EB-5 Visa Fraud Exposed and Defeated

by Joseph Whalen

Since last year, and in recent days and weeks, we have heard of highly publicized lawsuits, investigations, Regional Center Terminations, I-526 and I-829 petition denials for individual investors and APA challenges to them. Many people see these as signs. I am compelled to ask what they truly signify. Those who want to decrease immigration in general point to these cases as FAILURES by DHS, USCIS, and the rest of the U.S. Government by allowing corruption to "flourish". I know because I have seen the articles and heard the various "talking heads" spewing these sentiments. Don't you just love that first amendment of ours and it's freedom of speech! I do because I have the freedom to tell them off! Maybe I should call this my "Drop-Dead, Op-Ed"?

A Warrant of Arrest was issued on August 13, 2012, against Israeli national Ofer Biton, charging him with Visa Fraud under 18 USC § 1546(a) in connection with false statements that he made on his I-526, Immigrant Petition by Alien Entrepreneur, as to the true source of funds used for his EB-5 investment. How did this happen? USCIS, the DHS Benefits Granting Agency, saw something and investigated it a bit further. Once USCIS was able to articulate true concerns they evidently referred the case to its Federal Law Enforcement partners. The actual affidavit which serves the basis for the aforementioned Warrant was from a Special Agent with the FBI. This case is an extreme example of egregious behavior in the EB-5 world. It is also proof that fraud gets detected and criminal charges are pursued when it is the appropriate course of action.

Less severe problems have plagued other EB-5 investors. A "COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF" was filed in the U.S. District Court for the Central District of California on August 21, 2012. The Plaintiffs in that civil action styled as: Chung et al. v. USCIS et al., make the outrageous claim that USCIS is "heightening the standard of proof" by having the audacity to actually verify the authenticity and veracity of the documentary evidence submitted to it in support of the request to remove conditions from status.

The complaint accuses USCIS of "Violating Due Process" by not adhering to the "preponderance of the evidence" standard of proof. The complaint includes these:

94. The USCIS adjudication was contrary to the due process clause of the 5th Amendment of the United States Constitution by adjudicating Plaintiffs' petition under a heightened standard above and beyond the correct "preponderance of evidence" standard contrary to their own regulations and guidance.
95. The USCIS' imposition of a heightened standard above and beyond the correct "preponderance of evidence" standard of proof, its unwarranted reliance on information contained in non-public Government databases, and the lengthy adjudicatory delays combined to deny the Plaintiff due process.
In other words, "How dare USCIS require valid and authentic proof when I can bury it with these altered documents until the cows come home!" I put it to you, the reader, is there such a thing as a "preponderance of the fraudulent documents" standard of proof ? How about a "preponderance of the bull****" standard of proof? I think not. Maybe, some people would like there to be a "big pile of ****" "standard of ****" but that will never happen.

As has been pointed out time and time again, not only is "specific evidence" required when it is clearly spelled out in the law but it also must be authentic. Additionally, it is the quality that counts, not the quantity. Meeting the "preponderance" standard relies not upon the volume of "corroborating" documentary evidence, but rather the sufficiency of discernible facts that it proves or supports by a preponderance to be true; more likely than not; or probably true.

There have been two highly publicized Regional Center Terminations.

Victorville Regional Center was terminated due to insufficiency in meeting program goals. They could not create enough jobs to support the number of EB-5 investors that they were able to attract. They tried some "very new" math but it did not do the trick. Due to that case, we all started talking about "NEXUS". At least, those folks were not attempting any criminal behavior. Things just did not work out for them. Towards the end of their struggle to retain status they started to sink rather low into the realm of the ridiculous assertion. Sanity reared its head and they gave up. I am glad they stopped before embarrassing the entire Regional Center Program beyond repair. Their problems helped others to avoid the same.

El Monte Regional Center was also terminated but that one had quite different issues. The City trusted someone to run things and recruit investors who turned out to be crooked. Other Federal Agencies were (and probably still are) looking into multiple financial and fraud issues perpetrated by certain individuals. It is too bad for the City because they need that development and it would help their economy to get it done. It looks like they might never get any EB-5 investors to look their way again due to the actions a couple of crooks.

The above Regional Centers' problems resulted in actions being taken by USCIS to terminate their designations and expulsion from the Pilot Program. However, there have been more stories and cases involving other Regional Centers. The investors in failed and/or failing projects have gone after the Regional Centers and agents connected to them. The South Dakota Regional Center was sued but the plaintiffs agreed to a joint Voluntary Dismissal. In the Complaint known as Zhen et al. v. SDRC, filed in October 2011, it was alleged, in pertinent part, that:

Defendants' representations and disclosures in the Offering Memo* were incomplete and inaccurate; Defendants' subsequent disclosures to the limited partners thereafter were incomplete and inaccurate; and Defendants have mismanaged, and continue to mismanage .....

Confidential Offering Memorandum drafted by SDRC and Joop Bollen, and their attorneys (the "Offering Memo") was written in English and translated into Chinese allegedly failed to disclose numerous pertinent facts as follows:

    The Project had already missed its initial completion date by nearly two years;
  • The Project was facing financial difficulties and having trouble obtaining financing;
  • That a prior group ofEB-5 investors in the Project were in jeopardy of losing their investment in the Project at the time the Offering Memo was being provided to the Investors here;
  • That NBP's own attorney had acknowledged that loans to the Project were "extraordinarily high-risk," because they would be used to "complete a half constructed, failed project of enormous size," and also that lenders would have little or no recourse if the Project failed;
  • That by the time the Offering Memo was circulated, substantial litigation liens had been filed against the Project;
  • That NBP was unable to pay, or delinquent on, property taxes due and owing;
  • That Bollen had lost other EB-5 investor funds in a similar project relating to the Veblen East Dairy in South Dakota;
  • That Defendants had a business relationship and conflict of interest with Hanul Professional Law Corporation, a law firm that was appointed as escrow agent for funds paid by the Investors.
Those folks chose to stop this merry-go-round and get off and they did that in March 2012, in a Joint Motion filed with the Judge stating, in pertinent part:
WHEREFORE, Plaintiffs/Counterclaim-Defendants Zhang Yongjun, Yan Jingqi, Zheng Caiwen, and **** Xinping, Defendants/Counterclaim-Plaintiffs/Third-Party Plaintiffs SDRC, Inc., SD Investment Fund LLC 6, and Joop Bollen, and Henry Tongzhao USA Consulting, Inc., through their respective undersigned attorneys, and pursuant to Rule 41 of the Federal Rules of Civil Procedure, respectfully request that this Court enter an order:
  • Granting this Motion;
  • Dismissing all claims in the Amended Complaint, Amended Counterclaims, and Third-Party Complaint without prejudice, with all parties to bear their own costs and fees; and
  • Terminating this case in its entirety.
There is another juicier case trudging along in connection with the New Orleans Regional Center. In the civil action, filed March 15, 2012, styled as Sumpter et al v. Hungerford et al the unhappy investors have demanded that the people hired by the City to run its Regional Center be held accountable and ousted.

The unhappy investors are limited partners in the Noble Real Estate Fund, L.P (the "Fund"). These Plaintiffs make claims of gross mismanagement, breach of fiduciary duty, intentional interference with contract, conversion of the Fund's assets, and unjust enrichment against Defendants, William B. Hungerford, Jr. ("Hungerford") and Timothy O. Milbrath ("Milbrath") who are the principals of Noble-Real Estate-GP, LLC ("Noble-Real Estate-GP"), the general partner of the Fund.

The Complaint contains some interesting background on the New Orleans Regional Center and the overall process for seeking and maintaining Regional Center Designation, in general, mixed with its allegations as follows:

The City of New Orleans Regional Center

105. On January 18, 1994, the Mayor's Economic Development Department of the City of New Orleans was initially approved and designated as a Regional Center to participate in the Immigrant Investor Pilot Program by the predecessor federal agency to USCIS.

106. In May 2006, during the administration of former New Orleans Mayor C. Ray Nagin, the Mayor's Office of Economic Development ("MOED") of the City of New Orleans advised USCIS of a restructuring and reorganization of the former Mayor's Economic Development Department into MOED.

107. In an electronic Request for Evidence dated June 14, 2006 and directed to the MOED, USCIS identified fourteen (14) factors that the MOED would need to address in any amendment to its original Regional Center approval and designation.

108. On October 16, 2006, the MOED submitted a comprehensive response to the USCIS electronic Request for Evidence together with supporting evidence, data, and information.

109. In its response, the MOED sought to re-certify its designated Regional Center by substantively amending its business plan, in part, to have defendant NobleReach-NOLA, LLC ("NobleReach-NOLA") operate and administer funds related to the MOED Regional Center.

110. In furtherance of the proposed arrangement with the Nagin-era MOED, Hungerford and Milbrath registered or caused to be registered NobleReach-NOLA on or about May 25, 2006 as a limited liability company organized and existing under the laws of Louisiana.

111. At all times material to this action, Hungerford and Milbrath operated, controlled, and ultimately owned (and continue to own) NobleReach-NOLA through two different limited liability companies: NOP, LLC and NobleOutReach Original Principals, LLC, which together are the sole members of NobleReach-NOLA.

112. Hungerford and Milbrath registered or caused to be registered NobleOutReach Original Principals, LLC as a limited liability company organized existing under the laws of Louisiana, and is wholly owned by Hungerford and Milbrath.

113. Hungerford and Milbrath likewise registered or caused to be registered NOP as a limited liability company organized and existing under the laws of Louisiana, and is wholly owned by NobleOutReach Original Principals, LLC, which (as just described) is wholly owned by Hungerford and Milbrath.

114. Upon information and belief, Hungerford and Milbrath formed NobleReach-NOLA and the entities through which Hungerford and Milbrath own, operate, and control NobleReach-NOLA for the sole purpose of creating a vehicle through which to perpetrate fraudulent schemes to divert Fund assets and convert such assets for their own ultimate personal benefit.

115. Upon information and belief, NobleReach-NOLA has no legitimate and/or independent business activities outside of its involvement in the fraudulent schemes of Hungerford and Milbrath to divert Fund assets.

And it goes on and on and on. This case continues to progress with a huge number of filings back and forth already in the docket and more on the way. I checked on September 2, 2012, and the PACER Docket is up to over 115 items filed. One of them, linked herein, is the Defendants' Motion to Dismiss . Read it if you care, ignore it you don't.

In conclusion, I see that USCIS has taken steps to detect fraud and is perfectly willing to turn cases over to the appropriate Law Enforcement Agencies with jurisdiction to bring criminal charges against wrongdoers. USCIS is also capable of shutting down Regional Centers that are not performing or that run into "other" (such as criminal) trouble. I see also that investors are not afraid to go after "alleged" con artists. Between the Government, the actual investors, and other stakeholders, the EB-5 Regional Center Pilot Program is learning to police itself. Congress can feel secure in re-authorizing the Pilot Program.

About The Author

Joseph Whalen is not an attorney. He is a former government employee who is familiar with the INA. His education is in Anthroplogy with a concentration in Archaeology and has both a BA (from SUNY Buffalo) and an MA (from San Francisco State University) in Anthroplogogy. He previously worked as an Archaeologist for the U.S. Forest Service before becoming an Adjudicator with INS which became USCIS.

The opinions expressed in this article are those of the author(s) alone and should not be imputed to ILW.COM.