Defrauding of EB-5 investors alleged million
The US Securities and Exchange Commission has obtained an asset freeze against a California doctor and his associate accused of defrauding 40 Chinese investors of $20 million through the federal EB-5 immigrant investor program.
Robert Yang, 45, of Redlands and Claudia Kano, 45, of Pomona are scheduled to appear at a preliminary civil hearing on Dec 21 in US District Court for the Central District of California in Riverside. The court ordered the asset freeze and a restraining order against them on Nov 25, according to the court docket.
Yang runs a geriatric-care medical practice in San Bernardino registered as “Yanrob’s Medical Inc”. He purchased land in Fontana in 2008 to build a nursing facility for chronically ill patients, according to the SEC complaint filed on Nov 19 with the court.
In or around May 2012, Yang and Kano, administrative manager of Yang’s medical practice, contacted an unnamed firm that offered to help them raise money for the Fontana project from Chinese investors interested in immigrating to the US through the EB-5 program.
The EB-5 program requires applicants to make an investment of at least $1 million (or $500,000 in an area designated as rural or high-unemployment) and create or preserve at least 10 jobs for US workers.
With the assistance of the finder, Yang and Kano raised $20 million from 40 investors in China from September 2012 to early 2014 for the development of three “sub-acute nursing care facilities” — Suncor Fontana LLC, Suncor Hesperia LLC and Suncor Care Lynwood LLC — in those three towns. Yang is owner and president of the Suncor entities and Kano is senior vice-president.
But according to the SEC, Yang and Kano diverted more than $10 million for personal and other uses, such as for Yang’s medical practice and his personal taxes, and the purchase of real estate unrelated to the EB-5 projects.
Although the defendants made repeated statements to investors that their funds would “only” be used to develop the specific medical facility projects in which they made an investment, the defendants transferred funds between projects, the complaint says.
While investors understood and paid $45,000 fees to the finder in addition to their $500,000 investments, the minimum threshold for qualifying for the EB-5 program, they were not told that another 18 percent of their investments would be deducted and diverted to the finder, causing their net investments to fall below the threshold. Their prospects for US residency were therefore jeopardized.
The SEC also said that the Suncor projects were years behind schedule. For the Fontana and Hesperia locations, which were marketed starting in September 2012, the offering documents represented that construction was “well under way”, with projected completion dates of September 2012 and September 2013, respectively.
The Suncor Lynwood project, first marketed in July 2013, had a projected completion date of February 2014.