This is not exactly EB-5 fraud, but like a knock-off of a Gucci handbag, the scheme plays off the attraction of the original, in this case the EB-5 program.
There is now (or at least was quite until recently) an offer on the Chinese part of the internet made by a convicted American felon that says that a $380,000 investment in Florida real estate (isn't this where we came in 90 years ago?) can produce not only a nice place to live, but, within two-to-six months, a U.S. passport and many other governmental benefits as well. I am told by our translator that the term "EB-5" does not appear in the pitch, but the investment-in-exchange for immigration benefits proposal tracks EB-5 quite closely and is aimed directly at rich and insecure Chinese investors, the principal alien users of this program.
In short, this is yet another indication that EB-5 — the immigrant investor program — directly, and here indirectly, breeds fraud.
The 16-page pitch, mostly in Mandarin but with a few words in English and a few numbers, deals with all the benefits that could flow from buying a house in Palm Bay, Fla., a location that may sound like Palm Beach to people on the other side of the globe.
Palm Bay is 111 miles north of Palm Beach, and houses in the latter cost six times as much as those in the former. Further, given the shapes of the two communities shown on the maps, Palm Beach has much more actual beach than Palm Bay, a mostly inland community where the average house price, according to Zillow, is a modest $135,400.
Whether the Palm Beach vs. Palm Bay business is a sleight of hand or not, the rest of the offer is, in part, purely fraudulent and other parts are misleading, to say the least. For example:
The Price: $380,000. The rock bottom price for an EB-5 investment is $500,000 and there are often as much as an additional $100,000 more in fees involved.
The Authorized Middleman. In real EB-5 cases, the investments are made with a regional center authorized by the Department of Homeland Security; there is no such regional center in this instance.
The Nature of the Investment. The purchase of a dwelling unit for the alien investor is never approved in the EB-5 program; one must invest in a business of some kind that will produce, allegedly, 10 jobs for legal residents of the United States.
The Immigration Benefits. In the EB-5 program, an investment leads to a set of temporary green cards for the investor's family; then, two years later, if all goes well, a permanent set of green cards; and then, years later, if they successfully apply for it, citizenship (with a passport as a symbol of that status.) The Palm Bay offer calls for a passport in two to six months!
Other Benefits. The prospectus also falsely offers a series of governmental benefits meant for the American poor to the potential alien home buyers, who are, by definition, affluent. For example: "Giving birth to kids is free in the U.S., apply for approximately 800 dollars for childcare, free milk powder and diapers" and "Children can ... enjoy free medical treatment ... and low-income subsidies."
The promoter is Giro Katsimbrakis, CEO of Palladio Development, whose photo and phone number appear on the prospectus. Another of his numbers, according to a well-informed informant, once was the Federal Bureau of Prisons Register Number, 35803-054; that was prior to his release in 2004. The PACER case numbers of his criminal trials are 1:1994-cr-00176 and 1:1997-cr-01045, both in New York's federal courts.
My informant wrote that he talked quite recently to one of Katsimbrakis' colleagues who confirmed — the informant pretended to be interested in the investment — that these were the terms offered.
Has the scam worked? Our source thinks so; perhaps a civil suit by a victim filed later will confirm that.
One would hope that with this information being transmitted to federal authorities — as it has been — that the Palm Bay promotion would be terminated, preferably with some jail sentences.
I am most grateful to Elizabeth Telford, recently returned from several months in China, for her translation of the proposal, as well as to an anonymous informant in China.