Avoiding Fraud in EB-5
February 8, 2013 5 Comments
UPDATE: I recommend that those interested in the SEC action sign up to participate in IIUSA’s webinar this Friday 2/22 on Securities Laws Enforcement in the EB-5 Context: SEC Process & Procedures.
We in the EB-5 community sometimes sigh over USCIS’s increasing fixation on “verifiable detail,” which makes applications and petitions so much harder for us to prepare. Two years ago my EB-5 business plans were about 20 pages and simply explained the business proposal. That was the norm, judging by application materials for older Regional Centers that were released in response to FOIA requests. Now my EB-5 plans are more like forty pages not counting footnotes and a stack of exhibits, and not only present the business plan but try to validate every detail with reference to evidence from independent sources. Sometimes it seems that USCIS assumes each application to be fraudulent until proven innocent, and applicants/petitioners whose face value happens to be real value are taken aback and frustrated at being suspected and probed. What does USCIS think they’d do, anyway? A complaint filed this week by the Securities and Exchange Commission against Intercontinental Regional Center Trust of Chicago, LLC details what one Regional Center did do, from inventing franchise agreements and financing commitments to forging letters and enormously inflating cost estimates and revenue projections. I think that reading this complaint should make us more supportive of USCIS in its efforts to scrutinize and test applications and petitions before approving them. And the government should not be alone in this scrutiny. Kudos to Michael Gibson for reporting on concerns about this project as early as November 2011.
EB-5 Updates 
Any thoughts as to why in the Chicago Convention Center complaint, the SEC is only alleging fraud rather than also raising the Broker-Dealer registration issue? Thank you.
Since the investors are foreigners, the registration of a broker is less important issue to SEC.
Should all PPMs disclose the kickbacks given to the Chinese brokers? I believe that the disclosure is material and will let Chinese investors make judgement whether those brokers have conflict of interests when they receive kickbacks in forms of syndication fees or management fees from EB-5 regional centers or developers?
Does the SEC regulatory regime requiring “full disclosure” of all material facts in the Offering Documents in an EB-5 private placement offering make any sense given that almost all Chinese EB-5 investors cannot speak nor read the English language? Moreover, the Chinese emigration agents in China neither have the English language skills nor the legal training to understand the Offering Documents, nor any incentive to explain their contents to their client investors. Thanks.
Should all PPMs disclose the kickbacks given to the Chinese brokers? I believe that the disclosure is material and will let Chinese investors make judgement whether those brokers have conflict of interests when they receive kickbacks in forms of syndication fees or management fees from EB-5 regional centers or developers?