Yet another EB-5 scandal has been exposed, this time in Florida's Palm Beach, with the promoter using his photos with Donald Trump and (separately) with Bill and Hillary Clinton in his efforts to gull both Chinese and Iranian aliens into wasteful investments.
Misusing millions of dollars provided by rich Chinese, yearning for U.S. visas, is par for the course, but this instance relates to both Iranian and Chinese investors, and it involves an assertive promoter claiming totally phony links to both the former and the future president, making it a double two-fer on the EB-5 scam scale.
Neither Trump nor either Clinton had anything to do with the now deteriorating Palm House Hotel (Trump's Palm Beach hotel is called the Mar-a-Lago Club) and neither is charged in the pending federal court case. What developer Robert Matthews (and his colleague Joseph J. Walsh) did, according to a complaint filed in the federal court in Florida, was to claim that both Trump and former president Clinton served on the "advisory committee" to the hotel. The investors contend that this did not happen, and that there was no such committee.
Matthews and (apparently) his wife, managed to be photographed with Trump and the Palm Beach Post ran the picture in connection with its coverage of the lawsuit. Matthews also obtained, and used, a photo of himself between the Clintons in his promotional material.
All of this came to the public's eye when a long list of would-be EB-5 visa holders filed a complaint saying that they had all lost their $500,000 investments plus $40,000 fees, that none of them had secured a green card, and that most of the money had been siphoned off to buy the con men, among other things, a 151-foot yacht.
This is not just another sordid example of how the EB-5 program attracts both citizen sharpsters and gullible wealthy aliens (which it does); it is also a splendidly complex tapestry of what appears to be criminal activity as richly detailed as a Pieter Bruegel painting.
Consider these numbers:
- 98 - The number of pages in the civil complaint;
- 79 - The number of alien victims, not all of whom filed;
- 53 - The number of Chinese plaintiffs;
- 5 - The number of Iranians filing (neatly segregated at the back of the list of plaintiffs in the complaint); and
- 34 - The number of defendants (called "bad actors" in the brief; my favorite is a Cayman Islands entity called Alibi, LTD.).
The numbers suggest that: if there is a trial, it will be a long one; if there is an attempted settlement (this is a civil, not a criminal case), the difficulties of arriving at a compromise acceptable to all will be massive; and, no matter what happens next, this is a bonanza for a lot of Florida lawyers.
Users of the PACER system, dealing with documents in federal court cases, can find the filings at case 9-16-cv-81871-KAM. The dispute is in the West Palm Beach Division of the Southern District of Florida. The judge is Kenneth A. Marra, now 65, a Bush II appointee, who may well retire before the litigation is completed.
The plaintiffs say that they collectively lost $50 million in the case. Put in the context of some of the larger EB-5 scams recently, this is, as we reported at the time, about level with the Vermont disaster, but smaller than the huge realized loses in South Dakota, clearly in excess of $100 million, and much smaller than the hotel scam in Chicago, nipped in the bud by the Securities and Exchange Commission, which threatened a loss of $147 million.
Unfortunately for the alien investors, there does not seem to be any SEC activity here, or none so far, which has played such a useful role in the Chicago and Vermont capers. Nor are there, as there are in the Vermont case, large banks or brokerage houses to be sued.
The aliens in the Palm Beach case, according to the Palm Beach Post, "accuse the ... developers of using $6 million of their money to buy a 151-foot yacht. The rest went to such expenses as a luxury car, paying off a tax lien, and retiring a secret mortgage." Who knew that you could buy a yacht that big for that price!
The developers were also accused of hiring phony construction workers to dress the part and to pretend to work on the hotel in question to give a false sense of progress.
While charges of misusing (stealing) the aliens' money are all too typical in these scams, the Palm House Hotel case has an interesting additional twist that I, for one, have not seen earlier. The plaintiffs charge that the bad actors have busily created a bunch of lawsuits, sometimes against each other. The complaint (p. 5) reads:
Adding insult to grave injury, the Bad Actors have kept Plaintiffs in the dark, engaging in a practice of lulling, and have used the legal system to placate Plaintiffs and to cover up their conduct by bringing neutered, passive claims against one another and not seeking criminal prosecution. While this may give the appearance — to the press and to the courts — that justice is being pursued, in reality the legal "actions" have done nothing to right the wrongs or to return the funds.
Incidentally, the photo of Donald Trump and defendant Robert Matthews that the Palm Beach Post printed is probably at least 19 years old, as it shows a considerably slimmer Trump next to what looks very much like Marla Maples, his second wife. They separated in 1997 and divorced two years later.