Caveat Emptor OR EB-5 Investor Beware

EB-5 promoters may promise you a rose garden, but watch for those thorns.

In one of our previous posts, we discussed projects in which our clients have invested: they not only received their green cards but were participants in real, tangible commercial projects. The results of those investments can be seen in the pictures that we posted. Unfortunately, for those who are not our clients, they may be unaware that there is another side to EB-5 — a risky side which could lead to a loss of $500,000 and no green card. For example, four EB-5 Regional Centers have recently encountered serious problems, and a review of the problems is instructive for anyone contemplating an EB-5 investment.
Let’s start with the worst…

The Mamtek Regional Center was supposed to build a factory and infrastructure projects in Moberly, Missouri. The city and state were so desperate for investment that the state offered more than $17 million in tax incentives and the city offered $39 million in bonds to support the project. The EB-5 aspect was supposed to attract at least 15 investors ($7.5 million). The project was spearheaded by a company called Mamtek International, which supposedly had a manufacturing operation in China. Upon investigation, no such company in China nor office location was found in the United States. More information can be found here: http://www.columbiatribune.com/news/2011/sep/23/mamtek-pushed-visa-deal-to-chinese-investors/ Incredibly, USCIS continues to list this Regional Center as approved!

The El Monte Regional Center was recently closed down by USCIS. The Center was originally set up to attract funds to build a real estate project in El Monte, California. However, the developers, John Leung and Jean Lang, are being investigated by the FBI and the Housing and Urban Development Agency for misuse of public funds. What is most instructive for investors is that simple due diligence on these operators would have turned up a previous bankruptcy and an arrest record from 2009 — when they were arrested for fraud and embezzlement. Fortunately, only two investors fell victim. More information can be found here: http://www.sgvtribune.com/news/ci_19050660

Another problem regional center is the Victorville Regional Center, which was de-certified, i.e., had its approval revoked, by USCIS after it changed its business plan and failed to convince USCIS of the legitimacy of its job creation methodology. The city of Victorville planned to construct an industrial wastewater treatment plant and attracted funds of more than a dozen investors. After the de-certification, Victorville has sued USCIS in Washington, DC, where the case is currently pending.

Finally, a large real estate project in Florida, promising ownership in apartments in exchange for investments, has pending more than 70 petitions, with the first petitions filed more than 18 months ago. USCIS has called into question the redemption agreement offered by the promoters, stating that the project cannot unconditionally promise a return on investment to an investor. Currently, the project continues to seek out and attract investors, who may be unaware of these problems.

The overwhelming majority of EB-5 promoters are well-intentioned, but as you know, the road to hell is paved with good intentions… Before investing, check with us or a certified financial specialist for a second opinion. We can set you on the right road.