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Thursday, April 28, 2016

Creditors Get In Line As Jay Peak Development Scandal Unfolds

Posted By and on Thu, Apr 28, 2016 at 9:41 AM

click to enlarge Q Burke Hotel & Conference Center under construction last July. - FILE: DON WHIPPLE
  • File: Don Whipple
  • Q Burke Hotel & Conference Center under construction last July.
As Northeast Kingdom developers Ariel Quiros and Bill Stenger face civil fraud charges in federal and state court, many of those who have done business with their companies are going unpaid.

Among them: Vermont Electric Cooperative, the Johnson-based utility that keeps Jay Peak Resort’s lifts spinning.

“They’re in arrears,” VEC CEO Christine Hallquist said Wednesday.

She declined to reveal how much Jay Peak owes or how long the ski area has owed it. But Hallquist acknowledged that the company has a hefty electric bill: It’s the co-op’s second-largest customer — behind WestRock, a Sheldon boxboard manufacturer.

Hallquist said she has been in contact with federal receiver Michael Goldberg, whom a judge appointed two weeks ago to oversee Jay Peak and the developers’ other assets. Federal and state authorities charged Quiros and Stenger April 14 with misusing more than $200 million raised through the EB-5 investor visa program.

Hallquist said she expects to hear details from Goldberg about a payment plan by Friday. “I’m happy with the response,” she said.

VEC is not alone.

In court papers filed last Friday, Goldberg wrote that a host of vendors who have done business with Jay have said they are owed money.

“On April 20 alone, my management team had conversations with soft drink, internet service, gasoline and food services suppliers, all of whom in one fashion or another threatened to cut off service or require cash payments,” Goldberg wrote.

Steve Olson, chief executive officer of Leisure Hotels & Resorts, the company Goldberg hired to run Jay Peak and Burke Mountain resorts, said this week that “critical” vendors whose products are vital to operating the facilities will be compensated first. While they are anxious to get paid, none of the companies supplying Jay have stopped working with the resort because of the situation, Olson said.

Asked Wednesday during a press conference at the Hotel Jay & Conference Center when he would pay back creditors and in what order, Goldberg said it was “too early for any of those questions.”

“Right now, my primary focus is securing the assets, identifying bank accounts, cash,” he said. “And then we focus on — once we have it all secured — the next step of [the] claims process and distributions.”

Goldberg emphasized that his current task was like none of the 25 receiverships he’s managed in the past — in part because some EB-5 investors hope to keep their money in the development projects

“That being said, typically you have secured creditors ahead of unsecured creditors ahead of equity,” Goldberg said, explaining the order in which creditors are often paid. “That’s very general and it may not apply in this receivership.”

click to enlarge Michael Goldberg on Wednesday at Jay Peak - PAUL HEINTZ
  • Paul Heintz
  • Michael Goldberg on Wednesday at Jay Peak
Asked whether Northeast Kingdom businesses who are owed money will see it soon, Goldberg said, “Of course.”

“These assets are not going to be sitting around,” he said. “We’re going to eventually sell them and accumulate cash and use that cash to pay them off.”

First on the market, Goldberg said, would be the Q Burke Hotel & Conference Center, which he showed to potential buyers on Tuesday and which he expects to sell within five months to a year. 

“We’ll utilize those proceeds to satisfy the claims of creditors in accordance with what the court orders us to do,” he said.

Vendors such as VEC aren’t the only ones owed money from the EB-5 projects Stenger and Quiros launched. 

Jerry Davis, owner of Winooski-based PeakCM, said he and his subcontractors are owed $4 million for their work building the recently completed hotel at Burke. He said he’s owed another $500,000 for Burke Mountain snowmaking upgrades and $600,000 for work on a Newport biotechnology plant called AnC Bio.

Davis said he hired two lawyers — one local and one in Miami — to help him recoup the money.

“I’m afraid we’re going to be offered pennies on the dollar,” he said. “Many of us can’t afford that.”

Davis estimated that about 25 of the nearly 100 subcontractors he hired for the Q Burke job are owed some money.

The loss for Davis goes beyond past debts. He said it’s been especially painful to lose the $40 million job to complete the AnC Bio plant. Davis said he had anticipated ramping up work on it this month.

“We planned on that project,” Davis said. “The worst time for a job to fail is right as it’s about to start.”


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About The Authors

Terri Hallenbeck

Terri Hallenbeck

Bio:
Terri Hallenbeck is a Seven Days staff writer covering politics, the Legislature and state issues.
Paul Heintz

Paul Heintz

Bio:
Paul Heintz is a staff writer and political editor for Seven Days. He wrote the "Fair Game" political column from May 2012 through December 2016.

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