It happened again, and it probably won't be the last time.
The El Monte Regional Center in El Monte, California just got the boot from USCIS. In the agency's own words, the regional center was "no longer promoting job creation or the kind of local economic development for which it was initially certified to do."
According to the Pasadena Star-News, the regional center, which was created to help fund a mixed-use development at the city's transit station, was subject to Victorville-style termination proceedings.
As with any failed EB-5 project, among the most disappointing outcomes is the investor's lost opportunity to obtain a U.S. green card. El Monte gives us only the latest in a number of EB-5 project disasters, another being the embarrassing case of Missouri state officials lending public support to the catastrophic Mamtek International deal.
Perhaps the only silver lining in El Monte's debacle is that only two foreign national investors contributed to the project over the three-year lifespan of the regional center.
One of those investors had already received a conditional green card. Unfortunately, it will now be impossible for him or her to ever receive a permanent U.S. green card via the El Monte Regional Center's EB-5 immigrant investor project.
Had those investors performed due diligence, it's unlikely they would have bothered with the El Monte Regional Center, which has been embroiled in legal troubles since 2009.
Fraud, embezzlement, arrests, lawsuits
Questionable investment, overselling the engagement of state and local government, not disclosing accurately the risk of investment ? those kinds of problems are a concern not only to people making the investments, but to the U.S. and El Monte because we want people to have confidence in the United States ... without that, we are going to have a crisis of confidence here and we are going to have as much credibility as North Korea, Cuba.
? Dave Gondek, Senior Deputy El Monte City Attorney, in comments to the Pasadena Star-News
The El Monte Regional Center story isn't a happy one.
|John Leung was arrested in 2009 for fraud and embezzlement.|
The city of El Monte originally hired developers Transit Village, LLC (TV, LLC) to transform a 65-acre area around its bus station into a $1 billion mixed-use development called, fittingly, Transit Village. El Monte received USCIS approval to raise money for the project via the EB-5 investor visa program. A detailed economic blueprint of the project from 2008 offers a good overview of the city's plan.
Unfortunately, things turned sour quickly. In 2009, TV, LLC executives John Leung and Jean Lang were arrested for alleged fraud and embezzlement. No charges were ever filed, but the two are still under investigation by the FBI.
As for the city, it no longer wanted anything to do with TV, LLC and selected a different developer.
But TV, LLC wasn't through with El Monte. Alleging that the city violated its contract when it selected the new developer, the company is suing El Monte for $18 million. Not only that, but TV, LLC's new owner, Bang Zhao Lin, still wants to develop Transit Village, and his attorney, Ben Reznik, says the company still has the rights to do so.
With new investment from Lin, Reznik told the San Gabriel Valley Tribune last January, it's definitely possible for the company to proceed with the development as planned.
In March, Lin met with El Monte Mayor Andre Quintero.
Although relations appear amiable, there are still several stumbling blocks both sides must overcome ? in particular the lawsuit, which is still underway seven months after this video was shot.
It's also worth noting that TV, LLC filed for bankruptcy in the wake of its legal proceedings, another issue that Lin's company, Cross Oceans Holdings, is currently dealing with. Bart Doyle, whose name once appeared as the operator of El Monte Regional Center on the USCIS Website, has said he'll almost certainly need a different developer at the helm if the effort to secure funding from foreign national investors is to continue. He needs someone "with enough cash to pay of TV, LLC's debt," according to the Tribune.
But for EB-5 investors, it gets even worse.
Despite multiple arrests, bankruptcy proceedings, a multi-million dollar lawsuit, and an FBI probe, the Pasadena Star-News reports that the El Monte Regional Center continued to promote this project to prospective investors in China and Korea.
Some have even alleged that the developer was involved in another EB-5-related swindle in San Bruno, California. A number of Chinese citizens are suing a group of individuals who allegedly defrauded them out of a $3 million investment in a Chinese restaurant ? an investment the accusers made in order to obtain EB-5 visas.
Not only were the investors' petitions denied, but the lawsuit claims that several of the accused are now in hiding. One of the defendants named in the suit is Jenny Pei Lin, an executive at Bang Zhao Lin's company, Cross Oceans Holdings.
The consequences of not performing due diligence
Had the investors in El Monte Regional Center done due diligence on the project in which they were investing, they might have considered alternatives.
Even excluding a thorough financial analysis from a trained and certified investment advisor, an investigation into the El Monte Transit Village project would have revealed that:
- The developers had been accused of committing felonies and at one point were placed under arrest.
- The developer had filed for bankruptcy.
- The U.S. Department of Housing and Urban Development was investigating the possible misuse of HUD money associated with the development.
- Bang Zhao Lin, who purchased the project's original developer, had never developed property in the U.S. and had zero real estate experience in markets outside of Asia.
- The developer had accused the city of violating its contract and was suing the city for $18 million it claimed it had lost.
- The city had chosen a different developer and scaled down the project significantly ? actions that could make the project subject to material change issues.
- The developer was using the regional center's name to market the project to overseas investors in spite of the fact that the city had chosen another developer.
- Two former executives at the developer were under FBI investigation.
- The developer, which had been effectively fired by the city, was continuing to use the city's logo in its marketing materials, presumably to lend more legitimacy to its efforts.
- An executive with the developer had been named as a defendant in another EB-5-related lawsuit in which investors were allegedly swindled.
The fact that a convicted Watergate conspirator represented the disgraced developers in legal proceedings probably didn't help much.
If there's a lesson to be learned from the El Monte Regional Center disaster, it's that not all EB-5 visa "opportunities" are created equal.
Aside from the more unusual aspects of El Monte's story ? lawsuits, FBI involvement, regional center termination ? it's a classic case of an EB-5 project that was a bad deal for investors and an embarrassment to well-intentioned city officials. Despite assurances that the project would create jobs and provide a gateway to permanent U.S. residency for EB-5 visa immigrant investors, the El Monte project created no jobs.
Instead, its investors lost money ? lots of it. And they certainly won't be getting green cards.