People’s United Jay Peak Ski Resort Ponzi Scheme Class Action

Investors bring this class action against companies they believed would build a Jay Peak Ski Resort in Vermont—People’s United Financial, Inc. and People’s United Bank. But according to the complaint, the money they put up went to an alleged Ponzi scheme, finally uncovered in a two-year investigation by the Securities and Exchange Commission (SEC).

The class for this action is all persons who invested in the eight limited partnerships at issue in this case.

Interestingly, the complaint claims that the limited partnerships were funded solely by foreign investors who wanted immigrant status in the US under the EB-5 Immigrant Investor Program. This program allows foreigners to achieve permanent resident status in the US by investing either $500,000 or $1,000,000 in commercial development projects that create jobs in the US.

Eventually, 836 investors put money into eight different limited partnerships, six of which related to the Jay Peak resort. (The last two were for a Jay Peak Biomedical Research Park and a Burke Mountain ski resort, also in Vermont.)

Originally, the money for the first two phases of the projects (the first two limited partnerships) was held by the Chittenden Trust Company. In January 2008, People’s United acquired that organization’s holding company, then merged the trust company into People’s Bank. The companies also acquired the two Jay Peak limited partnerships in June of that year.

They paid for the two Jay Peak limited partnerships with $15 million from the funds themselves. This left the two limited partnerships “practically insolvent,” the complaint says. They then started other limited partnerships to raise more money to fund the earlier insolvent funds, thereby initiating the Ponzi aspect of the project.

Each of the limited partnerships claimed it would use the money invested to buy real estate, build specific improvements, and then operate the improvements. In reality, the money was already being incorrectly used, since the companies “recklessly and/or negligently released escrow investor funds for each of the eight (8) limited partnerships to projects other than those associated with the escrow accounts and for the personal expenses of Ariel Quiros, one of the two primary individuals behind the scheme. (The other was William Stenger.)

Eventually, the SEC began investigating. It finally filed a civil enforcement action in April 2016, alleging fraud and other illegal actions by various individuals, including Quiros and Stenger.

This class action attempts to obtain some monetary relief for investors in the fraudulent scheme. It claims breach of contract and fiduciary duty and negligence, among other things. 

Article Type: Lawsuit
Topic: Investments
Tags: Ponzi Scheme, SEC Investigations, Securities Frauds