Green card EB-5 program exploited to ‘defraud’ investors

A federal program intended to spur job creation in the U.S. by giving green cards to foreign investors was used to defraud a Canadian couple, a new lawsuit alleges. The couple’s suit follows a number of fraud prosecutions in the Bay Area relating to use of the EB-5 “investor visa” program, which grants permanent residency and a pathway to citizenship to qualified investors.

Teresa Chiu and Daniel Hsieh, a married couple from Ontario, invested $500,000 with a Santa Clara County couple ostensibly putting together a development project under the EB-5 program, their suit filed in Santa Clara County Superior Court claims.

The money was supposed to fund development of a food court in the Central California city of Turlock, 15 miles southeast of Modesto, according to the suit accusing the other couple, Joe and Gloria Wu, of fraud.

The Wus did not immediately respond to messages left Thursday and Friday with a person who answered the phone at the office of a San Jose business they own.

At the time Hsieh and Chiu wired their money to the project bank account in 2012, the EB-5 “investor visa” program required a minimum $1 million investment in a new commercial enterprise creating or preserving at least 10 full-time jobs, or $500,000 for enterprises in rural or high-unemployment areas deemed “targeted employment areas.”

The EB-5 program was created in 1990 “to stimulate the U.S. economy through job creation and capital investment,” according to the Securities and Exchange Commission. Last year, the administration of President Donald Trump boosted the minimum investment amounts to $1.8 million and $900,000, and shifted authority for designating high-unemployment areas to the federal government from state and local governments.

The Canadian couple’s investment followed promises by the Wus that the money would be used to renovate a building and operate it as the Sunrise Food Plaza, which would be finished in January 2013 and create 62 jobs, the suit alleged. The investment was to provide the Canadians with 20% equity in the food court, the suit claimed.

But work on the project didn’t start until after January 2013, the suit alleged. And after Chiu and Hsieh asked for a refund because they had received green cards through other means, Joe Wu told them their investment was locked in for five years and the earliest they could get their money back would be July 2017, the suit claimed.

The Canadians had received $70,000 in interest payments, but no refund has been forthcoming, the suit alleged. Last year, they flew to California, visited the Turlock project, and “were shocked to see that the current state of the site was only partially constructed and appeared to be largely abandoned,” the suit claimed.

The EB-5 program has generated other recent allegations of fraud in the Bay Area. A San Mateo County businesswoman last year agreed to pay $50 million in a settlement with federal regulators who accused her of misappropriating at least $45 million from foreign citizens seeking green cards through EB-5 investments in a Cupertino real estate development.

In December, a Palo Alto lawyer and her business partner were convicted of fraud after running a nearly decade-long, multi-million-dollar scheme built on the EB-5 program.

In 2018, the Securities and Exchange Commission laid fraud charges against a South Bay lawyer and her office manager, alleging the pair made nearly $13 million from illegal commissions received for referring more than 400 clients to groups that bundle investments from foreigners seeking EB-5 visas. The U.S. attorney for the Northern District of California filed criminal charges of fraud, identity theft and obstruction of justice against the two.


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