New Orleans Regional Center lawsuit will get new counsel.
In April 2012, EB5News.com reported on a lawsuit brought forth by 27 EB-5 visa immigrant investors against New Orleans Regional Center operators William Hungerford and Tim Milbrath, both of which were hired by former New Orleans Mayor Ray Nagin. The investors were seeking an immediate accounting of the whereabouts of their investments as well as relief and answers to their questions concerning the status of their residency in the United States.
The latest in the case, which occurred in May 2013, has the plaintiffs attorneys being dismissed for conflict of interest issues. The court docket stated they had 45 days to enroll new counsel and everything is put on pause (stayed) until plaintiffs’ new counsel enroll. No mention of new counsel is found in the docket currently, but there have been conversations about the file transfer process recently on the docket; on June 5 there was a motion to establish file transfer protocol by the plaintiffs, which implies that new counsel will be entered in the case. Reportedly the dismissed plaintiff’s attorney used to work for Hungerford and Milbrath. To date, the accused pair have only made procedural arguments, not answered any specific allegations.
In 2006, Nagin signed an exclusive 30-year deal with Maryland businessmen William “Bart” Hungerford Jr. and Timothy Milbrath to run the city’s EB-5 operation. They called their company NobleOutReach, and initially, the process seemed to be on the right track. Hungerford and Milbrath recruited 31 investors and collected $15.5 million for a pooled investment fund in order to invest in multiple projects to help rebuild New Orleans after Hurricane Katrina. They wooed investors by claiming they had opened five eateries and had big hotels under construction. They said their projects would create 1,500 jobs.
A promotional video produced by NobleOutReach emphasizes the Katrina disaster and the purpose of the funds to help rebuild New Orleans (hence the name Noble Outreach as was explained to Michael Gibson of EB5News.com in 2007 by Tim and Bart in a meeting they had in Washington DC). Hurricane Katrina, the worst natural disaster in U.S. history, struck the region on Aug. 29, 2005, flooding 80 percent of the city, dispersing the city’s 450,000 inhabitants and causing more than a billion dollars in damages to residential property in Orleans Parish alone.
"'We’re giving these people an option,' explained Milbrath, a retired Air Force colonel who was chief of staff of the White House Military Office during three presidential administrations and worked in the United Arab Emirates before joining NobleOutReach. 'You can live in Moscow, for example, and still invest in the New Orleans recovery effort. The city was totally devastated, so this is a good time to get in there and share in the profits. This is not a charity. We’re going in with private equity.'”
During this time, NOBLE was a frequent fixture at EB-5 conferences handing out Mardi Gras beads and large checks. Their $40,000-$60,000 finders fees paid to attorneys and others was at the time the highest in the program. Many immigration attorneys took Bart and Tim up on their offer and now their clients are probably wondering who was keeping an eye out for their interests.
In December 2010, Hungerford and Milbrath broke ground on their biggest project. “This is groundbreaking and hopefully a little over a year from now, we'll be opening the door to a WOW restaurant, conference center, training facility that will be out here on the front side and a hotel on the backside,” Hungerford said, as reported in wwltv.com’s January 2013 article by David Hammer, ‘Investors say visa program with ties to Nagin is wrought with fraud.’ More than two years later, the site is an empty lot with a few rusty girders.
Where Did the Money Go?
Here’s one piece: “When the immigrant makes his $500,000 investment, there’s a service fee of 12 percent, which we collect to cover our marketing and travel costs,” Milbrath explained to EB5news.com in 2012. “We don’t pay New Orleans, and the city doesn’t pay us. We collect it directly from the investor, because the city cannot be in a conflict of interest with the investor. That’s why they need a private company like us.”
The plaintiffs allege fraud, saying Hungerford and Milbrath spent $6 million from the investment fund to buy a 49 percent interest in a Maryland consulting company called Bay-NOLA-Mgmt – a company they run. And for just $200 of their own money, Hungerford and Milbrath got a 51 percent, majority ownership of Bay-NOLA-Mgmt. Ledgers collected by the plaintiffs through the lawsuit show some 30 investment companies set up by Hungerford and Milbrath, primarily in Louisiana, Maryland and Delaware between 2008-2010, with names like Bartone (Bart One) and Timone (Tim One), Bay-Bourbon-Ritas, Bay-NOLA-Hospitality, Bay-NOLA-Ventures-MD, VP-NOLA, VP-NOLA 1, VP-NOLA 2 and VP-NOLA-WOW, both articles explain. The complaint filed states that Hungerford and Milbrath never disclosed to plaintiffs that the fund’s investments would be structured in such a complicated and non-transparent manner.’
The fund did buy into three PJ’s coffee houses (two at Tulane University and one on Canal Street downtown), the Rita's Tequila House on Bourbon Street and Maurepas Foods, a Bywater restaurant and cocktail bar that opened in 2012. The wrench is that although these have been successful projects, USCIS is not counting these jobs toward the number needed for investors’ green cards.
What It Means to Investors
Investors also say that Hungerford and Milbrath were ignoring what the U.S. Citizenship and Immigration Service was telling them: That the main recipient of the funds, their Bay-NOLA-Mgmt consulting firm, was not a qualified job-creating entity for the New Orleans center. The lawsuit alleges that they put at least $500,000 of the investment dollars into that enterprise after it had already been rejected by the feds, reported wwltv.com.
Furthermore, Hungerford and Milbrath wrote a letter to their investors in 2011 that USCIS would now only count the jobs created at the Algiers hotel, conference center and WOW Cafe project, which is zero jobs. Result being some investors now face deportation.
“This entire episode has been extremely wrenching for them,” lead plaintiff attorney James Rodgers said. “They have put out their money, they’ve put out their time. They played by the rules and now they face complete loss of their effort after having been invited in to help make an investment to improve things in the city of New Orleans. And as it turns out, everybody seems to be losers in this,” ends the wwltv.com report.