What the heck is going on at Magic?

BenedictGomez · Jul 10, 2014

MadMadWorld said:
When an organization is considered a club funds it pretty much gives the officer free rein when it comes to how/where money is spent. The fact that state regulators are involved in a situation involving a club is a huge red flag in my experience. I don't want to speculate too much but this is not good for Mr. Sullivan.

It's bizarre given AFAWK nothing criminal has/is being investigated. Were they perhaps tax exempt?

The Securities Commission is looking at the whole process from the initial offering, to the change to a club, and to all of the receipts and disbursements. There undoubtedly will be requirements of me when that process is completed.

Because this smells of embezzlement concerns, "speculation" or not.

MadMadWorld · Jul 10, 2014

BenedictGomez said:
It's bizarre given AFAWK nothing criminal has/is being investigated. Were they perhaps tax exempt?

He was the sole member of the LLC so corporate tax doesn't apply to him in the same manor a partnership would. However, when the shares were sold it was indeed a partnership (Matt Lillard?). Which is why I believe the commission is investigating. This is all total speculation on my part though.

RustyGroomer · Jul 11, 2014

http://www.powder.com/stories/magic-mountain-changes-ownership/

MadMadWorld · Jul 11, 2014

Nice write up by Powder.

RustyGroomer · Jul 11, 2014

Hopefully it answers a few questions. Feedback welcome as always.

MadMadWorld · Jul 11, 2014

RustyGroomer said:
Hopefully it answers a few questions. Feedback welcome as always.

A few points:

I think former management is fine as long as they did everything in their power to contact those individuals who bought shares and allowed them the opportunity to opt out (I'm guessing that's what the SEC is looking at)

Second, the article states they did their due diligence about the co-op.....that's obviously not true.

It sounds like Mr. Sullivan got in over his head and ran out of money.

RustyGroomer · Jul 11, 2014

Trying to remain neutral & to not throw anyone under a bus. The "communication" was the biggest problem in all of this.

manhattanskier · Jul 11, 2014

Great write up, one of the few that really explained things in my opinion, I hope everything will be ok.

Sent from my iPhone using AlpineZone

thetrailboss · Jul 11, 2014

BenedictGomez said:
It's bizarre given AFAWK nothing criminal has/is being investigated. Were they perhaps tax exempt?

Because this smells of embezzlement concerns, "speculation" or not.

I think that that basic concern were the State securities laws. He was selling "memberships" in a "coop" that might meet the definition of a security type investment.

thetrailboss · Jul 11, 2014

Good article. Some points:

The Magic Faithful Club—a collection of supporters who put up $3,000 each, initially to form a cooperative ownership group—would have no further role with the resort.

Barker also said that Sullivan was cooperating with the Vermont Securities Division to account for how the roughly $600,000 of club money was spent.

That explains that as well.

MMM then leases the ski area to an operating company. Most recently this was JSL Magic and Sullivan, but it has included other entities over the years.

Interesting. So JLS was merely an operating company and did not own the resort.

Sullivan’s operating company did not own the land or infrastructure, and neither Sullivan nor the owners of the property were willing to give up 100 percent of their investments to go to a full co-op. “It’s harder to put that kind of an asset program together for the operating company without having it backed up by the property,” says Barker.

And securities laws can be difficult:

Barker also says the plan encountered legal issues. Once a board was established and did due diligence, Barker says, it learned that the co-op partnership not only needed permission from the State of Vermont, but from every state in which an investor lived—six or seven more states—and to pay fees, and likely fines, in each. “This was a fundraiser for the states, apparently,” Barker quips.

In February 2014, Sullivan said there were 218 club members. MFC members get 20-percent-off season passes, and a child’s pass for half price. (They were also supposed to get a voting say in how the money was used, which is the center of the controversy surrounding Sullivan and the Securities Division).

This always seems to be the thing that kills ski areas...at least in Vermont. Burke had this issue many times:

Sullivan’s eight-year tenure at the helm of Magic Mountain came to a head in June, when a notice was posted that the area was delinquent on its taxes.

MadMadWorld · Jul 11, 2014

thetrailboss said:
And securities laws can be difficult:

That's an understatement. I would compare it water boarding.

RustyGroomer · Jul 11, 2014

thetrailboss said:
Interesting. So JLS was merely an operating company and did not own the resort.

YES. Most are unaware of this. Tom Barker has been there much longer than the existing of JLS. Take it for what it's worth, but it's not like this is entirely "new". Just a change IMO.

thetrailboss · Jul 11, 2014

RustyGroomer said:
YES. Most are unaware of this. Tom Barker has been there much longer than the existing of JLS. Take it for what it's worth, but it's not like this is entirely "new". Just a change IMO.

That surprised me. Especially considering how much money he wanted to invest in the physical infrastructure. It's kind of akin to what is happening now with PCMR. Talisker owned the ground, PCMR now is realizing how SOL they are that they only leased the ground. Theoretically they may lose their lifts and buildings in which they invested.

I think it does come down to someone with very good intentions, an ambitious plan that did not come to fruition, and unfortunately he got in over his head with the complexity of the situation. The article makes it clear that the resort is much better than it was.

Abubob · Jul 11, 2014

RustyGroomer said:
http://www.powder.com/stories/magic-mountain-changes-ownership/

This says Sullivan is out completely but didn't I read in this thread somewhere he's still on as an advisory roll?

RustyGroomer · Jul 11, 2014

Abubob said:
This says Sullivan is out completely but didn't I read in this thread somewhere he's still on as an advisory roll?

As of right now,.....YES. Tom has stated Jim will remain on in an advisory role. Whether or not that changes, time will tell.

AdironRider · Jul 11, 2014

So you Magic faithful really have no fear that Jim was embezzling funds from his law clients in CT, but is clean as a whistle at Magic. Please.

bobbutts · Jul 11, 2014

AdironRider said:
So you Magic faithful really have no fear that Jim was embezzling funds from his law clients in CT, but is clean as a whistle at Magic. Please.

Just a theory as I am not intimately involved at all.
I don't think it really matters all that much as long as the resort operates. Faithful got a decent deal for their money even if some of it was embezzled/wasted/whatever.

xwhaler · Jul 11, 2014

Seems to me that this has less to do with where the $ went but more so whether a formal process was in place to get the approval from the co-op share members with how to use said funds.
Part of the neat thing about being in a co-op is the feeling that you have a say in how $ is allocated to various projects. If Sullivan just acted on his own w/o involving the members, that is probably where the issue reside.

thetrailboss · Jul 11, 2014

bobbutts said:
Just a theory as I am not intimately involved at all.
I don't think it really matters all that much as long as the resort operates. Faithful got a decent deal for their money even if some of it was embezzled/wasted/whatever.

I think that's the first time I have seen someone try to justify embezzlement, or in this case, perhaps alleged wrongdoing.

bobbutts · Jul 11, 2014

thetrailboss said:
I think that's the first time I have seen someone try to justify embezzlement, or in this case, perhaps alleged wrongdoing.

Let me try to rephrase.. They just want the mountain open and going in the right direction, which is what happened. I also left the door open for lesser infractions than embezzlement.
If there is some dispute over some % of funds, it's secondary to the improving operations of the mountain.
Also gfy with your assertion that I am somehow defective for having the thought. No reason at all to be a dick about it.

What the heck is going on at Magic?

Well-known member

Active member

Active member

Active member

Active member

Active member

Active member

New member

Moderator

Moderator

Active member

Active member

Moderator

Well-known member

Active member

Well-known member

New member

Active member

Moderator

New member

Similar threads