hu et al, v. chan et al., no.15-cv-00709-ssb-skb (s.d. oh) complaint and rc termination november...

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

WESTERN DIVISION AT CINCINNATI

JIAXI HU, MENGFANG LI, XIAOYAN WU, WEI REN, RUIMIN CHEN, JIANLI DU, JIMEI ZHANG, ZHENPING HAO, JIE CIU AND GUIYING WANG, Plaintiffs, v. TERRY CHAN, GARY CHAN, MARTIN ANGIULLI, ANGIULLI, INC., KENTUCKY REGIONAL CENTER, LLC D/B/A MIDWEST EB-5 REGIONAL CENTER, SV ARX, LLC, DANTE BELLA, LLC AND JEFFREY JACOBS Defendants.

Case No. 1:15 cv 709

Now come Plaintiffs, Jiaxi Hu, Mengfang Li, Xiaoyan Wu, Wei Ren, Ruimin Chen, Jianli Du,

Jimei Zhang, Zhenping Hao, Jie Cui, and Guiying Wang (“Plaintiffs”), and for their complaint

against Defendants, Terry Chan, Gary Chan, Martin Angiulli, Angiulli, Inc., Kentucky Regional

Center d/b/a Midwest EB-5 Regional Center, SV ARX, LLC, Dante Bella, LLC, and Jeffrey

Jacobs (collectively “Defendants”) state as follows:

Case: 1:15-cv-00709-SSB-SKB Doc #: 1 Filed: 11/04/15 Page: 1 of 21 PAGEID #: 1

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RC Termination upheld in Nov. 2015.

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Complaint in Civil Action

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THE PARTIES

1. Plaintiffs are citizens and residents of the People’s Republic of China and limited

partners in KRC Fund I LP (the “Fund”). The Fund is an Ohio limited partnership with its

principal place of business located in Cincinnati, Hamilton County, Ohio.

2. The Fund was purportedly organized for the purpose of raising funds from the

solicitation of foreign investors to invest in a mixed-use real estate project (the “Project”) in the

Short Vine entertainment district in Cincinnati, Ohio.

3. Defendant the Kentucky Regional Center, LLC d/b/a Midwest EB-5 Regional

Center (“KRC”) is a Kentucky limited liability company with its principal place of business

located in Cincinnati, Hamilton County, Ohio. KRC is the former general partner of the Fund.

KRC was removed by the Fund’s Limited Partners on July 15, 2015, and replaced by KRC Fund

I Management, LLC, due to numerous acts of malfeasance.

4. Defendant Terry Chan is a resident of Hamilton County, Ohio, and former

principal of KRC.

5. Defendant Gary Chan is a resident of Hamilton County, Ohio and former

principal of KRC.

6. Defendant Martin Angiulli (“Angiulli”) is a principal of KRC and principal of

defendant SV ARX LLC (“SV ARX”). Angiulli is also the owner of defendant Dante Bella,

LLC (“Dante”) and Angiulli, Inc. (“A-Inc.”). Angiulli resides in Hamilton County, Ohio.

7. Dante is an Ohio limited liability company based in Hamilton County, Ohio.

Dante is the entity that Angiulli organized to acquire KRC from the Chans.


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The Regional Center AAO Decision is Matter of KRC

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8. A-Inc. is an Ohio corporation owned and operated by Angiulli that holds the real

estate that was supposed to be acquired with Plaintiffs’ EB-5 investment funds for the Project

(as defined below), but never was.

9. SV ARX is an Ohio limited liability company with its principal place of business

in Hamilton County, Ohio. SV ARX is the developer of the EB-5 Project at issue in this action.

10. A-Inc., SV ARX, and Dante are all alter egos of Angiulli, completely dominated

and controlled by him such that they have to separate mind, will or existence of their own

11. Defendant Jeffrey Jacobs (“Jacobs”) is a principal of defendant SV ARX. Jacobs

resides in Hamilton County, Ohio. Jacobs is the project manager for the Project at issue in this

action.

NATURE OF THE ACTION

12. This is an action that Plaintiffs assert against Defendants for breach of contract,

unjust enrichment/quantum meruit, gross negligence, breach of fiduciary duty, conversion, fraud,

and punitive damages, for the Defendants’ mismanagement, embezzlement and self-dealing of

Fund assets.

13. Defendants have also violated the Securities and Exchange Act of 1934, 15

U.S.C. § 78j(b), because they procured Plaintiffs’ investments by fraud, misrepresentation, and

deception.


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JURISDICTION AND VENUE

14. The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332, because

there is complete diversity of citizenship between the Plaintiffs and the Defendants, and the

amount in controversy exceeds the value of $75,000, exclusive of interest and costs.

15. Pursuant to 28 U.S.C. § 1391, venue is proper in this Court, because a substantial

part of the events or omissions giving rise to the claims occurred in this District, and because

Defendants are subject to personal jurisdiction in this District.

BACKGROUND FACTS

16. Plaintiffs re-state paragraphs 1- 15 as if fully rewritten.

17. Defendants lured Plaintiffs into investing in the Fund as part of the EB-5 Visa

Program administered by the U.S. Department of Homeland Security, U.S. Citizenship and

Immigration Services (“USCIS”).

18. In 1990, Congress established the EB-5 Program in order to bring new investment

capital into the United States and create new jobs for U.S. workers.

19. Under the EB-5 Program, immigrants who invest their capital in job-creating

business enterprises in the U.S. receive “conditional” permanent resident status in the U.S. for

two (2) years after their I-526 application is approved. If, after the two-year period, the

immigrants satisfy the EB-5 Program conditions and other Program criteria, USCIS removes the

conditions and the immigrant investors become lawful permanent residents. In other words, the

immigrant investors obtain their “green cards.”

20. In 1993, Congress enacted the “Immigrant Investor Pilot Program” in order to

attract immigrant investment in a range of commercial development opportunities through the

use of “regional centers.” In 2012, Congress eliminated the “pilot” term from the Immigrant


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Investor Program and re-authorized use of the regional center investment model through

September 2015.

21. In essence, the EB-5 Program has three key components: (a) immigrant

investment of capital; (b) in a new commercial enterprise; and (c) that creates jobs.

22. To avail oneself of the EB-5 Program, the immigrant investor must invest at least

$1,000,000 of capital in new commercial enterprise that creates at least 10 jobs, unless the

immigrant invests his or her capital in what is called a “targeted employment area.” In that case,

the immigrant must invest $500,000.

23. The regional center model is not required in order for an immigrant investor to

obtain a permanent resident visa through the EB-5 Program. That is, an investor may make a

“direct” investment into a new commercial enterprise that creates 10 jobs. However, through the

use of the regional center model, the immigrant may invest his capital and can rely on “indirect”

job creation, which involves jobs that are held outside of the new commercial enterprise but

nonetheless counted as if they are in the commercial enterprise.

24. Defendants used the EB-5 Program to lure Plaintiffs into collectively investing

$5,000,000 in a purported redevelopment project in the Short Vine District in Cincinnati, Ohio,

under the regional center model. As will be discussed more fully below, Plaintiffs have nothing

to show for the $500,000 each of them invested. The Project remains in the infancy stage after

several years, the Plaintiffs money has been improperly spent, and their visa applications have

been revoked and/or denied.

25. On April 29, 2010, USCIS designated KRC as a Regional Center pursuant to the

EB-5 Program, which authorized the Regional Center to manage and sponsor EB-5 immigrant

investor funds.


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26. KRC had originally been organized to develop and promote the Manhattan

Harbor Project, a concept Terry and Gary Chan (the “Chans”) came up with to develop riverfront

area in Dayton, Kentucky. However, the Manhattan Harbor Project never amounted to anything.

27. After the failure of the Manhattan Harbor Project, the Chans came up with a new

idea that involved redevelopment of the Short Vine area in Cincinnati, Ohio. Their idea was to

solicit foreign investors seeking permanent residency status in the United States under the EB-5

visa program.

28. The Chans did not have the financial wherewithal to fund the redevelopment

project themselves, so they approached Angiulli, a fellow Pittsburgh native, and the owner and

operator of Martino’s restaurant on Short Vine Street in Cincinnati. In addition to being a fellow

Pittsburgh native, Angiulli was also the father-in-law of Terry Chan.

29. Together, the Chans and Angiulli conspired to come up with a plan to line their

own pockets at the expense of foreign investors under the guise that they would be redeveloping

the 2600 block of Short Vine Street using an investment fund consisting of EB-5 investments

from Chinese citizens.

30. The Chans formed the Fund on or about October 16, 2010, in Cincinnati, Ohio,

which is an Ohio limited partnership that KRC managed and utilized to collect the EB-5

investments.

31. The Fund was supposed to be a real estate development project (the “Project”)

that involved the acquisition, renovation, and management of mixed use retail, restaurants, and

office development in the east and west blocks of 2600 Short Vine Street in the City of

Cincinnati, Hamilton County, Ohio (properties that are, for the most part, owned and controlled

by Angiulli and A-Inc.).


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32. The Fund sought to raise $23 million of EB-5 investment funds from 46

immigrant investors to finance the Project. The investors’ funds were invested with the Fund and

then lent by the Fund to the project developer, SV ARX to finance the job-creating activities in

the Project. The total budget of the Project was $29 million.

33. In late 2010, the Chans, Angiulli and Jacobs began seeking EB-5 investors in

China in order to raise funds for the Project.

34. Gary Chan spent approximately six (6) months in China in 2011 making

presentations to potential investors in China. The presentations were organized through Chinese

immigration consultants who were hired by the potential investors looking to gain permanent

residency and citizenship in the United States. Defendants Jacobs and Angiulli participated in

the planning and attended many of these marketing meetings.

35. As part of the presentations made, the Chans promised Plaintiffs and other

potential investors that the Short Vine Project was the “first project to be guaranteed by

government funds.” That is, the Chans explained to Plaintiffs and their immigration consultants

represented that if the investors invested in the Project and it failed, that there is law in Ohio that

would guarantee the return of their investment through the Ohio government. In actuality,

however, this “law” was nothing more than a bill that was proposed, but never enacted into law.

However, the Chans, through the promise of this alleged government guarantee, lead Plaintiffs to

believe that their investment was safe in the event the Project failed.

36. Defendants Angiulli and Jacobs were aware of these misrepresentations to

Plaintiffs and actively conspired with the Chans to promote this false information to Plaintiffs in

order to fraudulently induce Plaintiffs to invest in the Project.


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37. The Chans also told Plaintiffs that the Project would also receive funding through

bank loans and tax credit financing. The reality was that the Defendants had no alternative

financing for the Project; the only funding source was EB-5 investment dollars.

38. On or about September 15, 2010, the Fund issued a Private Placement

Memorandum on behalf of the Fund which offered “eligible investors up to 40 units of limited

partnership interests (the “Units”) for $500,000 per Unit, plus an additional $45,000

administration fee per Unit, which fee will be paid by the Fund to the Fund’s general partner.”

At that time, the general partner of the Fund was KRC. The PPM was later amended on

November 15, 2010 (the “PPM”), and was the PPM that was incorporated into the subscription

agreements signed by the first nine Plaintiffs. A copy of the PPM is attached here to as Exhibit

A.

39. Under the PPM:

Pending USCIS’s decision on the prospective investor’s I-526 Petition, the subscription payment will be held in an escrow account. If the USCIS approves the prospective investor’s I-526 Petition, the Fund will close on the prospective investor’s subscription agreement, subject to the general discretion of the GP to reject subscriptions. The subscription payment will then be applied as the prospective investor’s capital contribution, and the subscription payment in the escrow account will be released to the Fund for the Fund’s use consistent with the then applicable EB-5 Program Requirements. If the USCIS denies the prospective investor’s I-526 Petition, the subscription payment will be released from the escrow account and returned to the prospective investor, who will be released from his or her obligation to purchase the Unit.

40. On July 19, 2011, plaintiff Jianli Du entered into a Subscription Agreement

offering to purchase one Unit in the Fund for $500,000, plus an additional $45,000

administration fee. A copy of Mr. Du’s Subscription Agreement is attached hereto as Exhibit B.

Mr. Du funded his investment in the Fund on December 12, 2011. Under the PPM, incorporated


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into the Subscription Agreement, Mr. Du’s investment proceeds were to be held in an escrow

account and not disbursed by MERC or its principals, the Chans, until after USCIS approved Mr.

Du’s I-526 application.

41. On July 24, 2011, plaintiff Ruimin Chen entered into a Subscription Agreement


administration fee. A copy of Mr. Chen’s Subscription Agreement is attached hereto as Exhibit

C. Mr. Chen funded his investment in the Fund on November 25, 2011. Under the PPM,

incorporated into the Subscription Agreement, Mr. Chen’s investment proceeds were to be held

in an escrow account and not disbursed by MERC or its principals, the Chans, until after USCIS

approved Mr. Chan’s I-526 application.

42. On July 25, 2011, plaintiff Wei Ren entered into a Subscription Agreement


administration fee. A copy of Mr. Ren’s Subscription Agreement is attached hereto as Exhibit

D. Mr. Ren funded his investment in the Fund on November 21, 2011. Under the PPM,

incorporated into the Subscription Agreement, Mr. Ren’s investment proceeds were to be held in

an escrow account and not disbursed by MERC or its principals, the Chans, until after USCIS

approved Mr. Ren’s I-526 application.

43. On August 31, 2011, plaintiff Jiaxi Hu entered into a Subscription Agreement


administration fee. A copy of Mr. Hu’s Subscription Agreement is attached hereto as Exhibit E.

Mr. Hu funded his investment in the Fund on October 6, 2011. Under the PPM, incorporated

into the Subscription Agreement, Mr. Hu’s investment proceeds were to be held in an escrow


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Hu’s I-526 application.

44. On October 20, 2011, plaintiff Xiaoyan Wu entered into a Subscription

Agreement offering to purchase one Unit in the Fund for $500,000, plus an additional $45,000

administration fee. A copy of Ms. Wu’s Subscription Agreement is attached hereto as Exhibit F.

Ms. Wu funded her investment in the Fund on November 3, 2011. Under the PPM, incorporated

into the Subscription Agreement, Ms. Wu’s investment proceeds were to be held in an escrow

account and not disbursed by MERC or its principals, the Chans, until after USCIS approved Ms.

Wu’s I-526 application.

45. On October 26, 2011, plaintiff Mengfang Li entered into a Subscription


administration fee. Mr. Li funded his investment in the Fund on November 3, 2011. A copy of

Mr. Li’s Subscription Agreement is attached hereto as Exhibit G. Under the PPM, incorporated

into the Subscription Agreement, Mr. Li’s investment proceeds were to be held in an escrow


Li’s I-526 application.

46. On December 6, 2011, plaintiff Jimei Zhang entered into a Subscription


administration fee. A copy of Ms. Zhang’s Subscription Agreement is attached hereto as Exhibit

H. Ms. Zhang funded her investment in the Fund on December 28, 2011. Under the PPM,

incorporated into the Subscription Agreement, Ms. Zhang’s investment proceeds were to be held

in an escrow account and not disbursed by MERC or its principals, the Chans, until after USCIS

approved Ms. Zhang’s I-526 application.


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47. Upon investing their money with KRC, Plaintiffs became Limited Partners in the

Fund pursuant to the Limited Partnership Agreement attached hereto as Exhibit I.

48. However, contrary to the terms of the PPM and their representations to Plaintiffs,

and unbeknown to the Plaintiffs, the Chans did not hold the Plaintiffs funds in an escrow account

and began spending the money as soon as it was deposited into KRC’s operating account in

violation of the PPM.

49. By the time that Plaintiffs’ I-526 applications were submitted to USCIS,

Defendants had conspired to waste Plaintiffs’ investments and use the funds for purposes

inconsistent with the PPM and EB-5 Program requirements.

50. By February 2012, over $4 million of the Plaintiffs’ investment funds had been

improperly spent by the Defendants, with little to no development done on the block of

properties that were supposed to be redeveloped into 9 restaurant concepts to create jobs so that

Plaintiffs could get their permanent resident visas approved through USCIS.

51. For example, Angiulli funneled approximately $700,000 to his family members

that provided no meaningful services on the Project. Family members were hired and paid for

sham positions like human resources manager for a company with less than five actual

employees.

52. In addition, $400,000 of Plaintiffs’ money was invested in technology companies,

like Zipscene and Wearcast, which was inconsistent with the Fund’s business plan and KRC’s

regional center charter. Those technology companies have not provided any return of capital to

the Fund or the Plaintiffs.

53. Angiulli used several thousands of dollars of the Plaintiffs investments to pay the

mortgages and taxes on properties he and/or his alter ego company defendant Angiulli, Inc.


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owned and never transferred title to SV ARX. Angiulli also diverted thousands of investor

dollars to pay expenses for his restaurant, Martino’s.

54. On December 21, 2011, Angiulli used investor funds to purchase the Colonade, a

parcel of property located at 2718 Vine Street, Cincinnati, Ohio. The Colonade generated

$13,000 in rental income per month. Yet, despite receiving such rental income from the

Colonade, the money went into Angiulli’s pocket, rather than into SV ARX for the benefit of the

Project.

55. The Colonade was also used as collateral for a $250,000 line of credit with U.S.

Bank. Angiulli and Terry Chan drew down the $250,000 line of credit and split the proceeds

instead of using the proceeds to benefit the Project. When the Colonade was eventually sold, the

line of credit was paid off from the sales proceeds. This was another $250,000 taken from

investor funds.

56. By September 2012, nine restaurants were to have been developed according to

the Project’s business plan. However, at this time, the Project was on put hold and the

restaurants were nowhere near completion due to the Defendants’ disputes over funding for the

Project. The Project was out of money and Defendants SV ARX, Angiulli and Jacobs were

demanding more money from the Chans, KRC and the Fund. All of the Defendants were

accusing each other of misappropriating the Plaintiffs’ funds. The reality was that all of them

had misappropriated Plaintiffs’ funds and did little to advance the Project forward.

57. Defendants failed to notify the Plaintiff-Investors of the problems and infighting

taking place on the Project. Instead, Defendants proceeded to solicit further investments from

unsuspecting Chinese investors.


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58. Without any disclosure as to the problems that were rampant on the Project,

Defendants lured three more investors into investing in the Fund, plaintiffs Zhenping Hao, Jie

Cui, and Guiying Wang, who all fell victim to Defendants’ scheme.

59. On July 20, 2012, plaintiff Zhenping Hao entered into a Subscription Agreement


administration fee. A copy of Mr. Hao’s Subscription Agreement is attached hereto as Exhibit J.

Mr. Hao funded his investment in the Fund on July 30, 2012. Under the PPM, incorporated into

the Subscription Agreement, Mr. Hao’s investment proceeds were to be held in an escrow


Hao’s I-526 application.

60. On July 21, 2012, plaintiff Jie Cui entered into a Subscription Agreement offering

to purchase one Unit in the Fund for $500,000, plus an additional $45,000 administration fee.

Ms. Cui funded her investment in the Fund on August 2, 2012. A copy of Ms. Cui’s

Subscription Agreement is attached hereto as Exhibit K. Under the PPM, incorporated into the

Subscription Agreement, Ms. Cui’s investment proceeds were to be held in an escrow account

and not disbursed by MERC or its principals, the Chans, until after USCIS approved Ms. Cui’s

Hao’s I-526 application.

61. On September 5, 2012, plaintiff Guiying Wang entered into a Subscription


administration fee. Mr. Wang funded his investment in the Fund on September 26, 2012. A

copy of Mr. Wang’s Subscription Agreement is attached hereto as Exhibit L. By this time, the

PPM had been updated to remove the escrow requirement and Defendants were no longer


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misleading investors that their investment proceeds were going to be held in escrow pending the

approval of their I-526 applications.

62. The disagreements between the Chans and SV ARX, Angiulli and Jacobs

continued, even after three more investors were lured into the Fund. As a result, on December

21, 2012, SV ARX and Angiulli filed suit against the Fund and the Chans in the Hamilton

County, Ohio, Court of Common Pleas, Case Number A1209855, alleging that the Chans

improperly diverted nearly $1,000,000 in investment funds that should have gone to SV ARX for

the project and that the Fund was refusing to fund the project in violation of the loan documents

between the Fund and SV ARX.

63. On January 17, 2013, the Fund counterclaimed SV ARX, Angiulli and Jacobs

alleging breach of the loan documents and conversion of investor funds.

64. On or about June 11, 2013, Defendants settled the Hamilton County litigation.

After settlement of that litigation, Mr. Angiulli purchased KRC from the Chans for $300,000 in

January 2014 with investor funds.

65. At this point, the Project was in shambles and the Plaintiffs’ funds were gone. It

was not until October 2013 that Defendants informed the Plaintiffs that the Project was stalled.

Prior to that time, there was no mention of the infighting among Defendants or the egregious

mismanagement that had occurred with Plaintiffs’ funds.

66. Finally, in January 2014, nine of the Plaintiffs I-526 applications were approved

by USCIS, granting them conditional resident status in the United States. Plaintiff Guiying

Wang’s I-526 has never been approved. Under the PPM, applicable to the first nine investors, it

was not until this time that the investors’ funds should have been released from escrow. Instead,


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unknown to Plaintiffs, their money had already been misappropriated by Defendants in violation

of the PPM.

67. While the first nine investors were pleased that USCIS had approved their

conditional visas, this was the last positive news that they would receive on the Project.

68. In September 2014, USCIS sent KRC a Notice of Intent to Terminate KRC as a

regional center due to the apparent mismanagement of Defendants in the use of EB-5 Funds. It

was apparent to USCIS that KRC no longer promoted economic growth.

69. On October 20, 2014, KRC responded to the Notice of Intent to Terminate

(“NOIT”). However, USCIS did not find KRC’s response persuasive, noting that KRC “did not

sufficiently address the grounds alleged in the NOIT.” As a result, USCIS terminated KRC as a

regional center on February 13, 2015.

70. In the Notice of Termination, USCIS found, among other things, that Defendants

failed to demonstrate any progress on the Project, that Defendants failed to promote economic

growth, and that expenditures on Project to date were inconsistent with the SV ARX business

plan.

71. After terminating KRC as a regional center, USCIS then revoked 9 of the

Plaintiffs’ I-526 and denied Guiying Wang’s I-526 application. Plaintiffs are appealing USCIS’s

actions, but their visas are in serious jeopardy.

72. At this point, Plaintiffs have collectively lost $5,000,000 in this project and do not

have their visas. The Defendants have placed the Plaintiffs in a disastrous position as a result of

numerous acts of malfeasance as discussed above.


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LEGAL CLAIMS AGAINST DEFENDANTS

First Claim – Breach of Contract

73. Plaintiffs restate the paragraphs 1 through 72 as if fully rewritten.

74. The PPM says that Plaintiffs’ investment funds will not be touched until after the

I-526 applications are approved.

75. Defendants spent Plaintiffs’ investment funds before the I-526 was approved in

violation of the PPM.

76. Defendants also used the administrative fees for purposes inconsistent with the

PPM.

77. Plaintiffs’ I-526 applications were either revoked and/or denied. Under the PPM,

Plaintiffs are entitled to a return of the monies that they invested in the Fund.

78. The Limited Partnership Agreement provides that KRC is “under a fiduciary duty

to conduct the affairs of the Partnership in the best interests of the Partnership, including the

safekeeping and use of all Partnership funds and assets for the exclusive benefit of the

Partnership.”

79. As detailed in the foregoing paragraphs, KRC, the Chans, and the remaining

Defendants have failed to conduct themselves in the best interests of the Partnership. Instead of

using Plaintiffs’ investment funds to benefit the Partnership, they have used the monies to line

their own pockets, pay family members for work that was never performed, pay taxes and

expenses on properties that were never acquired by SV ARX, pay expenses on Angiulli’s

restaurant, pay the Chans for KRC, pay travel expenses, furniture expenses, and other improper

expenses.


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80. As a direct and proximate result of Defendants’ numerous breaches of contract,

Plaintiffs have been damaged in an amount in excess of $5,000,000, the exact amount to be

proven at trial.

Second Claim – Breach of Fiduciary Duty

81. Plaintiffs restate paragraphs 1 through 80 of the Complaint as if fully rewritten.

82. Defendants owed Plaintiffs a statutory, contractual and common law duty of the

utmost good faith and loyalty in the handling of this project and their investment funds.

83. Defendants have violated their fiduciary duties to Plaintiff by misappropriating

and wasting their investment dollars for their own personal gain and contrary to the best interests

of the Project. Further, Defendants were under a duty to use their best efforts to run the Project

in a manner that would result in the creation of jobs and to secure Plaintiffs’ EB-5 visas.

Defendants have breached this duty to Plaintiffs and their actions have caused USCIS to revoke

and/or deny Plaintiffs EB-5 visa applications.

84. As a direct and proximate result of Defendants’ breaches of fiduciary duty,

Plaintiffs have been damaged in an amount in excess of $5,000,000, the exact amount to be

proven at trial.

Third Claim – Fraud

85. Plaintiffs restate paragraphs 1 through 84 of the Complaint as if fully rewritten.

86. As described in the foregoing paragraphs Defendants made material

misrepresentations to Plaintiffs that their funds would remain in escrow until the I-526

applications were approved and never had any intention of keeping Plaintiffs’ funds in escrow.

87. Defendants made material representations that they would have other, non-EB-5

funding in the Project, which Defendants knew were false.


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88. Defendants made material representations to Plaintiffs that their investments were

backed by a government guarantee, the only project of its kind in the United States, which

Defendants knew was false.

89. The representations of Defendants were material, false, misleading, and Plaintiffs

relied upon them in making their investments in the project.

90. As a direct and proximate result of Defendants’ fraud and misrepresentation,

Plaintiffs have been damaged in excess of $5,000,000, plus interest, punitive damages, attorney’s

fees and costs.

Fourth Claim - Conversion

91. Plaintiffs restate Paragraphs 1 through 90 of the Complaint as if fully rewritten.

92. Defendants exercised wrongful dominion and control over Plaintiffs’ investment

funds and refuse to return them despite demand from Plaintiffs.

93. As a direct and proximate result of Defendants’ conversion of Plaintiffs’ funds,

Plaintiffs have been damaged in excess of $5,000,000, plus interest, punitive damages, attorney’s

fees.

Fifth Claim – Unjust Enrichment/Quantum Meruit


95. Plaintiffs conferred a substantial benefit on Defendants by investing $545,000

each into this project.

96. Defendants have misappropriated and wasted the investment funds as alleged

above.

97. Under the circumstances, it would be unjust to Plaintiffs to allow Defendants to

retain the benefits conferred upon them by Plaintiffs.


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98. Plaintiffs have been damaged in excess of $5,000,000, plus interest and other

relief as provided by law.

Sixth Claim – Gross Negligence


100. Defendants owed Plaintiffs a duty of care to properly manage the Project and their

investment funds consistent with the offering documents, EB-5 rules and regulations, and the

representations made to Plaintiffs as described above.

101. Defendants have grossly mismanaged the Project, misappropriated Plaintiffs’

investment monies for their personal gain, made improper payments to family members, and

acted so grossly negligent that USCIS terminated KRC’s regional center charter and set in

motion the revocation and denial of Plaintiffs’ visa applications.

102. As a direct and proximate result of Defendants’ gross negligence, Plaintiffs have

been damaged in excess of $5,000,000, plus interest, attorney’s fees, punitive damages and other

relief as provided by law.

Seventh Claim – Securities Law Violations


104. Defendants have violated the Securities and Exchange Act of 1934, 15 U.S.C. §

78j(b), because they procure Plaintiffs’ investments by fraud, intentional misrepresentation, and

deception.

105. As a direct and proximate result of Defendants’ conduct, Plaintiffs have been

damaged in excess of $5,000,000, plus interest, attorney’s fees, punitive damages and other relief

as provided by law.


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WHEREFORE, Plaintiffs demand judgment against the Defendants for the following

relief:

a. Compensatory damages against defendants in an amount in excess of $500,000,000, the exact amount to be proven at trial;

b. Forfeiture of fees paid to Defendants in excess of $450,000; and

c. Punitive damages in amount at least three times compensatory damages as provided by law; and

d. Such other relief as the Court deems just and equitable, including interest, costs and attorney’s fees.

Respectfully submitted, /S/ Christopher D. Cathey

Christopher D. Cathey (0071231) PORTER, WRIGHT, MORRIS & ARTHUR LLP

250 E. Fifth Street, Suite 2200 Cincinnati, OH 45202-5118 Telephone: (513) 369-4214 Facsimile: (513) 421-0991 Email: [email protected] Attorney for Plaintiffs


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JURY DEMAND

Under Rule 38 of the Federal Rules of Civil Procedure, Plaintiffs demand a trial by jury.

Respectfully submitted, /S/ Christopher D. Cathey

Christopher D. Cathey (0071231) PORTER, WRIGHT, MORRIS & ARTHUR LLP

250 E. Fifth Street, Suite 2200 Cincinnati, OH 45202-5118 Telephone: (513) 369-4214 Facsimile: (513) 421-0991 Email: [email protected] Attorney for Plaintiffs

CINCINNATI/230697v.1


U.S. Citizenship and Immigration Services

MATTER OF K-R-C-, LLC

Non-Precedent Decision of the Administrative Appeals Office

DATE: NOV.17,2015

APPEAL OF IMMIGRANT INVESTOR PROGRAM DECISION

BENEFIT: REGIONAL CENTER DESIGNATION

The Applicant, a regional center, seeks to maintain its United States Citizenship and Immigration Services (USCIS) designation as an approved regional center under the immigrant investor program. See section 610 of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act (Appropriations Act), as amended. The Chief, Immigrant Investor Program (IPO), terminated the Applicant's designation; the matter is now before us on appeal. The appeal will be dismissed.

I. THE LAW AND REGULATION

Section 610(a) of the Appropriations Act, as amended, provides in pertinent part:

Of the visas otherwise available under section 203(b)(5) of the Immigration and Nationality Act (8 U.S.C. § 1153(b)(5)), the Secretary of State, together with the Secretary of Homeland Security, shall set aside visas for a program to implement the provisions of such section. Such program shall involve a regional center in the United States, designated by the Secretary of Homeland Security on the basis of a general proposal, for the promotion of economic growth, including increased export sales, improved regional productivity, job creation, or increased domestic capital investment. A regional center shall have jurisdiction over a limited geographic area, which shall be described in the proposal and consistent with the purpose of concentrating pooled investment in defined economic zones. The establishment of a regional center may be based on general predictions, contained in the proposal, concerning the kinds of commercial enterprises that will receive capital from aliens, the jobs that will be created directly or indirectly as a result of such capital investments, and the other positive economic effects such capital investments will have.

The regulation at 8 C.F.R. § 204.6(m)(6) relating to the termination of regional center status provides, in pertinent part:

To ensure that regional centers continue to meet the requirements of section 61 0( a) of the Appropriations Act, a regional center must provide USCIS with updated

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Midwest EB-5 Regional Center, LLC

(b)(4)

Matter of K-R-C-, LLC

information to demonstrate the regional center is continuing to promote economic growth, improved regional productivity, job creation, or increased domestic capital investment in the approved geographic area. Such information must be submitted to users on an annual basis, on a cumulative basis, and/or as otherwise requested by users, using a form designated for this purpose. users will issue a notice of intent to terminate the participation of a regional center in the pilot program if a regional center fails to submit the required information or upon a dete1mination that the regional center no longer serves the purpose of promoting economic growth, including increased export sales, improved regional productivity, job creation, and increased domestic capital investment. 1

II. PROCEDURAL HISTORY

On April 29, 2010, USCIS designated the Applicant as a regional center focusing on nine industrial categories in a geographic area of three Kentucky counties and four Ohio counties. In addition, users approved the which consisted of a mixed-use commercial center including a hotel, retail stores, restaurants, residences, and office buildings, as a capital investment project for the Applicant. On June 25, 2013, USCIS approved an amendment request for additional industry categories, including residential and commercial construction and restaurants.

Between January 30, 2012, and December 30, 2013, the Applicant filed Form I-924A, Supplement to Form I-924, each year to comply with the fiscal year filing requirement. On the Form I-924A filed on December 31, 2012, the Applicant indicated that there had been an aggregate capital investment of $5 ,000,000 for which included a $4,292,295.69 investment in and a $250,000 investment in _ _ According to its business plan, would loan money to to develop and operate eight restaurants in the Ohio. On January 13, 2014, USCIS approved Form I-526, Immigrant Petition by Alien Entrepreneur, for nine immigrant investors associated with According to the Form I-924A filed on December 30, 2013 , the Applicant made no capital investment in any commercial enterprises or job creating enterprises. In addition, the Applicant filed Form I-924A on March 28, 2014, to reflect a new managing company,

and a new principal,

On September 17, 2014, the Chief issued a notice of intent to tetminate (NOIT) the Applicant' s regional center designation and subsequently terminated it on February 13, 2015, because the Applicant was no longer serving the purpose of promoting economic growth through the two commercial enterprises under its sponsorship, was not meeting the monitoring and oversight responsibilities set forth in its designation letter, and was not accounting for capital investments. On

1 Pub. L. No. 112-176, 126 Stat. 1325 (Sept. 28, 20 12) eliminated "pilot" from section 61 O(a) of the Appropriations Act. 8 C.F.R. § 204.6(m)(6) has not been updated to reflect the change.

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March 18, 2015, the Applicant filed an appeal and submitted additional documentation as well as previously submitted documentation.

On appeal, the Applicant requests an oral argument "to ensure full exploration of the circumstances and arguments and alternatives." The regulation provides that the requesting party must explain in writing why oral argument is necessary. Furthermore, USC IS has the sole authority to grant or deny a request for oral argument and will grant argument only in cases involving unique factors or issues of law that cannot be adequately addressed in writing. See 8 C.F.R. § 103.3(b). In this instance, the Applicant identified no unique factors or issues of law to be resolved. Further, the written record of proceeding, including the Applicant's brief and additional documentation submitted on appeal, fully represents the facts and issues in this matter. Consequently, the request for oral argument is denied.

III. ANALYSIS

A. The Applicant's Ownership Change

As a preliminary matter, we first discuss the effect of the Applicant's ownership change relating to meeting the requirements of section 610(a) of the Appropriations Act.2 On appeal, the Applicant submits a declaration from asserting his history and involvement with the Applicant's prior principal owners, , and the Applicant. According to

. his company, owns six buildings in the district in . Ohio, and his eventual son-in-law, convinced him that renovating the buildings into restaurants could be achieved through the immigrant investor program. Furthermore, although was formed, with as the sole member, to operate as the borrower of immigrant investor capital by asserts that he was a "passive observer" and "had no real control over the project expenditures." Moreover, states that after he had concerns regarding the expenditures, he sued the to recover

funds, and the countersued alleging defaulted loan payments. Both parties entered into a settlement agreement that resulted in with as its sole principal, purchasing the Applicant.

Although the actions of the previOus owners, as well as the actions of the current owner, are important considerations and will be given weight, the Applicant is ultimately responsible for providing users with updated information to demonstrate that it is continuing to promote economic growth, improved regional productivity, job creation, or increased domestic capital investment in the geographic region. Furthermore, the regulation at 8 C.F.R. § 204.6(m)(6) provides that regional center designation will be terminated if the regional center does not submit the required information or it no longer serves the purpose of promoting economic growth.

2 We maintain de novo review of all questions of fact and Jaw. See Soltane v. United States Dep 't of Justice, 381 F.3d 143, 145 (3d Cir. 2004).

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A change in ownership does not wipe the slate clean for the Regional Center or the new owner.

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(b)(4)

Matter~~ K-R-C-, LLC

The Applicant's current principal owner, asserts that he neither had knowledge of the activities nor of the immigrant investor requirements. The Applicant, however, has not

established that was a "passive observer" and "had no real control over the project expenditures" during the ownership of the Applicant. Although the Applicant submits the complaints and counterclaims between the parties, the submitted settlement agreement indicates that each party denied the claims and counterclaims. The Applicant did not submit any other documentation beyond declaration indicating that his role was limited to a passive observer, and he had no involvement in the activities.

Page 6 of the "Purchase, Release and Indemnification Agreement" (Purchase Agreement) provides that the buyer shall hold the seller "harmless from and pay any and all losses, costs, damages, claims, obligations, liabilities and expenses ... . " Accordingly, the new owner assumed all risks in the purchase of the existing regional center, including the possibility of the regional center's termination based on the business activities of the prior owners. In addition, an ownership change does not relieve the regional center from the regulatory requirements of establishing that it has provided updated information and promoted economic growth. Thus, we will evaluate whether the grounds that formed the basis of the Chief's termination of the Applicant ' s regional center designation were in compliance with the regulation at 8 C.F.R. § 204.6(m)(6), and whether the Applicant has overcome those grounds on appeal.

B. The Promotion of Economic Growth Through and

The Chief found that the was no longer viable as the Applicant indicated that there had been no activity promoting economic growth through the On appeal, the Applicant indicates that it has not had any involvement with the in the last five years, that no immigrant investor capital was invested into the project, and that it does not intend to promote economic growth through Accordingly, we consider the to be abandoned, and the Applicant has not and will not promote any economic growth through this project.

Regarding . the Chief determined that the Applicant's failure to properly account for investor funds did not serve to promote economic growth. First, the Chief found that the Applicant had not assigned expenses to the proper category, including illegitimate hard and soft cost expenses. For example, the record indicated a transfer of$165,475.75 to on October 11 , 2011 , with the memo "Tech Fund" and an expenditure of $8,345.63 at with the memo "Office Furniture tech fund" listed as hard costs. In addition, the record included an expenditure of $6,799.16 at an

on November 14, 2011, with the memo "Tech Fund supplies" listed as a soft cost. The Chief concluded that such expenditures for furniture, fixtures, and equipment typically occur near the end of the construction when the facility is completed and undergoing final outfitting for operations and surmised that these expenses were for the Applicant rather than for Furthermore, the Chief pointed out that investment capital was spent to cover the Applicant's expenses, such as organizing and marketing expenses on trips to China.

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Moreover, the Chief found that there did not appear to be any active permits associated with , and the Applicant was only able to produce a letter from architects regarding the feasibility

of obtaining building permits in the future. In addition, although the Applicant submitted a chart in response to the Chiefs NOIT reflecting that $4,034,073 of investment capital was disbursed to

by August 2, 2012, the Applicant asserted that waiting for the adjudication of immigrant investor petitions crippled the marketing and development progress. The November 2013 business plan indicated that had the ability to borrow funds from a number of banks in the area if immigrant investor capital was not raised. However, there was no progress reported in the construction and operation of new restaurants consistent with the $5,000,000 investment into

On appeal, the Applicant states that there are two immigrant investor petitions pending with USCIS, that there are two additional investors who are awaiting the outcome of this decision before they file their petitions, and that there are two more investors whose funds have yet to invest into the project. Moreover, the Applicant indicates that eight contracts have been entered into for services related to the project, and a business evaluation was conducted for the properties reflecting a market value of $11,000,000 with a potential market value of $23,200,000 upon completion of the projects. Furthermore, the Applicant states that the expenditures for tech funds were consistent with proper use of immigrant investor capital and were part of the business plan at one point. In addition, the Applicant disagrees with the Chiefs determination that furniture, fixtures, and equipment typically occur towards the end of construction projects and that such purchases were for the benefit of the Applicant. Further, the Applicant states that has made progress, such as securing building permits, in the renovation of six properties. The Applicant acknowledges that there were regional center expenditures in the amount of $107,458 that occurred even after the Applicant's change of ownership and "can only promise that no such expenses will be made" again.

The Applicant also indicates that the immigrant investor expenses made for orgamzmg and marketing trips of the regional center should be offset by the personal funds of and his family will provide to the project. Moreover, the Applicant asserts that "can only offer potential remedial solutions [to] include transferring ownership of the buildings to from

without paying for the buildings." The Applicant further states that will forego the ownership of these remaining buildings and contribute over $1.1

million dollars in equity into the project" in order to offset any inappropriate regional center expenses.

Although the Applicant submits documentation, both new and previously submitted, such as emails from current immigrant investors and recently obtained building permits and construction contracts, reflecting its desire to continue in the renovation of the buildings, the Applicant has not addressed or overcome all of the grounds of the Chiefs decision. Doubt cast on any aspect of the petitioner's proof may, of course, lead to a reevaluation of the reliability and sufficiency of the remaining evidence offered in support of the visa petition. Matter of Ho, 19 I&N Dec. 582, 591 (BIA 1988). While the Applicant indicated that it disagreed with the Chiefs assessment that furniture, fixtures, and equipment typically occurred near the end of projects, the Applicant did not submit any

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(b)(4)


documentation showing that the expenses mentioned by the Chief were used for rather than for the regional center. Furthermore, the Applicant indicated that the construction projects were halted because of the length of time it took for immigrant investors' petitions to be approved; however the Applicant did not address business plan reflecting that had the ability to boiTow funds from a number of banks in the area if immigrant investor capital was not raised.

Moreover, although the Applicant offers potential remedies, such as using the funds from to repay the missing funds and reimbursement of the misused funds, there is no evidence in the record that the Applicant promoted economic activity at any time after its initial designation. The phrase "is continuing to promote economic growth" requires the Applicant to continuously promote economic activity from its initial designation. See 8 C.F.R. § 204.6(m)(6). Furthermore, the purpose of the NOIT is to advise the Applicant of US CIS' determination that the Applicant did not abide by the terms of its regional center designation, including the promotion of economic activity and job creation and the submission of required information, such as Form I-924A. The NOIT is not an opportunity for the Applicant to show that it will begin promoting economic growth or that it will begin promoting economic activity again after it had already ceased for an extended period of time. The Applicant's "stop-and-start" approach is contrary to the regional center' s purpose of promoting economic growth. Generally, the promotion of economic activity is a continuous process. Although the Applicant was designated a regional center in 2010, it has not provided any evidence of promoting economic growth as of the date of the Chiefs Notice of Termination. An applicant's past achievements or activities are indicative of its future achievements or activities. Considering that the Applicant has not demonstrated that it promoted any economic activity in over four years of designation, including after its sale, the Applicant has not established that it can and will promote economic activity.

Furthermore, the Applicant used immigrant investor funds for other than job creation and still cannot account for the full amount of the $5,000,000 it has already received from investors. Even after the change of ownership, the new owner used immigrant investor funds for the Applicant, such as on trips to promote the Applicant, rather than on job creating projects and thus did not engage in promoting economic growth through the full investment of funds raised through this program. For these reasons, the Applicant has not established that it has continued to promote economic growth through

· C. The Promotion of Economic Growth Through Monitoring and Oversight Responsibilities

The Chief determined that the Applicant did not meet the monitoring and oversight responsibilities set forth in its designation letter. Although business plan made a brief reference to

_ investment expenditures included a $150,000 to and a $150,000 payment and other expenditures totaling $24,165.98 to The investments in · and were not in business plan or disclosed in any of the Form I-924A filings. Furthermore, the Chief found that several of the Form I-526 petitions included a statement from the who stated that the Applicant "has allocated the investment funds of these seven immigrant investors solely towards job creation activities in the approved restaurant

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(b)(4)


industry." The statement was therefore inconsistent with the other documentation as the Applicant also reported expenditures into "tech funds" rather than only in the restaurant industry. On appeal, the Applicant asserts that the Chiefs reference of a payment to for $150,000 "came back into the project," and that while it appeared that investments into technology companies totaled $250,000, the net of the investments was $150,000. Moreover, the Applicant indicates that the Chiefs reference to the $24,165.98 payment to was erroneously labeled by the Applicant and should have been labeled as a $19,765.97 expenditure for the creation of website. Furthermore, the Applicant asserts that expenditures on technology companies became appropriate with USCIS Policy Memorandum PM-602-0083, EB-5 Adjudications Policy (May 30, 2013), http://www. usc is. gov I sites/ default/files/USCIS/Laws/Memoranda/20 13/May /EB 5%20Ad j udications %20PM%20%28Approved%20as%20final%205-30-13%29.pdf, which provides that formal amendments to the regional center designation are not required when a regional center changes its industries of focus, its geographical boundaries, its business plans, or its economic methodologies. !d. at 23.

The issue here, however, is not whether the Applicant was permitted to make investments in technology companies. Rather, the issue is the Applicant' s submission of inaccurate and inconsistent information. It is incumbent upon the petitioner to resolve any inconsistencies in the record by independent objective evidence. Any attempt to explain or reconcile such inconsistencies will not suffice unless the petitioner submits competent objective evidence pointing to where the truth lies. Matter of Ho , 19 I&N Dec. at 591-92. The Applicant submitted a statement, dated March 7, 2012, accompanying several Forms 1-526 reflecting that the immigrant investor funds would be used for the acquisition and renovation of buildings to house restaurants, along with the associated tenant improvements and incentives in the restaurant industry. In the November 2013 business plan, there was a reference to an investment in and in response to the NOIT, the record reflected that there were additional investments using immigrant investment capital in and A review of the Forms I-924A that were submitted by the Applicant does not reflect that the Applicant ever disclosed investments in and in the required end of the year filings. Although USCIS Policy Memorandum PM-602-0083 no longer requires a regional center to file Form I-924A each time there is a change in its operation, the policy memorandum did not cease the requirement of filing Form I-924A at the end of each year with true and correct information. Part 4 of Form I-924A requires the signature of the applicant attesting that the supplemental form and the evidence are all true and correct. In addition, the Applicant's statement that was submitted with the immigrant investors ' Forms 1-526 that their capital would be invested in the restaurant was inaccurate as funds were also used in technology companies.

Moreover, the Chief found that the purchase of the Applicant by from the was funded by immigrant investor capital based on the proceeds of the sale of a property by Specifically, the Applicant submitted an expenditure chart in response to the NOIT reflecting that

purchased the located at for $1 ,500,000 on December 21 , 2011 , using immigrant investor capital. then sold the the sale coinciding with a deposit of $425,006.88 on January 24, 2014, into account. On the same date, $300,000 was transferred from to who purchased the Applicant for $300,000. Prior to the

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$425,006.88 deposit, account balance was $54,798.78 indicating that purchase of the Applicant for $300,000 was derived from immigrant investor capital.

On appeal, the Applicant states that the Chief's determination that _ used immigrant investor funds to purchase the Applicant "is demonstrably wrong." The Applicant indicates that it was always part of the business plan for to purchase properties from _ , and the Applicant submits on appeal a warranty deed for the property showing the transfer from

to on September 27, 2013. The Applicant further asserts that when the proceeds of the came into the project, ~ received $300,000 for the purchase of the

property. The applicant also submits _ credit union statement showing a $300,000 deposit on January 24,2014, and an outgoing wire transaction of$300,000 on the same date.

The Applicant's explanation and documentation do not resolve the Chief's concerns with this issue. Although the Chief indicated that the was located at the Applicant discusses and submits the warranty deed for the property located at The Applicant has not demonstrated how the property relates to the sale of the located at Furthermore, the credit union statement coincides with the Chief's finding that the deposit into account, the deposit into _ account, and the wire transfer from

account all happened on January 24, 2014, indicating that immigrant investor funds, which were originally used to purchase the , were later used to purchase the Applicant. Accordingly, the Applicant has not established that immigrant investor funds were not used by

to purchase the Applicant.

In addition, the Chief found that the financial records reflected disbursements made to individual principals of the Applicant, such as the transfer of $222,475.75 from to in October 2011, that did not relate to the business plan for the creation of jobs. On appeal, the Applicant asserts that was at the mercy of the in terms of expenditures of project funds, and some of the transfers were a result of the signatory authority. As discussed above, the Applicant has not established that was a passive observer and had no control over project expenses. Regardless, as the Applicant used immigrant investor capital other than for the purpose of promoting economic activity, the Applicant has not demonstrated that it had properly monitored the capital and expenditures.

Further, the Chief found that in the second Form I-924A the Applicant indicated $5,000,000 in immigrant investor capital through yet the Applicant stated that $4,292,295.69 was invested in and $250,000 was invested in _ totaling $4,542,295.69 leaving an unaccounted amount of $457,704.31. Although the Applicant submitted a chart from the regarding loans that were loaned to or paid on behalf of , the Chief stated that he had concerns with the figures, and that the reported transactions of$4,819,362.76 still left a shortfall of$180,637.24. In addition, the Chief concluded that although the Applicant submitted documentation reflecting $4,034,073.18 of immigrant investor capital deposited into account, it did not account for the $250,000 investment that was reported on Form I-924A and mentioned in the business plan. Furthermore, the $4,034,073.18 immigrant investor capital that was deposited into account was not consistent with the $4,292,295.69 reported in the filing of the second Fmm I-924A.

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On appeal, the Applicant states that it cannot vouch for the contents of the Form I-924A filings and "can only offer speculative explanations." The Applicant also indicates that its response to the Chiefs NOIT contained some inadvertent mislabeling such as the payment/investment assertion discussed above. Further, the Applicant acknowledges that out ofthe previously reported $4,034,073.18 that was transferred to account, $752,453.72 was improperly used. This amount included: $266,475.75 in payments to the $448,057.08 in regional center expenses; and $37,920.17 in regional center marketing trips. Regarding the unaccounted $965,926.82, the Applicant indicates that $44,238.79 appears to be legitimate project expenses, such as computer purchases. The Applicant also asserts $667,635.92 in non-investor funds that have come into the project includes: $243,531.92 in contributions by and his family; $85,000 for sewer work improvements performed by the buyer on all project buildings as part of the sale of the $62,000 for loan proceeds guaranteed by , and $277,104 for the sale of _ . Further, the Applicant indicates that _ equity contribution of $1,100,000 and the addition of$667.635.92 in non-investor funds would offset the $1 ,674.141.75 of improper and/or unaccounted immigrant investor capital.

Again, the Applicant is unable to account for the full amount of the $5 ,000,000 immigrant investor capital. In addition, the Applicant does not submit any documentation to support any of its explanations beyond the previously submitted expenditure chart for Going on record without supporting documentary evidence is not sufficient for purposes of meeting the burden of proof in these proceedings. Matter of Soffici, 22 I&N Dec. 158, 165 (Comm'r 1998) (citing Matter ofTreasure Craft ofCaltfornia, 14 I&N Dec. 190 (Reg'l Comm'r 1972)).

Further, page 4 of the Purchase Agreement reflects that "[t]he financial statements and documents and tax returns provided to Buyer by Seller and the are true, correct, accurate and complete in all material respects." Notwithstanding, the record reflects that the Applicant misused immigrant investor funds and cannot account for other funds. Although the Applicant has proposed that

will reimburse the Applicant for the missing funds, the Applicant only submits a loan billing statement reflecting that secured a loan in the amount of $1,052,424.34 as of February 11, 2015. There is no evidence, su·ch as the transfer of funds from to the Applicant, showing that _ actually reimbursed the Applicant. The Applicant also has not submitted any documentation supporting its assertions regarding the reimbursement of $667,635.92 in non-investor funds . Regardless, the Applicant's misuse of and unaccounted for immigrant investor capital has not promoted economic activity, and therefore has not complied with its monitoring and oversight responsibilities.

D. The Submission of Required Information to USCIS

The Chief also found that the Applicant did not comply with the end of the fiscal year filing requirements because it did not submit all of the required information to USCIS on Form I-924A. The Chief determined that although the Applicant reported $5,000,000 in immigrant investor capital through including a $4,292,295.69 investment in . the chart only reflected $4,034,073 in immigrant investor capital directly transferred to In addition, the Chief

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indicated that even if he was to accept the accounting in the chart totaling $4,819,362.76, the Applicant has not accounted for the full amount of $5,000,000 of immigrant investor capital. Therefore, the Applicant's second Form I-924A was inaccurate and omitted required information. On appeal, the Applicant asserts that was not the owner when the second Form I-924A was filed and cannot vouch for the previous owners but can only offer potential remedial measures. As discussed above, the Applicant submitted inaccurate information and omitted information that was required pursuant to the filing instructions for Form I-924A and has yet to account for the missing immigrant investment capital. The regulation at 8 C.P.R. § 103.2(a)(1) provides that every benefit request must be executed and filed in accordance with the form instructions. Accordingly, the Applicant did not submit the required information to USCIS.

IV. CONCLUSION

The appeal will be dismissed for the above stated reasons, with each considered as an independent and alternative basis for denial. It is the applicant's burden to establish eligibility for the immigration benefit sought. Section 291 ofthe Act, 8 U.S.C. § 1361. Here, the Applicant has not met that burden.

ORDER: The appeal is dismissed.

Cite as Matter of K-R-C-, LLC, ID# 14127 (AAO Nov. 17, 2015)

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http://www.uscis.gov/sites/default/files/err/K1%20-%20Request%20for%20Participation%20as%20Regional%20Center/Decisions_Issued_in_2015/NOV172015_01K1610.pdf

hu et al, v. chan et al., no.15-cv-00709-ssb-skb (s.d. oh) complaint and rc termination november...

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