LegacyGT

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This is getting hard to watch. They've been shut down each of the past two weeks and then permitted to re-open on the weekends? But they're only open (for skiing anyway) on the weekends. So what's the story here. Does the State just want to appear like it's doing something? Or is the State being fooled by the Club? Either way, they owe a lot of money and it's hard to see how this ends well.
 

LKLA

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This is getting hard to watch. They've been shut down each of the past two weeks and then permitted to re-open on the weekends? But they're only open (for skiing anyway) on the weekends. So what's the story here. Does the State just want to appear like it's doing something? Or is the State being fooled by the Club? Either way, they owe a lot of money and it's hard to see how this ends well.

This is about Hermitage wanting to appear like it is open for business and making the mistake of trying to cater to its members who paid their dues for the year and perhaps even being crazy enough to think that this is a way to attract new members. The gig has been up for a long time. The question now is what will happen. They have some nice facilities but its going to be a hard sell.
 

newboots

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They make a deal with the state and if they cough up the "progress payment," the state lets them re-open. Pathetically, this money is taxes that customers already paid the Club; they just used the money for other things.
 

LegacyGT

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https://vtdigger.org/2018/04/01/lawsuit-filed-founder-hermitage-club/
So they're shut down again. And in addition there's this lawsuit which, as far as I know, is there first evidence of ponzi-type behavior. And this is what should have been clear to the public and members throughout. At first, some of the development could have been funded by the founder's wealth and his lenders. But as the plan rapidly grew to include, not just the ski area but also hotels and real estate and restaurants, there was no way for the founder to finance that without utilizing cash from memberships, real estate sales, etc. to finance other projects.
 

Jully

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Yikes. That certainly does not look good at all. I really want to know what they spend the state's sale tax on too haha, as they missed paying that back to the state...

What are the actual requirements for what you can and can't use real estate funds for? Using membership dues for stuff I would think is totally okay. The real estate sales used for other projects I would think might be okay too, provided there was enough money to build the houses (which there may or may not have been here...)
 

CalG

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Did Barnes expressly say membership dues were only for upkeep though? I think it was just poor business and too much expansion, no ponzi scheme that I see (yet).
If one misrepresents where the funds for such tangible projects such as a building a house are being directed in order to continue the flow of cash.
THAT IS A PONZI scheme. Take money from the unsuspecting under false representation. I suppose it could be called other things, But really.....
 

newboots

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. . . and he told the home buyers that there was progress, coming along nicely, etc.

These folks robbed Peter to pay Paul so many times they probably couldn't keep track of the money, or the lies.
 

Average Joe

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With all the money shenanigans going on at Haystack, I'm puzzled as to why it is taking so long to trickle out. You would think that after the Burke/Jay peak scam that the State of Vermont would be proactive in nipping Ponzi schemes in the bud. Instead, they look to have enabled the scam by allowing continued operation when it was clear that taxes collected were being diverted.
This is another Quirios train wreck in progress - the longer it keeps going, the broader the pain.
 

LegacyGT

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With all the money shenanigans going on at Haystack, I'm puzzled as to why it is taking so long to trickle out.
Interesting point. Maybe some of it is that the operation quickly became too big to fail. Other than Mt. Snow the Wilmington/Dover area really hasn't had too many successful businesses in recent times and here is one that employed a lot of people, demonstrated rapid growth and promised to deliver significant tax revenue. Also, the Jay Peak scam involved the EB-5 program which is a Federal program attracting national attention. Additionally, EB-5 programs look like scams even when they work properly.

As pointed out by some comments above, The Hermitage probably didn't extend into true Ponzi territory until you add in the real estate sales as alleged in the law suit. It it's just a matter of squandering membership initiation fees and dues then I don't know if that qualifies as there's no asset or expected return. People are paying for an experience and it seems as if they've been mostly satisfied. But they should have been concerned about whether or not the club was being run in a sustainable way. Clearly it hasn't been. And this should have been evident from it's rapid expansion, acquisitions, building and development along with the marketing materials and emails that seemed to always be focused on the next big thing. Clearly it was all designed to chase the next group of members and home buyers but this should have alarmed existing members. If the club is doing so much to attract new members, then it's doing that much less to nurture the existing operations. Whether or not it's a Ponzi scheme, it's similar behavior and it's not sustainable.
 

Average Joe

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Ponzi schemes often start out as legit operations - as cash becomes scarce the comingling of funds becomes a game of whack-a- mole accounting.
I'm surprised that the contracts for construction allowed the funds to be diverted for general use - normal practice is for oversight approvals and disbursement from stand alone LLC accounts. Is this the tip of the iceberg?
True that the redevelopment of Haystack has been a bright spot in an area that needs it. "Too big to fail" is a good description, as Jay Peak and Burke (and Newport, VT) showed, when lots of money comes to town.........sometimes good instincts and common sense take a back seat. Even the Governor and Senator were part of the dog and pony show.
True that EB-5 is a federally administered scam- there is no way to fairly administer pay for play. That they use foreign nationals as a source for cash -to trade for the possibility of a green card? You can't make this up. But that's for a different thread.
 

James

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Total mess indeed. People paying for construction yet the contractors and taxes weren't paid so now they can't close on their unit.
Probably will get worse.

What's the market for an Inn there?
 

LKLA

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Total mess indeed. People paying for construction yet the contractors and taxes weren't paid so now they can't close on their unit.
Probably will get worse.

What's the market for an Inn there?
With Mt Snow building 100+ slope-side hotel rooms a mile down the road, the value is not likely to increase.
 

LegacyGT

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I guess this means it's over. It's not going to be easy to unwind this thing and figure out who owns what. But when you look at this you have to wonder how the membership accepted the club's purchases of all these properties.

I imagine that members will still want a private ski/golf club. It will be interesting to see if a group can acquire it and operate it in a sustainable way.
 

Wilhelmson

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While I don't know the details and understand the town doesn't want to forgive taxes for a bunch of wealthy people it seems that by putting the screws to the bank they're just prolonging any possible return to a community asset. Sometimes the right descision isn't the easy one and commuinty leaders need to have a longer term vision.
 

K2 Rat

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While I don't know the details and understand the town doesn't want to forgive taxes for a bunch of wealthy people it seems that by putting the screws to the bank they're just prolonging any possible return to a community asset. Sometimes the right descision isn't the easy one and commuinty leaders need to have a longer term vision.
I hear ya. But the bank clearly is concerned on their 17mm loan to the Hermitage and how can they recover this money or how much of it. Because the hermitage is not paying the bank, it was left without much choice but foreclosure. Because they are trying to control the situation and not let the town do anything to hurt the value, the bank paid the 660k taxes due to the town. I don't think the Bank paid the state though. Although I never thought the business model made any sense for that area, I hope it works out somehow since it will really hurt the valley if it does not open again.
 

James

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They should turn Ascutney into Hermitage North...
J/k
It's tough to backtrack from this. The obvious thing would be for Mt Snow to reincorporate it. But since they've built upscale homes and a lodge, that's tough to swallow if you've bought there. Likely, to save it someone with deep pockets will have to save it and not be all that concerned that he'll recoup the total investment.

I guess the question is how much of a hole in the ground do you have to fill with money and is there an end to it or is it an endless sink hole?
 

Wilhelmson

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K2, I get that and there are probably some hard feelings involved just don't see how forcing the bank to pay $600K to avoid tax sale was the best option. I would take that as a dont' bother doing business in our town if things don't work out we'll hang you out to dry, but again I don't know the details. Possibly some intermingling between entities. In classic meeting minutes style the TM notes that Berkshire has paid $xx of the lien, end of conversation.
 
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