Law360, New York (May 16, 2016, 4:12 PM ET) — A Vermont Ski resort owner accused by the U.S. Securities and Exchange Commission of a $350 million fraud scheme using the EB-5 immigrant investor program urged a Florida federal court Friday to let him pay attorneys’ fees racked up defending himself, saying the investors’ money is safe.
Jay Peak Resort owner Ariel Quiros is asking the court for an order that would permit him to pay about $280,000 in fees to attorneys and an expert witness, a bid the SEC blasted this month as an “outrageous” request that jeopardizes the ability of defrauded investors to get their money back. But Quiros fired back on Friday, arguing that the SEC is at most looking to disgorge $55 million and that the figure is actually overstated by $30 million. And even though the SEC has undervalued the resort, it admits that it’s worth more than the regulators can recover, Quiros said.
“While the SEC’s so-called ‘economist’ attempted to devalue Jay Peak — ignoring, among other things, an unseasonably warm winter — the resort’s worth is more than sufficient to cover potential disgorgement even of $55 million,” Friday’s reply said. “An order releasing money for fees and costs could not conceivably jeopardize any hypothetical disgorgement.”
Quiros also pushed back against the SEC’s assertion that the fees request is too high, arguing that the case is complex and that the owner is also fighting a suit over similar allegations in Vermont.
“This argument fails to account for the exigencies of a motion for preliminary injunction, the freeze order and the receivership order, the complexities of this litigation, and the parallel litigation in Vermont, which itself requires staffing and preparation,” the reply said. “And yet again, the SEC fails to identify a single specific instance in which partner involvement was inappropriate.”
The SEC sued Quiros and Jay Peak CEO William Stegner last month over an alleged eight-year scheme that raised $350 million from foreign investors. They allegedly told investors that their money funded expansions at the resort as well as a biomedical research facility in Vermont.
The SEC said the two men, through various companies including Jay Peak and Q Resorts Inc., used $200 million of the money in “Ponzi-like fashion” to cover losses in unrelated projects and to pay for $50 million in Quiros’ personal expenses, like buying a luxury condo and paying income taxes. The SEC said the fraud included false statements, deceptive financial transactions and outright theft.
The state of Vermont has also sued Quiros and Stegner over the same alleged fraud scheme. The owner has pushed back against the SEC’s bid for an asset freeze and the appointment of a receiver for the property.
In addition to the fee request from Quiros’ current attorney, former counsel Berger Singerman LLP is also asking the court to allow it to be paid. The firm is seeking $96,930.47 for work it said it performed for the defendant between April 1 and May 5. It said the 177 billable hours was justified becuse of the enormous amount of work it undertook in such a brief amount of time.
“During Berger Singerman’s tenure as Quiros’ counsel, the firm was instantly thrust into an emergency situation of learning a tremendous amount of very complex facts, events and transactions in issue, involving about many thousands of pages of documents and pleadings with exhibits,” the firm said in a motion for payment. “And in fairness to Berger Singerman, we think we excelled in every task, providing the client and lead counsel with quality and efficient legal services.”