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.

OHIO LOBBYIST PLEADS GUILTY IN KICKBACK AND MONEY LAUNDERING CASE

FROM:  U.S. JUSTICE DEPARTMENT 
Monday, December 23, 2013
Ohio Lobbyist Pleads Guilty for Role in Kickback and Money Laundering Scheme

An Ohio attorney and lobbyist pleaded guilty today for his role in a bribery and money laundering scheme involving the Ohio Treasurer’s Office.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, First Assistant U.S. Attorney Mark T. D’Alessandro of the Southern District of Ohio, and Special Agent in Charge Kevin R. Cornelius of the FBI’s Cincinnati Division made the announcement.

Mohammed Noure Alo, 35, of Columbus, Ohio, appeared before U.S. District Judge Michael H. Watson of the Southern District of Ohio and pleaded guilty to aiding and abetting honest services wire fraud.   He faces a maximum penalty of 20 years in prison, and sentencing will be set at a later date.

Alo is a partner and founding member of a Columbus-based law firm and became a registered lobbyist to the State of Ohio in 2010.   Court records state that from approximately January 2009 through January 2011, Alo admitted he conspired with his close personal friend Amer Ahmad, 38, of Chicago, and others to use Ahmad’s role as deputy treasurer to direct official State of Ohio broker services business to Douglas E. Hampton, 39, a securities broker from Canton, Ohio, in return for payments from Hampton.  Hampton funneled in excess of $123,000 to Alo.   Ahmad and Joseph M. Chiavaroli, 33, of Chicago, concealed additional payments from Hampton by passing them through the accounts of a landscaping business in which Ahmad and Chiavaroli held ownership interests.

As a result of the scheme, Hampton received approximately $3.2 million in commissions for 360 trades on behalf of the Ohio Treasurer’s Office.   Ahmad and his co-conspirators received in excess of $500,000 from Hampton.   Both Hampton and Chiavaroli entered guilty pleas in August 2013.

Ahmad was indicted on Aug. 15, 2013, on charges of conspiracy, honest services wire fraud, money laundering, conspiracy to commit money laundering, federal program bribery, and false statements.   He is scheduled for trial on March 3, 2014.   A criminal indictment is a formal accusation of criminal conduct, not evidence.  A defendant is presumed innocent unless convicted through due process of law.

The case was investigated by the FBI’s Central Ohio Public Corruption Task Force, which includes special agents from the FBI and the Ohio Bureau of Criminal Investigation.  The case is being prosecuted by Assistant U.S. Attorney Douglas W. Squires of the Southern District of Ohio and Trial Attorney Eric L. Gibson of the Criminal Division’s Public Integrity Section.