EB-5 Fallout: Quiros Seeks to Have Federal Receiver Removed

EB-5 Fallout: Quiros Seeks to Have Federal Receiver Removed

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

Ariel Quiros’s lawyer, who last week filed a memorandum seeking for him to regain control over his businesses in the Northeast Kingdom, was not the same attorney representing him for a show cause hearing in U.S. District Court in Miami on Monday and yesterday.

Charles Lichtman, who on Thursday filed a memorandum seeking to have Quiros restored to control of his Northeast Kingdom Economic Development Initiative projects, said in an email he is no longer involved in the case.

Lichtman’s name has appeared on the filings in Quiros’s defense since he was first accused by the U.S. Securities Exchange Commission of an alleged scheme to defraud investors.

Quiros is accused of masterminding a fraudulent scheme which state and federal officials say dates to 2008 when he bought Jay Peak. He and his business partner, Bill Stenger, stand accused of misappropriating more than $200 million of investor funds in the EB-5 immigrant investor program, and Quiros alone is also accused of pocketing another $50 million.

Attorneys for Quiros argue in the motion that five of seven projects under the Northeast Kingdom Economic Development Initiative he is partners in with Bill Stenger have come to fruition, “and are fully operational, and the others have been on track to be completed.”

“The incontrovertible facts demonstrate that the sponsors of these projects delivered exactly what was promised to investors and committed no wrongdoing,” wrote Lichtman in Thursday’s filing for his former client.

The memorandum filed by Lichtman late last week insists Quiros has not committed any wrongdoing.

“The SEC sues for federal securities fraud even though it cannot demonstrate that Quiros made a representation to investors that was false,” Lichtman asserts. “As a matter of law, this is fatal to the SEC’s claims. Indeed, the SEC bases its claims against Quiros on documents distributed to investors before he even owned Jay Peak and /or that he had no role in preparing.”

To the allegation that Quiros pocketed more than $50 million of the EB-5 investments and used them for luxury items, taxes and more, Lichtman wrote that, “…what the SEC mischaracterizes as ‘investor funds’ in fact belonged to entities that Quiros owned or controlled, and these entities had an absolute right to receive these funds.”

“Critical to the SEC’s claim of impropriety is the assertion that Jay Construction Management, Inc. (JCM), which now is owned by Quiros, served as a conduit for comingling funds. In fact, under contract, these funds belonged to JCM and not to investors,” the court document states. “Indeed, the agreements and investing documents fully disclosed this to potential investors…JCM had no obligation to segregate its own funds in any respect, nor was there any limitation on what it could do with the money that it earned.”

Declarations of Jay Peak’s chief financial officer, George Gulisano and attorney William Kelly, were entered as exhibits last week, as well, in Quiros’s defense.

The memorandum presses federal officials why, during an investigation that goes back three years, they did not step in earlier to protect investors. “Plainly, if the SEC truly believed that appointment of a Receiver was necessary to protect investors, it would not have sat silently as it did for three years… the SEC has ‘cherry picked’ evidence and ignored proof that exonerates Quiros and demonstrates that he has not violated any federal securities law,” the memorandum concludes.

“No money is missing… every penny spent has been properly spent.”

On Friday, the SEC filed additional declarations for Monday’s show cause hearing, including the declaration of George Gulisano, Jay Peak’s chief financial officer and SEC investigator Trisha Sindler, as evidence in their case against Quiros.

“The Commission’s position is that instead of using the investor funds JCM had received to benefit the project, Quiros misappropriated and misused most of these funds,” the SEC filing goes on, stating the funds were used to pay off a margin loan that was unrelated to the AnC Bio project, to pay off a margin loan he had used to buy the Q Burke Resort, and that he had used more than $10 million of the funds to back a personal line of credit he used to pay his personal income taxes, “…and pay Ponzi returns to investors in prior projects,” and more.



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