Dying EB-5 Program Gets Negative Headline in $100 Million Dispute

By David North on June 29, 2021

The dying EB-5 (immigrant investor) program, the main part of which is due to expire at midnight, Wednesday, June 30, was the subject of a thoroughly negative headline from Law360 on June 28. It read: “Fla. Judge Certifies Class In $100M EB-5 Fraud Suit”.

My step-daughter happens to be a class action lawyer, and she tells me that when a judge rules that a group of litigants is regarded as a class, then the suit is likely to be decided in their favor.

In this instance, 199 Chinese investors in a Florida real estate deal (previously OK’d by the sometimes-sleepy Department of Homeland Security) sued to get their money back from Nicholas A. Mastroianni, identified by Law360 as “[having] ties to former Trump administration adviser Jared Kushner”.

In this case, the investors got the expected green cards, and the project, the Harbourside development in Jupiter, Fla., was built, but the developer, through a controversial and intricate maneuver, “converted the membership structure without their consent and refused to repay the principal they contributed for a construction loan”, according to the article. Each of the investors had put $540,000 into the project.

We at CIS have been following this case, which also involved once-jailed Trump lawyer Michael Cohen, for years.

Meanwhile, that part of the EB-5 program that pools aliens’ investments, such as in this case, is due to expire at midnight Wednesday, June 30, as Congress has not extended its life as it has many times in the recent past.

The EB-5 program, until November of 2019, granted alien investors, and their spouses and under-21 children, green cards in return for a minimum $500,000 investment (plus usually some fees) in a development OK’d by, but not guaranteed by, an arm of DHS, the Immigrant Investor Program Office, which carries the mis-initialed moniker of IPO (it should be IIPO). In 2019, the Trump administration issued a set of regulations, much like those proposed by the prior administration, raising the minimum ante to $900,000 and tightening the rules on how to define the depressed areas in which such investments could be made. In the past, the moneys were generally plowed into glitzy urban real estate.

The industry wants to extend the program and to shake off the Trump/Obama regulations; a federal magistrate judge has ruled that the reforms were invalid because the acting secretary of DHS at the time was not properly appointed. An effort to secure the extension of a reformed version of the program, supported by senior senators of both parties on a unanimous consent basis, was torpedoed by Sen. Lindsay Graham (R-S.C.) last week.

Graham apparently wants the program extended, but without the reforms.