Immigration Attorneys Charged with Defrauding EB-5 Investors

 

In yet another cautionary tale, on September 3, 2014, the Securities and Exchange Commission charged Los Angeles attorney Justin Moongyu Lee, his wife Rebecca Taewon Lee, his law firm partner Thomas Edward Kent and five companies controlled by Mr. Lee, with conducting an investment scheme to defraud EB-5 investors.  The U.S. Attorney’s Office for the Central District of California also filed criminal charges against Mr. Lee.

The SEC alleges that Mr. Lee and Mr. Kent operated a regional center in Kansas that was used to raise $11.5 million in EB-5 funds for the construction of an ethanol plant that was never built and was no longer a viable project by mid-2008.  Despite this, the Lees and Mr. Kent continued to promote the project and distributed materials to EB-5 investors falsely representing that construction was ongoing and the plant would be in operation by November 2011.  The group also submitted false documents to USCIS to conceal the failure of the project.

According to the SEC complaint, the EB-5 funds were misappropriated for other uses.  It is alleged that Mr. Lee withdrew funds from the EB-5 investor escrow accounts without their knowledge and misused several million dollars.    The SEC press release can be read here.

This matter illustrates the importance of EB-5 investor due diligence prior to making an investment decision.  It also demonstrates the inherent conflicts of interest in regional center owned projects.  It is no surprise that greater scrutiny is being given to the EB-5 program by the SEC and other governmental agencies.