There is more news this week about the ways and devious means through which fraudsters have separated alien investors (mostly Chinese) from their EB-5 (immigrant investor) money and how the federal courts have coped — or not — with these cases.
Let’s start in Chicago with a long-running dispute about the missing $50 million EB-5 investments and the non-constructed Carillon Towers. The last time we looked in on the case, the defendants were arguing for more time to obtain a $50 million loan from the Gulf States — the time was needed because a date set by an American judge conflicted with a five-day religious holiday, an interesting excuse, and no information could be obtained during that period. This marked the eighth time that the developers had failed to pay the 88 or so Chinese investors as ordered by a federal judge.
Now a federal judge is suggesting that the loan was a will-o-the-wisp and that the investors should take another approach to getting paid, according to a Law360 article.
But the Chicago case is still alive, unlike one in New York. The second case reflects the extreme and long-lived naivety of a single Chinese EB-5 investor and the problems that can arise when two parties to a financial arrangement are represented by the same lawyer.
Shixu Bai, a citizen of Mainland China, was a good enough or lucky enough investor to have a million dollars to invest in an EB-5 deal back in 2013, but he committed the following three glaring errors:
- He signed a million-dollar deal with a firm whose lawyer, Serge Bauer, was also the lawyer for the other party, Tegs Management, a grocery operation active in, among other places, Brighton Beach, Brooklyn;
- He signed a deal that at one point included a guarantee of no risk to him, contrary to the rules of EB-5, both points made clear in the court filings; and
- He invested twice as much money — for the same family-sized set of visas — as other Chinese investors were doing at the time.
The last is my own observation; though I did not read the entire file, I saw nothing to this effect in that part of it I did read, nor was this fundamental error noted in the Law360 coverage of the matter.
USCIS, working correctly in this case, ruled that the “no risk” provision in the deal made it invalid, and also raised some questions about the source of the funds; so no visas for the Bai family, and no return of the invested moneys.
Then Bai, still clueless and apparently victimized by his own lawyer, accepted his lawyer’s advice to appeal the USCIS decision which his new lawyers say was sure to lose. In the time that passed the statute of limitations lapsed and the other day a judge sitting in the Southern District of New York ruled that Bai’s current case, now becoming very long in the tooth, was too old to be valid. It is case 1:20-cv-04942-DLC-RWL in the PACER files.
With victims like Bai, both rich and persistently ignorant of the law, it is no wonder that the EB-5 story is continually refreshed by new scandals; most of these stories are like this one, resident scoundrels doing in well-to-do aliens, either one at a time in New York, or by the dozens in Chicago.