On March 17th, in the case of United States Securities and Exchange Commission (SEC) (plaintiff) vs. A Chicago Convention Center, LLC, Anshoo Sethi, and Intercontinental Regional Center Trust of Chicago, LLC (defendants), a final judgment was reached in the United States District Court for the Northern District of Illinois Eastern Division by Honorable Judge Amy J. St. Eve, ending over a year of civil proceedings. This marks the end of the first ever SEC civil enforcement action in the EB-5 industry, an approximately $158 million investment scheme perpetrated by the defendants against more than 250 investors, most of whom hail from China.
It was also reported by The Wall Street Journal on February 27th that a record $14 million whistleblower award was paid by the SEC for the tip which ultimately led to the enforcement action against A Chicago Convention Center (ACCC). The 2010 law was established under the Dodd-Frank financial-overhaul and is designed to encourage tipsters to come forward with information about financial fraud.
According to the final judgment, the defendants are obligated to pay over $11 million to the SEC to cover the amount scammed from investors. Each defendant is also ordered to pay a punitive amount, including $1 million owed by Anshoo Sethi personally, all of the money payable to the SEC. The funds from the frozen accounts will be put towards this payment, as will the proceeds of the court-ordered sale of land that is held by one of the defendants. Foreign migration agents who were recipients of compensation were also urged to return more that $5 million to investors as part of making them financially whole again. Lastly, according to the judgment, Anshoo Sethi is not allowed to sell securities, nor own more than 5% of any company that sells securities for the next 20 years (read the press release).
The next step is potential criminal proceedings, with the Federal Bureau of Investigations (FBI) set to investigate whether the facts of the case merit a criminal charges.
IIUSA Involvement in the Case
Since news of the SEC enforcement action against Chicago Convention Center (CCC) broke in February 2013, IIUSA has publicly supported inter-agency collaboration between the U.S. Citizenship and Immigration Services (USCIS) and the SEC to protect the integrity of the EB-5 Program. In fact, on April 3, 2013 at a status hearing on the Securities and Exchange Commission (SEC) vs. A Chicago Convention Center, et. al. case, IIUSA filed an amicus brief addressing the motion filed by the SEC on March 28, 2013 to modify the current asset freeze order to unfreeze the investors’ capital and return it directly to them through their escrow agent. IIUSA remains proud of our work to amplify the message of deterrence that the SEC sent to the EB-5 marketplace by enforcing existing securities laws to protect the EB-5 Regional Center Program:
IIUSA, as the trade association and representative of the EB-5 Regional Center Program industry, fully supports the Plaintiff’s motion to modify the asset freeze order and return investors’ funds directly to them. This action will demonstrate that the United States is governed by the rule of law, efficiently and prudently enforced to protect investor interests – restoring investor confidence in the Program as a result.
The difficult economic times of today exacerbate the need for vigilant enforcement of United States securities laws that sends a message to investors that our country is open for investment and those who do invest are protected by our laws. The Plaintiff’s actions to date, and most recent motion would send exactly that message to the immigrant investor marketplace, and it is welcomed by the industry.
At a hearing on April 22, 2013, the court ordered the funds unfrozen, which directed the escrow agent to return the escrowed funds (more than $147 million) returned directly to investors. IIUSA subsequently sent a letter to the Beijing Exit/Entry Association, attaching the court order and supporting amicus brief by IIUSA.
IIUSA Recommended Best Practices for EB-5 Regional Centers
In June 2013, IIUSA approved Recommended Best Practices for EB-5 Regional Centers, a 38-point document developed by the IIUSA Best Practices Committee which provides guidance to regional centers seeking to conduct business in a manner that will foster the growth and success of the EB-5 Regional Center industry.