Towns value Quiros’ properties well below state’s $2M settlement figure

A residence owned by Ariel Quiros at 4452 Darling Hill Road in Burke. 

Properties owned by disgraced former Jay Peak developer Ariel Quiros are worth 20 percent less than state officials say.

That’s according to VTDigger’s review of town assessments of properties Quiros has agreed to turn over to the state as part of the settlement of a fraud lawsuit brought against him.

Those records shows towns value those properties about $400,000 less than the $2 million state officials said the settlement was worth.

The settlement was already well short of the $8 million figure the state had earlier argued for as part of as freeze of Quiros’ assets during a court hearing in the case.

Now, it appears, the settlement could bring the state even less.

However, state officials remain confident that values set by the towns is lower than what the properties will actually fetch on the open market.

“We’re pretty comfortable with the $2 million estimate,” said Michael Pieciak, commissioner of the Department of Financial Regulation. “You’ll never know what the true value will be until you end up selling the properties.”

When state officials, including Gov. Phil Scott and Attorney General TJ Donovan, held a press conference last month in Newport announcing the settlement they referred to it repeatedly as a $2 million deal with Quiros.

Though, they added, that they hadn’t had Quiros’ properties appraised, not wanting to spend down that money, lowering the eventual overall settlement.

Municipal records obtained by VTDigger this week showing the assessed value of the five properties revealed a total value of the settlement properties at $1,618,700.

The five properties and their assessments are as follows:

• A Jay Peak Villages Townhouse on South Village Road in Jay, two-story, four-bedroom, four-bathroom unit built around 2003, valued by the town at $637,400.

• A parcel of land, measuring 78.4 acres, on Shallow Brook Road in Jay, is valued by the town at $148,600.

• A parcel, known as Okcha Land, consisting of nearly 80 acres in Jay, is valued by the town at $117,200.

• Aqurios Farms, consisting of nearly 200 acres of land, on Loop Road in Troy, is valued by the town at $234,500.

• A parcel at 4452 Darling Hill Road in Burke, consisting of 16.5 acres with a residence built around 1992 with 2,111 square feet, one and three-quarters bathrooms, and three bedrooms, is valued by the town at $481,000.

The $2 settlement with Quiros, which is still awaiting final approval from Washington County Superior Court Judge Mary Miles Teachout, resolves civil securities fraud claims the state leveled at Quiros more than two years ago.

“This is not something that we spent a lot on money valuing these properties, because we really didn’t want to dissipate assets in that way,” Assistant Attorney General Kate Gallagher, who has handled the Quiros case, said at the press conference last month announcing the settlement.

Gallagher on Wednesday referred comment on the value of the properties to Pieciak. When setting the value of the properties that are part of the settlement, he said, several factors were taken into consideration.

“We looked at the assessed value, but the assessed value is the not the market value,” he said.

Pieciak said factors taken into account in determining the value of the properties included comparable sales as well as input from Michael Goldberg, the court-appointed receiver now overseeing Jay Peak Resort, and Goldberg’s “real estate team.”

“We got a sense of what he might offer up these properties for,” Pieciak said.

Mike Pieciak, commissioner of the Department of Financial Regulation. 

Take the Darling Hill property in Burke, which makes up for its lack of curb appeal with a stunning view of Burke Mountain. Piecieck said while it may be valued by the town at $481,000 he has received estimates that it could sell for as high as $675,000.

In total, Pieciak said, the state’s estimate of the value of the settlement properties to be a range of $2 million to $2,250,000.

Even after paying roughly $28,000 in delinquent taxes and another $43,000 in overdue homeowners association fees, the state would still net between $1.9 million and a little more than $2.1 million, Pieciak said.

Jim Campbell, who operates Jim Campbell Real Estate with offices in Jay and Newport, said Wednesday that he doesn’t know the specifics of the settlement or the properties.

But he did say it’s difficult to say that sale prices in the Northeast Kingdom meet or exceed assessed values set by towns because it tends to vary by municipality.

“I wouldn’t tell you Jay hasn’t been a struggle to sell anything in the last three years because I’d be lying to you,” Campbell said. “There was a lot of uncertainty as to what was going to happen in Jay.”

But, he said, that has been changing after two solid winter ski season following the filing of the fraud case two years ago. And, Campbell said, it will get even better with what he hopes will be another strong ski season this year.

The property in Burke, he said, will likely be the easiest to sell at the highest price.

“That’s the one that’s going to be the most valuable, most saleable,” Campbell added. “Burke has really turned the corner.”

State and federal regulators filed separate civil lawsuits in April 2016 against Quiros and his former business partner, Bill Stenger, Jay Peak’s former CEO, accusing the two men of misusing $200 million in EB-5 investment funds.

Bill Stenger, left, and Ariel Quiros at a ribbon cutting.

The two men had raised the money through the federal immigrant investor program to fund a series of development projects over an eight-year span, including massive upgrades at Jay Peak, a new hotel at Burke Mountain, and two projects that never got off the ground in Newport.

The developments ground to halt when the lawsuits were brought alleging a “Ponzi-like” scheme operating behind the scenes with the investor funds.

Quiros, the alleged mastermind of the scheme, and Stenger eventually settled their cases with the U.S. Securities and Exchange Commission, with Quiros agreeing to surrender properties valued at $81 million and Stenger agreeing to pay a $75,000 penalty.

In settling the state case, Stenger has agreed to pay $100,000, in installments over four years, to the city of Newport, which will be administered by the state Agency of Commerce and Community Development. The funds, like the ones the state will receive from the proceeds of Quiros’ properties, will also be earmarked for economic development in Newport.

None of the money will go to the more than 800 EB-5 investors who were allegedly defrauded by the developers, which state officials had previously said was the reason behind the state launching its own case.

Instead, the money is targeted to Newport, the Northeast Kingdom community that is home to two failed projects headed by the developers.

One of those, a proposed biomedical facility, was deemed “nearly a complete fraud” by the SEC.

The other left a large hole in the city’s Main Street after buildings were razed for an office project that stalled once state and federal authorities brought their lawsuits in April 2016.

https://vtdigger.org/2018/08/08/towns-value-quiros-properties-well-states-2m-settlement-figure/

Mentions

• Ariel Quiros
• Vermont Agency of Commerce and Community Development RC
• Jay Peak - Q Burke Mountain Resort, Hotel and Conference Center L.P.
• UNITED STATES SECURITIES AND EXCHANGE COMMISSION
• Bill Stenger

Litigation Cases

• 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

States

• Vermont