SEC freezes assets of ski resort amid fraud allegations

Washington, D.C., April 14, 2016 — The Securities and Exchange Commission today announced fraud charges and an asset freeze against a Vermont-based ski resort and related businesses allegedly misusing millions of dollars raised through investments solicited under the EB-5 Immigrant Investor Program.
The SEC’s case is filed in a Miami federal court.  The court has appointed a receiver over the companies to prevent any further spending of investor assets.
The SEC alleges that Ariel Quiros of Miami, William Stenger of Newport, Vt., and their companies made false statements and omitted key information while raising more than $350 million from investors to construct ski resort facilities and a biomedical research facility in Vermont.  Investors were told they were investing in one of several projects connected to Jay Peak Inc., a ski resort operated by Quiros and Stenger, and their money would only be used to finance that specific project.  Instead, in Ponzi-like fashion, money from investors in later projects was misappropriated to fund deficits in earlier projects.  More than $200 million was allegedly used for other-than-stated purposes, including $50 million spent on Quiros’s personal expenses and in other ways never disclosed to investors.
According to the SEC’s complaint, Quiros improperly tapped investor funds for such things as the purchase of a luxury condominium, payment of his income taxes and other taxes unrelated to the investments, and acquisition of an unrelated ski resort.
“The alleged fraud ran the gamut from false statements to deceptive financial transactions to outright theft,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “As alleged in our complaint, the defendants diverted millions of EB-5 investor dollars to their own pockets, leaving little money for construction of the research facility investors were told would be built and thereby putting the investors’ funds and their immigration petitions in jeopardy.”
The SEC’s complaint charges Quiros, Stenger, Jay Peak, and a company owned by Quiros called Q Resorts Inc. as well as seven limited partnerships and their general partner companies with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  Four other companies are named as relief defendants in the SEC’s complaint for the purpose of recovering investor funds transferred into their accounts.  The SEC seeks preliminary and permanent injunctions, financial penalties, and disgorgement of ill-gotten gains plus interest.  The agency also seeks conduct-based injunctive relief against Quiros and Stenger along with an officer-and-director bar against Quiros.
The SEC’s investigation was conducted by Brian Theophilus James, Trisha D. Sindler, Michelle Lama, and Mark Dee, and the case was supervised by Chedly C. Dumornay of the Miami Regional Office.  The SEC’s litigation will be led by Christopher Martin and Robert K. Levenson of the Miami office.  The SEC appreciates the assistance of the Office of the Vermont Attorney General and other authorities in Vermont.  See:

https://www.sec.gov/news/pressrelease/2016-69.html

Scary thought

USCIS reports that as of April 5, 2016, it has approved 824 regional centers in the United States. Fully 98 percent (or more) of these regional centers are run by people who do not know what they are doing.
Scary thought, indeed!

Chicago EB-5 scam perpetrator pleads guilty to wire fraud

Anshoo Sethi, pleaded guilty on January 12 to wire fraud, admitting his role in a scam that promised to build hotels and a convention center near O’Hare Airport by fraudulently raising more than $158 million from Chinese investors who expected to get immigrant visas under the so-called EB-5 Program, whose goal is to create full-time U.S. worker jobs.
Sethi, 32, admitted in federal court that he provided investors with forged documents, including a bogus letter from Hyatt Hotels, to get them to invest in his development, which had been approved by U.S. Citizenship and Immigration Services, the agency that grants immigrant visas to foreigners who invest at least $500,000 in approved projects under the program.
None of Sethi’s 290 investors got a visa, but they did receive refunds of their $500,000 investments.

SEC freezes assets in south Florida EB-5 scam

http://www.sec.gov/litigation/litreleases/2015/lr23409.htm

EB-5-funded PhoenixMart HQ raided by FBI in securities fraud investigation

The PhoenixMart headquarters was raided by the Federal Bureau of Investigation on the morning of Nov. 19 in northeast Phoenix, Arizona.
FBI agents entered the building at 7:00 a.m. in what those close to the investigation said was a look into possible securities and investor fraud at the company.
Developers hoped that the multi-million-square-foot mixed-use project would have been a major economic asset for the Pinal County, Arizona, community. More than 500 acres were committed to the project, along with significant public improvements.

New EB-5 memo available for comment

USCIS has published a new EB-5 memo for comment.  Comments are due no later than Sept. 8.  Get it here:

http://tinyurl.com/oh4fwxl

My take on S 1501, the American Job Creation and Investment Promotion Reform Act of 2015

When it was SB 774, it was a good EB-5 improvement bill. With Sen. Grassley's participation, the bill has become an unmitigated nightmare!  I cannot support this bill, as written, and cannot encourage my congressional leadership in the five states where ACFI operates, support it.

Summary by Boyd F. Campbell, 2015-07-15, please take note:

The bill provides for a five-year extension of the regional center program.  I would rather see Congress make this oldest "pilot" program permanent.
It reworkes TEA classifications to encourage more rural (towns under 20,000 population) development and not allow aggregation of census tract or commuting pattern configurations. OMB has cautioned Congress for years not to rely upon Metropolitan Statistical Areas, which is uses for statistical purposes only.  There are many rural areas within MSAs.
It increases investment amounts to $800,000 for TEA projects and $1.2M for non TEA projects. These increases are unnecessary and create confusion in the EB-5 marketplace.
The bill creates an extra-judicial framework so that DHS may, allegedly, have better oversight of regional centers. This extra-judicial framework does not affect independent EB-5 projects unrelated to regional centers, which are usually far more risky.  Finally, the bill requires regional centers to pay for this extra-judicial framework with a mandatory assessment of $20,000 per year.  This is disgusting and is beneath Congress's role. The federal laws we already have on the books today are more than sufficient to police the EB-5 Program.
The bill changes job creation calculations, requiring direct employees for a new commercial enterprise, only 30 percent of jobs may be created by non EB-5 capital.  This will make many EB-5 projects unattractive.
It would make improvements in reliability of processing times.  It would establish a 120-day processing time, on average, for exemplars, a imit of 150 days for I-526 petitions and 180 days for I-924s. This is a nice idea, but it won't happen. As more and more USCIS employees are hired for the EB-5 Program, processing times become longer and longer. I know it sounds counter-intuitive, but it's true.
The bill would introduce a premium-processing fee to expedite petitions and areduce processing times. This won't happen either.
It removes TEA determinations from the states and puts USCIS in charge of TEA determinations.  This is a
REALLY bad idea.  Do the senators know how long it will take USCIS to make TEA determinations?  Months. Many months.  I get them done in my states (five in the Southeast) in less than a week.
Unless SB 1501 is heavily revised in accordance with my comments above, I must urge the senators in the five states in which my regional center operates to vote no on this bill.