The EB-5 program is popular among many seeking a path to citizenship in the United States. Created as part of the 1990 Immigration and Nationality Act, it gives foreign nationals two possible paths to citizenship. One provides an opportunity for a green card if a foreign national invests $1 million creating or preserving jobs for at least 10 U.S. workers in this country. The other creates an opportunity for those who invest $500,000 in a high unemployment or rural area. The program is administered by the U.S. Citizenship and Immigration Service or USCIS.
The program also attracts fraudsters. The Commission just brought its second enforcement action this year centered on alleged fraudsters abusing the program. SEC v. Ramirez, Civil Action No. 7:13-cv-00531 (S.D.Tx. Filed September 30, 2013). The action names as defendants Marco Ramirez, the director of Operation USA Now, Bebe Ramirez, a director and managing member of the same firm and also the managing member of Now Co. Loan Services, LLC and three related entities, USA Now, LLC, USA Now Energy Capital Group, LP, and Now Co. Loan Services, LLC.
After forming USA Now in 2010 the Ramirez defendants sought to participate in the EB-5 program. The plan was to have USA Now approved as a Regional Center for the program. That approval would have to come from USCIS. If granted USA Now, as a center, would be permitted to charge investors an administrative fee for providing investment opportunities and assisting with the preparation of the necessary paperwork for the visas. The application submitted by the Ramirez defendants was for a geographic region in South Texas. The business sectors listed in it included retail property development, general office, medical office and others.
Before USCIS approved the application to become a center, the Ramirez defendants began soliciting investors. Initially, they targeted Mexican investors and later others. Investors were told that their funds would be held in escrow until they received USCIS approval. Once the funds were released the money was to be used for a specific business purpose.
The defendants did not hold the investor funds in escrow, according to the Commission’s complaint. Rather, the investor funds were many times immediately diverted to other undisclosed businesses or to the personal use of the individual defendants. To date none of the investors identified by the SEC have received even a conditional visa.
In July 2013 the FBI seized assets at the offices of the Defendants. Nevertheless, the Defendants continue to control the accounts containing investor funds. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). The Court granted the SEC’s request for a freeze order as to the accounts of the defendants. The case is in litigation.
This is not the first case filed by the Commission related to the EB-5 program. In February 2013 the agency filed another action which centered on the program. That action also alleges that investors and persons seeking a path to U.S. citizenship were being defrauded. SEC v. A Chicago Convention Center, LLC, Case No. 13 cv 982 ((N.D. Ill. Filed Feb. 6, 2013). This case is also in litigation.