Feds Seize Jay Peak & Burke Mountain, Allege $200 Million Fraud

Jay Peak and Q Burke Mountain Resorts have new management today courtesy of the federal government.  In a joint press conference with Vermont’s governor and state regulators this morning, the U.S. Securities and Exchange Commission released an 81-page complaint alleging Q Resorts Inc. owner Ariel Quiros and CEO Bill Stegner defrauded investors and misused $200 million over the past eight years in a “Ponzi-like” scheme.

The EB-5 Visa program gives foreign investors permanent U.S. residency in exchange for investing $500,000 and creating jobs at American businesses.  Funds are supposed to be used for specific projects such as the snowmaking expansion at Mt. Snow.  At Jay Peak, Mr. Quiros and Mr. Stegner raised $350 million with 700+ investors from 74 countries for seven different projects.  At least $200 million of that money was instead redirected to pay off loans used to buy both ski mountains, purchase a condo for Quiros at Trump Place in New York and pay personal income taxes.  “The alleged fraud ran the gamut from false statements to deceptive financial transactions to outright theft,” said Andrew Ceresney, Director of the SEC’s enforcement division.

The alleged flow of funds is so complicated the State of Vermont set up an interactive page to view it.
State of Vermont diagram showing the alleged flow of funds.
What does this all mean for the ski operations?  The SEC froze assets yesterday and appointed Kansas City-based Leisure Hotels and Resorts to operate Burke and Jay.  The company has no ski resort experience but owns numerous hotels in the Midwest. Jay’s Communications Director said this afternoon that Quiros and Stegner no longer have any authority to conduct business or direct operations until the case has concluded.

Longtime Chief Marketing Officer Steve Wright has stepped in as General Manager for now an

Jay Peak is open for skiing today with 4 

lifts spinning.

Q Resorts bought Jay Peak from Mont St. Sauveur International in 2008 and purchased Burke Mountain in 2012.  Mr. Quiros, who lives in Florida, promptly re-named the latter “Q Burke Mountain,” after himself.  Both resorts have benefited from significant capital spending including the new Taxi quad chair at Jay and the Mid-Burke Express high speed quad.  It’s unlikely more improvements will be made (such as Jay’s West Bowl expansion or Bonaventure six-pack) until the civil and potential criminal cases are settled.  More broadly, it’s not every day you have federal investigators raiding the offices of ski resorts. This case tarnishes the entire EB-5 program, making it harder for others like Mt. Snow to attract investors.

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