Raymond James Financial Inc. has reached a $150 million settlement in a lawsuit that involved financing of the failed Jay Peak ski resort and related real estate development in Vermont.
The suit centered on an alleged fraudulent EB-5 investment program created in 2007 by third parties and offered to foreign investors. EB-5 is a U.S. government visa program through which foreign investors and their immediate families can obtain permanent residency green cards by making a capital investment in a U.S. business. Last April, the Securities and Exchange Commission announced fraud charges and an asset freeze against Jay Peak and related businesses for allegedly misusing millions of dollars raised through the program.
According to the SEC,
Raymond James's involvement in the case stemmed from wire transfers received by one of its South Florida brokers beginning in 2008 from a bank in Vermont to accounts controlled by Ariel Quiros, one of the developers of the project. The wire transfers were investors' money slated for the Jay Peak resort. Mr. Quiros later borrowed against the money in the
Raymond James accounts with high interest margin loans, according to the SEC's complaint.
In its lawsuit, the SEC-appointed receiver for Jay Peak named as defendants
Raymond James, Mr. Quiros and Joel Burstein, the
Raymond James broker and branch manager. Mr. Burstein is the former son-in-law of Mr. Quiros. The receiver's complaint alleged that
Raymond James was involved in the misuse of Jay Peak investor funds.
Last June,
Raymond James settled with Vermont's department of financial regulation over compliance violations tied to the project. The firm agreed to pay $4.5 million to a federal receiver that will return money to foreign investors who backed the projects, as well as pay $1.25 million to Vermont's general fund and $200,000 to reimburse the state regulator for the cost of its investigation.
In a press release,
Raymond James said that it did not act as a placement agent or in any other capacity for the program and none of the investors in the program purchased their investments through
Raymond James. While not mentioning Mr. Burstein by name,
Raymond James also said that the financial adviser for the brokerage accounts of the related investment partnerships is no longer employed by the firm.
The firm also said that it had accrued $50 million related to the case and that the settlement provides it with the right to share in proceeds of "certain third-party recoveries that may be obtained by or on behalf of the SEC-appointed receiver or the receivership entities." It also noted that it has significantly enhanced its anti-money laundering control system.
