘others’ Quiros is referring to, any facts showing why he is entitled to contribution from these unnamed ‘others,’ what specific claims he is alleging his set-off defense applies to, the specific victims, or the losses he is claiming he (or ‘others’) repaid.”

Levenson argues that the lack of specificity in Quiros’s claims means the defense has not been fairly noticed to the SEC.

The defenses Quiros has pled “…contain no facts but only the bare minimum assertion that the defense exists, (and) are not proper under any pleading standard,” the SEC argued. “If Quiros, as he states, is not prepared to reveal the professionals he relied on or the third parties who he claims owe him contribution, then the Court should make him pay the price and strike his second and third affirmative defenses as the law requires. At a bare minimum, the Court should strike them and order Quiros to replead them with the kind of factual detail the Federal Rules and the cases mandate.”

Meanwhile, as the two sides prepare for mediation, they also work toward a possible trial.



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