Receiver seeks $1.95m helping clean EB-5 mess Jay Peak

Receiver seeks $1.95m helping clean EB-5 mess Jay Peak

Michael Goldberg, left, the receiver for the Jay Peak and Burke ski areas, and Gov. Peter Shumlin

The receiver for two troubled ski resorts in the Northeast Kingdom is asking the court to approve $1.95 million in legal and accounting fees.

Michael Goldberg, the court-appointed receiver for Jay Peak and Burke Mountain resorts, racked up the fees as he worked to stabilize the companies, which were on the brink of bankruptcy. His law firm will receive nearly half of the money sought.

The resorts were seized by the federal government in April, and Goldberg has spent the past seven months cleaning up the mess left in the wake of the biggest alleged EB-5 fraud in the nation’s history.

Goldberg submitted a filing Tuesday evening asking a judge to permit the payment of those fees and expenses with proceeds from a recently approved $13.3 million settlement with Citibank.

“The Receiver recognizes that this is an optically large amount,” Goldberg wrote, “however, it is important to recognize that this fee application covers a nearly seven month period and the professionals who seek payment hereunder have collectively discounted their fees by over $875,000 off their regular rates.”

He said the receivership is “extremely complex,” involving the operations of hotels and resorts at two different mountains, Jay Peak and Burke, both in Vermont’s remote Northeast Kingdom.

“Unlike other receiverships, the Receiver and his professionals have also been required to deal with numerous immigration issues affecting hundreds of investors,” Goldberg added. “In short, this receivership is much more complicated than other receiverships that simply involve the liquidation of non-operational assets.

Goldberg posted the new filing on the website he runs to keep the hundreds of investors up to speed on the status of the receivership and the cases against the developers who allegedly defrauded them, Jay Peak’s owner Ariel Quiros, and Bill Stenger, the resort’s former CEO.

The filing was accompanied by another document, “Receiver’s second interim report,” which reads like a “State of the State” of the receivership properties. The report talks of how the operations of those properties have stabilized since April when Goldberg assumed his duties after federal and state lawsuits were leveled against Stenger and Quiros.

Quiros and Stenger are accused in the lawsuits of misusing more than $200 million in funds raised over eight years through the EB-5 immigrant investor program that were supposed to pay for specific projects in the resort towns of Jay and Burke as well as the city of Newport.

Bill Stenger

The projects included hotels at Jay Peak and Burke Mountain as well as other offerings that raised funds from EB-5 investors but never materialized, including a proposed $110 million biomedical center in Newport, that federal regulators have said was “nearly a complete fraud.”

EB-5 immigrant investors put up $500,000, plus an administrative fee, in a qualified project. If that investment creates 10 jobs, the investor becomes eligible for permanent U.S. residency. More than 700 investors from 74 countries were allegedly defrauded by Quiros and Stenger in a “Ponzi-like” scheme that was driven by money from new investors. When that money dried up as a result of VTDigger reports about allegations of financial improprieties, three of the projects were not completed as advertised and the jobs were not created.

Investors are owed more than $350 million. Goldberg says they will be repaid when the resorts are sold.

Federal regulators allege the two developers operated a “Ponzi-like” scheme, with Quiros using investor funds to pay for personal expenses, such as the purchase of a $2.2 million luxury condo in Trump Tower in New York City.

Goldberg was appointed in April by federal Judge Darrin P. Gayles as the receiver to oversee the properties associated with the fraud case, including the resorts at Jay Peak and Burke Mountain.

Gayles presides over the federal lawsuit brought by U.S. Securities and Exchange Commission against Stenger and Quiros. The case is pending in Miami, where Quiros resides and many of his businesses are located.

When Goldberg took the case last spring, more than $12 million was owed to contractors and vendors, the tram at Jay Peak needed $5 million in repairs, and there was little money leftover from the last ski season to run the resort over lean the summer months.

In an earlier report to investors, back in August, Goldberg did not specify how much the receivership had tallied in legal fees since his appointment to the position in April. Goldberg, and his firm, Akerman LLP, based in Fort Lauderdale, Florida, asked the court at that time to defer payment until the resorts are on firmer financial footing.

Now, with the funds from the Citibank settlement, Goldberg is seeking payment. That settlement was reached to avoid litigation between the receivership and Citibank over a $15 million line of credit Quiros took out with the financial institution in 2015.

“The professionals who seek payment pursuant to this fee application have financed this receivership due to their agreement to defer payment for upwards of six months so that the receivership estates’ limited funds could be used to pay critical operating expenses in order to preserve the assets for the investors’ and creditors’ benefit,” Goldberg wrote in Tuesday’s filing.


Goldberg, in breaking down the request, wrote that he is seeking $1,883,901 for the fees for the professionals “engaged by the receivership,” as well as $69,566 for expense reimbursements, for a total payment of $1,953,467.

The filing states that Goldberg and his firm had agreed to reduced billing rates. Instead of their standard billing rates, which range from $440 to $690 an hour, Goldberg wrote, in this case, all partners are billed at $395 an hour.

Associate rates, which extend up to $340 an hour, he added, have been set as $260 an hour, according to the filing, with paraprofessionals, who regularly bill from $220 to $295 an hour, billed at $175 an hour.

Stateside Townhomes at Jay Peak.

In addition to the rate reduction, all time billed to long distance travel is reduced by an additional 50 percent, Goldberg wrote, adding the discounts equates to a $410,000 reduction from Akerman’s standard billing.

Since the appointment as receiver in April, the filing states, Goldberg and his firm, Akerman, billed 2,470.20 hours and seeks payment of $822,453 in fees, and reimbursement of $16,070 in reimbursements, for a total of $838,523.

Tuesday’s filing contains nearly 400 pages of billing records, with short explanations for each entry as well as a log of time spent on each task.

Also, Soneet Kapila, a certified public accountant, and the accounting firm Kapila Mukamal, based in Florida, provided accounting and forensic work for the receivership, according to the filing.

Kapila agreed to a reduced rate for the professionals in the firm for this case not to exceed $395 an hour, and all time billed to long distance travel was also cut by 50 percent, according to the filing, saving the receivership $40,000.

For its work so far, the accounting firm billed for 2,495.2 hours, and seeks payment of fees of $584,759 and reimbursement of expenses of $19,487, for a total of $604,246, Goldberg wrote.

In addition, Klasko Immigration Law Partners, LLP, of Pennsylvania, has worked for the receivership in assisting with EB-5 immigration matters. The firm is described in the filing as a “cutting-edge immigration” law firm, with experience helping immigrant investors as they seek permanent U.S. residency through the EB-5 program.

The Klasko attorneys bill at rates of $340 to $850 an hour, but for this case have reduced it rate to about $339 an hour. For their work, Klasko is seeking payment $47,739 for 139.5 hours, and reimbursement for $2,304 in expenses, for a total of $49,683, the filing states.

Expenses to other outside professionals brings the total request for payment to $1,953,467, according to the filing.


Attorneys fees have been the subject of much debate in the case, specifically involving Quiros.

Lawyers for the Miami businessman, at hearing last month, asked Gayles to approve the payment of about $1.5 million in legal fees accumulated over about four months. Quiros requested Gayles’ permission to use proceeds from a mortgage on a Setia luxury condo in New York City to pay the bills for his lawyers.

Ariel Quiros

Attorneys for the SEC argued for a much lower figure. They contended Quiros was quickly “squandering” funds on “exorbitant” legal fees.

After a nearly hourlong hearing, Gayles only a approved a fraction of the amount Quiros had been seeking, $80,000. The judge said he was trying to balance Quiros’ ability to defend himself with the need to protect the assets of investors who were allegedly defrauded.

Unlike the receivership’s request, which included fees and expenses for work by “professionals” other than lawyers, such as $604,246 for the accounting firm, Quiros’ bill dealt mostly with attorney expenses.

The judge still must approve Goldberg’s request.


In addition to covering the receivership fees, the Citibank settlement funds are expected to help pay for the the operations of the ski resorts at Jay Peak and Burke Mountain.

Goldberg also plans to pay roughy $2.5 million in overdue taxes in Burke, Jay and Newport.

The receiver also hinted in an interview Wednesday that additional lawsuits may be filed to recoup losses. Goldberg declined to elaborate on the possibility of the future litigation.

Goldberg said he intends to submit a filing with the court in the next week or so laying out the specifics of how he intends to use all of the proceeds from the Citibank settlement funds.

He did say that Stenger, who no longer is a full-time employee of the resort but does work for the receiver on an as-needed, hourly basis, is not being paid with any funds from the settlement.

The Jay Peak Biomedical Research Park, planned for the former Bogner plant in Newport. 

Stenger settled his federal case with the SEC in September. He agreed to cooperate with investigators and still faces the possibility of a civil monetary penalty based on his level of cooperation and ability to pay.

Also, contractors who haven’t received payment for work on the Burke Mountain and AnC Bio Vermont projects are expected to receive a portion of the more than $6 million they are owed from the Citibank settlement proceeds.

“I should be able to get contractors between 30 and 40 percent immediately, paid,” Goldberg said Wednesday. “Will try to get them more.”

He said that in about 10 months, if the receivership is able to successfully sell the Burke Mountain and Jay Peak ski resorts, contractors will end up getting 100 percent of what they are owed.


The document regarding the attorney fees and expenses was posted Tuesday evening at about the same time Golberg submitted another filing labeled, “Receiver’s second interim report.” The first report was submitted in August.

In addition to explaining how the resort operations have stabilized, the report provides several updates on the cases involving Quiros, Stenger and other parties associated with the fraud allegations.

Those updates include:

News just this week that Gayles issued a strongly-worded ruling, agreeing with the SEC to order a preliminary injunction against Quiros that freezes his assets associated with the case and prevents him from raising funds through the EB-5 program. The case is now headed to trial.

In the same case Gayles approved a process to search information from Quiros’ personal laptop to determine if he used it to conduct any business associated with investor fraud allegations.

Efforts in September by lawmakers in Congress, including Sen. Patrick Leahy, D-Vt., to pass reforms to the EB-5 program did not prevail. In the end, Congress passed a “straight reauthorization” of the program through early December, minus the reforms. Goldberg has said he expects Congress to pass another “straight reauthorization” of the EB-5 in December over the lame duck session, and is hopeful that in the new year lawmakers will act on proposed reforms that should provide some relief to defrauded investors.

Burke Mountain Hotel and Conference Center opened over the Labor Day weekend, and more news at that resort is expected soon. “To that end, the Receiver and (Burke Mountain Academy) hope to shortly announce some significant changes to Burke Mountain which will positively impact the Burke Hotel,” the report states. Goldberg declined to elaborate Wednesday.


Goldberg spoke Wednesday about the process ahead for selling Burke Mountain and Jay Peak ski resorts.

“We bring in the investment bankers, and they go around the world and solicit interest,” he said. “They will put together a package on the mountain and the hotels and they will send that out to thousands of companies in the ski arena space, investment bankers, bankers all over the world.”

He speculates that about 200 people or entities will express interest, and after they “kick the tires” that number will likely be greatly reduced to about a dozen, or half-dozen.

“Once you get down to the that group, you go into a control-type of auction where you bid them off of each of other to get to the highest purchaser who is most qualified to operate the mountain,” he said. “It’s important for us to leave the mountain and the hotels in good hands for the people of Vermont and the Northeast Kingdom.”

The investors are not slated to receive any of the Citibank settlement funds. Instead, through the sale of the assets and future litigation, Goldberg said Wednesday he optimistic that he can make them whole, both financially and with regards to their immigration status.

‘We’re hopeful we’ll get most of the investors, if not all of the investors, their green cards,” he said, adding, “We’re hopeful we’ll get most of the investors, if not all of the investors, the money they are owed.”


Litigation Cases


  • Vermont

Securities Disclaimer

This website is for informational purposes only and does not constitute an offer or solicitation to sell shares or securities. Any such offer or solicitation will be made only by means of an investment's confidential Offering Memorandum and in accordance with the terms of all applicable securities and other laws. This website does not constitute or form part of, and should not be construed as, any offer for sale or subscription of, or any invitation to offer to buy or subscribe for, any securities, nor should it or any part of it form the basis of, or be relied on in any connection with, any contract or commitment whatsoever. LLC and its affiliates expressly disclaim any and all responsibility for any direct or consequential loss or damage of any kind whatsoever arising directly or indirectly from: (i) reliance on any information contained in the website, (ii) any error, omission or inaccuracy in any such information or (iii) any action resulting therefrom.