Lawsuit alleging kickback scheme set to be first EB-5 case to go to trial
The Hotel Jay and Conference Center at Jay Peak Resort.
A lawsuit alleging a “kickback” scheme involving an attorney who brought foreign investors and their money to Jay Peak projects may be the first to make it to trial in a years-long scandal that has rocked the state.
Judge Christina Reiss on Thursday told attorneys in the case during a hearing held in federal court in Burlington to be ready for a trial to begin April 20.
Moments earlier in the hearing, Russell Barr, an attorney for the EB-5 investors bringing the suit, told the judge he wanted the case to proceed as fast as possible.
“We are ready for trial,” he said, adding that the case was already over two years old. “We would like to have our day in court and see what the jury has to say.”
Other cases related to the largest fraud scandal in the state’s history have either settled or have been put on hold after criminal charges were brought earlier this year against Jay Peak developers Ariel Quiros and Bill Stenger, as well as two of their associates.
Many of the earlier EB-5 projects headed by Quiros, Jay Peak’s former owner, and Stenger, the past CEO of the resort, were built, including massive upgrades at the northern Vermont ski area.
However, later projects ground to a halt when regulators say they uncovered a “Ponzi-like” scheme, which involved the developers commingling and misusing $200 million of the more than $350 million raised from foreign investors through the EB-5 visa program.
Quiros, according to regulators, also siphoned off another $50 million to pay for personal expenses, such as New York City condo and his own taxes.
The federal criminal fraud charges against Quiros and Stenger and two other men are tied to a project they headed to build a $110 million biomedical research center in Newport, known as AnC Bio Vermont. That development was later termed by federal regulators “nearly a complete fraud.”
Barr’s lawsuit, filed on behalf of three Chinese investors, is against Shen Jianming, an immigration attorney from New York state.
The three investors — Wei Wang, Guangyi Xiong and Xiaogeng Feng — say they never would have invested in Jay Peak projects had their attorney warned them about allegations of fraud that surfaced in 2012 and again in 2014.
The legal action claims that Shen took more than $1.25 million in kickbacks in return for bringing investors to the Jay Peak projects led by Stenger and Quiros.
According to the lawsuit, at the time Shen was bringing investors to the Jay Peak projects he did not tell immigrant investors he was getting a payoff from Stenger in addition to the legal fees he charged those investors to help with their immigration paperwork.
Barr has faced many roadblocks from Judge Reiss as he sought to expand the lawsuit to include as plaintiffs many more of the over 800 EB-5 investors in the projects headed by Quiros and Stenger.
Russell Barr speaks to reporters outside the Lamoille County Courthouse in Hyde Park in 2017.
The judge had earlier denied a bid by Barr to make the lawsuit a class-action to include more of those investors in the case.
Reiss has also blocked Barr from deposing top state officials as part of his case. Barr has contended that Shen opened the door for such depositions when he claimed as a defense that he blamed state officials for not property monitoring the EB-5 projects.
Reiss ruled that Barr must first take the deposition of Shen. And, depending on what Shen said, the judge said she may allow the depositions of other state officials.
Barr has since deposed Shen in which he said he had “multiple interactions” with the witnesses Barr had been seeking to depose, including traveling to China to translate the speeches and lectures of some of them. He specifically named Lawrence Miller, the former secretary of the Agency of Commerce and Community Development.
However, the judge thwarted Barr’s efforts to press ahead and depose those state officials, finding that Shen’s deposition did not show that he had garnered any information from those state officials other than what was already publicly available about the EB-5 program and the projects.
As a result, Barr won’t be able to call those state officials as witnesses in the trial and Shen won’t be able to use them either as he mounts his defense.
Barr told the judge during the hearing Thursday he believed the trial would run about two days.
He said that he expected to call a handful of witnesses, including a legal ethics expert, the three foreign EB-5 investors who are plaintiffs, and Michael Goldberg, the court-appointed receiver overseeing the properties at the center of scandal, including Jay Peak and Burke Mountain ski areas in northern Vermont.
In addition, Barr said, he may call Stenger to the stand to testify in the case, though he told the judge he wouldn’t be surprised if that was foiled should Stenger invoke his Fifth Amendment right against self-incrimination with the criminal charges currently pending against him.
Attorney Andrew Montroll, representing Shen, said Thursday during the hearing that before moving forward to a trial he wanted to submit a motion for summary judgment, a filing seeking to have the case decided by a judge on legal grounds.
However, Reiss decided against that, saying that an earlier schedule for the case set a deadline for August for such motions to be filed and none were submitted.
Reiss did say that she would allow Montroll to file a motion making arguments he would have made in a summary judgment filing as part of a motion in limine, which are submitted and decided on right before a trial takes place.
Reiss also told the attorneys on both sides Thursday that if the case resolved to let her and the court know as soon as possible.
She said she didn’t want to waste the court’s time, or the spend money to bring in jurors if a settlement had been reached.
- Vermont Agency of Commerce and Community Development RC
- Jay Peak - Q Burke Mountain Resort, Hotel and Conference Center L.P.
- Jay Peak - AnC Bio Vermont
- Jay Peak Resort - Hotel Jay & Conference Center
- Russell D. Barr
- Ariel Quiros
- Bill Stenger
- United States of America vs Ariel Quiros & Bill Stenger
- Michael I. Goldberg vs Ariel Quiros
- MICHAEL I. GOLDBERG vs The AM Wealth Management Group of Raymond James & Ariel Quiros & Joel Burstein
- JAMES B. SHAW, JOHANNES EIJMBERTS, and LORNE MORRIS Individually and On Behalf of All Others Similarly Situated, vs The AM Wealth Management Group of Raymond James & Bill Stenger & Joel Burstein & Ariel Quiros
- ALEXANDRE DACCACHE, on behalf of himself and all others similarly situated vs Ariel Quiros & Bill Stenger & The AM Wealth Management Group of Raymond James & Joel Burstein
- State of Vermont vs Bill Stenger & Ariel Quiros
- UNITED STATES SECURITIES AND EXCHANGE COMMISSION vs Ariel Quiros & Bill Stenger
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