Thursday, September 21, 2017

EB-5 Regional Centers Touting Fake Projects. Here are some more.


Mythical California Chinatown in Rancho Cucamonga, advertised in China


EB-5 regional centers are hastily assembled, opportunistic business entities who have received approvals from the USCIS to collect $500,000+ investments from foreigners seeking U.S. green cards. The idea is to pool the foreign money into a job creating enterprise that creates at least 10 jobs per investor, and the foreign investor is then given permanent residency after 2 years.

While in Chicago during the summer of 2013, I visited the site of the “A Chicago Convention Center” scandal. This fake EB-5 project promised a new convention center and five hotels on a 2.8-acre site along the Kennedy Expressway leading to O’Hare Airport. This scam lasted a couple of years, attracted the endorsements of Illinois Governor Quinn and Illinois Senator Durbin, and collected $160 million from 290 mostly Chinese investors before a rival regional center manager took one look and turned the developer, Anjoo Sethi, into the SEC. In those two years, no one had called Chicago planning officials to verify that this was an approved project. http://www.internationalappraiser.com/2013/05/attempt-to-defraud-261-chinese.html

In the eleven years I have been practicing as an independent appraiser, at least half of my practice has been the valuation of land entitled for development projects. Calling the relevant planning officials is one of the first things I do, because real estate developers occasionally lie or forget to disclose costly conditions of approval.


When I returned from my Chicago trip, I called a former neighbor of mine who is a Chinese-born immigration attorney.  I asked him if he referred clients to EB-5 regional centers.  He said, “No, because I don’t want to go to jail.”  I figured that I was possibly on to a new, unaccountable industry rife with fraud.
The most conspicuous local EB-5 regional center in LA was that of the California Investment Immigration Fund (CIIF) in the lobby of the San Gabriel Hilton hotel. I visited them during the summer of 2013 to ask about what projects they were working on, and I was told about Victoria Center, a hotel, office and restaurant project to be built in the desert town of Indio, California. I called the Indio planning department and they confirmed a development application for Victoria Center, but it lacked an office building. Nevertheless, I gave CIIF the benefit of the doubt.

Two years later I stopped by the CIIF office again to inquire about the Victoria Center, and the manager on duty had a frightened look on her face. She denied knowledge of Victoria Center. Since the CIIF had been open continuously since 2008, I asked her if they had found anything to build in the ensuing 7 years, and she gave me a Chinese-language brochure featuring a new project in Rancho Cucamonga, CA, pictured above, to be called California Chinatown. I called the planning officials in Rancho Cucamonga and they had not heard of it. 

Considering that the California Chinatown project was not even featured on the CIIF U.S. web site, I did some searching and found that CIIF had an alternate Chinese web site (www.ciif-eb5.com) with several fake real estate projects in Ontario, Riverside and Rancho Cucamonga. I called the relevant planning authorities and none were familiar with these advertised projects. These were fake projects, the most absurd one being the future headquarters building of the American Chinese Business Association, a fake business association created by CIIF to gain access to politicians. Before the FBI raid, political commendations were posted on the front window, such as this one:

I referred the matter to the SEC (Securities and Exchange Commission) and they called me one month later to ask me to discuss the matter with the FBI (Federal Bureau of Investigation).  The FBI raided CIIF and shut it down in April 2017, 17 months after I made my initial complaint. Charges have not been filed yet because the nature of the raid was to seize evidence.

Since November 2015, I have made complaints on over 30 EB-5 regional centers, and the U.S. government has pursued complaints against two of them – CIIF, and the ZGlobal regional center, aka PDC Capital, operated by Emilio Francisco. The SEC and FBI are limited in resources and must follow meticulous investigative procedures which take time, but result in 90+% conviction rates.

I have a high regard for the work that the SEC and FBI are doing, but this still leaves the problem of how quickly the EB-5 regional center industry can be cleaned up.  There are 835 regional centers at present, none of which have had their executives properly vetted by background checks, and my own background checks of some of these executives make me quite uncomfortable; many of them are underemployed lawyers, securities salesmen and real estate salesmen, not skilled in job creation, with legal histories of tax liens, civil judgments and foreclosures, and occasional bankruptcies  I am concerned that there are fraudulent regional centers still taking hundreds of millions of dollars in money from foreign investors.

Some of the EB-5 regional centers I have contacted would not discuss the projects that they are supposedly working on. I find this suspicious, but I cannot prove wrongdoing.

Some other regional centers advertise fake projects, projects that city planners deny any knowledge of, and this wrongdoing is more apparent and more interesting. Let me tell you about some of them.

United Venture Regional Center is headquartered in Turlock in California’s Central Valley and advertises oversized projects in poor, undersized cities. Here are some examples from their web site http://www.univrc.com/projects:

·       Under Kern County they mention that they are building a 55,500 square foot office/hotel project in the town of Wasco.  Roger Mobley, the head of the Wasco planning department, (661) 758-7200, tells me that no such project has been proposed nor has anyone from the UVRC acquired land that would support such a development. The planner also considers the project to be too large to work in Wasco, a town of 25,000 residents, 22.4% of which are incarcerated in the local prison.

·       Under “Villa Crest” they announce Villa Crest Apartments and Commercial Complex, which will encompass 126,800 square feet of office, retail, restaurant and apartment space in Ridgecrest, a military town of 29,000 residents. Pam Contreras of the Ridgecrest Economic Development Department tells me that no such development application has been received.

·       Under “Westpointe Commercial Complex”, they announce a “165,700 square feet retail commercial center with office buildings, a supermarket, a restaurant, and a residential facility” in Ceres, California. City Planner Tom Westbrook confirms that there is no such proposal in his city. He can be reached at (209) 538-5778.

American Vision Regional Center is based in Houston.  Open for business since as early as February 2013, there is only one project listed on their web site, and several others vaguely listed as “Coming Soon”. The only illustration of an EB-5 project they claim to be theirs is an office building called the Kingwood  EB-5 project. 

Kingwood is a town near the Houston Intercontinental Airport. However, the office building depicted above is that of the canceled 25-story office tower which was to be built at 22 Waugh Drive in the Houston Heights area near downtown Houston. This project was canceled due to the lack of preleasing activity. Meanwhile, American Vision’s CEO has made the following vehicular purchases since entering the regional center business:
2013 Bombardier Canada boat, 1/10/13
2012 Mazda 6i, 6/21/13
2012 Jeep Patriot, 7/22/13, $15,995
2014 Triton Boat trailer, 5/2/14
2015 Porsche Macan, 6/6/14, $49,900
2015 Toyota Scion, 11/3/14, $24,900
2015 Mercedes Benz 350, 5/15/15, $48,300
1984 Land Rover, 4/19/16
1987 Land Rover, 4/19/16

Meanwhile, the Southeast Florida EB-5 Regional Center has several unverifiable projects listed on its web site.  It started last year with a Great American Diner to be built at 6239 Lake Worth Road in Greenacres, Florida with $3 million from 6 EB-5 investors. Instead, the land has been listed for sale since 2014.  Meanwhile, they have since announced a 300-room Marriott Westway hotel to be built at 1216 N. Atlantic Avenue in Daytona Beach, but city planner Hannah Ward denies receiving a proposal or development application for this project.

Finally, they have announced the Biscayne Park Residency, a 44-room continuing care retirement community with a 5-star restaurant and 38,000 square foot office building to be built in Miami, but unknown to Miami city planning personnel I have talked with. The selected operator, the SR Healthcare Group, is a previously unknown operator, founded on 10/7/15 and declared inactive since after being revoked after its annual report.  Meanwhile, the operator of the SE Florida EB-5 Regional Center has a sordid legal history of 29 liens and civil judgments against him and one bankruptcy.

Golden Pacific Ventures in Concord, California, states on its web site:

“Below are specific projects Golden Pacific has worked with developers and immigrant investors on building.

Plantation Agro-Tourism

Combining a the world’s largest organic tea plantation with a luxury destination resort makes “agro-tourism”.  Organic agriculture meets vacation spot.”

Their photo is actually of the well-known BOH tea plantation in Malaysia’s Cameron Highlands, which serves as a tourist destination to escape the heat of the lowlands of Malaysia.  Visit http://www.kualalumpurbudgettour.com/cameron-highland-tour/cameron-highland-tour.htm and you will seem the same tourists in the photo.

It also troubles me that the managers of this regional center have such lengthy legal histories, such as tax liens, civil judgments and foreclosures.

At the EB-5 Investors Magazine conference in Las Vegas in January 2016, I visited a booth of the Great Southwest Regional Center advertising a 90-room Holiday Inn Express and the 264-unit Lakeside Vista Apartments in a 70-acre tract called Westside Peak in San Antonio, Texas, near Lackland Air Force Base.  The San Antonio city planners claimed no knowledge of these projects or any development applications, nor was this parcel legally subdivided for development of these projects, but what was more surprising was that the land for these projects had actually been listed for sale on LoopNet since 8/20/2014, and 65.35 acres are still listed for sale .  
I questioned Rich Zhang of EB-5 Investors Magazine about whether he failed to vet this regional center, and he seemed to get right on their case, and the fake projects were soon removed from their web site.  No new projects have been announced on their web site, but meanwhile, the CEO has purchased the following vehicles since being approved by USCIS to be an EB- regional center:

2012 Mercedes CLS 550               $71,300
2013 Jeep Wrangler Sahara        $27,695
2014 Mercedes CLS                       $106,500
2014 Mercedes E350                    $51,900
2015 Mercedes GLK350               $37,900
2015 Mercedes S550                    $94,400
2016 Mercedes S550                    $121,550
2016 GMC Sierra                           $49,135
2017 Mercedes GLE350               $52,000

Meanwhile, the CEO's younger brother, who serves as managing director, has a history of two bankruptcies, a civil judgment against him, and a recent tax lien.

Considering that every EB-5 applicant must supply more than $500,000 of capital and that there are 835 EB-5 regional centers we know little about, it concerns me that tens or hundreds of millions of dollars might be in the process of being stolen by people who are not vetted and not audited.


I believe the EB-5 scandals that have emerged so far are just the tip of the iceberg because none of these entities and their executives have been vetted by background checks or have been audited.
Every year, each regional center must report to USCIS on form I-924A about their progress in creating jobs . If I want to read a particular regional center's I-924A, I must make a Freedom of Information Act request, but I first have to receive the regional center’s written permission. In other words, USCIS is granting the same privacy standards to regional centers as they grant to vulnerable visa applicants.  But regional centers should not merit such privacy when they are taking billions of dollars from vulnerable visa applicants. The bad regional centers would probably not consent to my FOIA requests, any way.

The California Investment Immigration Fund is a case in point.  They filed false I-924A forms claiming progress that they never made and even got conditional green cards for 3 of China’s top 100 criminals. If I had been able to read their I-924As, I could have stopped the fraud two years sooner.
I wrote the following suggestion to Senators Feinstein and Grassley (the Senate's EB-5 skeptics) last week. Make all I-924A forms public; redact visa applicant names for their privacy.  Functionaries in Washington are not in the position of knowing the truthfulness of the I-924A forms, but a lot of local people like me will be watching, and the lies will be detected much more quickly.  For the EB-5 program, sunlight is the best disinfectant.

1 comment:

Michael said...

Another fascinating post. With the increased scrutiny of EB-5 Visa's related to the Kushner Companies use of this program perhaps more light will be shined on this program and the numerous ongoing scams. A recent article I read indicated that even investors in a legitimate project could be waiting 5-10 years for a visa as the number of Chinese applicants far exceeds their annual quota.