SEC CHARGES ATTORNEY, WIFE AND LAW PARTNER WITH FRAUD INVOLVING EB-5 IMMIGRANT INVESTOR PROGRAM

 FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission today charged a Los Angeles-based immigration attorney, his wife, and his law firm partner with conducting an investment scheme to defraud foreign investors trying to come to the U.S. through the EB-5 Immigrant Investor Program.
The SEC alleges that Justin Moongyu Lee along with Rebecca Taewon Lee and Thomas Edward Kent raised nearly $11.5 million from two dozen investors seeking to participate in the EB-5 program, which provides immigrants an opportunity to apply for U.S. residency by investing in a domestic project to create jobs for U.S. workers.  The Lees and Kent informed investors that they would be EB-5 eligible if they invested in an ethanol production plant they would build and operate in Ulysses, Kan.  However, investors’ money was misappropriated for other uses instead of the ethanol plant project.  The plant was never built and the promised jobs never created, yet the Lees and Kent continued to misrepresent to investors that the project was ongoing.

In a parallel action, the U.S. Attorney’s Office for the Central District of California today announced criminal charges against Justin Lee.

“These immigration lawyers exploited a desire by foreign investors to participate in a program that would not only generate them a positive investment return, but also provide them a path to legal residency in the United States,” said Michele Wein Layne, Regional Director of the SEC’s Los Angeles office.  “Long after all construction had ceased, they continued to falsely tell investors that they were building the plant.”

According to the SEC’s complaint filed in U.S. District Court for the Central District of California, the investors defrauded by the Lees and Kent were primarily of Chinese and Korean descent.  Justin Lee and Kent applied to the U.S. Citizenship and Immigration Services (USCIS) in 2006 for designation as a “regional center” under the EB-5 program.  They claimed there would be “substantial economic benefit” and “thousands” of new jobs for this area in southwest Kansas.  However, by mid-2008, construction of an ethanol plant at the site was no longer economically feasible, and the Lees and Kent concealed their failure to generate the jobs required by the EB-5 program by submitting false documents to the USCIS.

Meantime, the SEC alleges, when Justin Lee was running low on cash and having difficulty obtaining financing, he took money out of investor escrow accounts without their knowledge prior to the approval of an investor’s application for residency.  Lee and his wife subsequently misused several million dollars raised from the ethanol plant investors for other undisclosed purposes such as financing an iron ore project in the Philippines and repaying investors in other unrelated offerings.

According to the SEC’s complaint, the Lees set up investor seminars in Los Angeles at which the purported ethanol plant project was the main part of the presentation despite the halt of construction in 2008.  Kent, who visited the site frequently in 2008 and 2009 and knew no construction was taking place, also participated in the seminars.  Investors continued to be misled that the proceeds from their investment were being used to construct an ethanol plant.  In particular, the business plan updated in June 2010 and distributed to investors falsely represented that construction was “ongoing” and the plant would be in operation before November 2011.

The SEC’s complaint charges the Lees, Kent, and five companies founded and controlled by Justin Lee (American Immigrant Investment Fund I, Biofuel Venture IV, Biofuel Venture V, Nexland Investment Group, and Nexsun Ethanol) with violations of Sections 17(a)(1), (2), and (3) of the Securities Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934 as well as Rule 10b-5(a) and (c).  Justin Lee, Kent, and the entities also are charged with violating Rule 10b-5(b).  The SEC’s complaint seeks disgorgement, prejudgment interest, and penalties along with permanent injunctions.

The SEC’s investigation was conducted by Carol Lally, Roberto Tercero, Roger Boudreau, and Spencer Bendell of the Los Angeles Regional Office.  The SEC’s litigation will be led by Karen Matteson.  The SEC appreciates the assistance of the USCIS, U.S. Attorney’s Office for the Central District of California, Federal Bureau of Investigation, U.S. Department of Homeland Security’s Immigration and Customs Enforcement (ICE), Internal Revenue Service, and State Bar of California.

SEC ANNOUNCES SETTLEMENT IN IMMIGRANT INVESTOR OFFERING FRAUD

FROM:   SECURITIES AND EXCHANGE COMMISSION 
SEC Obtains Settlements in $150 Million EB-5 Immigrant Investor Offering Fraud

On March 17, 2014, the U.S. District Court entered a consent judgment against defendants Anshoo R. Sethi, A Chicago Convention Center, LLC (ACCC) and Intercontinental Regional Center Trust of Chicago, LLC (IRCTC) for their roles in raising approximately $158 million dollars from close to 300 investors as part of a fraudulent offering that targeted foreign nationals who sought to invest in the U.S. economy and gain a legal pathway to citizenship through the EB-5 Immigrant Investor Program, as alleged in the SEC's February 2013 complaint. The Final Judgment provides the following relief:

joint-and-several liability for over $11.5 million in disgorgement and prejudgment interest, subject to offsets for certain amounts refunded or credited to investors;
permanent injunctions against future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder;
an order enjoining and restraining defendants for twenty years from offering or selling securities issued by any of the defendants or issued by any entity owned or controlled by Sethi;
a civil penalty of $1 million against defendant Sethi;
civil penalties of up to $1.45 each against ACCC and IRCTC;
ACCC and IRCTC agreed to wind up and dissolve after satisfying their payment obligations.

The Defendants will satisfy their payment obligations, at least in part, by paying over the funds frozen in certain bank accounts pursuant to the Court's asset freeze order in this case and also by selling property held in ACCC's name.

The Commission filed its case on February 6, 2013, and obtained a temporary restraining order and asset freeze against Sethi, ACCC and IRCTC. On April 19, 2013, the Court granted the Commission's motion to return to investors the entire $147 million of principal that had been frozen pursuant to the SEC's motions. The agreed upon settlement resolves, among other things, the disposition of approximately $11 million in administrative fees paid by investors, which are the only funds remaining to be returned in order to make the investors whole.

Sethi, ACCC and IRCTC neither admitted nor denied the SEC's allegations.