"Severe Financial Mismanagement" Threatens Resort's Ability to Stay Operational
VERMONT -Â On April 14, 2016 Jay Peak Resort, hosts of "Big Gay Jay Weekend", and sister mountain Burke Mountain were seized by Government officials after the U.S. Securities and Exchange Commission accused the owners of the resorts, Ariel Quiros and Bill Stenger, of fraud in a lawsuit filed in a Miami federal court.
A bit of Jay History
Jay Peak Ski Resort first opened in 1955, with trails cut out by a former Austrian racer, Walter Foeger. Â Now, the fifth largest resort in Vermont, the mountain offers 78 trails covering nearly 385 acres (156Â ha) of skiable terrain.
In 2008, a group headed by Bill Stenger purchased the resort from Mont Saint-Sauveur International.  Stenger's plan was to invest $100 million in capital improvements for the resort over the next few years with the funds for the improvements generated through the US Federal Government's EB-5 program.  The controversial program gives foreign investors who invest at least $500,000 in a project in an economically depressed region of the country a permanent US residency visa if the project creates a required number of jobs.
In 2010, improvements were made including an indoor ice arena, a parking garage, an enclosed beginners lift, and a new RFID ticketing system. The old Hotel Jay was demolished and replaced with a new 170-room one which also included a conference center and 33,000 square foot water park.
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Now
Stenger and Quiros are accused of misappropriating about $200 million of the some $400 million they raised from foreign investors through the federal program.
Michael Goldberg, the attorney appointed by the court to take over Jay Peak on April 13, and later the Q-Burke Hotel, as the properties entered receivership, reports that Jay Peak and Burke Mountain have very little cash on hand, "and numerous upcoming expenses that will quickly use up available cash and, if additional money is not obtained, force the Receiver to shut down operations at Jay Peak and eliminate any possibility of Q Burke opening."
"My assessment of the ski resort operations after examining the financial records available to me and meeting with former CFO George Gulisano and the accountants and management company I retained to examine and manage Jay Peak, is that the ski resort operations are currently losing money and in danger of not having sufficient funds to continue operating beyond the very immediate future," - Goldberg tells federal court.
Despite what Goldberg told a federal court in Miami was severe financial mismanagement that threatened the resorts with failure, he said he would find a way to keep Jay Peak open, and open Q Burke Hotel in the fall.
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As an experienced receiver, Goldberg said he has learned that it saves a lot of time and money to tap into the knowledge and experience of owners of seized properties when that is possible, acknowledging that Bill Stenger has been helping him run Jay Peak.
Goldberg said when he first met with Stenger he was "visually upset," with tears in his eyes.  "He vowed to immediately cooperate, and he did cooperate," Goldberg said. "He has shown a willingness to assist at all times" while working at a reduced salary of "under $100,000."
According to resort managers, Jay Peak needs between $7 million and $11.5 million to stay open through the current off-season.
Goldberg and his team say they are facing a "daily barrage of demand for payment from numerous vendors."
"On April 20 alone, my management team had conversations with soft drink, internet service, gasoline and food service suppliers, all of whom in one fashion or another threatened to cut off service or require cash payments," Goldberg writes. "There are hundreds of vendors whom Jay Peak owes money, and if we do not come up with additional funds soon, the Resort will cease operating."
But the news gets worse.  Jay Peak is known for its unique feature of having a 60-person aerial tramway, also known as the "tram". While any avid skier knows how horribly inefficient it is moving people up the mountain, being the only one of its type in the state of Vermont, it remains a must-experience feature of the resort every visit, and the only way (aside from hiking) to make it to the very top of the mountain.
Originally installed in 1966 by Von Roll, and upgraded in 2000 with new cabins from Swoboda, Goldberg reveals that the system is in need of "major and immediate repairs" to meet the state's safety standards.
"The system is 52 years old," Goldberg writes, "The gondola's manufacturer, which is the only company in the world capable of properly repairing the gondola, has quoted the Jay Peak Resort a $4.15 million price to complete the repairs."
Goldberg tells the court Jay Peak must come up with an immediate 30 percent down payment for the gondola repair of approximately $1.3 million, plus an additional $800,000 later in the summer, with the balance due early next year.
"If the gondola becomes non-operational, the Resort will not be able to transport skiers to the top of the mountain, and will not survive," Goldberg writes.
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It Goes Deeper
While the developers did build the Stateside Hotel and Baselodge in 2013, they never completed promised vacation cottages, recreation center and medical center. These projects would cost another $26 million to finish, but Quiros and Stenger have blown almost all of the money earmarked for the project.
Similarly, a proposed biotech facility in Newport, for which ground was broken last May, is at least $43 million short and in “grave danger†of not being built. This facility, AnC Bio, is described as “nearly a complete fraud.â€
Meanwhile - Goldberg needs every penny available to keep the resorts afloat
After he was accused of fraud, the court froze all of Ariel Quiros' assets, which Quiros estimates at $200 million.  Quiros is attempting to unfreeze all but $50 million of these assets to pay his lawyer and cover basic living expenses.
According to Goldberg, Quiros was asking for a minimum of $150,000 per month for his legal fees and more than $80,000 per month for living expenses.
"Quiros is trying to free up money to pay exorbitant expenses and legal fees," Goldberg said, "That would burn just under a quarter million dollars a month for his expenses... I'm not going to sugarcoat it. It's not great if you start giving him money. I may not have enough money to operate."  He continued, "If you give him that money it's taking away from the money I need to open Burke and operate Jay Peak. Right now I do have sufficient money."
Big Gay Jay Weekend
As of the date of publication, despite requests from the resort, the Boston OutRyders, the ski club responsible for Big Gay Jay Weekend, and OUTSLOPES, the Canadian partner of the weekend, have not delivered deposits to the resort.  The weekend itself will be undergoing some operational changes during the off-season, and once agreements are made between both partners and with the resort, the necessary deposits will be delivered.
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