sec complaint 2

8/18/2019 SEC Complaint 2

1/81

n ~ . , . _ ,

~ ~ _

~

UN1Tl+I)

STATES

DISTRICTCOURT

SOITTHERN DISTRICTOFFLORIDA

CASENO.

SECURITIESAND

EXCHANGE

COMMISSION,

P l l i ~ i t i f f ,

V.

ARIEL

QUIROS,

WILLIAM

STENGER,

JAY

PEAK, NC.,

Q

ESORTS,

NC.,

,TAY

PEAK

~O TEL

SUITES

.P.,

JAYI'LAKHOTEL

UITESCHASE I

L.P.,

JAY

PEAKMANAGEMENT

NC.,

JAYPEAK

ENTHOUSESUITES . . P . ,

JAY

PEAK

GP

SERVICES,

NC.,

JAYPEAK

GOLF

Nll

MOUNTAINSUITES

.P.,

JAY

PEAK

GP

SERVICESGOLF, NC.,

JA Y

PEAK

ODGE

AND TOWNHOUSES .P.,

JAY

PEAK

GP

ERVICESLODGE, NC.,

JAY

PEAK

~4TEL

SUITES

STATESIDE .P.,

JAY

PEAKGP

S.ERViCES

STATESIDE,

NC.,

JAY

PEAK

IOMEDICAL

RESEARCH

PARK .P.,

AnCBIO

VERMONT

GP

SERVICES,

LC,

Defendants,and

JAY

CONSTRUCTION

MANAGEMENT NC.,

GSIOF

ADE OUNTY,

NC.,

1~70RTH

EAST

CONTRACT

ERVICES, NC.,

Q URKE

MOUNTAIN

2ESORT,

LC,

Relief e f e n c l a n t t s .

F L

D

y

_

D.C.

P

2

1 6

STEVEN

M.

LARIMORE

CLERK

.S.

DIST.

CT .

S.

D.

f

FLA.

—MIAMI

COMPLAINTFOR NJUNCTIVE

AND 1

HL

R

RELIEF

I l a i n t i f F

S e c u r i t i e s and

Exchange

Commission

a l l e g e s

a s

f o l l o w s :

1 .

INTRODUCTION

1 . This

i s

an

emergency a c t i o n

t l a e

Commission

i s

b r i n g i x l g t o

s t o p an

angaing,


2/81

massive e i g h tyear f r a u d u l e n t sch eme

i i

w l l i c t ~

t } Z e

M i a 1 ~ ~ i

owner

and

t h e

c h i e f

e ; ~ e c u t i v e o~ a

Vermont

s k i

r e s o r t

ha v e

s y s t e m a t i c a l l y

l o o t e d

m o r e

t h a n

S0

a n i l l i o n of t h e mor e

t h a n .

350

m i l l i o n

t h a t

has

been

e a

s e d

fiom hundreds

of

o r e i g n

i n v e s t o r s

t h r o u g h

t h e U . S . .

C i t i z e n s h i p

and

Imxni~r a t i o n S e r v i c e ' s

EB

- S

Immigrant

n v e s t o r Program.

2 .

The f r a u d u l e n t sch eme

s p a n s

s e v e n

l i m i t e d

p a r t n e r s h i p

s e c u r i t i e s o f f e r i n g s

a l l

c o n n e c t e d t o Jay Peak, I n c . , a

Vermont

s k i

r e s o r t t h a t

i s wholly own e d by

Miain

- b a s e d Q

R e s o r t s ,

I n c . , which

i n

t u r n i s a wn e d b y

M i a i n i

businessman

A r i e l Q u i r o s .

Q u i r o s

and

W i l l i a m

S t e n g e x , h e p r e s i d e n t

and CEO

f

ay

Peak, r e

p r i m a r i l y

r e s p o n s i b l e f o r

t h e

f r a u d u l e n t scheme.

3 .

A mong .

o t h e r t h i n g s ,

Q u i r o s ,

S t e n g e r ,

and

t h e

companies

t h e y

run

t h a t

have

o v e r s e e n t h e

development a c i d

c o n s t r u c t i o n of h e Jay P eak r e s o r t have

misused

mor e

t h a n 200

m i l l i o n

—more h a n

h a l f

of

l l

m o n e y

r a i s e d

from

i n v e s t o r s . Q u i r a s

o r c h e s t r a t e d

a i s d

S t e n g e r

f a c i l i t a t e d an i n t r i c a t e

w e b

of r a n s f e r s

between

t h e

v a r i o u s

D e f e n d a n t s and

R e l i e f

D e f e n d a n t s t o

d i s g u i s e t h e f a c t

t h a t

t h e

m a j o r i t y of

h e

seven

p r o j e c t s were

e i t h e r o v e r

budget

o r

e x p e r i e n c i n g

s h o r t f a l l s .

These

s h o r t f a l l s

were d u e i n l a r g e p a r t t o Q u i r o s

p i l f e r i n g .

t e n s of i l l i o n s

of o l l a r s

~f

n v e s t o r

m o n e y

o r h i s

own

s e .

4 .

S i ~ z c e

2008,

u i r o s

has m i s a p p r o p r i . a t e r 3 s n o r e t h a n : D S O

m i l l i o n

i n

i ~ l v e s t o r

m o n e y

t o ,

a m o n g

t h e r

t h i n g s :

(1)

i n a n c e

h i s

p u r c h a s e of

h e Jay

P e a k

r e s o r t ;

(2)

back

a

e r s o n a l

l i n e

of

c r e d i t t o pay h i s

income

t a x e s ;(3)

u r c h a s e

a

l u x u r y

c o n d o n n i n i u i n ; (4) pay t a x e s of a

comp any

he

owns;

and

(5}

b uy a n

u n r e l a t e d

r e s o r t .

He

m p r o p e r l y

used a d d i t i o n a l

i n v e s t o r funds t o pay

d o w n

and

pay

o f f

m a r g i n .

o a n s

( i n c l u d i n g paying n e a r l y 2 . S

m i l l i o n

i n

margin

i n t e i

° e s t

he

s e t

u p

i n

t h e

n a m e

of

h e

Defendant

c o m p a n i e s a t a

b r o k e r a g e

f i r m .

5 . T l ~ e

EB

- 5

i n v e s t m e n t program g i v e s f o r e i g n i n v e s t o r s t h e

chance t o e a r n

permanent

e s i d e n c e i i i

t h e U x i i t e d

S t a t e s

t h r o u g h

i n v e s t i n g i 1

U.S. p r o j e c t s t h a t

c r e a t e

a

c e r t a i n


3/81

numbe

r

of o b s .

Q

u i r a s ,

S t

e i a g e r

a i d

t h e

o

t h e r

D e f e n d

a n t s

made

num

erous

m i s r

e p r e s e n

t a t i o n s

c i d

m a t e r i a

l o m i s s i

o n s

t o

t

h e s e .

f o

r e i g n i n v e s t o r

s .

mong

t

hem were

t e l l i n g

i n

v e s t o r s

t

h e

D e f e n d a ~ i t s

would

o n l y u s e

i n v e s t o r

money

o

f i n a n c e t h e

s p e c i f i c p r o j e c t t o

which

e a c h

i n v e s t o r

c o n t

r i b u t e d .

The

D

e f e n d a

n t s

f u r t h e r

a s s

u r e d

i n v e s

t o r s t h a t S t

e n g e r , t h

e

de

a c t

o

g e n

e r a l

p a r t n e r

f o r

t

h e

f i r s t

s i x

p r o j e c t s

, h

ad c o n t

r o l of

n v e s t o r

f u n d

s .

I n r e a l i

t y

S t e n g e r

e x t

r e m e l y

r e

c k l e s s l

y

c e d e d

c o n t r o l

of

n v

e s t o r

f u n d s

t o Q u

i r o s .

H

e

i d

a l ~ n o

s t

n o t h i

n g

t o manag

e

i n v e s t o

r

money

,

ev

en w h

en

o

n f r o n t e

d w i t h

r e d f l a g

s of u i r o s

m i s u

s e .

6 . The

i r s t

s i x

p r o j e c t

s f o

r

which

t h

e

D

e f e n d a

n t s x a

i s e d

m

oney

were l l

p a r t of

a

k i

r e s o r t

and accompanying

f a c i l i t i e s

l o c a t e d

c l e a r

J a y ,

Vcrmant.

The

most

r e c e n t

p r o j e c t , f o r

whi

ch t h e

D e f e n

d a n t s

c o n t i n

u e

t o r a i s

e

money

fr

om

u

n w i t t i n

g

i n v e

s t o r s ,

p u r p

o r t s t o

be

f o r a

n e a

r b y

1

10 m

i l l i o n

b

i o m e d i c

a l r

e s e a r c h

c e n t e r

t h a t

t h e

D e f e n

d a n t s

have

o p e r a

t e d a s

n

e a x l y a

c o

m p l e t e

f

r a u d . Th

e f f e

r i n g docu

ments

h e

D e f e

n d a n t s

a x e

p r o v i d

i n g t o

i

n v e s t o r

s

i n t h

a t

p r o j e

c t

a

r e

r i f e

w i t

h

m

a t e r i a l

m i

s s t a t e m

e n t s a

n d

o m i s

s i o n s .

These

i n c l u d e

bogus

c l a i m s

t h a t

t h e

D

e f e n d a

n t s

a r e

i n

t h e

p r o c e

s s

of

o b t a i n i

n g Foo

d

an

d Drug

A d m i n

i s t r a t

i o n a

p p r o v a l

f o r

t h e

r e s e a r

c h

c e n t

e r s

p r o d u c t

s .

I n

r e a l i t

y

t h e D e f e n

d a n t s

hav e

n o t

u n d e r

t a k e n

t h e

n e c e s s a

r y

s t e p s

t o

be

gin the

l e n g t

h y a

nd c u i n b e

r s o i n e

proc

ess

o

f

e t t i n g

rDA

p p r

o v a l . F

u r t h e r

e x a

c e r b a t i

n g

t h e i r

m i s s t

a t e m e n

t s t h e Defend

an ts

h av

e

b a s

e l e s s l y

p r

o j e c t e d

hu

ndreds

of m

i l l i o n s

of d

o l l a r s i n

reve

nue from t h e

x e s e a r

c h . c e i i t

e r

—

p r o

j e c t i o n

s

based

on FDA

pprov

al t

hey

have

done

v i

r t u a l l y

n

othing

o

o b t a i

n .

7.

s

a

r e s u l

t ,

althou

gh

t

h e

Defend

ants

have

r a i s e d

al

most t h r e

e

-

q u a r t e r

s

o

h e

mone

y o r t h e

r e

s e a r c h f a c i l i

t y ,

th

ey

hav e

done

almost

no

w ork

on t o t h

e r

tha

n s i t e

p r e p a r a

t i o n

a z ~ d

gro

und-

b r e a k i

n g

a

c i d a r e

y e

a r s

be

hind t h e i r

o r i g i n

a l c o n s t

r u c t i o n

and

rev

enue s c h e d

u l e .

Qu

iros h

as s e c r e t l

y used

mos

t

of

he

mo

ney

a i s e d

f

o r

th

e

r e

s e a r c h

f a c

i l i t y s

c o n s t

r u c t i o n

t o pay


4/81

off a ~ d pay

d~wsl

a

margin

loan and t o

~ n i s a ~ p r o ~ ~ r i l t e

a ~ ~ ~ a° o x i l n a t e l y 30

i l l i o n f o r

h i s ow~1

u s e .

8 .

As

a

consequence

o f

h e

Defendants'

s y s t e m a t i c

misuse

o f

n v e s t o r

funds

from

the v a r i o u s Jay

Peak

p r o j e c t s , t k ~ e r e

i s

l i t t l e

m o n e y

l e f t in a ~ x y

o f

the

r e s e a r c h

f a c i l i t y ' s accounts

t o pay f o r i t s c o n s t r u c t i o n .

S i m i l a r l y the

s i x t h p r o j e c t ,

p a r t

o f the

s k i

r e s o r t ,

i s

nowhere hear

completion

and out o f

money.

I n v e s t o r s in those p r o j e c t s , who

o n t r i b u t e d $500,000

each,

r • e

i n

grave

danger

o f o s i n g

t h e i r investments

and having

h e i r

immigration

p e t i t i o n s

d e n i e d .

9 .

The Defendants a p p a r e n t l y

a r e hoping

t o

fund

remaining

c o n s t r u c t i o n o f h e

s i x t h

and

s e v e n t t z p r o j e c t s

through

ongoing

e f f o r t s t o r a i s e

money

fr om

new

n v e s t o r s

—both

i n

t h e

biomedical

r e s e a r c h

f a c i l i t y

and i n

a d d i t i o n a l

EB

- S

p r o j e c t s Quiros

i s

a t t e m p t i n g

t o

s t a r t .

To

stop

t h e Defendants' i l l e g a l

course o f

conduct and

prevent

f u r t h e r

fraud o n

i n v e s t o r s ,

the

C o m r n i s s i o l ~ i s b r i n g i n g

t h i s a c t i o n

and seeking

emergency

e l i e f ,

among t h e r

remedies.

1 0 . Through t h e i r

conduct, the

Defendants have each

v i o l a t e d S e c t i o n 17(a)

o f the

S e c u r i t i e s

Act

o f

1933

S e c u r i t i e s

Act ) ,

and

S e c t i o n 10(b)

and

Rule 10b-5

o f the

S e c u r i t i e s

Exchange Act

o f

1934 Exchange

~ 1 c t

) .

In

a d d i t i o n , Quiros v i o l a t e d

S e c t i o n 20(a)

o f

t h e

Exchange

Act

and

h e

and

Q

esorts aided

and

a b e t t e d v i o l a t i o n s

o f

ection

10(b) and

Rule

1 Ob-

5(b)

o f

the Exchange

Act.

T he

C om m i s s i on i s

seeking

s e v e r a l

f o rms

o f

r e l i e f ,

i n c l u d i n g

simultaneous

emergency

r e l i e f

o f

temporary

r e s t r a i n i n g o r d e r s ,

a s s e t

f r e e z e s ,

appointment

o f a

Receiver,

and s w o rn

a c c a u n t i n g s .

The

Commission

a l s o

seeks

p r e l i m i n a r y and

permanent

i n j u n c t i o n s and

c i v i l

m o n e y p e n a l t i e s

a g a i n s t

a l l

t h e Defendants,

and disgorgement o f

l l -

f a t t e n

gains

a g a i n s t t h e

Defendants

and

Relief Defendants.

I I . llEFENDANTS

ND

ELIEF

DEFENDANTS

A.

nefendants

0


5/81

1 1 .

Jay Peak

i s

a

Ver m

ont c a r p o r a t i a n

w i t h

i t s

p r i n c i

p a l p l a c e o

f b u s i n e s s

a

n

J a y

Vermont.

Jay Peak o

p e r a t e s t h e Jay

Peak

R e s o r t

i i i

J a y

Vermo

nt, which

encompass

es

t h e

f i r s t

s i x p r o j e c t s

f o r

which

t h e

Defendants

r a i s e d

money.

Jay

Peek,

n c o n j u n c t i o n w i t h

o t h e r s

h a s

s e r v e d a s

t h e manager

o r d e v e l o p e r

of h e

p r o j e c t

s .

1 2 .

es

orts i s

a

Delawa

re

c o

r p o r a t i o n

w i t

h

i t s

o f f i c e s

i u

M i a n i i

F

l o r i d a . Q

R e s

o r t s

i s

t h e

1

00 p e r c e n t ow

ner of Jay

Peak

,

and

Quiros s

t h e

s

o l e

owner, f f i c e r and

d i r e

c t o r

ofQ e s o r t s .

Q

e

s o r t s

a c q u i r e d Jay Peak

fro

m a

Can adian

F i n n

i n

2008,

and Q u

i r o s

l e a s s i n c

e

o v e r s e e n

t h

e v a r i o u s Jay

Peak

r o j e

c t s

t h r o u g h

e

s o r t s .

1 3 .

Qniros,

,

e s i d e s i n

ey

i s c a y n e ,

l o r i d a . I n a d d i t i o n t o b e i n g . h e s o l e

owner,

o f f i c e r a ~ d d i r e c t o

r

of e s o r t s he i s

chairman

of Jay

Peak.

Thro

ugh t

h o s e two

companies ,

Q u i r o s

c o n t r o l l e d

each of

h e D e f e n d a ~ i t

g e n e r a l and

l i m i t e d p a r t n e r s h i

p s .

He

s a

p r i n c i p a

l

of

t h e g e n e r a l p a r t n e r

of h e

Jay

Peak

B

iomedical i m i t e d


o f

f e r i n g

which

s

t

h e

s e v e a n t h

and

most

e c e n

t

p r o j e c t

o f f e r i n g .

Between Febr

uary

an d

Apri12

011, Quiros

e r v e d on t h e

b o a r d

of

i r e c t o r s

of

i o h e a r t

n c .

a p u b l i

c l y

- t r a d e d

company

.

1 4 . Sten

ger, 6, e s i d e s

i n

Newport

,

Vermo

nt. S t e n g e

r

i s

t

h e

D i r e c t o r P r e

s i d e n t

and

CE

O f Jay

Peak. He s

t h e

p r e s i d e n t and

d i r e c t o r of

h e

g e n e r a l

p a r t n e r

o

f h e

f i r s t

J a y Peak

p r o j e

c t o f f e r i n g and

i s t h e s o l e

o f f i

c e r

o r d i r e c t o r

of h e g e n

e r a l

p a r

t n e r

of

h e

second

t h r o u g h

s i

x t h

o f

f e r i n g s .

A l l . s i x o f f e r i n g s

were s e

t

u

p a s

l i m i

t e d

p a r t n e r s h i p s .

S t

e n g e r i s

a l o n

g w i t h

Q u i i a s ,

a

r

i n c i p a l i n t h e Jay

Pea

k

Bio

medical

e n

e r a l p a r t n e r .

1 5 .

Jay

Peak

Hotel

S u i

t e s

L.P.

S u i t e

s

Phase

I

)

s

a V

er mont i m i t e d

p a r t n e r

s h i p

w i t h

i t s

p r i n c i p

a l p l a

c e of

u s i n

e s s

i n J a y

Vermo

nt.

Between D ecem

ber 2006

and

May 008,

S u i t e s

Phase T

r a i s

e d

17 .5 m i

l l i o n

f

rom 35 i i l v

e s t o i s

t h r o u g h

an

E

-

5

o f f e r i n g

of

l i

m i t e d

p a r

t n e r s h i p

i n t e r e s t s

t o b

u i l d

a

o t e l . The

o t e l

i s

com

pleted

an

d o p e r a t i n g

.

E


6/81

16.

.

T a y

Peak

H

otel

S

u i t e s

P l

x a s e

1 I L.

P.

H

otel

Pha

se

X

T )

s a

V

e i - ~ n o x

~ t l

i m i t e d

p a r t n e

r s h i p

w i t h i t s

p z ~ i

n c i ~ a l

p l a c e

o

f

b

u s i n e

s s i n

J a y ,

Ver

mont.

Betwe

en

Marc

h 200

$

and

Janu ary

201 1 ,

I n t e l

Phase

I l

r a i s e d

X75

m i l l i o n

f i o r n

1 50

i n v e s t o r s

through an

B

-5

o f f e r i n g

of

l i m i

t e d

p a r

t n e r s h

i p

i n t e

r e s t s

t o

b u

i l d a

h o t e

l , an

in

door w a f t e

r p

a r k ,

an

i c e

r i n

k , an

d a

g o

l f

c l u b

hou

se.

Cons

tructi

on

on

a l l

i s

comp

lete an

d

they

a r e

o

~ ~ e r a t

i n g .

17

. J a

y

Peak

Ma

nagem

ent,

Inc

.

i s

a

Verm

ont

c o r p o

r a t i o n

which

i s

t h e

g e n e r

a l

p a

r t n e r

of

S u

i t e s

Phas

e I

an

d

H

otel

Phas

e

T I .

I t i s

a l s o

awho

lly-own

ed

s

u b s i d i

a r y of Ja

y

Peak

.

St

en ger

i s

the co

mpany

's

p r e s i d

e n t .

1$.

J ay

1 e 1 1 ~

Penthouse

Suites

L.P. Penthouse Phase

1 1 1

)

s

a

Vermont

l i m i t e d

p

a r t n e

r s h i p

wi t

h

t s

p r i

n c i p a l .

p

l a c e of

bus

iness

i n

Jay

, Ver

mont.

Be

tween

J u l y

201

0 and

O c

t o b e r •

201 2

,

Pen

thous

e

Phas

e I I

I r a i s e d

$

32.5 m

i l l i o n

from

65 i n v

e s t o r s

throu

gh

an

-5

o f

f e r i n g

of

l i m i t e

d

p a r t n

e r s h i p

i n t e r e

s t s

t o

b u i

l d

a 5

5

- u

n i t ` ` p e

n t h o u s

e

s u i t e

s

h o t e l

and

an

a c t i v i

t i e s

c e n t e r

,

i n c

l u d i n g

a ba

r and

r e s t a

u r a n t .

C

onstr

uction

i s

co mpl

ete

and

t h e

f a c

i l i t i e s

a r e

o p e r a t

i n g .

19.

J ay

Pea

le

P er v

ices,

Inc.

i

s

a V

e i - ~ n o

n t

c o r

p o r a t i

o n

and

t h e g e n

e r a l p a r

t n e r o i

Pen

thous

e

Ph

ase

I I

. S

t e z l ~ e

r , l i s

t e d a s

the

d i r e

c t o r ,

i s

i t s

onl

y p r i n c i

p a l .

20.

J ay

Pe

ak

G

olf

a

nd

Mo

u ntai

n

Suite

s

L.

P.

Golf

and M

o u n t a i

~ i

f ' h a s c

I

V )

s

a

Verm

ont l i m

i t e d

p a r t

n e r s h

i p

wit

h

i t s

p r i n

c i p a l

p l

a c e o

f b u s i n

e s s i n J

a y ,

Ver

mont.

Betw

een

D

ecemb

er 20

1 0 and N

ovemb

er

2

01 1 ,

Gol

f and

Mou

ntain

Phas

e

I

V

r a

i s e d

$

45

m i l l i

o n

from

9

Q

i n v e s t

o r s

th

ro ugh

an

-5

o f f e r i

n g o

f l i m

i t e d p a

r t n e r s

h i p i n t e r

e s t s

t

o

b u

i l d

gol

f

c o

t t a g e

d

uplex

es, a

wedd

ing chap

el,

an

d

o t

h e r

f a c i l

i t i e s .

Const

ructio

n i s co

mp let

e, and

t h

e

f a c

i l i t i e s

a 1 • e

o p e r a

t i n g .

21. Jay

Pe

ar

~P

Ser

vices

G

olf,

Inc

.

i s

a

Ver

mont

c o r p

o r a t i o

n a

nd

t h e

g e n e ~ ' a

l

p a r t

n e r of

Golf

and Mou

ntain

Phase

IV

.

Steng

er,

i s t e

d a s t

h e d i r

e c t o r ,

i s

i t

s

onl y

p r i n c

i p a l .

6


7/81

2 2 . Jay

Peak

Lodg

e

an

d

Townho

uses

L.

P.

L

edge ~

l d T o r

~ n h o u s e

s

Ph

ase V )

s a

Ve

rmont

i m i t e

d p a r t n

e r s h i p w

i t h

i t s

p r i n c i p

a l

p l a c e

o

f

u s i

n e s s

i n Jay

Vermo

nt.

Betwee

n

y

2011

a i

d

November

2012,

o c l g e

and

Townhouses

h a s e .

V

a i s e d

$45

i l l i o n

f r o ~ ~

90

n v e s t o r s

t

h r o u g h an EB

- 5

o f f e

r i i z g o

f

i m i t e d

p a

r t n e r s h

i p

i n t e r

e s t s

t

o

b u i l d

34

a c a

t i o n

r e n t a

l

t o w n

h o u s e s

90

v a c a

t i o n r e n

t a l

c o t t

a g e s ,

a c a f e ,

an

d

a p a r k i n

g

g a r a

g e . C o n s

t r u c t i o

n

i s

c o m p l e t

e

a

nd

t

h e

f a c i

l i t i e s a r

e o p e r a t i

n g .

2

3. J

ay

Peak

GP

e r v i c

e s

Lodg

e, Inc.

s

a

V e i 7 n o

n t

c o

r p o r a t i

o n an

d

t h e

g e n e r

a l

p a

r t n e r

of

L

odge

and Townho

uses

Phase V.

S t e n g e

r , i s t e d

a

s t h e d i r e

c t o r ,

s

i t s

o n l

y

p

r i n c i p a l

.

24.

Jay

Peak

Hotel

S u i t e s S t a t e s i d e

L. P.

S t a t e s i d e

Phase

VI

)

s

a Vermont

l

i m i t e d p

a r t n e r s

h i p

w i t h

i t s p r i n c

i p a l

p l a

c e of

u s i n e s

s

i

n J a y ,

Ve

rmont.

Be

tween

O

c t o b e r

2011

and

Dec e

mber 20

12, t a t e

s i d e

Phase VI a

i s e d $

67

i l l

i o n

fr

om 134

n v e s t

o r s

t h r o u

g h an E

B- 5

o f f

e r i n g

of

i m

i t e d p a

r t n e r s h

i p i n

t e r e s t s t o

b u

i l d an 84

- u

n i t

h o t e

l ,

8

4 a c

a t i o n

r e n t a l

c

o t t a g e s

,

a

g u e s

t

r

e c r e a t i

o n c e n t

e r , a

nd

a

m

edical

e

n t e r .

Alth

ough h e

S t

a t e s i d e

Phase

VI

f f e

r i n g

was

u l l y

s u b s

c r i b e d ,

t

h e D

efenda

nts

h

ave

only

u i

l t t h

e

h o t e

l .

A

m a l

l amount

of wor k

has

b

een

do

ne

on

b u i

l d i n g

t h e

c o t t a g

e s

and

w

ork

h

as

not

y e t

b

egun

on

h e

r e c

r e a t i o n

an

d m e

d i c a l

c

e n t e r s .

25.

Ja

y P

eak G

P

e r v i

c e s

S t a

t e s i d e ,

I n c .

i s a V

ermon

t

o r p o r a t

i o n

v1d

t h e

g e n

e r a l

p a r t n e r

of t a

t e s i d e . S t e n g e

r ,

i s t e

d

a s

t h e

d i r

e c t o r ,

s

i t s

o n

l y

p r i n c

i p a l .

26.

Jay

P

e a l c

Bi

omedic

al R

esearc

h Park

L

.P.

Biomed

ical Phas

e

V

I I )

i s a

Vermon

t

i r r z i t e

d

p a r t n

e r s h i p

w i

t h i t s

p r i n c

i p a l

p l a c e

of

u s i n

e s s i n N

ewport

, Vermon

t.

S i

n c e

Nov

ember

201

2, Bio

medica

l

P

hase V

I I has

a i s e d

a p

p r o x i m a

t e l y

$83 i l l i o n

fro

m 166

n v e

s t o r s

t h r

o u g h an

E

B- 5 o f f e r

i n g o

f

l

i m i t e d

p a r t n e r

s h i p

i n t e r e

s t s t o

c o n s t r u

c t

a

b i o m e d

i c a l r e s

e a r c h

f a c i

l i t y

Other t

h a n s i t e

p r e p a r

a t i o n

a

nd

g r o u

n d b r e a k

i n g

~ o

w o Y • k h

as been

done

on

t h e f a c i

l i t y

Th

e

Defend

ants se

ek

t o

r a i s e

a

p p r o x i

m a t e l y

a n o t

h e r

$27

m i l l i

o n f

r o m .

54

i

n v e s t o r s

, whi

ch,


8/81

b e c a

U S e

of h e

m

isuse

and

m i s a p p r o

p r i a t i o n of u n

d s ,

w i

l l n o t

be

enough

t o

f a n a n

c e c o n s h l i c t i o n

of

h

e

r e s

e a r c h f a c i l i t y

27.

Aa~C Rio

V e r n l o r i i

GP

e r v i c e s ,

LLC

s

a-Vermont

l i m i t e d

l i a U i l i t y company

and

t h e

g

e n e r a l

p a r t n e r

of iomedi

cal

Pha

se I I .

I t s

man

aging m e

m b e r s x • e Q u i r o s

and

S t

e n g e r .

S.

e l i e f

D

efendants

28.

Jay

Construction

Manag e m

ent,

nc

. JCM )

s

a

Vermont o r p o r a t i o n

w i t h i t s

o f f i c e s

i n

Miami ,

l o r

i d a , a t

t h e

s a m e d d r e s

s a s e s o r t s .

I t s

s t a t

u s

i s

l i s t e d

a s t e r m i n a t e d a s

of

March

1 6

,

2

016. Qu

iros

i

s

t h e s o l e

o f f i c

e r

and d i r e c t o r

of JGM

Q u i r o s

f u n n e l e d m o

re

t h a n

$1 6 0

m i l l i o n

of

n v e s t o r

funds

from

s e v e r a l

p r o j e c t s

t h r o u g h

JCM

nd

i t s

bank

a c c o u n t s ,

and

e n t e r e d i n t

o

c o n t r a c t s

w i t

h

o u

t s i d e

v e n

d o r s

f o r

c

o n s t r u c t i o n

of

o m e

of h e J a y

Peak

r o j e c t s .

He

a l s o used

misuse

d t e n s o

f

m i l l i o n s

of

o l l

a r s

of t h e funds

JC

M

e

c e i v e d . Q u i r o s

c o n t r o l

l e d

JCM's

bank

a c c o u n t s . Withou

t

any

l e g i t i m a t e

b a s i s , JC

M

r e c e

i v e d i n v e s t

o r s

p

r o c e e d s

em

anating f

rom t h e

D e f e n d a n t s '

e c u r i t i e s

f

r a u d .

29.

GSI of

Dade

County

,

n c

.

GS

I )

s

a F l o r i d a

c o r p o r a t i o n

w i t h

i t s

o f f i c e s i

n

Mi a m i a t

t h e

s a m e

a d d r e s

s

a s

Q

e s o r t s

a

nd

JCM

Q u i r o

s

i s t h e

owner

and s o l e

o f f i c e

r

and

d i r e c t

o x

of

GS

I.

GSI r e c e

i v e d more

t h a n

$13

m i

l l i o n

of

i n

v e s t o r m o n e y

emanating

from

Biome

dical

Phase

VII

i n v e s t o

r

f u n d s

.

W

ithout any l e g i t i m a t e

b a s i

s ,

G S I

r e

c e i v e d

i n v e s t o r s

p r o c e e d s emanati

ng from h e

D

e f e n d a n t s '

e c u r i t i e s

f i ~ a u d

30 .

North Eas

t

Contract

S e r v i c e s , LL

C N o r t h e a s t )

s

a F l o r i d a l i m i t e d

l i a b i l i t y

company forme

d i n

February

2 0 1 3

and

h e

a d q u a r t e r e d

i n

Weston,

l o r i d a .

N o r t h e a s t

a c t s

a s

p r o j e c t

manager

f o r

Biomedical

Phase

V

I I . William

K e l l y ,

who

i

s

J a y P e a k

' s

C

OO

nd

a

l o n g t i m e b u s i n e s s

a s s o c i a t e

of Q u i r

o s , i s t h

e

managing

p r i n c i p a

l

of

N o r t h e a s t .

N o r

t h e a s t

r e c e i v e d a t

l e a s t $7.9 m i l l i o n

o

f

Biome

dical

Phase

VII

i n v e s t o r

f u

n d s

( i n t u r n ,

N o r t h e a s

t

p a i d


9/81

appr

oxima

tely

5.5

m i l l

i o n

o

P t h

e s e f i e

n d s

t

o

G

SI)

f o

r

p u r p o

r t e d

s

u p e r v

i s i o

n f e e s

. on

a

ppro

ximat

ely

47 z l i

l l i o n

of e x

pens

es t

h a t

JCM

u

t p o r

t e d l y

wa

s

go

ing t o

da

y

o

n

b

ehal

f

o f

B i o i r ~ e d i c a l P l a a s e

V I I .

i i

r e a l i t y

t h e

Defendants laid

l e s s

than

10

i l l i o n

o f

Biomedica l

Ph ase

V

II

exp

ense

s

w

ith

th

e

a

ppro

ximat

ely

4

7 m i l l

i o n J

CM

e c

e i v e d

fr o m

Bio

medi

cal P

h a s e

V I I .

Quiro

s

m i su

sed an

d

m i

s a p p

r o p r i

a t e d

t h e

v a s t

n

a j o r i

Y y

~f

h e

rem

ainin

g m o r

e

t

han

3

7

i l l

i o n

o f

B

i om ed

i cal

Phas

e

~ 1

I I

i n v

e s t o r

fund

s

t h a t

JCM

e c e

i v e d . .

H

en ce

,

orth

east

e c e i

v e d

c o n s t

r u c t i

o n

s u p e

r v i s i

o n

f e

e s

f o

r

w

o r k

t h a t wa s

not p e

r f o i -

~ n e d .

W

ith o

u t

a n y

l e g

i t i m a

t e

b a s i

s ,

North

east

r

e c e i v

e d i n

v e s t

o r s

proc

eeds

e

ma n a

t ing

f

r o m

t h

e

D

efend

ants

'

e c u r

i t i e s

f r a

u d .

31,

urke Mo u n t a i n

R e s o x • t ,

LL

Q

Bu r ke

)

s

a

F l o r i d a l i m i t e d

l i a b i l i t y

c

ompa

ny

fo

r m e d

i n

Ap

ril

201 2

and h

eadqu

arte

red i

n Miam

i a t

th

e same

a d d r

e s s a

s

e

s o r t

s .

Qu

iros

i s

t 1

1 e

m a n

a g i n

g p

r i n c i

p a l

~f

u

rke.

urke

i s

a l s o

t

h e

o w

n e r

o f

h

e Bu

r ke

Mo u

n t a in

Res

ort

l

o c a t

e d i n

East

B

u rke

, Ve r m

o n t,

wh i c

h

i s

the

s i t e o

f

n o t h

e r

EB-5

o f f e r

i n g

t h a t

Q

uiro

s i s

pro m

ot in

g c a l l e

d

u r

ke M

o u n t

a i n

R e s o r

t .

As d e s c r

i b e d

b el

ow,

Qu

iros

imp

rope

rl y

us

ed

ap

prox

imat

ely

$

7 i l l i

o n f r o i

r ~

a

ma r

gin

l

oan

b ack

ed

by n v e

s t o r

r and

s

t o

p

urcha

se Q

urk

e.

He

subse

quen

tly

us

ed appr

oxim

atel

y

18.

2

m

i l l i

o n

o

f

B

io me

di cal

P

h a s e

VII

i n v

e s t o r

f

unds

as

p a r t

o f

t

he

19 i l l

i o n

p

a y

off

o f

h i

s m

argi

n L o

a n .

With

out a

n y

l

e g i t i

m a t e b

a s i s ,

u

rk e

r e c e i

v e d

i

n v e s t

o r s

proc

eeds

em an

at in

g

i •

o r n

the D e f e

n d a l z

t s

e

c u r i t

i e s

f r a u d

.

I I I .

JU

RIS

DIC

TIO

N

A

ND

VE

NUE

32.

The

Cou

rt h a

s u r i

s d i c t

i o n

ov

er

t

h i s

a c t i o

n

purs

uant

t o

S

e c t i

o n s

2 0 b )

,

20(

d),

and

22(

a)

o f

t h e

S e c

u r i t i

e s A c

t, I

S U.

S.C.

§§

7

7 t ( b )

,

7 7 t

( d ) ,

a n

d

7 7 v a

) ;

a nd

S e c t

i o n s

21

(d),

2 1

( e ) ,

and

27

f

h e

E x c h

a n g e

A ct

,

15

t I . S .

C . §§

8u(d)

,

8 u e )

,

a nd

78

aa.

33.

T

h is

Co ur

t has p e

r s o n a

l j u

r i s d i

c t i o n

ove

r

t

h e

Defe

ndan

ts and

ve n

u e i s

pr

oper

i n

the

So

uther

n D i s

t r i c t

o

f

l o

r i d a

f o r

s e

v e r a l

r e

a s o n s

. Q

e s o r

t s , w

h i c h

owns

Ja

y

Pe

a k a

nd

a s

a

D


10/81

r e s u l t

o v e r s

e e s t h e

J a y

Pea

k p r

o j e c t s

i s

l

o c a t e d

i t i

Miam

i.

Q u i

r o s

who

o r c

h e s t r a t e

d t h e

f r a u d

u l e n t s

cheme a

nd t

h r o u g h Q

e s o

r t s

c o n t

r o l s

t

h e

g

e n e r a l p a r t

n e r

and

i m i t e d p a r

t n e r s h i

p s i n

a l l

J a y

Peak

o f f e r i n g s

r e s i d e s

and works

i n t h e

1 V l i a i n i

a r e a .

S t e n g e r

and

t l ~ e

o t h e r

J a y

Peak

emplo

yees

a l l t a k e

d i r e c t

i o n

from

Q u i r o s

.

S e v e

r a l

of

t

h e

co

mpanie

s t l ~ r o

u g l ~ .

whi

ch Q u i r

o s

o r c h e s t

r a t e d

t h e f r a u

d and

t h r o u g h

whi

ch

he f u r u i e

l e d mon

ey ,

n c l u d i n

g

JCM,

SI,

N o r

t h e a s t

and Q

urke,

r e

l

o c a t e d

i n

So

uth

F l o

r i d a .

3 4 .

I n

a

d d i t i o n

t h

e Ra y m

o n d

Jame

s &Ass

ociate

s, n c .

Ra y

molid Ja

mes

)

c c o u n t

e x

e c u t i v e

and

b r o

k e r a g e

o f f

i c e t

h r o u g h which

Q u i r

o s

op

ened

t h

e

Ray

m o n d

James

a c c o

u n t s

used

t o

p e r p e t r a t e

t h e f r a u d

were

l o c a t e d i n

C o r a l G a b l e s

F l o r i d a .

While

i n v e s t o r

m o n e y

was

i r s t

d e p o s i

t e d

i n

an

escr

ow

a c c o u

n t f o

r e a

c h

p r o j e

c t a t

a Ve

rmont

bank,

t

was

s

oon a f

t e r t r

a n s f e r r e

d

t o

a c o r r

e s p o n d i

n g Ra

y m o n d

Ja

mes

a c c

o u n t t h

r o u g h t h e

b r o k

e r a g e

o f f i c

e

l o c a

t e d

i n

C

o r a l

G a b l e s

. Q u i r o s

and

S t e n

g e r

h

ad

num

erous

commun

icatio

ns

w i

t h

t h e Ra y m o

n d James

b r o k e r

l o c a

t e d

i n C o r

a l G a b l

e s n c

l u d i n g

e m a i l s

e t t e

r s

w

i r e s and

t e l e p h

o n e c

a l l s .

35.

F u r t

h e r m o r

e K e l l y J

ay Peak

's CO

O s l

o c a t e d

i n Sou

th F l o r i

d a . Othe

r key

J

ay

P

eak

emplo

yees

s p

e n t

s i

g n i f i c a

n t tim

e i x ~

S

outh

F l o

r i d a

d u r i n g

t h e

t i

m e

p e r i o d

a l l e g

e d

i n

t

h i s

C o

m p l a i n

t .

A

u mb

er of

n v

e s t o r s

who

e c e i

v e d g r e e n

c

a r d s

a l s

o have

s e t t l e

d i n

t h e

S o u t h e

r n

D i s t r

i c t

i n c l u d i

n g a t

l e a s t

22 n v e s t

o r s

i n

H o

t e l

P

hase I

e i g h t

i

n

Pen

thouse Pha

se

I I

1

9 n

Golf

and Moun

tain Pha

se IV, 1 1

i

n

Lo dge

and

Townho

uses Ph

ase

V

1

7

i n

S t a t e s i

d e

Phase

VI,

and

s

e v e n

i n Bio m

edical

Phase

V I

I .

36.

T

he

D e f e n d a

n t s

d i r e c t l

y

and

i

n d i r e c t

l y

ma d

e

use

of t

h e

me

ans and

i n s t r u

m e n t a l i t

i e s

of n

t e r s t a t

e

com

merce,

and

t h e

m a i l s

i n

c o n n e

c t i o n

w i t h

t h e a c t s p r

a c t i c e s

and

c o u

r s e s of

u s i n e s

s

s

e t

f

o r t h

i n t h i s

C o m

p l a i n t

.

IV

.

THE EB-5

PRO

GR M

10


11/81

37. C

ongress

c r e a

t e d

t h e

EB

- 5

I m ~ x ~ i g r

a n t

I n

v e s t o r Pr o g r

am

i n 1990 i n

a

n

e f f o

r t t o

b o o s t

t h e U.

S. econ o m

y. The Pr o g r a

m

p r o v i

d e s a

p r o s p e c t i v e immigran

t

w i

t h

t h e

o p p o

r t u n i t y t o

be c o m e

a

p e n x ~ a n e n t r e s i d e n t

by

n v e s t i n g i n t h e

U.S.

3 8 .

T

o

q u a l i f y f o r

a i a

EB-

5 v i s a , a

f o r e i g n

a p p l i c a n t mu

s t i n v e s t $500,0

00 ~ ~

$1

m i l l

i o n (depe

nding

o n t h e

t y p e

o f n v e s t m

e n t i n

a

c o m ~ n , e r c i a

l e n t e r p r i s e

approved

by

t h e

U.

S.

C

i t i z e n s h i p

and

I m m i ~ r a

t i o i l

S e r v i c e

Immig

ration

S e r v i c e ) .

O nc e

he or

s

he

h a s

i n v e s t e

d ,

t h e

f o r e

i g n

a

p p l i c a n t

may

p p l y f o x

a

c a i l d i t i o n a l

g r e e n

c a r d ,

which

i s go o d

f o r

t w o

y e a r s . I f

t h e

i n v e s t m e

n t

c r e a t e s

or

p r

e s e r v e s a t

l e a s t t e

n

jobs

d u r

i n g t h

o s e

t w

o

y e a r s

, t h e f o r e i g n

a p p l i c a n t

znay

a p p l y

t o

ha ve

t h e c o n d i t i o n s

r e m o v e d from

h i s

o r h e r g r e e n

c a r d .

The

a p p l i c a n t

ca n

t h e n .

l i v e

and

work n t h

e

U.

S. e r m a n e n t l

y .

3 9 . e r t a i n

n umbe

r

o f

E

B-5 v i s a s

a r e s e t

a s i d e

f o

r p r o s p e c t i v

e immigrant s

who

i n v e s t

t l u o u g h

wha

t

s know

n s a Regio

nal

C e n t e

r .

n p p l i

c a n t o n l y

has t o i n v e s t

$500,000

f

l

i e o

r

s l o

i n v e

s t s

t h r o u g h a Regional

C e n t e r .

40.

The S t a t e

o f

Ve

r m o n t EB

- 5

Regiona

l C e n t e r

has

be e

n a f e d e r a l l y -

d e

s i g n a t e d

Regi

onal C e n t e r

s i n c e 199 7.

P r o s p e c t i v

e

immigrants

i n v e s t i n g

t h r o u g

h

t

h e V e r m

o n t

R e g i o n a

l

C e n t e r

o n l y have t o

i n v e s t

$500,000.

s h e R e g

i o n a l C e n t e r

,

t h

e

s t a t e has

a p p

r o v e d a l l

EB

- S

p r o j

e c t s

w

i t h i n

t h e

s t a

t e

and

has

e n t e

r e d i n t o

a

m enn

oxandum

o f

n d e r s t

a n d i n g

w i t h t h e

i

s s u e r s

o f

EB

- 5 p r o j e c t s ,

i n c l u d i n g

Jay

Peak

.

The

Ve r

mo n t Ag e ncy

o

f

C o

m m e r c e

and

C o m m u

n i t y

De

v e l o p me n t

h a s ,

u n t i l r e c e n t l y , a d m i n i s t e r e d

t h e

s t a t e

s

EB

- 5 program.

The

V e r m o n t

D i v i s i o n

o f i n a n c i a

l

R e g u l a t i o n

n

ow

h a r e s

t h a t

r e s p o n s i

b i l i t y

w i

t h

t h e Ag e

ncy.

V

TI

DE

J YPE

KEB- 5

O

FFERINGS

41. Jay Peak began

o f f e r i n g and

s e l l i n g

s e c u r i t i e s

i n

t h e

farm

o f

i m i t e

d

p a r t n

e r s h i p

i n t e r e s t s

i n

D ecembe

r

2006.

Since

t h a t

time

t

has

a

i s e d

m o r e

t h a n

$ 3 5 0

i

l l i o n from

m o r e

t h a n

1 1


12/81

700

n v e s t o r s from a t

l e a s t 74 o

u n t r i e s i n

seven e p a r a t e

o f f e r i n g s .

T

he

n d i v i d

u a l o f f e r i n g s

a r e

s e t

f o r t h

i n P a r a g r a p h s

I5 1

6 1 8

20

22

24 and

26

a U o v e .

Wh

ile Bi

omedical

Phase

VII

i n v o l v e s c o n s t r u c t i o n

of

t h e

b i o m e d i c a l

r e s e a r c h

f a c i l i t y

t h e

f i

r s t s i x l

i m i t e d

p a r

t n e r s h i p

o f f e r i n g

s

ha ve

c e n t e r e d

a r o u n d . a

s k i

r e s o r t

and

r e l a t e d

f a c i l i t i e s

such a

s

h o t e l s

l

o d g e s

condom

iniums

e c r e a t i o n

a

nd me

eting

a c i l i t i e s

an

d e s t a u r a n t

s

and

c a f e s .

42

.

Jay

Peak has

marketed

i t

s E I 3

-5 l i m i t e d p a r t n

e r s h i p i

n t e r e s t s a n

c ~

s o l i c i t e d

i n v

e s t o r s

i n

a

v a r i e t y

of wa y s

— t h r o u g h

i t s

w e b s i t e

i

n t e r m e d i a r i e s w

o have

pr

omoted t h e

i n v e s t m

e n t s

i m m i g r a t

i o n a t t o r n e y s

w i t h i l i t e r e s

t e d

c l i e n t s and

o v e t • s e a

s m e e t i n g s and

s e m i n a r s

w i t h

p r o s p e c t i v e

i n v e s t o r s .

43.

F

or examp

le

J a y

P e

ak

has

r o u t i n e l y

a t t e n d e d

e

v e n t s

o v e r s e a s where

c omp

an y

r e p r e s e n t a t i v

e s i n

c l u d i n g S t e n g e r

ha

ve spoken and

m e t

w i t h

p r o s p e c t

i v e i n v e s t o r s .

I n

a d d

i t i o n

J a y

P eak

ha s

s p o n s o r e d b

o o t h s

and

spoken

a t

i m m i g

r a t i o i Z -r e

l a t e d

c o n f e r e n c e s

and

e v e n t s

b o t h

i n t h

e

U.S. and

a b r o a d . S t e n

g e r

has ~ ~ e t

i n

p e r s o

n

w i t h

ab

out

9

5

p e r c e n t of

h e

i n

v e s t o r s

i n t h e

Jay

P eak

r o j e c t s and

Quiros

n r e c e n t

y e a r s a l s o

has t t e

n d e d

Ja

y P e ak

m e e t i n g s

w i t h i n v e s

t o r s

and

answe

red

t h e i r

q u e s t i o n s .

44

. While

o r e i g n r e s i d e n t s

a r e

i n t e r e s t e d

i n

i n v e s t i n g t o

o b t a i n t h e

i r permanent

r e e n

c a r d

s t h e

y

a

l s o

a x e

i n t e r e s t e d

i n

a c h i e v i

n g

a

r e t

u r n

on

t h e i r

i n v e s t m e n t .

S t e n g e r

ha s

t o l d

i n v e s t o r s he

a n t i c i p a

t e d t h e i n d i v i d u a l

p r o j e c

t s would

each

s n a k e

a

t wo t o

s i

x

p e r

c e n t

a

n n u a l

r e t u n l

once t h e y

were

eac

h

c

omplete

and

o p e r a t i n g .

I n

a d d i t i o n

t

h e

o f f e r i n g

m a t e r i a

l s

t h e

De

fendant s

p r o v i d e d t o i n v e s

t o r s

ha

v e

o u t e d

t h

e i r

p o t e n t

i a l r e t u r n s . F

or

exampl

e

ne

t a

t e s i d e

i n v e s t o r

r e c e i v e d i n f o r

m a t i o n .

f

rom J

ay

P e ak i n

t h e

S t a t e s i d

e

Pha

se V I f f e r i n g

m a t e r i a l s

s t a

t i n g

t h a t

once

t h e

p r o j e

c t i s

c o m p l e t e i n v e s f i a r

s w i l l r e a l i z e

u p

t o a

s i x

p e r c e n

t

a n

n u a l

r e t u r n .

Bio

medical Phase

VIT n v e s t o r

r e c e i v e d m a t e r i a l s s t a t i n

g

a

i v e

p e r c e n t

a n

n u a l

r e t u r n

i s

e x p

e c t e d .

1 2


13/81

Oth

er

B

iomed

ical

Phas

e

V T T

i n v e

s t o r s

a l

s o

r e

c e i v e

d

o f f e

r i n g

do c

ument

s

t

o u t i n

g a

P o u r

t o

s

i x

p e r

c e n t

a

z u ~ u a l

r

e t u r n

onc

e

h

e

p

r o j e c t

i

s

b u i l

t .

45.

I n t e r e s t e d

i n v e s t o r s i n

each

o f

t h e

p a r t n e r s h i p s g e n e r a l l y

p u t

d o wn

a

$10,000

d

e p o s i

t , which

goes

tow

ards t h

e i r

$

500,0

0 0

i n v e

s t m e n

t . Th e

i

n v e s t o

r s

t h e

n

n o

r m a l l

y r e c e i v

e

fr o

m

Jay Pe

ak, an

d

o f t e n

fr o

m

S t e n g

e r ,

o f f

e r i n g

Y n a

t e t a l s

t h a t c o

n s i s t

o

f

a p r i

v a t e

p l a c e

m e n t

m

e nno r

and u

m ,

a b u s i n

e s s

p l a n ,

and

a

i m

i t e d

p a r

t n e r s h

i p

a g r e

e m e n t

.

46.

m

ong

h e

do

cumen

t s

i n c l

u d e d

i n

ea

ch

b

u s i n e

s s

p

l a n

i s o ne show

ing

t h e c o s t

of

each

p r

o j e c t

and

t

h e

us

e

o f n v e s

t o r f u n

d s .

Give

n

d

i f f e r e

n t

t i

t l e s , such

a s

Sour

ce and

U

se

o f

I n v e s t o r

Fun d s

S u i t e s

Ph ase

I ,

P r o j e c t e d

S o u r c e s and

Use s of

F t u z d s

(Biomedical

Phase

V I I ) ,

o

r

I n v e s

t o r

F

un d s

Sou

r ce

and

A p

p l i c a

t i o n

(Pen

thous

e

P

h ase

I I

I ,

t

h i s

use of

p r o c e e

d s

d o

c u m en

t

i

s t s

i

n

g r e a

t

d e

t a i l

e x a c t l

y how

Jay

Pee

k

a

nd/

o r

t h e

l i

m i t e d

p a r t n e

r s h i p

i n t e n

d

t o

sp

end

a l l

i n v

e s t o r fu

nds r a i

s e d ,

i n c l u

d i n g

o n

l

a n d a c

q u i s i t

i o n ,

s i t e

p

r e p a r a

t i o n ,

and

c o n s t

r u c t i o

x x

Th e

use

o

f

r o c

e e d s

d o

c um e

n t

a l

s o

l i s t s

t h e

m a n

a g e m e

n t c o n t

r i b u t i

o n

i n

ea

ch o f f e r

i n g ,

and h

ow

Ja

y

Pea k

o r t

h e

l

i m i t e d

p a r t n

e r s h i p

w i l l

sp e

nd

t h a

t

m o

n e y . ' T

h e

d

o cum e

nt

a l s o

s p e l

l s o u

t e x a c

t l y

how

m u c h

i n

c

o n s t r

u c t i o n

, m a

n a gem

en t,

l a

n d ,

or

o

t h e r

f e e s

J

ay

P

e ak and

t h e g

e n e r a

l p a r t n

e r a r e

e n t

i t l e d t o

t a k

e fr o m

i n v

e s t o r m o

n e y

n e

ach o f F e

r i n g .

47.

S

o ,

f o r

exa

mple ,

i n

S u i t

e s Phase

Y

, t

h e

d ~ e u

r n e n t

e

n t i t l e d

Sour

ce and

U

s e of

I

n v e s t o

r Fun

d s sh

ows

t h

e

p r o j

e c t

r a i s

i n g

$

17.5

m i l l i o

n

fr o

m i n v e

s t o r s

t o

pa y

f o

r t h e

p

r o j e c t .

Th e

c o

s t s

a r e t h e n

brok

en d

own

a s $10.4

m i

l l i o n

f o r c o n s t

r u c t i o

n ,

$ 1 . 6

m i

l l i o n

f o r

o p

e r a t i n

g

s y s t e :

~ x ~ s

and

equip

ment,

$800

,0 0 0

f o r u

t i l i t i e

s

and

c

ommo

n r e a s

,

$1.8

m i l l i o

n

f o r

p

u r c h a s

e

o f

t h e

l a n d ,

a p p r o

x i m a t

e l y

$ 6

0 0 , 0 0

0 f

o r c

o n t i n g

e n c i e

s ,

a

nd

a p p r

o x i m a t

e l y $40

0,000

f o

r wo r

king

c a p i

t a l p

on

compl

etion

o f

h e p r o j e c

t ,

Jay

Pe

a k i s e n

t i t l e d

t o

t a k

e

$ 1 .

9 m i l l i

o n i n

d

e v e l o

p e r

f e

e s ,

o

r

a

o t a l of

1

7.5 m

i l l i o n

.

13


14/81

~8.

n d d i t i o n a l p a r t

of h e

o f f e r i n g

m a t e r i a l s i s

t h e

l i m i t e d


agreement

n

each p r o j e c t , which s p e l l s

out

t h e

r i g h t s ,

o b l i g a t i o n s and

r e s p o n s i b i l i t i e s

of

h e

g e n e r a l

p a ~ ~ t n e r

f o r

each

p r o j e c t

a s

w e l l a s

t h e l i m i f i e d

p a r t n e r s ( i n v e s t o r s ) . I n

each

p r o j e c t

t h r o u g h

S t a t e s i d e

Phase

VI, h e g e n e r a l p a r t n e r i s an

e n t i t y i n w h i c h . S t e n g e r • i s

t h e

s o l e

p r i n c i p a l .

I n

Biomedical

Phase

V I I ,

S t e n g e r

and Quiios a r e

bath

p r i n c i p a l s i n t h e

g e n e r a l

p a r t n e r .

49.

mong

t h e r

key p r o v i s i o n s , each l i m i t e d


agreement

—w h i c h

l l

i n v e s t o r s

e i t h e r s i g n e d or adopted — c o n t a i n s

s e v e r a l

p r o v i s i o n s

r e g a r d i n g h o w

Jay

Peak

and

t h e

g e n e r a l p a r t n e r

can

use

i n v e s t o r m on e y.

G e n e r a l l y ,

each l i m i t e d


agreement

r e v e ~ i t s

t h e g e n e r a l

p a r t n e r

from,

w i t h o u t c o n s e n t

of

the

l i m i t e d

p a r t n e r s :

1)

borrowing

from

o r

commingling n v e s t o r funds;

2}

c q u i r i n g

any

p r o p e t - t y

w i t h

i n v e s t o r

funds

t h a t does

not

belong

t o

t h e

l i m i t e d p a r t n e r s h i p ; or

3)

mortgaging, conveying

or

:encumbering

p a r t n e r s h i p p r o p e r t y

t h a t was not

e a l

p r o p e r t y .

50. s

d e s c r i b e d

i n d e t a i l

t h r o u g h o u t

t h e

r e s t

of t h i s Complaint,

t h e

Defendants

r o u t i n e l y

v i o l a t e d

t h e s e

p r o v i s i o n s

w h e n they

misused, m i s a p p r o p r i a t e d , and

commingled

i n v e s t o x funds

from t h e d i f€ e r e n t

p x o j e c t s .

I n s t e a d of s i n g

i n v e s t o r funds

a s

d e s c r i b e d i n

t h e use

of

proceeds

documents, h e

Defendants f r e q u e n t l y h a d

i n v e s t o r

funds

f i l o w i n g i n a

c i r c u l a r and

roundabout

m a n n e r a m o n g

v a r i o u s a c c o u n t s and e n t i t i e s ,

which a l l o w e d t h e m t o

misuse

a c i d

m i s a p p r o p r i a t e

i n v e s t o r f u n d s .

51, S t e n g e r reviewed,

w a s e s p o n s i b l e

f o r ,

and h a d

a u t h o r i t y

o v e r , t h e

c o n t e n t s

of h e

o f f e r i ~ x g documents

i n 1 l i a s e s I

-VI,

n c l u d i n g

t h e

l i m i t e d


agreements

and t h e

use of

proceeds

d a c u m e l l t s .

Moreover,

Quiros

reviewed t h e

c o n t e n t s of t h e

Phase

I

-VI

a f ~ e r i n g

documents,

was

f a m i l i a r

w i t h

them, a l d u n d e r s t o o d

l i e

had

t o

a b i d e

b y

them. He l s o

approved

t h e use ofprocee ds d oc u m e n t n

Phases

I T I

- V I .

14


15/81

5

2. Bo

th S

t e n g

e r

an

d

Q u

i r o s

,

a s

p r i n

c i p a l

s of

t h e g e

~ l e r a l

p a r t n

e r

f o z

~

3 i o m z

d i c a l

Phas

e V I I

, re

view

ed

a i l d

a

ppro

ved

t h e

c o

n t e n

t s o

f h a t

p

r o j e c

t s

o f f e

r i n g

doc

umen

ts,

n c l

u d i n g

t h e l i m i t e d p a r t n e r s h i p

agreement and

t h e u s e

of

proc eeds

d o c u m e n f i .

S3.

I

n t e r e

s t e d

i n v e

s t o r s

made

a

5 0

0,00

0 i

nves

tm ent

n

a

p a r t i

c u l a r

p r

o j e c t ,

a s w e

l l

a s

p a i

d

a ~ z a

d d i t i

o n a l

SO

,U00

a d m i

n i s t r

a t i v

e f e e

t h

a t Ja

y

Pe

ak and t

h e

o t h

e r Def

enda

nts

u s e d .

f

o r

exp

ense

s a s s o

c i a t e

d

with

t h e

i n v e

s t m e

n t , i n c

l u d i n

g

f

e e s t o

i n t e r

m e d i a

r i e s .

Eac

h

p r o

j e c t

had

a

n

esc

row

accou

nt a t

P e o p l

e s

Uni

te d

Ba

n k i n V

ernn

ant

f o

r ~ n e r

i y know

n a

s

t

h e

C

h i t t e

n d e n

T r u

s t

Com

p any

).

S

t e n g

e r

w a

s

a s i g

n a t o r

y

on

a

l l

o

f

t

h e P

e o p l e

s

Ba n

k a c c o u

n t s

and

r o

u t i n e

l y

a u t h o r i z e d t h e

t i a ~ l s f e r

of

unds

n t o

and

ou t

of

h o s e a c c o u n t s .

54

.

The i

n i t i a

l 5

00,0

00

inve

stm e

nt

n o

r i n a l

l y

w a s

d e p o

s i t e

d

i n

t o

t h

e P

e o p l e

s

Ba n k

acco

unt

f o r

t h

e

s p e c i

f i c p r o j e

c t i

n

whic

h

t h

e i

n v e s f i

o r

w a

s

p a r

t i c i p a

t i n g .

Onc e

t

h e Im

migr

ati o

n

S e r

v i c e

a

ppro

ved t h

e

i n v e

s t o r

s

i n i

t i a l o r

p r o v i

s i o n

a l ,

gr

een

c a

r d ,

S t

e n g e r

t y p

i c a l l

y ha

d

t h

e

5

00,0

00

t r a n

s f e r r

e d

t o

a

a

ymon

d J am

es

acc

ou nt

t h

a t w a s

s e t

u p i n t h e

nam

e

of

h e

p a r t i

c u l a r

p r o

j e c t

thr o

ugh

a

ymon

d a i n

e s

Co

ral

Gab

les o

f f i c e

.

55.

S t e

n g e r

had

n

o s i g n

a t o r

y

or

o

t h e r

a u t

h o r i t

y

ov e

r t h e

ay

mond

J a me

s

a c

c o u n t

s .

R a

t h e r ,

Qu

iros

ope

ned a

l l

o

f t

h e ay

mon

d

J a m

es a c

c o u n t

s , and

ha

d

s o l

e

a

u t h o r

i t y ov

er

the

m.

T l i

e

aymo

nd

J

a m es

br

oke r

l i s t e

d

on

t h e

a c c o

u n t s

w

a s

Quir

os ' fo r

mer

s

on-

i i

i

- l

a w .

O

n c e

t

h e

ay

mond

J

ames

a

ccou

nts

r

e c e i v

e d

t

r a n s f

e r s fr

om

t

h e P e

o p l e

s

Ba n k

a c c

o u n t s

, i t

w

a s

s

o l e l y

Quir

os

w

o

i r e c t

e d use of

h e

f u

n d s .

56.

Q u

i r o s

,

S

t e n g e

r ,

and o t h e

r

o f

f i c e r

s of

Jay

Pe

ak

a

nd

t h e

Def

enda

nts

ove

rsaw

a c

i d

d i r e c

t e d us

e

of

l l

i n

v e s t o

r f

i a n d s

an

d t

h e

dev

elop

ment

and

c o n s t

r u c t i

o n of

l

l p r o

j e c t s

.

I n

v e s t

o r s

p l a y

e d

n o o l e

i n t h

e

dev

elopm

ent,

o n s

t r u c

t i o n ,

or

o p e

r a t i

o n

of

h e

f a c i l i

t i e s .

V I

THE

DEF

END

ANT

S

+RA

UDU

LEN

TLY

U

SED

IN

VES

TOR

FU

NDS

T

O FI

NAN

CE

QUI

ROS

URC

HAS

EO AY

PEA

K

15


16/81

57. J a y

Pe

ak was

o r i

g i n a l l y

ow

ned

by

a Cana

di an

f i r m

,

Mon

t

S a i n t -

S

auveur

I n t e r n a

t i o n a l , I n c

.

MSSI

) , t h a t

ov e

rsaw

t h e

Phas

e

I

s e c

u r i t i e s

o f f e r

i n g .

S t e

n g e r

wor

ked

f o r

I v I S S i

a t

t h e

t i m e ,

and

a l s o

ov e

rsaw t

h e

o f

f e r i n g

a s

t

h e

p

r i n c i p a l

o

f

J

ay

Pea

k

M

anagem

ent,

h e

g e n

e r a l

p a r t n e

r

of Defe

ndants

S u i

t e s

Ph

ase 7 and

H

otel

Ph

ase

I I

S u

i t e s

Ph

ase I r

a i s e d

1

7.5

m i l

l i o n

fr o

m

3S

i n v e

s t o r s

fr om

De

cembex

•

2006

t h r o u

g h

May

008 .

S 8 .

Fr o

m

J a

n u a r y

t

h r o u g h

Ju

ne

200

,

Qui

ros n e g o t i a

t e d

and

f i

n a l i z e d

a

t o c k

t

r a n s f e r

agreem

ent

betwee

n

MS

SI nd e s o r t s

i n

which

MSSI

g r e e d

t o

t r a n

s f e r t

h e

r e a l

e

s t a t e

a

nd

o t h e r a s s

e t s

of

J

ay Pea

k

t

o Q e s o

r t s .

Th

e

agree

ment

wa

s s i g n

e d on

June

1 3 ,

2008,

an

d

t

h e

p a r t i e s

c l o s e d on

t h e

d e a l

1

0

d

ays a t e

r

Ju

ne 23,

2008,

o r a

i n a l

p

r i c e

of

25.7

m i l l i

o n .

59

.

Jay Pe

ak

owned

S u i t e

s

Ph

ase I

Durin

g

t h e ti

me

w

hen

Q u i r o s

an

d MSS

I we re

n

e g o t i a t

i n g

t

h e s t o

c k

t r a n

s f e r a g

r e e m e n

t , S u i t

e s Phase

I

was

r

a i s i n g

fu

nds

fr

om

i n v e s

t o r s .

A p p r o

x i r r ~ a t

e l y

e

i g h t

p e o p l e

i n v e s t e

d

i n

t h e

S

u i t e s

Phas

e

I l i m i t e d

p

a r t n e r s

h i p

bet

we en

J a n u

a r y

and

Ma

y

0

08.

60.

H o t e t Phas

e be

gan

r a i s i

n g

mo

ney

n

Mar c h

200 ,

n d

.

t

h a t l

i n n i t e d

p

a r t n e r s h

i p

r e c e

i v e d

5

00, 000

i n v

e s t m e n t

s

fro

m 1 5

i n v e s

t o r s

be

tween

Ma

r c h

and J

une

2

008

(a o t a

l o

f 7 . 5

m i l

l i o n ) .

r r om

J u l y

t

h r o u g h

Septem

ber 2008,

Ho

tel Phase

r e c e i v e

d

500,0

00

a p

i e c e fro

m

a n o

t h e r

1 5

n v e s t o

r s

(a o t a l

o

f

7.5

m i l l i o n

) .

61 .

I n

t h e

f i v e

mon

ths

b e f

o r e c l o s i n

g on

t h e p u r c h a s

e

of ay Peak,

u i r o s

wa

s

e a v i l

y

i n v o l v

e d i n a l I

a s p e c t s

of

h e

Jay

Pea

k

p r o j

e c t ,

i n c l u d

i n g u n d e r

s t a n d i n

g

h

ow

t h

e

p r o

j e c t

r a i s

e d

money

and

managing

t h e

n a s c e n t

S u i t e s

Phase

I c o n s t r u c t i o n .

e

new

S u i t e s

Phase

I

was

r a

i s i n g

money

and n v e s t i

g a t e d

how

h

a t was

b e i

n g

done

b e f

o r e

he

bo

ught

Jay

Peal.

62.

I

n

p

r e p a r a t

i o n f o r

t h e

c l o s

i n g ,

Qui

ros as

ked

MS

SI r e p r

e s e n t a t

i v e s t o ope

n

b r o k

e r a g e

a c c o

u n t s

a t

ay

mond J

ames

w

i t h

h i s

for

mer

s

on

- i n- l a w

i n

t h e

nam

es

of h e

S u i t e

s

1 6


17/81

Phase

I

and

H o t

e l

. P h a s

e I I l i m i t e d

p r z r ~ n e r s

h i p s . MS

SI

e p r e s

e n t a t i v e s a g r e

e d ,

and

S t e n g e

r

open

ed a

S u i t e s Phase

I

a c c o u n t a t

Raymo

n d

James o n

May

0,

2008.

month l a t e

r on June

20,

U0~, h e

opened

a

Hotel

Phase

I

a c c o u n t

a t

Raymon d

James.

63.

Both

t

h e

S u i t e

s Phase I

a n d .

Hotel Ph

ase I I l i m i t e d p a r t n e r s

h i p

a g r e e m e n t s

p r o v i d e d

t

h a t

t h e

g e

n e r a l

p a r t n

e r s c o u

l d

only p u t

i

n v e s t o r

m

o ney n

FDIC-i n s

u r e d

bank

a c c o u n t s .

As a

b r o k e

r a g e

f i r m ,

Ra ym ond

James

wa s

n o t

a

b

ank and

n o t

FDIC-

i n s u r e d . O

n

May

2 , 2008,

e i g h t

days

b e f o r

e

h e

opened

t h e

S u i t e s

Phase

I

Ra}nnond

James

a

c c o u n t ,

S t e n g e r

s i g

n e d

an

ame

ndment on b e h a

l f o f h e g e n e

r a l

p a r t

n e r

removing

t h e

r e q u i r e m e

n t

of

an

FDIC

-

i n s u

r e d

bank

a c c o u n t

fiam

t h e S u i t e s

P l i a s e

I l i m i t e d p a r t n e r s h i p

a g r e e m e n t .

This

c l e a r e d t h e

way

o r t h e

t r a n s f e r

o f

n v

e s t o r

funds t o Raym ond

J

ames

a c c o u n t s . No uc

h

amendnnent

was

e v e r

s i g n e d

f o r

t h e Hotel

Phas

e I l i m i t e d

p a r t n e

r s h i p

a

g r e e m e n t .

Thus,

t e n g e r s

s u b s e q u e n t

t r

a n s f e r

of

h e

75

m i l l i o n r

a i s e d

from 15

0

Hotel

Phase

I i n v e s t o r s

i n

2

008, 20Q9,

and

2

010

from

P e o p

l e s B a n k

o

Raym

o n d J a n n e s and

Q u i r o s

c o n t

r o l v i o l

a t e d t h e

Hotel Phase I

l i m i t e d p a r t n e

r s h i p

a g r e e m e n t .

64. O

n une

16

and

17,

0

08,

n

p r e p a r a t i o

n

f

o r

c l o s i n g ,

MSST r a n s f

e r r e d

11 m i l l i o n

i n

S u

i t e s Phase

I

i n v e s t o r funds

from P

e o p l e s Ba n k t

o

Raym

o n d James.

Three days

l a t e r

o n

June

20

,

M

SSI

r a n s f e r r e

d

7

i l l i o n

i n H o t e

l

Phase

I I

i n v e s t o r

funds

f

rom

P e o p

l e s

Ba n

k

t o

Raymon

d Jame

s. S t e n g e r

s i g n

e d

t h e wire t r a n s

f e r r e q

u e s t

f o r t h i s

7 i l l i o n . T here

w

a s

no

m oney

i n

e i t h e r t h e

S u i t

e s

Phase

I or

H o t e l

Phas

e

I I

Raymo n d

James

a c c o u

n t b e f o r e t

h e t h

r e e

t r a n s f e r s

d e s c r i b

e d

i n

t h i s

P a r a ~

~ a p h .

65.

I n c o n

j u n c t i o n w i t h t h o s e

t r a n s f e r s

,

MSS

I

e p r e s

e n t a t i v e s

on

Jun

e

18

w x o t e a

l e t t e r

t o

t h e

Ra

ym ond

Jame

s

b

r o k e r , w i t h

c

o p i e s

t o

Q u r o s

and S

t e n g e r , a

n i o n g

o t h e r s ,

e x p l a i n i n g

t h a t

t h e

f

u n d s i n

t h e MSSI

Ra

ymond

Ja

mes

S

u i t e s

Ph

ase I a c

c o u n t

were

i n v e

s t o r

f u n

d s .

T he

l e t t e r f u r t

h e r

s

t a t e d

t h e i n v e s t o r

money

c o u l d

o n l y b

e

used

i n

t h

e

ma nner

s p e c i f i e d

i n t h e

S u i t e s

17


18/81


19/81

( p r e v i

o u s l y

e

mpty)

h a t he h

ad j u s

t

open

ed

A t

R

aymo

nd

Ja

me s i n t

h e n

ame of

e s o r

t s .

e

c o i n p

l c t e d

h i s

f i r s t

f

r a u d u l

e n t t

r a n s f e

r t h e

same

da

y

wh

en

he

w i r

e d

13

.544

m i l l

i o n

f i o z n

t

h e

R e s o r t s

account

o

t h e

law

i i ~ n

r e p r e s e n t i n g

MSSI

s

p a r t i a l

payment

o r

t h e

Jay

Peak

p u r c h a s e .

70.

Over

d

i e

nex t t h r e e

mont

hs,

Q

uiros ma

de

o u r

a d d i t i

o n a l

p

aymen

ts

t

o t a l i n

g

5

. 5

m i l l i o

n f

rom

t h e

e s o r

t s acco

unt

o

t

h e

sa

me

law

f i

r m

a s

c o t

a t i n u e

d p a

y m e x l t

f o r

t h

e J

ay

Pea

k

p

u ~ • c h a

s e .

The

p e c i

f i c pa

yment

s

were

1.5 m i l l i o

n

on 3 u

l y 1 , 200

8; 1

m i

l l i o n

o

n

A

ugust

29,

2008;

5 04,0

00

o n

Septe

mber 5, 00

8; and

2.

5

m

i l l i o n

o n e p t e

r n b e x

26,

008.

71.

Q

uiros

m

ade h r e e

a d d i t i

o n a l

t r a

n s f e r s

from

t h e

e s o r

t s

acco

unt

t o t

a l i n g

2.9

m i l l i o n

—

2

i l l i o n

o n

June

25, 200 8; 628,684

o n

June 26, 2008; and 263,000

on

Sept ember

3,

0

0 8

—all o

t h

e

law

i r m

t h a t

h

ad r e p r

e s e n t e

d

e s

o r t s i n

sec complaint 2

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