MIAMI >> Attorneys for a Miami businessman asked a federal judge Monday to allow him to resume operating projects around a Vermont ski resort that a U.S. Securities and Exchange Commission lawsuit charges amount to a massive fraud on hundreds of investors.

Ariel Quiros did not violate any securities laws as the SEC claims in a civil lawsuit over the Jay Peak Resort projects, his attorney David Gordon said at a hearing Monday in Miami federal court. The seven-phase project includes a hotel, a biomedical research facility and rental cottages. Some of the work has not been started or is only partly complete.

The SEC contends Quiros misused some $200 million in investor money and improperly diverted about $50 million for his personal use. The money came from foreign investors in the federal EB-5 visa program, which allows permanent U.S. residency for those who finance projects that create a certain amount of jobs.

The SEC is seeking an injunction barring Quiros from operating companies related to the Jay Peak projects, which would be taken over by a court-appointed receiver. The SEC also has frozen most of Quiros' assets.

Gordon told U.S. District Judge Darrin P. Gayles that the SEC has no case because Quiros did not make any misrepresentations on offering documents for investors and that investors were told money paid to one of his entities could essentially be used for any purpose Quiros wanted.


Advertisement

"Why wouldn't he? It's his money," Gordon said. "There was disclosure. Any investor who didn't believe this agreement did not have to invest money."

Gayles, who set a second day of testimony for Tuesday, said there may have been important points that were not said to investors in the documents about how their money could be used. Gayles has not said when he will rule.

"One of the things I have to consider is whether there was material omission," the judge said.

SEC lawyers put on several witnesses, including Michael Pieciak, deputy commissioner of the Vermont Department of Financial Regulation. Pieciak described in detail numerous financial irregularities with the Jay Peak companies and said about 400 of the investors still have no idea whether they will get their "green cards" for permanent U.S. residency.

"The jobs need to be created and there needs to be evidence their money created those jobs," Pieciak said of the investors in limbo.

Pieciak said only about $3 million of the $350 million provided by investors for all phases of the project has been repaid to them despite glowing predictions of returns of up to 6 percent. And, he said, some of those payments were from loans secured by Quiros using investments from other parts of the project.

The SEC lawsuit names Quiros and Jay Peak President Bill Stenger of Newport, Vermont. Neither has been charged with a crime and both have said they will be exonerated. The federal receiver appointed by Gayles, Michael Goldberg, recently said he has secured enough money to keep the resort operating.

One investor, Felipe Vieira, testified Monday that he managed to scrape together $500,000 to invest in the project by selling a farm and apartment he owned in his native Brazil. Based on the Jay Peak investment documents, Vieira said he planned to use his returns to finance his daughter's college education and for retirement.

"We're working hard to move ahead," said Vieira, who lives in Stowe, Vermont, but may be forced to return to Brazil if his "green card" doesn't come through. "I'd basically have to dismantle all this life."