From the Desk of an
EB-5 Lawyer
by David Hirson
In each issue of EB5 Investors Magazine, editorial board member David Hirson addresses developments in the EB-5 arena. With a mix of observation and analysis, attorney Hirson keeps readers up-todate with all things EB-5. Here are some winter updates for the third and fourth quarters of 2013.
David Hirson
As the year came to an end, changes continued without any real reform in the EB-5 world; comprehensive immigration reform stalled in the House after the Senate passed a bill, and a meeting between legislators and USCIS fell through. A certain level of dishonesty has crept into a small number of cases, and unfortunately, these unscrupulous people have cast aspersions on the rest of a magnificent program( and will be further discussed later). Nonetheless, there have been many important developments in the field, and the EB-5 program remains a win-win-win: investors receive green cards; projects get necessary funding; and the U. S. economy is stimulated through job creation and increased spending, at no cost to the taxpayer. What follows are some of the highlights of the second half of 2013.
USCIS I-526 project denials The SEC files second action centered on the EB-5 program
In September 2013, the Securities and Exchange Commission brought its second enforcement action( SEC v. Ramirez) this year against a husband and wife in Texas for stealing funds from foreign investors under the guise of the EB-5 program. In 2010, the defendants, Marco and Bebe Ramirez sought USCIS regional center designation for their company USA Now. The SEC alleged that the defendants began soliciting and accepting EB-5 investors prior to filing the application for regional center designation. The defendants falsely promised investors a 5 percent return on their investment and an opportunity to obtain an EB-5 visa. Investors were further told that their funds would be held in escrow until each investor received Form I-526 approval. To date, none of the at least 10 investors identified by the SEC have received a return of their investment or Form I-526 approval.
It is also worth mentioning that, in February 2013, the
SEC filed its first action of the year against an individual living in Illinois, and his two companies, for utilizing the EB-5 program to defraud foreign investors. In this seminal case( SEC v. A Chicago Convention Center, et al.), the SEC and USCIS coordinated to halt an alleged $ 156 million fraudulent investment scheme. The SEC alleged that Anshoo R. Sethi created A Chicago Convention Center(“ ACCC”) and Intercontinental Regional Center Trust of Chicago to fraudulently sell more than $ 145 million in securities. The investors were led to believe that, by purchasing interests in ACCC, they would be financing construction of the“ world’ s first zero carbon emission platinum LEED certified” hotel and conference center near Chicago’ s O’ Hare Airport. The defendants— Sethi and two companies he created— collected $ 11 million in administrative fees from more than 250 investors.
The SEC’ s complaint alleges that Sethi and his companies made a number of misrepresentations about the project to cajole investors, including misrepresenting franchise agreements in their offering materials, misrepresenting the construction and occupancy timelines of the project; and misrepresenting the amount of experience held by the owner and developer of the project.
An important outcome of this case was that the U. S. federal court affirmed that the SEC has jurisdiction over the sale of EB-5 securities in foreign countries.
In light of these two cases filed by the SEC, some investors have become more wary of utilizing the EB-5 program to obtain their green cards. These cases illustrate the need for thorough due diligence of each project on the part of the regional center and EB-5 investor, as well as an understanding of why some projects fail.
18 EB5 Investors Magazine