On September 3rd, 2014, the Securities and Exchange Commission (SEC) charged Justin Moongyu Lee, Rebecca Taewon Lee and Thomas Edward Kent of defrauding foreign investors of millions of dollars. The SEC claims the Lees and Kent tricked investors to invest in an ethanol production plant that would become functional before November 2011. These immigration lawyers claimed that through their investments, the investors would not only receive “substantial economic benefit” but also be allowed to obtain lawful permanent resident status through the EB-5 program. However, the Lees and Kent concealed the fact that construction of the ethanol plant had stopped by mid-2008 and have been misappropriating the funds for other uses. During investor seminars, they knowingly mislead investors claiming that the construction of the plant was ongoing. In addition, when Justin Lee ran out of money, he “took money out of investor escrow accounts without their knowledge prior to the approval of an investor’s application for residency.” The SEC suspects these L.A based immigrations lawyers of raising nearly $11.5 million from two dozen investors mainly of Chinese and Korean descent.

“The SEC’s complaint charges the Lees, Kent, and five companies founded and controlled by Justin Lee (American Immigrant Investment Fund I, Biofuel Venture IV, Biofuel Venture V, Nexland Investment Group, and Nexsun Ethanol). In conjunction with the SEC’s actions, the U.S attorney’s Office for the Central District of California also announced criminal charges filed against Justin Lee.

As a matter of fact, before L.A Based Immigration Lawyers was being investigated, there are three other regional centers under investigation as well.

In early November 2013, FBI began to investigate the South Dakota Regional Center (SDRC) following the bankruptcy of its EB-5 Northern Beef Packers project (NBP). Founded in 2008, SDRC is a private for-profit company that works with the EB-5 program to bring in foreign investors in exchange for green cards. The SDRC backed Northern Beef Packers project ended in disaster. The SDRC recruited 160 investors for the Northern Beef Packers project. The project began in 2005 with the idea of starting a beef processing plant to process high-quality beef from local farms and ranches. In January 2013, the company announced that it had completed its financing with $150 million. Northern Beef Packers hired over 350 employees and projected to expand its workforce to over 500. However, unexpectedly, by middle of April, NBP laid off 108 workers due to a lack of capital to buy cattle. President and CEO David Palmer claim the company needs to raise $20 million more. With a series of setbacks, including lawsuits and tax issues, the $115 million processing plant has filed for Chapter 11 bankruptcy on July 19, 2013 leaving their investors with little or no return for their investment.

On October 1st, 2013, USCIS released an “Investor Alert” to warn potential and active EB-5 investors of fraudulent EB-5 projects which seek to exploit immigrant investors. The alert followed an investigation by the U.S. Securities and Exchange Commission (SEC) into an allegedly fraudulent EB-5 regional center scheme in Texas called the USA Now Regional Center, run by Marco and Bebe Ramirez in McAllen, Texas. The couple had applied for USCIS approval of their regional center in 2010, but, according to reports, they began attracting investors under false pretenses before the regional center was actually registered with USCIS. 

The SEC’s investigation into the Ramirezes’ EB-5 project comes just eight months after the SEC brought a suit against A Chicago Convention Center, LLC and Intercontinental Regional Center Trust of Chicago, a fraudulent regional center scheme run by AnshooSethi in Illinois. Sethi mainly targeted wealthy Chinese investors by making false claims and convincing investors that they would be investing in the world’s first zero carbon emission platinum LEED certified hotel and conference center while pursuing a path to citizenship through the EB-5 program. Sethi and his companies even falsified documents which they provided to USCIS to seek approval for their regional center.

While these SEC (or FBI) investigations into EB-5 projects may seem to bring into question the credibility of the EB-5 program, such investigations are beneficial and necessary to maintain the ultimate purpose of the program of creating U.S. jobs and opening a path to citizenship for immigrant investors who decide to invest in the U.S. As the EB-5 program has grown exponentially over the past few years, fraudulent principals have become increasingly interested in seeking to make a quick profit by abusing the system and attempting to defraud immigrant investors of their money. However, these recent highly publicized investigations into EB-5 projects will help to maintain the integrity of the program and serve as a warning to anyone hoping to abuse the process for his or her own personal gain. With the increased scrutiny of the SEC (or FBI), EB-5 project managers and investors are becoming more aware of their duty to adhere to securities laws, which will only help to make the EB-5 process a more transparent and legitimate one.

While potential immigrant investors may be weary to invest in regional centers following the recent exposures of these fraudulent schemes, it is important to remember that investing in a regional center is only one option available to immigrants seeking to participate in the EB-5 program. Alternatively, immigrant investors can choose to make a direct investment in a new, restructured, or troubled enterprise. While an investment in a regional center allows the ten required jobs to be created either directly or indirectly, provides an existing business model into which an immigrant can invest, and removes the requirement that the investor have an active role in the daily operations of the business, the removed nature of such an investment creates a lack of oversight and a degree of non-transparency for investors who may not know exactly how their investments are being used or whether the regional center project will exist long enough to ensure the immigrant investor’s two-year conditional permanent residency and eventual indefinite green card approval. While choosing the direct investment path requires an investor to directly create ten jobs and to be involved in the everyday management of the business, this method allows for much greater control over the investment and reduces the chances for the misappropriation of an immigrant’s funds. In addition, the franchise model of direct investment allows for an immigrant investor to invest in an existing chain with a proven business model, and many franchisors will provide investors with tools and management guidance to ensure the success of the franchise. If you would like to learn more details about that issue, you may read an article by clicking the following link:

http://www.hooyou.com/news/news2012/news122812eb5.html 

Zhang & Associates has experience in helping investors determine which method of investment best suits their immigration needs and business experience. Our knowledgeable attorneys will work with you to find a reputable and viable investment project and carry out our own due diligence to ensure that your needs as an immigrant investor are met. It is important to note that we do not receive kickbacks from regional centers and we will always pass on any inducements we receive to our clients. If you are interested in the EB-5 program and would like to know more about the immigrant investor visa, please contact us at info@hooyou.com.

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Founded in 1996, Zhang & Associates, P.C. offers legal services to clients nationwide in all aspects of U.S immigration law. We have successfully handled thousands of immigration cases.

At Zhang & Associates, P.C., our attorneys and supporting professionals are committed to providing high-quality immigration and non-immigration visa services. We specialize in NIW, EB-1, PERM, and I-485 cases. In the past eighteen years, we have successfully helped thousands of clients get green cards. If you plan to apply for a green card, please send your CV to Attorney Jerry Zhang (info@hooyou.com) for a free evaluation.

Zhang & Associates, P.C.

Silicon Valley • New York • Los Angeles • Chicago • Houston • Austin • Seattle

Tel:	1-800-230-7040, 713-771-8433
Email:	info@hooyou.com
website:	http://www.hooyou.com

 

(09/08/2014)