Receiver's First Interim Report Paints Bleak Picture of Jay Peak and Burke
The northern Vermont resorts are facing deficits and debts resulting from the poor winter and EB-5 scandal.
Friday, August 12, 2016, NewEnglandSkiIndustry.com
Federally appointed receiver Michael I. Goldberg filed his First Interim Report of Jay Peak and Q Burke today, reinforcing a bleak picture of two previously touted resorts.
According to the report, Jay Peak is set to lose $6.5 million this off season. In sworn deposition last year, then-Jay Peak CEO Bill Stenger painted a different picture to the SEC, stating "In our industry, our business, the peak quarters are the winter, and the softer quarters are the summer. In the summer, we generally pay our bills, keep abreast of our financial commitments."
According to the receiver's report, "In addition to the cash short fall caused by operations and the Tram repair, at the commencement of the receivership the Jay Peak and the Burke Resort owed trade vendors $5.1 million for past due bills." The report also cites $3.6 million owed to Q Burke Hotel contractors.
The report also notes that "Material weaknesses were noted primarily in the payroll department at Jay Peak and several areas at Burke" and that a review of human resource policies and compliance found "some weaknesses and deficiencies at Jay Peak and several material weaknesses at Burke."
According to the report, off season bi-weekly payroll has been cut from $700,000 to $500,000. Also noted was the deferral of the receiver's payment until the financial situation at the resorts improves. Meanwhile, Leisure Hotels & Resorts is being paid 2.5% of gross (or a minimum of $54,000 per month) to operate the businesses. Former CEO Bill Stenger remains on the payroll with a $100,000 per year salary.
The SEC took control of the properties on April 13, alleging that Ariel Quiros and Bill Stenger were running a Ponzi scheme that was defrauding EB-5 immigrant investors. The businesses were placed in receivership under Michael I. Goldberg, with Leisure Hotels and Resorts of Kansas City appointed to run the resorts. United States District Judge Darrin Gayles, appointed to the court by President Obama in 2014, is presiding over the case.
In late April, the receiver renamed Q Burke to Burke Mountain Resort. In May, the receiver announced the completed-but-idle Burke Mountain Hotel would open on September 1. Jay Peak remains in normal summer operation.