Kin of Crooked Korean Kingpin Caught Up in EB-5 Case

By David North on August 11, 2015

Drip, drip, drip, drip.

They keep emerging: additional indications that the EB-5 (immigrant investor) program is a honey-pot attracting fraud of various kinds, as I reported recently.

While many of these immigrant investor cases relate to citizen and alien middlemen conning rich aliens, this item, which is both investor-centric and one I have not discussed before, is different because it involves the son and daughter-in-law of a corrupt Korean politician and their use (or attempted use) of daddy's funds in the EB-5 program.

As often happens, an agency other than USCIS (which manages EB-5) broke the case. Carrying the ball in this instance was the Criminal Division of the Justice Department.

This case is also interesting because a foreign government (Korea) is cooperating with the feds in investigating a situation involving both overseas corruption and the use of the fruits of that corruption in the EB-5 program.

Late last month, Douglas Hauer, an attorney with the DC law firm of Mintz, Levin, Cohn, Ferris, Glovsky, and Popco, summarized the case on the EB-5 Investments website thusly:

Here is an overview of the facts of the case at 15,000 feet.

On February 18, 2015, the Criminal Division of the United States Department of Justice (DOJ) brought a Forfeiture in Rem action against an EB-5 limited partnership interest. The basis for the complaint was that an EB-5 investor, who also happened to be the daughter-in-law of former President Chun Doo-hwan (President Chun) of Korea, had made an investment into a Regional Center project with funds traceable to corruption proceeds. Specifically, the President's son J.Y. Chun had liquidated a portion of bearer bonds that he owned and which were ultimately traceable to his dad's "Secret Fund." He and his wife used those funds to purchase an interest in an EB-5 limited partnership. The issue came to light through an effort on the part of the U.S. and Korean law enforcement authorities to locate assets of President Chun Doo-hwan. ...

The EB-5 interest was derived from proceeds traceable to unlawful activity including bribery of a foreign public official. ...

The court granted the government's motion [for forfeiture] for entry of a default judgment last month.

If the government seizes the money, one could conclude that the EB-5 visa petition was, or will be, denied, though these are different processes.

In a totally separate EB-5 case, one that came to light as a result of an alien's appealing the staff's denial of an EB-5 application to the Administrative Appeals Office, that entity confirmed that the petition was faulty and then added:

While not determinative, page 31 of the Confidential Private Offering Memorandum explicitly states that "an investment in the partnership is purely for the immigration benefits and not for commercial return on investment."

This confirms that at least one part of government recognizes something that I have been writing about for years: that the primary — and, in many cases, the only — motivation of aliens participating in the EB-5 program relates to the visas, not to any financial gains. The wording above would seem to set up a contractual situation in which the middlemen involved may have an easy out of any obligation to return any part of the half million dollars invested, just so long as the visa or visas were issued.

I do not know whether the quotation above is more than a one-off provision in this specific case, or if it reflects a fairly common practice, but it provides an insight into why the EB-5 middlemen are so enthusiastic about the program.