The government’s EB-5 program is supposed to be a win-win for everyone. For immigrants seeking admission to the United States it is supposed to provide a path to citizenship if the requirements, centered on the investment of $500,000 or more in select projects, are met. For the U.S. it is a job creation mechanism since the investments from those seeking admission under the program, administered by the United States Citizenship and Immigration Service, are supposed to be used to create jobs in this country. Unfortunately, the program is now at the center of yet another SEC enforcement action and a parallel criminal case. SEC v. Lee, Civil Action No. 2:14-cv-06865 (C.D. Cal. Filed September 3, 2014). Last year the agency brought two other cases involving the program. SEC v. A Chicago Convention Center, LLC, Case No. 13 cv 982 (N.D. Ill. Filed Feb. 6, 2013); SEC v. Ramirez, Civil Action No. 7:13-cv-00531 (S.D. Tx. Filed September 30, 2013).
Lee names as defendants two immigration attorneys, Justin Moongyu Lee and his partner Thomas Kent, and the administrator of their law firm and Mr. Moongyu’s wife, Rebecca Taewon Lee. In addition, seven entities, including Nexland, Inc., founded by Mr. Lee, were named as defendants. In March 2006 Messrs. Lee and Kent had Kansas Biofuel apply to USCIS for a designation as a regional center under the Immigrant Investor Program. The application identified five potential ethanol projects to be constructed in Kansas. The project was approved.
From March 2009 to April 2011 the defendants raised over $11.4 million from twenty-four investors through offerings of limited partnership units in the various entities. According to the offering documents each investor was required to invest $500,000 which was to be used solely for an income generating investment in Nexsun Ethanol, LLC. The funds were to be pooled and used to develop an ethanol production facility and an ancillary business or to acquire units of ownership of a new commercial business enterprise to develop and operate an integrated bio-fuel refinery.
Contrary to the representations made to the investors the facilities were not built, although some construction was done. Rather, the defendants provided USCIS with misleading documents which purported to show job creation by Nexsun. Defendants then misappropriated much of the money raised from investors. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Sections 10(b) and 20(a). The SEC’s action and the parallel criminal case are both pending.