New group of EB-5 investors sues Quiros, Raymond James

A group of Chinese investors have filed a federal lawsuit against Ariel Quiros, his former broker, and his one-time brokerage firm.

However, his business partner in a series of EB-5 funded projects in northern Vermont, William Stenger, is not named as a co-defendant, making it the first investor fraud lawsuit stemming from their work together that only names one of the two developers.

“He likely has no money, it just would be a waste of time,” Curtis Carlson, a Florida attorney representing the 31 Chinese investors, said this week of his decision to leave Stenger out as a defendant in the lawsuit.

The lawsuit names Quiros, Joel Burstein, Quiros’ broker at Raymond James and his former son-in-law, and the brokerage firm Raymond James.

The federal case was filed in Miami, where many of Quiros’ businesses are centered and other investor fraud lawsuits stemming from the Vermont projects have been brought.

Carlson is seeking a total of $17,050,000 for his 31 clients, which includes the $500,000 each put up as an investment in limited partnerships to fund a series EB-5 projects headed by Quiros and Stenger, as well as a $50,000 administrative fee each paid.

“Each of the Jay Peak Partnerships was part of a Ponzi Scheme orchestrated or facilitated by Defendants,” Carlson wrote in the lawsuit. “Each of the Plaintiffs has lost the sum of $550,000 in whole or in part.”

Immigrant investors in qualified EB-5 projects put up $500,000, plus the administrative fee. If the project creates 10 jobs, an investor then becomes eligible for permanent U.S. residency.

Carlson did say that some of his clients have received green cards granting them residency in the United States as a result of the projects. However, the attorney said, those investors still did not receive the full value of their investments.

“A lot of their money went to other places,” he said. “They were paying to have an investment that was going to throw off positive cash flow and the United States government was then going to give them a green card in appreciation for putting up the capital and creating the jobs.”

The investor fraud lawsuits against Quiros and Stenger started with cases filed by the federal government and the state of Vermont in April. Quiros, a Miami businessman, is owner of Q Resorts, a holding company that includes Jay Peak. Stenger, a Newport resident, is the former CEO and president of Jay Peak.

Stenger and Quiros are accused in the state and federal lawsuits of misusing $200 million in EB-5 investor funds meant to pay for development projects in Vermont. Stenger has settled his lawsuit filed by the federal government, agreeing to cooperate with investigators. He still faces the possibility of a monetary penalty based on his level of cooperation and ability to pay.

In addition to those two cases, a class-action lawsuit brought by investors headed by Alexander Daccache of Brazil against Quiros and Stenger is pending in federal court in Miami.

A separate lawsuit brought by a different group of investors is pending against the two developers in state court in Florida.

Another investor fraud lawsuit, filed in state court in Vermont by two Chinese investors, also named Quiros and Stenger as defendants. However, the brother and sister who brought that case dismissed it in September without saying why.

In the latest lawsuit, each of the 31 Chinese investors put money into EB-5 funded projects headed by Quiros and Stenger, including hotel developments at Jay Peak and Burke Mountain.

Some of the plaintiffs in the case invested in EB-5 funded projects proposed for Newport, including a biomedical facility, AnC Bio Vermont, to be located on the outskirts of downtown at the site of the former Bogner plant.

The U.S. Securities and Exchange Commision, which filed the federal lawsuit in April, termed the biomedical facility project that never materialized “nearly a complete fraud.” Carlson this week termed that development proposal “a joke.”

Carlson declined to comment when asked why he was pursuing a separate case, instead of representing his clients through the pending class-action lawsuit.

He did say Stenger is not cooperating with him in the lawsuit. “Nobody is cooperating,” Carlson added.

The 116-page lawsuit filed by Carlson this week raises many of the same allegations as previous suits against the developers, broker and brokerage firm.

The lawsuit alleges that Quiros bought Jay Peak Resort in June 2008 using EB-5 funds that were supposed to be kept in escrow for hotel projects.

“Raymond James and Burstein knew that Quiros did not have the personal funds to purchase Jay Peak, Inc. and needed to come up with a scheme to misappropriate the investors’ funds for himself in order to purchase Jay Peak, Inc.,” Carlson wrote.

Subsequently, according to the lawsuit, Quiros had to acquire additional investor funds to backfill the projects where he was taking money from the investors.

Quiros also used $2.2 million in investor funds in 2013 to help purchase a condominium at Trump Tower in Manhattan and used other investor funds to assist paying expenses, including his taxes, the lawsuit states.

The claims in the lawsuit include Burstein aided Quiros and that the firm allowed Quiros to create a series of transfers to hide the shortfalls in funding for the projects.

Quiros, Burstein and Raymond James have disputed similar allegations brought in earlier lawsuits. Their attorneys could not be reached Friday for comment.

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