De­fraud­ing of EB-5 in­vestors al­leged mil­lion

China Daily (Canada) - - ACROSS AMERICAS - By LIA ZHU in San Francisco li­azhu@chi­nadai­lyusa.com

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.

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