- Make the necessary investment in a commercial enterprise in the United States; and
- Plan to create or preserve 10 permanent full-time jobs for qualified U.S. workers.
This program is known as EB-5 for the name of the employment-based fifth preference visa that participants receive. Congress created the EB-5 Program in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. In 1992, Congress created the Immigrant Investor Program, also known as the Regional Center Program. This sets aside EB-5 visas for participants who invest in commercial enterprises associated with regional centers approved by USCIS based on proposals for promoting economic growth.
Foreigners, especially Chinese, often make investments in the U.S. under the EB-5 program for the green card while the return on investment is secondary. Chinese investors have amassed great wealth in the last couple of decades and are eager to obtain green cards. That attracts all kinds of investment promoters, including sophisticated deal-makers and con men alike.
A report from the Los Angeles times today reminds us that the EB-5 program is complicated, and even when sophisticated deal makers have attached their name to a project, foreign investors must be mindful to fully investigate the opportunity using experienced U.S. legal counsel. By doing so, these investors will decrease the risk of being involved in a failed deal.
The Los Angeles Times reported that sixty Chinese investors are suing the developers of the SLS Las Vegas hotel and casino because, even though they were promised U.S. permanent resident cards for investing, they never received the promised green cards. The lawsuit, filed in Los Angeles County Superior Court last month, claims the investors put in $545,000 each but were the victims of a conspiracy to use their money on a project that opened in 2014 but has yet to be profitable. “Once the SLS Hotel opened, it has allegedly not turned a profit from day one and is currently on the verge of bankruptcy,” the lawsuit says.
The lawsuit names several developers and managers of the project, including San Francisco-based Stockbridge Capital Group, SBE Entertainment, the hospitality company led by Sam Nazarian, and Alhambra immigration consulting firm Henry Global Consulting. Stockbridge Capital is in the process of selling the hotel project to Meruelo Group, a holding company with interests in banking, construction, hospitality and real estate. In a statement, Stockbridge Capital said it “is aware of recent litigation by certain alleged minority investors in the company’s second lien lenders and it believes such litigation is without merit. The company does not expect the litigation will deter the sale.” A spokesman for Nazarian declined to comment. Representatives for Henry Global Consulting could not be reached for comment.
The lawsuit alleges that the paperwork signed by the investors to participate in the visa program, known as EB-5, was in English and that most of the investors don’t speak English. The suit says the investors were led to believe that they would get their permanent resident cards within 30 months but none has received a permanent resident card and only some now have temporary resident cards. The lawsuit also contends that the sale of the hotel to the Meruelo Group would mean the investors would be repaid and that would violate a requirement of the EB-5 program that calls for a “sustained” investment in the U.S. Each investment must also create at least 10 full-time jobs. “To make matters worse, the SLS Hotel revenue was less than 50% of what was projected so the project had not created sufficient jobs to allow all investors, including some of the plaintiffs, to get green cards,” the lawsuit says.
Wittenberg Law has deep experience representing investors and has represented a sponsor of a EB-5 program hospitality deal. If you are considering an investment, call us at (310) 295-2010 before you invest. If you already made an investment, call us to discuss any concerns you may have.