Sometimes a bit of truth comes out from an unlikely, and non-commendable source.
It happened earlier this month. The setting was all too familiar to those of us who follow the EB-5 (immigrant investor) program.
The Securities and Exchange Commission is once again pressing civil charges against an American with a Chinese name who had, according to the SEC, defrauded 45 Mainland Chinese millionaires who had invested EB-5 money with him. Virtually none of the money had been invested in the fancy interior design center in Southern California as had been promised. Edward Chen and his wife have been accused of diverting a very high percentage of the funds to other, more personal uses.
Last year the SEC accused the Chens of misusing the money and not following the rules about handling other people's investments.
This month, Chen argued that the court should toss out SEC's case, according to a Law360 article (partially behind a paywall), "because investors really wanted to get green cards out of the deal rather than get a return on their investments, they weren't really buying securities," and so the Chens were not subject to the laws administered by SEC.
SEC responded in a legalistic manner about the definition of such an investment — the motive of the investor does not matter — and the judge ruled against the Chens, ordering that $25.8 million be returned to the investors.
I guess the moral of this story is that it is just as immoral to cheat someone who wants to buy a visa as it is to swindle a would-be investor.
The court documents in PACER, the electronic data system of the U.S. courts, were — unusually — blocked in this case; I assume that the investors were supposed to get their money back, but did not score the 45 sets of green cards they wanted. The PACER file number is 2:17-cv-06929-PA-JEM.
Despite all of the above, the Chens' California-based regional center, Home Paradise Regional Center, was still listed as an acceptable entity by the Department of Homeland Security on November 24, though a similarly named one in Texas had been terminated.
On a broader note: The heart of the EB-5 program, the provision to issue a family-sized bunch of green cards for a half million investment, is up, yet again, for congressional renewal on December 7. The speculation in Washington is that the extension, without changes, will be attached to an appropriations bill, as has so often happened in the past.
Correction: We initially identified Edward Chen as a lawyer. He is not, and the text has been updated to reflect that.