Friday, September 29, 2017

The International Appraiser’s 3rd Successful SEC Whistleblower Complaint Against an EB-5 Regional Center


This week the SEC filed an asset forfeiture action against the Home Paradise Regional Center in Commerce, California, a EB-5 regional center that gained temporary green cards for foreigners based on false reports to the USCIS on its alleged creation of 345 jobs at a fake home and commercial design center in Ontario, exaggeratedly measured at 111,000 square feet.

I first became acquainted with Home Paradise in Beijing at the Overseas Property Investment Exhibition. http://www.internationalappraiser.com/2016/05/overseas-property-and-immigration.html

A background check on Ed Chen, the CEO of Home Paradise, revealed a history of liens and civil judgments against him before he started Home Paradise, a matter of public record, which he had a duty to disclose this to investors per U.S. securities laws. If investors had known his legal history, they may not have entrusted him with $545,000 each.

All of this once again indicates the initial flawed design of the EB-5 visa regional center program. Imagine a federal agency announcing, “Who wants to collect tens of millions of dollars from naïve foreign immigrants?” and all of the hundreds of entities who responded by saying “We do! We do!” and not a single background check was performed. I wouldn't want the responsibility of creating 10 jobs out of each $500,000 investment. 

To get approved as a regional center, the most difficult thing they had to do was order an economic study proving the number of jobs they were going to create.

The approved regional centers were never subject to audits, just a yearly I-924A form explaining their job creation progress to functionaries in Washington, DC. Was it realistic to expect truthful I-924A reports? Now we know that Home Paradise was lying, as was the California Investment Immigration Fund I reported on in April. http://www.internationalappraiser.com/2017/04/california-investment-immigration-fund.html

Now the USCIS has already started a program to visit more than 200 regional centers per year to check facts, while the SEC investigates regional centers suspected of fraud. With 843 EB-5 regional centers, though, this process will take a long time.

It is time for USCIS to make I-924A forms public (meaning that the public does not have to obtain consent from the regional center). Civil servants in Washington might not know if a regional center is lying, but local rivals and investor advocates can find the lies much quicker than the current regulatory system if allowed access to the I-924A reports.

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