Thread: Kushner Companies EB-5 Activities May Constitute Securities Fraud

MAY 15, 2017 BY GARY CHODOROW

Reuters: Kushner Companies EB-5 Activities May Constitute Securities Fraud

Reuters is reporting on Kushner Companies actions that may make the company vulnerable to charges of securities fraud by the U.S. Securities and Exchange Commission (SEC). The problem is misrepresentations in advertisements placed by Qiaowai, an agent marketing to potential Chinese investors shares in a Kushner Companies’ New Jersey real estate project.

Jared Kushner’s family company apologized last week for boasting about their ties to the White House adviser when marketing to potential Chinese EB-5 investors shares in the project, called One Journal Square.

The EB-5 program, administered by the U.S. Citizenship and Immigration Services (USCIS), provides a path to legal residency for foreigners who invest at least $500,000 directly in a U.S. business that creates U.S. jobs.

“In a sector where investors are wary of failing projects and policy changes that would jeopardize their visas, Qiaowai and other Chinese migration agencies emphasize their contacts with U.S. politicians in order to reassure potential investors their EB-5 projects will be successful,” writes Alexandra Harney for Reuters.

But Kushner Companies may have crossed the line from mere boasting to securities fraud. In an online advertisement, Qiaowai wrote that the project “in a real sense guarantees a permanent green card and the safety of the investment principal.” After Reuters asked Qiaowai for comment, the post was deleted.

Other advertisements for the project made similar claims.

The SEC enforces Section 10(b) of the Securities and Exchange Act of 1934, and Rule 10b-5, codified at 17 C.F.R. 240.10b-5, which target securities fraud. EB-5 investments are frequently structured as a type of “security” subject to federal securities laws. Rule 10b-5 makes it unlawful to “make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.”

Qiaowai’s advertisements may violate the rule in two ways.

First, EB-5 investments are risky, not guaranteed. The immigration law specifically prohibits investments where the money is not at risk.

Second, there is no guarantee that an investor will actually get a green card.

There are a host of reasons why an investor could be denied a green card, such as health issues, membership in the Communist Party, inability to prove that the funds invested were earned legally, prior U.S. immigration violations, etc.

In a jointly issued Investor Alert, USCIS and SEC say as much:

Beware if you spot any of these hallmarks of fraud:
Promises of a visa or becoming a lawful permanent resident. Investing through EB-5 makes you eligible to apply for a conditional visa, but there is no guarantee that USCIS will grant you a conditional visa or subsequently remove the conditions on your lawful permanent residency. USCIS carefully reviews each case and denies cases where eligibility rules are not met. Guarantees of the receipt or timing of a visa or green card are warning signs of fraud.

Guaranteed investment returns or no investment risk.

Money invested through EB-5 must be at risk for the purpose of generating a return. If you are guaranteed investment returns or told you will get back a portion of the money you invested, be suspicious.

Kushner Companies may not be shielded from liability just because they hired Qiaowai rather than doing the marketing themselves. They may be liable for the actions of their agents. Securities lawyers advise that developers should know the parties marketing their deal abroad. The best practice is to have a clear agreement with the agent in which the agent agrees to comply with securities laws and to provide all marketing materials to the developer’s securities counsel for review before publication.

The SEC did not respond to questions by Reuters about Qiaowai’s ads.

Besides the current project for Kushner Companies, Qiaowai previously helped the Kushner Companies raise funds for Trump Bay Street, an apartment complex in Jersey City, New Jersey, that The Trump Organization licensed its name to.

http://lawandborder.com/reuters-kush...urities-fraud/

kushners should not be in the wh circle proper - kushner name was not on the ballot nor elected.

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