A federal judge has approved a $1.5 million deal between the court-appointed receiver for the Jay Peak Resort projects and PeakCM, one of the contractors for a series of developments at the resort.
President and CEO of Williston-based PeakCM, Jerry Davis, originally sought $2.7 million in payment for work performed for a proposed biomedical facility in Newport. That project was swept up in a federal regulatory action, along with Burke Mountain and Jay Peak developments.
Federal regulators determined in April 2016 that AnC Bio Vermont was “nearly a complete fraud.”
Since then, PeakCM has waited for payment for contracting expenses he incurred for the Newport facility.
“The Settlement Agreement reduces the claims asserted by PeakCM by approximately $1.2 million, The Settlement Agreement, therefore, provides a substantial benefit to the Receivership Entities and their investors and other creditors,” Michael Goldberg, the receiver, wrote in a filing to a judge laying out the agreement.
“Accordingly, the Settlement Agreement is fair, adequate and reasonable,” Goldberg wrote, later adding, “The Receiver believes that approving the settlement and release with PeakCM is advisable and will undoubtedly benefit the receivership estate.”
Judge Darrin P. Gayles, who presides over the Jay Peak investor fraud case brought by the U.S. Securities and Exchange Commission, approved the settlement in an order issued last week.
Sandy Fead, the attorney for PeakCM, said the agreement was “satisfactory” for both parties.
“The whole settlement was a package resolution that had as factors that played into it the difficulty in pursuing claims in the receivership action,” Fead said. “It was a negotiation.”
Michael Goldberg, the receiver, and Davis could not be reached for comment.
The deal covers PeakCM’s work on the failed AnC Bio Vermont biomedical research facility and projects at Burke Mountain, including construction of a hotel at the ski resort and the installation of snowmaking equipment.
PeakCM initially had a $2.75 million claim against the receivership, Goldberg wrote in a filing laying out the agreement.
That claim included $2.1 million for site work and some building work on the biomedical center in Newport. That project had barely started before the investor fraud case was brought by the SEC in April 2016.
PeakCM also had a claim of $220,000 for its unpaid portion of the cost of building the Burke hotel and $448,945 for purchases and work related the snowmaking equipment at the resort.
PeakCM reduced its $2.1 million claim to $1.2 million for work on the biomedical center.
The receiver agreed to a PeakCM claim for $146,905 representing its “direct costs” arising out of the construction of the Burke Hotel project, and a claim by PeakCM for $250,000 its “direct costs” associated with the snowmaking project.
Goldberg wrote that instead of pursuing a claim against PeakCM for the return of a $500,000 security deposit it has been holding for work on the Burke hotel property, that money will go to pay the claims by the contractor for the Burke hotel of $146,905, and snowmaking project of $250,000.
The remaining roughly $103,095 balance of that security deposit will go to cover part of the AnC Bio claim, leaving $1,064,029 remaining unpaid, including $278,750 due to subcontractors and suppliers.
As part of the deal, the $103,095 left over in PeakCM’s security deposit funds will be distributed “pro rata,” or on a proportional basis, to those subcontractors owed the $278,750, according to Fead.
The remaining roughly $1 million outstanding to PeakCM would come from proceeds of the sale of the property, at which time the subcontractors would receive their additional payments as well, he said.
The receiver wrote in his filing that he hopes to start that sale process as soon as receiving court approval for this settlement.
At one point earlier in the case, $3.9 million was owed to PeakCM and subcontractors for work associated with the Burke hotel project. Of that total, most was owed to subcontractors, $3.6 million.
The receiver has already paid those subcontractors with proceeds from a $150 million settlement last year in a lawsuit brought by Goldberg against Raymond James & Associates, a financial firm the receiver alleged conspired with Quiros to carry out the fraud.
In settling its claims, Raymond James neither admitted or denied the allegations against them.
The receiver had earlier filed a lawsuit against the financial firm, alleging Raymond James “aided and abetted” developer Quiros in carrying out what the SEC called a “Ponzi-like scheme.”
Quiros, Jay Peak’s former owner, and Bill Stenger, then-CEO and president of the resort, were accused in state and federal lawsuits of misusing more than $200 million. That money had been raised through the EB-5 visa program from foreign investors.
Both men have settled the federal SEC lawsuit, Quiros for $84 million, and Stenger for $75,000, with neither admitting or denying wrongdoing.
The state case against the two developers remains pending.
Read the story on VTDigger here: Jay Peak receiver reaches $1.5M settlement with PeakCM.