The brokerage firm Merrill Lynch has agreed to pay $4.5 million to settle claims made against it by the State of Vermont and Jay Peak’s federal receiver regarding its handling of accounts used in connection with the Jay Peak EB-5 fraud.
A federal court in Miami must sign off on the deal before it is finalized.
The Department of Financial Regulation alleged that Merrill Lynch potentially violated the Vermont Securities Act in its handling of accounts opened by Jay Peak owner Ariel Quiros. Federal Receiver Michael Goldberg made claims of improper handling of the accounts on behalf of Jay Peak.
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Quiros’ partner, Bill Stenger, was also implicated in EB-5 investigations by the Securities and Exchange Commission, the U.S. Attorney’s Office and the DFR.
“This is another good settlement for the Jay Peak investors and provides further restitution to help mitigate the financial impact caused by Ariel Quiros and Bill Stenger,” DFR Commissioner Michael Pieciak said in a news release.
$200 million misused by Ariel Quiros and Bill Stenger
Quiros and Stenger were accused by the Securities and Exchange Commission of misusing more than $200 million of about $400 million raised from foreign investors for area developments in “Ponzi-like fashion.”
Quiros and Stenger settled with the SEC, with Quiros surrendering more than $80 million in assets, including Jay Peak and Burke ski resorts.
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They were indicted criminally in 2019 along with two others over a failed plan to build a biotechnology plant using millions raised through the EB-5 visa program. The program encourages foreigners to invest in U.S. projects that create jobs in exchange for a chance to earn permanent U.S. residency.
Quiros pleaded guilty last year to charges of conspiracy to commit wire fraud, money laundering and the concealment of material information, with nine other charges dropped. Stenger pleaded guilty in August to providing false documents, also with nine other charges dropped.
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Under the terms of the settlement, Merrill Lynch will pay $4 million to satisfy Goldberg’s claims. A $500,000 penalty owed by Merrill Lynch to the DFR will be provided directly to Goldberg for investor restitution, adding up to the total of $4.5 million.
The story doesn’t end there, however, as there are several contingencies to consider.
First, Goldberg and his attorneys are entitled to $1.56 million of $4 million of the settlement in attorneys’ fees, excluding the $500,000 penalty owed to the DFR. Goldberg and his attorneys have agreed to contribute $400,000 of their fees to the Jay Peak receivership estate, meaning the total fee will be $1.16 million.
That leaves a total of $2.4 million for Jay Peak, but under the terms of a 2017 settlement, the brokerage firm Raymond James is entitled to $2.1 million of that amount, leaving $305,000 for the receivership estate.
Adding the $500,000 the state of Vermont is allowing the receiver to distribute and the $400,000 being returned by Goldberg and his attorneys, the final amount available for the receivership is $1.2 million. That money will be held in a restricted account until it is distributed by Goldberg in accordance with the Miami federal court overseeing his receivership.
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First to settle
Raymond James, which also figured prominently in Quiros’ handling of investor money, was the first to settle for $150 million with Goldberg in 2017. As part of that settlement, Raymond James negotiated a provision that it would receive a percentage of certain future settlements reached by Goldberg with other firms, such as Merrill Lynch.
DFR Commissioner Michael Pieciak explained Friday in an interview with the Burlington Free Press that the deal struck with Raymond James was to reimburse it for “up front costs of being first to settle.”
“It was important to get money quickly into the state,” Pieciak said. “Raymond James settled within one year. To have a major player in culpability on the financial services side settle within a year and bring significant revenues to (Jay Peak) to do upgrades and pay off investors was a big deal.”
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The Associated Press contributed to this report.
Contact Dan D’Ambrosio at 660-1841 or firstname.lastname@example.org. Follow him on Twitter @DanDambrosioVT. This coverage is only possible with support from our readers.