Serenade for Tiny Violins

MouseTinyViolinPoor, poor Ariel Quiros. The alleged fraudster has had his assets frozen by the big bad federal government, to the point where he can’t “feed his family” or “purchase… a cup of coffee, let alone defend against the SEC’s allegations.”

So says Quiros attorney Charles Litchman, who is asking for the freeze to be lifted.

The people of the Northeast Kingdom weep for him.

But Vermonters are a resourceful breed. Maybe we can suggest some ways Ariel could generate a little cash, even as his millions remain sequestered.

For starters, perhaps he could sublet that $2.2 million Trump Tower condo, allegedly paid for with money looted from Quiros’ EB-5 development project.

I’m sure he has other properties that could be rented out or even sold; these guys always own a fistful of homes in the garden spots of the world. I hear he owns a 42-foot oceangoing sailboat; maybe he could hire it out.

I hear tell of a thing called “Groupon.” It’s how the kids are getting all kinds of great deals on the Interwebs. He should check into it.

There’s always the local food pantry. I’m sure they would welcome him with open arms, since a man of his means must have donated liberally to worthy causes in his community. Right?

And don’t forget to check the sofa cushions and junk drawers. Maybe there’s a big ol’ Mason jar in the cupboard that’s full of loose change.

Oh, here’s an idea posted on VTDigger by “Irene Stewart”:

Maybe Quiros could plant a garden for his family in the very large hole they have left in the middle of Newport.

Digger commenter “Todd Spayth” chimes in:

If Quiros needs cash, for coffee and groceries, let him delineate the accounting to some of his EB-5 investors and show them (prove to them) he is a “victim” and see if they want to “float” him while this gets sorted out.

Good point. Quiros must have made a lot of friends in the course of this project. Because, after all, his lawyer claims that five of the seven EB-5 projects are completed and generating profits — and that’s the real source of the millions he took out of the project. It wasn’t investor cash; it was fresh money created by the completed projects.

Mr. Litchman is deploying a multi-pronged legal strategy which, I believe, is known in industry circles as “throwing everything against the wall and hoping something sticks.” Here are the claims he has made, some of which appear to be mutually exclusive.

— Quiros can’t defend himself because of the asset freeze.

— The freeze is excessively comprehensive, since it covers many millions more than the $50 million allegedly looted by Quiros.

— The SEC has made a “sudden rush to Court.” Which is an odd thing to say, since the feds have been investigating this for more than two years. That’s the slowest sudden rush I’ve ever seen.

— Litchman claims “the SEC is trying to punish [Quiros] for turning a profit” on the Vermont projects. Yeah, no.

— “All of the eligible EB-5 investors” have received green cards. Either he’s lying, or he’s putting a lot of weight on “eligible.” Investors aren’t “eligible” for green cards until their projects are finished and have begun creating jobs. If the projects remain incomplete — and state officials have already written off the proposed Newport hotel and biotech facility — they never become “eligible” for green cards.

— The SEC incorrectly argues that Quiros was “only entitled to receive a limited amount of investor funds from each of the limited partnerships.” In fact, Litchman says, Quiros was allowed to get “substantial compensation.”

Leaving aside the question of whether $50 million is beyond reason, there’s a contradiction at work. Litchman is tacitly admitting that Quiros siphoned off a lot of cash from these projects at a time when there wasn’t enough money to complete them. Seems like bad business.

— Quiros has acknowledged to the SEC that he took out margin loans against investor funds, which seems incredibly risky at the very least. But Litchman says the EB-5 agreements did not preclude the practice.

Which may be true, but one of the structural problems with EB-5 is that participants have to waive many of the rights and protections that shareholders usually receive.

Oh, and here’s a thing. Then-VTDigger reporter Hilary Niles wrote a somewhat fawning profile of Quiros in January 2014. (Not a good look after recent revelations.) In it, Quiros shares the secret of his entrepreneurial success.

Quiros says that… he avoids [getting into trouble] in business by not borrowing money.

“If I had a dollar, I lived with a dollar, instead of looking for the easy way, borrowing money,” Quiros says. “That makes an entrepreneur.”

Well, didn’t that just turn out to be complete horseshit?

I do feel the slightest twinge of sympathy for Mr. Litchman. He has to devise a winning strategy for a client who’s accused of doing some very bad things. And as it stands, he’ll have trouble collecting his sure-to-be-substantial legal fees.

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