Safe harbor: About fairness

As more EB-5 regional centers and projects fail, and as more fraud is uncovered, I reiterate my long-held notion that the EB-5 Program calls for a "safe harbor" for investors.  Consider this:
EB-5 investors have done everything the U.S. government has asked them to do.  They have placed their capital "at risk" in an EB-5 investment project for the purpose of creation of jobs and have filed an I-526 petition with USCIS.
But what if the EB-5 investment project fails?  What if the regional center fails?  What if someone runs off to the Cayman Islands with investors' money?  What if no jobs -- or not enough jobs -- for U.S. workers are created?  What if the investors cannot prove their entire $500,000 was invested "at risk" in the EB-5 project because no accounting records exist?  Most EB-5 investments use limited partnership, which means EB-5 investors have little or no control of the investment project.
A "safe harbor" would protect investors from deportion or removal, a harsh and unfair result currently of not proving the removal of the two "conditions" (1) that the full $500,000 was invested in the EB-5 investment project, and (2) that the project created 10 new jobs for U.S. workers.  In the case of a regional center project, indirect and induced jobs may be counted as well.
But now, when investors are unable to prove that the two conditions were met, USCIS places the investors and their family members in deportation (or removal) proceedings.  A very unfair thing to do to foreign investors who invested the money.
I urge Congress to pass a safe harbor provision to make the EB-5 Program fair and just for foreign investors.

EB-5 regional center program extended until Dec. 9

The House gave approval Wednesday to an already Senate-approved continuing budget resolution that would extend the EB-5 regional center program until Dec. 9, and avoid a government shutdown.

EB-5 bill is a mixed bag but won't become law

Rep. Bob Goodlatte, chairman of the House Judiciary Committee, has introduced a bill that targets the so-called "EB-5 Program" for foreign immigrant investors. It has some good provisions in it, some bad provisions, but is not likely to become law.
Congress has shown the American people over and over again that it will not do anything about immigration -- legal or illegal -- so the bill has little chance of becoming law. I would not be surprised if the chairman gets a favorable vote in the House Judiciary Committee, but in my view it goes no further.
What is likely is a reauthorization of the EB-5 Program for three to five more years in the Continuing Budget Resolution, and that will likely occur in the first week or so in December before this session of Congress adjourns sine die.  You heard it here first.
See:
https://judiciary.house,gov/wp-content/uploads/2016/09/GOODLA_53_xml.pdf

Alleged fraud uncovered in California regional center

Merced (California) County Superior Court Judge David Moranda ruled May 31 that a felony criminal case involving Sierra Academy of Aeronautics and KS Aviation co-owner Daniel B. Yoon, 66, must proceed to trial.
Yoon is facing two counts of fraud (intent to defraud) and two counts of falsification of corporate documents.
Prosecutor Walter Wall said in court that accusing him of falsely using the name of the flight school’s second owner, John Yoon (no relation), while applying for a $3 million loan from the Small Business Association and forging documents diminishing the percentage of ownership in Dan Yoon’s favor. He said the alleged illegal loans where used to purchase a flight simulator from the Boeing Aircraft Corporation, which is a critical component of the flight school’s pilot training program.
Last January, federal agents from the U.S. Treasury Department raided the Atwater flight school as part of a federal investigation.
Daniel Yoon is facing a host of legal problems in civil court.
John Yoon is suing Daniel Yoon in a fight for control over the flight school, which was established in the Bay Area and moved to Castle in 2004.
The civil lawsuit between John Yoon and Daniel Yoon is ongoing.
The Sierra Academy of Aeronautics is a school that trains commercial pilots for several Asian commercial flight companies.  Daniel Yoon owns a regional center called Sierra Air Center Development, LLC, which was established to provide flight training.  His regional center is under investigation by U.S. Citizenship and Immigration Services, and was moved to Castle, CA, several years ago.

EB-5 is about job creation

The words I am hearing from our politicians make little sense. If I need a job, I am going to where the job is. I don't care if the job is in an "affluent" area or not. A job is a job.

EB-5 fraud case uncovered in southern California

SEC Halts EB-5 Scheme Stealing Investments in Cancer Center

FOR IMMEDIATE RELEASE
2016-105

Washington D.C., June 2, 2016 — 

The Securities and Exchange Commission today announced fraud charges and an asset freeze against a husband and wife accused of misusing two-thirds of the money they raised from investors for the purpose of building and operating a new cancer treatment center that would use proton beam radiation to help oncology patients in Southern California.

 

According to the SEC’s complaint unsealed today in federal court in Los Angeles, Charles C. Liu and Xin “Lisa” Wang raised $27 million for the proton therapy cancer treatment center from 50 investors in China through the EB-5 immigrant investor program.  They touted in promotional materials that the project would create more than 4,500 new jobs and have a substantial impact on the local economy while giving foreign investors an opportunity for future U.S. residency.  But presently there is no construction at the proposed site after more than 18 months of collecting investments.  Liu meanwhile has transferred $11 million in investor funds to three firms in China and diverted another $7 million to his and his wife’s personal accounts.

 

In granting the SEC’s request to freeze the assets and accounts of Liu, Wang, and related entities, the court’s order prohibits them from raising further money from investors or spending remaining funds.

 

“We allege that Liu and Wang are using investor funds as their personal piggy bank and exploiting Chinese residents who were assured they were investing in an innovative project to create jobs and cure cancer patients,” said Michele Layne, Director of the SEC’s Los Angeles Regional Office.

 

According to the SEC’s complaint, one of the websites Liu and Wang have used to promote investments in the cancer center project includes a section entitled “Government Support” with photos of former president George Herbert Walker Bush and former California governor Arnold Schwarzenegger.  Their photos are accompanied by what appear to be letters they wrote in support of proton therapy in general rather than the depicted EB-5 project, which had not even been initiated at the time the letters were written. 

 

The SEC’s complaint names Liu and Wang along with the companies behind the EB-5 project: Pacific Proton Therapy Regional Center, Pacific Proton EB-5 Fund, and Beverly Proton Center LLC.  They are charged with violating antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  The SEC seeks preliminary and permanent injunctions as well as the disgorgement of ill-gotten gains plus interest and penalties. 

 

The SEC’s investigation was conducted by Tony Regenstreif and Lorraine L. Pearson and supervised by Victoria A. Levin of the Los Angeles office.  The SEC’s litigation will be led by John Berry.  The SEC appreciates the assistance of U.S. Citizenship and Immigration Services.
 

Why was nothing done about the South Dakota beef packing plant meltdown?

Source:  Dakota Free Press

Among the unsolved mysteries of South Dakota’s EB-5 scandal is how $167 million in state subsidies and private capital, including $95 million in EB-5 visa investment money, could have disappeared into Northern Beef Packers, a beef plant that took six years to build, ran nine months before going bankrupt, and then sold at auction to a clever investor for a mere $4.8 million—literally, pennies on the dollar.

We may find an answer to that mystery in Vermont, where state officials allege that developers Ariel Quiros and Bill Stenger used EB-5 money for something other than the EB-5 projects with which they lured their foreign investors:

Governor Peter Shumlin, Department of Financial Regulation (DFR) Commissioner Susan Donegan, Attorney General William Sorrell, and Agency of Commerce and Community Development (ACCD) Secretary Patricia Moulton announced on April 14 that the State and U.S. Securities and Exchange Commission (SEC) have filed similar civil actions alleging investor fraud dating back to 2008 at EB-5 development projects run by Florida resident Ariel Quiros and Bill Stenger….

From his very first contact with Jay Peak in 2008, Quiros “improperly” and with Stenger’s assistance, bought Jay Peak Resort with a substantial amount of EB-5 funds. AnC Bio, meanwhile, was to be a $110 million, medical clean-room EB-5 project originally set to open this fall. The SEC alleges that AnC Bio, the last of the approved projects, was a virtual ATM machine for Quiros.

…The complaints allege that Quiros and Stenger misused more than $200 million of investor funds intended for EB-5 development projects in northeastern Vermont. The cases further allege that Quiros misappropriated an additional $50 million of investor funds for his own personal use. According to the allegations, investor funds were unlawfully diverted, or misused, between and among various EB-5 projects over many years.  In addition, Quiros’s alleged misappropriations of investor funds for personal use include: over $2 million to purchase an apartment at Trump Place in New York City; millions of dollars to pay personal income taxes and other personal expenses; and over $20 million to purchase Jay Peak and Q Burke Resorts [Source:  Timothy McQuiston, “State Files Suit Alleging Investor Fraud at Jay Peak, Inc EB-5 Projects,” Vermont Business Magazine, 2016.04.14].

Stenger and Qiros are accused of using a complex web of corporate entities to cover their misappropriations. That sounds much like how Joop Bollen structured his state-approved EB-5 scheme.  Perhaps South Dakota Attorney General A.G. Jackley will trace those intricate money paths back through Northern Beef Packers and all the way to Cyprus and Russia.

Democratic U.S. Senator Patrick Leahy spoke Thursday to demand reform in the EB-5 program. Sen. Patrick Leahy (D-Vermont) has worked with his Republican colleague from Iowa, known EB-5 watchdog Sen. Chuck Grassley (R-Iowa), to bring more accountability to EB-5. The Senate passed an EB-5 amendment in 2013, but the GOP House refused to take the matter up for a vote. Rep. Kristi Noem, what’s that you said about wanting EB-5 reform?

Vermont and South Dakota are the only two states that have run EB-5 Regional Centers themselves rather than leaving it entirely to private companies. Yet these state-run programs seem just as susceptible to fraud and corruption as numerous privately-run EB-5 programs in other states.

Vermont Regional Center meltdown

I guess I have decided to wait and see what happens, but there have been a deluge of calls and email messages regarding the SEC investigation into Jay Peak Resorts and the Vermont regional center.

Let's just try to do the best we can.

Boyd Campbell

SEC freezes assets of ski resort amid fraud allegations

Washington, D.C., April 14, 2016 — The Securities and Exchange Commission today announced fraud charges and an asset freeze against a Vermont-based ski resort and related businesses allegedly misusing millions of dollars raised through investments solicited under the EB-5 Immigrant Investor Program.
The SEC’s case is filed in a Miami federal court.  The court has appointed a receiver over the companies to prevent any further spending of investor assets.
The SEC alleges that Ariel Quiros of Miami, William Stenger of Newport, Vt., and their companies made false statements and omitted key information while raising more than $350 million from investors to construct ski resort facilities and a biomedical research facility in Vermont.  Investors were told they were investing in one of several projects connected to Jay Peak Inc., a ski resort operated by Quiros and Stenger, and their money would only be used to finance that specific project.  Instead, in Ponzi-like fashion, money from investors in later projects was misappropriated to fund deficits in earlier projects.  More than $200 million was allegedly used for other-than-stated purposes, including $50 million spent on Quiros’s personal expenses and in other ways never disclosed to investors.
According to the SEC’s complaint, Quiros improperly tapped investor funds for such things as the purchase of a luxury condominium, payment of his income taxes and other taxes unrelated to the investments, and acquisition of an unrelated ski resort.
“The alleged fraud ran the gamut from false statements to deceptive financial transactions to outright theft,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “As alleged in our complaint, the defendants diverted millions of EB-5 investor dollars to their own pockets, leaving little money for construction of the research facility investors were told would be built and thereby putting the investors’ funds and their immigration petitions in jeopardy.”
The SEC’s complaint charges Quiros, Stenger, Jay Peak, and a company owned by Quiros called Q Resorts Inc. as well as seven limited partnerships and their general partner companies with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  Four other companies are named as relief defendants in the SEC’s complaint for the purpose of recovering investor funds transferred into their accounts.  The SEC seeks preliminary and permanent injunctions, financial penalties, and disgorgement of ill-gotten gains plus interest.  The agency also seeks conduct-based injunctive relief against Quiros and Stenger along with an officer-and-director bar against Quiros.
The SEC’s investigation was conducted by Brian Theophilus James, Trisha D. Sindler, Michelle Lama, and Mark Dee, and the case was supervised by Chedly C. Dumornay of the Miami Regional Office.  The SEC’s litigation will be led by Christopher Martin and Robert K. Levenson of the Miami office.  The SEC appreciates the assistance of the Office of the Vermont Attorney General and other authorities in Vermont.  See:

https://www.sec.gov/news/pressrelease/2016-69.html

Scary thought

USCIS reports that as of April 5, 2016, it has approved 824 regional centers in the United States. Fully 98 percent (or more) of these regional centers are run by people who do not know what they are doing.
Scary thought, indeed!

Chicago EB-5 scam perpetrator pleads guilty to wire fraud

Anshoo Sethi, pleaded guilty on January 12 to wire fraud, admitting his role in a scam that promised to build hotels and a convention center near O’Hare Airport by fraudulently raising more than $158 million from Chinese investors who expected to get immigrant visas under the so-called EB-5 Program, whose goal is to create full-time U.S. worker jobs.
Sethi, 32, admitted in federal court that he provided investors with forged documents, including a bogus letter from Hyatt Hotels, to get them to invest in his development, which had been approved by U.S. Citizenship and Immigration Services, the agency that grants immigrant visas to foreigners who invest at least $500,000 in approved projects under the program.
None of Sethi’s 290 investors got a visa, but they did receive refunds of their $500,000 investments.