Saturday, March 29, 2014

SEC Scrutiny of EB-5: Proactivity by the Commission Continues

The SEC's first truly proactive enforcement effort against an EB-5 project began a little over a year ago (February 6, 2013) when the Commission sought and obtained a temporary restraining order and asset freeze against Anshoo R. Sethi, A Chicago Convention Center, LLC (ACCC) and Intercontinental Regional Center Trust of Chicago, LLC (IRCTC) for their roles in raising approximately $158 million dollars from close to 300 EB-5 investors as part of a fraudulent offering. On April 19, 2013, the Court granted the Commission's motion to return to investors the entire $147 million of principal that had been frozen pursuant to the SEC's motions.  The only remaining dispute involved some $11 million in "administrative fees" paid by the investors, which were the only funds remaining to be returned in order to make the investors whole.

That got resolved two weeks ago: on March 17, 2014, the U.S. District Court entered judgment against the defendants.  The Final Judgment establishes, among other punishments, joint-and-several liability among the defendants for over $11.5 million in disgorgement and prejudgment interest and an order enjoining and restraining defendants for twenty years from offering or selling securities issued by any of the defendants or issued by any entity owned or controlled by Sethi, and the forced dissolution of the entities in question.  For a full breakdown of the enforcement actions, see the SEC's press release:

SEC Obtains Settlements in $150 Million EB-5 Immigrant Investor Offering Fraud

As my good friend Sam Udani put in ILW's Immigration Daily blog yesterday, "the SEC is on the prowl" they SHOULD be!   This is an excerpt from Sam's comments yesterday:
"Immigration Daily has learned that over the last couple of months the SEC has served subpoenas on 8 Regional Centers represented (separately of course) by 3 law firms. From the pattern of information that Immigration Daily has gleaned it appears that the SEC effort started in Q4 2013, when it received information (thru subpoena or otherwise) from financial institutions involved in EB5. The effort is not based in one particular SEC office, multiple SEC offices are involved. This may not be a one-time effort, since the subpoenas were sent out many weeks apart. So far, the RCs involved are small-to-mid-sized. Our calls to attorneys representing several of the top 10 RCs indicate that none of them has yet received a SEC subpoena.

Our best guess is that this is an effort by the SEC to educate itself on EB5 matters, and that more subpoenas will likely show up during Q2, 2014. On balance, Immigration Daily welcomes increased scrutiny by SEC into EB5 matters. Perhaps this scrutiny will focus on two major irregularities in EB5 custom as follows:
  • Most of the larger Chinese agents maintain offices in the USA, without appropriate licensure
  • In many cases, insufficient disclosures are made to Chinese investors as to intermediary fees paid by RCs to Chinese agent"
That is EXACTLY correct.  Over the past three years and my dozens of trips to East Asia, I have witnessed what I can only describe as a pandemic of hype-driven EB-5 marketing, particularly in China, which operates not only in flagrant disregard of both U.S. and local securities laws, but in flagrant disregard of fundamental principles of fair dealing and business integrity.   Many - not all but many - Chinese migration agents base their forceful "buy" recommendations not on the underlying integrity of the EB-5 project and its principals but on the size of the "success" fee offered.   Among the most dishonest agencies, the modus operandus is even simpler:  ad blitzes in secondary markets followed by hard sales pitches result in dozens of investors escrowing with the agent...who then negotiate under-the-table kickbacks with EB-5 projects for the bulk delivery of investors. And when the U.S. project is questioned about these tactics, the response is always the same:  "Hey, I can't control what the Chinese agents say!"  Sure you can't...

How do I know all this?  Because these issues are what those of us who are working very hard to comply with U.S. securities laws both inside and outside the U.S. face in overseas markets face on a daily basis.  As we painstakingly cultivate the foreign professional relationships through which bona fide, accredited prospective EB-5 investors may be able to find their way to Lake Point EB-5, the city buses roll by with giant EB-5 megaproject ads plastered on the's THAT flagrant, folks.

While AILA members fret at this increased involvement by SEC, Sam and I agree: if the securities fraud isn't aggressively contained by the SEC, EB-5 will go the way of the Canadian immigrant investor program, with the government concluding that the endeavor, in light of the reality, is not even worth the effort.

Thursday, February 13, 2014

Lake Point EB-5 Sees 1st Six Month I-526 Approval!

Congratulations to our newest Lake Point Capital Partners EB-5 investor from Vietnam, whose I-526 was approved by USCIS in a blazing six months (no RFE, of course.)  USCIS EB-5 team: you rock and we are very grateful for your efforts, aware as we are of the extraordinary workload pressures you continue to face.

Late last summer, when our first I-526 petition was finally approved after languishing at USCIS for over 18 months, "jubilation" hardly begins to express what we felt here at Team Lake Point.  I can only imagine what those first approvals felt like for our pioneer Limited Partners, who patiently watched 8 months turn to 12 turn to about blind faith!  These days, it seems a new Lake Point EB-5 approval arrives almost weekly, but it never gets old nor is the joy diminished.  As we approach the end of the offering, Lake Point's comparatively small $20 million/ 40 EB-5 investor project has proven itself as "the little engine that could".   No ad budgets, no direct marketing, no solicitation...just many thousands of miles of travel and many hours earning the trust of professional advisors worldwide whose clients were carefully considering a future in America.  (I know this may not be the most efficient way to find EB-5 investors, but being SEC-compliant makes for a better night's sleep!)

As we wind things up with the last EB-5 investors in Lake Point Capital Partners, the diverse nationalities of our EB-5 Limited Partners are reflective of the international appeal of our first EB-5 venture.  Lake Point's approved investors so far hail predominantly from Vietnam (where we may be -- we're not certain -- the top-selling EB-5 offering with the most approved I-526s),  but the rest hail from diverse parts ranging from Eastern Europe to Latin America to the Middle East.   Perhaps more interesting than the diverse nationalities is the fact that our investors are coming to us entirely via face-to-face meetings, long dialogues, and extensive due diligence on their part.  We've all heard the stories: dozens of EB-5 investors, checks in hand, systematically herded into a room to sign up for an EB-5 offering cherry-picked by a migration agent NOT for its viability but, rather, for its commission schedule.  I am happy to say that Lake Point's EB-5 Limited Partners are cut from a very different mold, and they come to us with a healthy skepticism born through decades of hard work and tenacity in their respective fields...folks who don't need someone else to tell them where to invest.  Perhaps the stories behind the success of Lake Point's General Partners and our distinction of being the only Forbes 400 owned and operated EB-5 Regional Center best explains why, so far, ALL of our investors have extraordinary stories of hard work behind their trust-fund babies so far at Lake Point...although we'd certainly welcome properly qualified ones! (-:)

In any event, today's I-526 approval sets a new threshold for speedy I-526 adjudication and is a welcome send-off as I depart for a much needed vacation.  But I'll be back in the saddle in about a week, and in March Jud and I head back to beautiful Saigon for what will hopefully be our final round of meetings for Lake Point Capital Partners EB-5.  In the meantime, if you have a qualified client still mulling over their EB-5 options, give Bianca Saltz a call at 786-866-9775 to learn more about Lake Point EB-5.

The Year of the Horse is off with a gallup!  Tally Ho!

Wednesday, February 12, 2014

Canada Kills Immigrant Investor Program, Refunding Pending Cases

It looks like the U.S. EB-5 Program is getting an unintentional boost from our neighbors to the North: Canada has just announced that it is ending its Investor Visa program, which has been extremely popular in China and proved an insurmountable adversary to the more encumbered, complex EB-5 investor visa offered by the United States.  Calling the program a failure, Canada announced the closure of the program without much fanfare, stating as follows:
"To eliminate the existing backlog, which is diverting resources away from better performing economic immigration streams, the Government intends to return applications and refund associated fees paid by certain federal Immigrant Investor Program and Entrepreneur Program applicants..."
According to our Asia teams, this will represent a flood of refunds in mainland China and other East Asian nations.   Canada's immigrant investor program, along with that of Australia, have both been far more popular than the U.S. EB-5 program at an international level for a number of reasons, not the least of which is that the U.S. program requires an "at risk" investment while the others assure that if a person invests, they WILL get residency, irrespective of any business success metrics.  But there are other reasons which suggest this latest decision on Canada's part will push more investors towards the U.S. and EB-5: recent media coverage in both Australia and Canada have focused on an increasing distaste for migration, particularly from China.  While the issue certainly does not smack of the violent xenophobia witnessed in recent years in Europe (esp. Germany and Greece), it is clear that both Australia and Canada have put away the welcome mat for foreign investors.

How will this impact U.S. EB-5?  Hard to say, but given the continued flagrant violation of U.S. securities regulations by most Chinese migration agents and by many U.S. project promoters, EB-5 is hardly treated with trust in China.  I expect that those projects with a legacy of integrity, whether large or small, will continue to draw investors from China at a strong rate.  But the big winners could the passport programs from St. Kitts or the very popular Portuguese and Greek residency programs currently in the market.

If you were planning on Canadian direct investment or will be affected by the closure of the program, write me and I'll be happy to chat with you and help you find the best option for your particular situation.  While we continue to market the final stage of the Lake Point EB-5 project, I will never recommend anything which is not in a client's best interest and the fact remains that for very high net worth individuals, U.S. residency is NOT the best option. 

Here is the full article on Canada's decision to end their immigrant investor program:
Canada Ends Investor Visa Program

Friday, January 24, 2014

Another Lake Point Investor EB-5 Investor from Vietnam Approved

Although Lake Point's stream of steady I-526 approvals is established and is no longer a "news flash", seeing the dream of U.S. residency realized for each of our investors never gets old.  It is particularly gratifying when one of our Vietnamese investor petitions gets approved without any USCIS questions or queries, and this further cements our commitment to becoming Vietnam's most reliable and proven EB-5 offering.

As we place investors in the final slots of Lake Point Capital Partners, the second and final tranche of Lake Point EB-5, our "Asia only" family of limited partners is seeing an influx of investors from Latin America, specifically from Brazil and Mexico.  We are thrilled with the cross section of entrepreneurs, professionals, and legacy investors from around the world who have joined the Lake Point family and we are humbled by the trust you have placed in us.  Rest assured that our history of proactive communication, responsible stewardship of your investment dollars, and unbridled commitment to seeing your permanent residency realized continues to grow stronger every day.


Friday, December 6, 2013

USCIS Approves American Bridge Seattle Regional Center!

[PREFACE: As most of my readers know, I'm very wary of structuring new EB-5 Regional Centers and Projects.   While many of my colleagues are doing very brisk business with EB-5 formations, I have a real issue taking on an EB-5 structure unless I'm 100% satisfied with both the quality of the folks behind the deal AND the confidence that when it is finally approved by USCIS, the project will actually FIND INVESTORS.  The former issue of GP reputation is as much about protecting my OWN reputation as it is about protecting future investors; the latter issue of saleability is based upon the hard, cold reality that a tiny fraction of the 300+ -- is it over 400 now? -- USCIS approved EB-5 Regional Centers already on the market have succeeded in raising their first dollar.  I'm not interested in earning a big fee when I know the deal will not sell, and I disagree with my colleagues who handle that issue by smugly pointing out that they are "just forming the project, not guaranteeing its success".  BULL-oney.] 
Folks, I am happy to report that USCIS has approved American Bridge Seattle Regional Center!  American Bridge was the only EB-5 RC I agreed to structure in 2012 and I am delighted that my clients can move forward.   American Bridge is in fact an entirely new breed of Regional Center, and that's not's why:

  • The Regional Center is co-owned and managed by my good friend Greg Denton, who's attended the EB-5 "School of Hard Lessons" side by side with me for these past few years.  Greg is one of the brightest minds in U.S. hospitality management, widely respected, and literally the author of a leading textbook on Hospitality Management.
  • The project, a Residence Inn Hotel in Seattle, is being developed by Navin Dimond and his veteran team at Stonebridge Companies. Navin, like Greg, is another hospitality industry maestro.  He's been honored the Award of Excellence from the American Asian Hotel Owners Association, the Hotelier of the Year Award from the Colorado Hotel and Lodging Association and the prestigious Hilton Hotels Multi-brand Developer of the Year Award.
  • The formula and structure for the project mirrors what Stonebridge has done dozens of times before, providing prospective EB-5 investors with real-world, verifiable proof of success in both the business model AND, more importantly, exit strategy.
If you've been reading my blog for awhile now, you know the trials and tribulations of the past few years as we've brought Lake Point EB-5 to success.  For us, despite being blessed with a Forbes 400 powerplant under the hood, the path to EB-5 success was essentially trial and error; EB-5 was an afterthought after the GP had already bankrolled 80% of the project.
(For Lake Point, the fact that our project is an existing and NOT "distressed" business continues to be a primary draw for our investors.)  American Bridge is, IMHO, "an entirely new breed" of Regional Center simply because it is, to my knowledge, the first "new construction" EB-5 project which is predicated upon a verifiable and proven business model which the principals have replicated successfully dozens of times over two decades.  Navin, Greg, and their team bring a depth of industry experience to the EB-5 business that few Regional Centers can match (100+ hotel projects and $3 Billion of transaction experience).  And THAT, folks, is why I am proud to have structured American Bridge EB-5!

Greg is also looking beyond the Regional Center format as far as the EB-5 solutions he wants to bring to market.  He's told me that American Bridge will also carve out a new niche in the EB-5 market by hosting select Direct EB-5 projects which are customized to meet the needs of the individual investor.  In fact, he's currently marketing a number of restaurant and commercial laundry projects to EB-5 investors, offering innovative terms (all structured to comply with USCIS rules, of course) such as equity conversion options, profit participation, cash flow "lockboxes" for the benefit of the EB-5 investors, and loan maturity mechanisms that are triggered upon approval of the I-829 application.   VERY cool stuff.

I've said for years that our Lake Point project was the ONLY real "investment" in the EB-5 market place because our equity EB-5 partners are par for par with the General Partner on ROI: if our GP makes 50%, so do our EB-5 investors; if our GP loses 50%, so do our EB-5 investors.  Bona fide risk, tempered with a Forbes 400 GP with a sterling reputation.  Greg's view toward creating innovative solutions for individual EB-5 represents another step in the right direction -- protecting the investor -- which has been  sorely lacking in the EB-5 marketplace.