Going Downhill Quickly – Jay Peak Involved a $350 Million Fraud

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.”

Owner and CEO of Jay Peak Accused of Fraud with EB-5 Program

Law360, Los Angeles (April 14, 2016, 6:16 PM ET) — The U.S. Securities and Exchange Commission slapped the owner and CEO of a Vermont ski resort with a fraud suit accusing them of misappropriating the bulk of $350 million in investments obtained under the EB-5 immigrant investor program, according to documents filed in Florida federal court and unsealed Thursday.

Federal securities regulators say Ariel Quiros, a Florida entrepreneur and owner of the Jay Peak Inc. ski resort, and Jay Peak CEO William Stenger engaged in an eight-year fraudulent scheme that raised $350 million from investors hoping to obtain visas through the EB-5 program, which rewards job-creating investments in the U.S., purportedly to build and develop 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 as well as $50 million on Quiros’ personal expenses.

“The alleged fraud ran the gamut from false statements to deceptive financial transactions to outright theft,” Andrew Ceresney, director of the SEC’s Division of Enforcement, said in a statement. “The defendants diverted millions of EB-5 investor dollars to their own pockets, leaving little money for construction of the research facility investors were told would be built and thereby putting the investors’ funds and their immigration petitions in jeopardy.”

Representatives for the defendants did not immediately respond to requests for comment Thursday.

U.S. District Judge Darrin P. Gayles granted the SEC’s motion for a freeze of assets of Quiros, Jay Peak and various related companies, according to court documents.

Quiros diverted the investor funds in order to buy a $2.2 million luxury condo at Trump Place in New York, pay off his income taxes and acquire an unrelated ski resort called Q Burke, according to the SEC’s complaint.

“Quiros orchestrated and Stenger facilitated an intricate web of transfers between the various defendants and relief defendants to disguise the fact that the majority of the seven projects were either over budget or experiencing shortfalls,” the complaint says. “These shortfalls were due in large part to Quiros pilfering tens of millions of dollars of investor money for his own use.”

The SEC alleges violations of the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 and seeks preliminary and permanent injunctions, financial penalties and disgorgement of ill-gotten gains, as well as injunctive relief against Quiros and Stenger.

Vermont state officials said Thursday they have filed their own civil suit against Quiros and others that mirrors many of the SEC’s claims.

Vermont Gov. Peter Shumlin said in a statement they were committed to protecting the jobs of Vermont residents as well as the investors.

“This is obviously a difficult day for Vermont and for the many people, myself included, who are so invested in growing jobs and economic opportunity,” Shumlin said. “Most of all, this is a difficult day for the hundreds of employees in the Northeast Kingdom who rely on Jay Peak, Q Burke, and the related projects that appeared to hold so much promise.”

The SEC is represented by Christopher E. Martin and Robert K. Levenson.

Counsel information for the defendants was not immediately available.

The case is Securities and Exchange Commission v. Ariel Quiros et al., case number 1:16-cv-21301, in the U.S. District Court for the Southern District of Florida.

Echo Mountain Resort Files Chapter 11

The Denver Post reports that Pykkonen Capital filed Chapter 11 in Colorado last week listing approximately $1.45 million in unsecured debt to its top 20 unsecured creditors, comprised mainly of lenders.  Nora Pykkonen purchased Echo Mountain Resort in 2012 with plans to develop a private ski racing training facility.  She bought the 226-acre ski area in Clear Creek County and converted it into a private, membership-only training ground for school-age ski racers. She hired Olympic-level coaches and promised $5 million in upgrades. Ski clubs and university teams from across the country booked time and lanes. She sold memberships in her new Front Range Ski Club for $5,000. The plan was to grow a ski racing scene for Front Range skiers.  Pykkonen said she plans to restructure.

Cranmore to Undergo $50 Million Capital Project


Cranmore to Undergo $50 Million Capital Project

SAM Magazine—North Conway, N.H., Jan. 28, 2016—The biggest ski town/resort news could just happen at quaint, historical Cranmore Mountain in the coming years. In a group press conference on Wednesday, Boston entrepreneur Joe O’Donnell, along with his partner, the father-son team of Brian and Tyler Fairbank (of Jiminy Peak, Bromley, and Cranmore) detailed a $50 million project and improvement plan that they hope to break ground on this spring.

The plan calls for a slopeside development called “Kearsarge Brook,” which will marry lodging, residential, retail, and a variety of amenities. But their goal is actually bigger: to re-invigorate North Conway, N.H., back to being the iconic ski town it was in the mid 1900s, or as O’Donnell said, to “reboot” the region.

“I love the area and I think it can be rebooted,” said O’Donnell, pointing out that with the creation and growth of Settler’s Green, the outlet shopping development he was involved in from the start 27 years ago, it has already “gone from a two season to a four season destination.”

He added that the aim of catapulting North Conway into a world-class destination isn’t a long shot. “What we are talking about here is creating a world class community from a first-class one,” he said. “This is not a zero to 10 situation.”

The plan includes, when complete, 106 new residential condominium residences at the base of Cranmore, and six new buildings that will eventually replace all existing facilities there, with the exception of the ticket office building that was renovated in 2010, and the newer Artist Falls Lodge.  Also, the classic Meister Hut will remain as it has been for decades—part of the resort’s goal to embrace its history while taking on major change.

This was in the minds of the Fairbank Group when they purchased the resort 10 years ago: “We could see that it was a little engine that could,” said Brian Fairbank. “It just needed a hug.”

A hug it got, with an immediate $10 million infusion into the mountain that improved its snowmaking, updated lifts, and added a wide variety of summer attractions that have amped up the resort’s annual visits.

Now, launching this project, the team hopes to make Cranmore—and North Conway—the world-class destination the original founders envisioned back in the 1930s.

Of course, it all will come down to real estate. The team, who all worked in tandem to make Jiminy Peak a success a quarter century ago, note that while that project took a full 25 years to come to fruition, this one should take half the time or less, thanks to lessons learned from Jiminy Peak.

In fact, permitting and financing are already in place. Now, partnering with local Badger Realty, they are launching sales of the first 18-unit building and hope, with enough commitment, to break ground in the spring.

Most of those purchases, they believe, will come from the metropolitan Boston area, since 60 percent of Cranmore’s visitors hail from that market. Cranmore president Ben Wilcox, who grew up in the area, also sees potential from current property owners in the North Conway region, since the slopeside access will offer something new to Cranmore skiers—right now, the only ski-in ski out property in the valley is the Grand Summit at Attitash.

The cost of the new units will range from the $300,000s to $500,000s and have two to three bedrooms.

Wilcox said the community at large is supportive of the project, citing its infusion of jobs and draw of more visitors to all businesses in the area.

It will also give locals a more comfortable ski experience. “This will double the day lodge space,” he said.



CNL Still Looking to Sell Off Ski Resorts

First Tracks!! has reported that CNL Lifestyle Properties, the Orlando-based REIT that over the past few years has quietly become the largest ski resort owner in the U.S., is still looking to sell off its ski areas, but won’t be able to do so in time to meet a self-imposed deadline. Skiers visiting destinations like Crested Butte, Okemo, Sugarloaf and Brighton are likely unaware that the mountain they’re skiing is owned by CNL. That’s because CNL has typically leased its resorts back to their previous owners, who continue to operate them following the infusion of CNL’s cash. CNL makes money for its investors via the operators’ lease payments.

But CNL, which also operates amusement parks, marinas, water parks and other attractions, is looking to get out of the ski resort business. It now admits, however, that it won’t be able to do so in time to meet its own Dec. 31, 2015 deadline. Thus CNL has sold only one resort, Bretton Woods in New Hampshire. Fifteen others, including Loon Mountain, Mt. Sunapee, Sierra-at-Tahoe and Sunday River, remain on the market.

Willard Mountain stockholders get $5 a share in bankruptcy deal

The TimesUnion reports that stockholders of Willard Mountain will get $5 per share in a deal reached with the ski area’s creditors.

The Chapter 11 bankruptcy plan clears the way for Willard Mountain owner Chic Wilson and his wife to have 100 percent ownership of the business so they can seek a buyer in the next few years.

The family that owns the land at Willard Mountain had sued Wilson over unpaid lease obligations, and under the bankruptcy plan, that money will be paid over time.

Wilson and his wife have owned the ski area since 1994. They put the business into Chapter 11 bankruptcy protection in June in order to freeze litigation brought by its landlord but have continued to operate and have been profitable.

Willard Mountain has 14 trails and is popular with families. A season pass runs for between $300 and $400. Like most other small mountains in the state, Willard Mountain has not been able to open for the season due to the unseasonably warm weather. Even Whiteface Mountain outside Lake Placid only has 6 trails open so far.

There are about 50 shareholders, although Wilson and his wife already own 58 percent of the stock, but the couple will not receive any money for their shares. About $15,000 will go to the remaining shareholders.

Willard Mountain’s bankruptcy lawyer Richard Weisz said he did not know how much the shareholders originally paid for their stock. However, he noted that shareholders with at least 100 shares will receive a season pass for five years, and shareholders with at least 200 shares will received a family pass for five years. About 12 shareholders fall under that category.

The margins are extremely thin in the downhill ski business. For instance, even though Willard Mountain makes about $900,000 in sales every winter, it is only projected to earn $40,000 to $50,000 in “profit” in the next few years, according to an analysis included in the bankruptcy plan.

Peak Resorts 2Q Loss Widens

The St. Louis Dispatch has reported that Peak Resorts’ second quarter loss widened as food and beverage and lodging revenue declined during the summer season.  The operator of 13 ski resorts reported a $6.9 million loss for the quarter that ended October 31, or 49 cents a share, compared to a $6.7 million loss, or $1.69 a share last year.  Revenue slipped 1.2% to $6.2 million.  The company’s first acquisition as a publicly traded company is on track to finalize before the end of the year.  The company announced last month that it is buying Hunter Mountain in New York for $36.8 million.

Peak Resorts in Expansion Mode Again

With a new $15.0 million line of credit in hand, Peak Resorts is poised to make additional resort acquisitions and add to its already impressive portfolio.  Peak currently owns or operates 13 ski resorts in the Northeast and Midwest.  The line of credit, led by Royal Banks of Missouri, should put Peak in a position to move quickly if the right opportunity presents itself.

Action Sports Media Leader Files Bankruptcy

SBC Media has filed for bankruptcy protection.  The rider-owned sports media company announced that it is closing its doors and the delivery of Snowboard Canada, SBC Skier and its other titles. The investment infusion in 2014 was used to restructure the group and shift toward digital mediums, but it was not enough.  There are several companies showing an interest in purchasing the magazines and possibly and continuing the publication.