EB-5 Gets Another Black Eye – Maybe Two of Them

By David North on November 25, 2015

The EB-5 program suffered from one scandal last week in California (Chinese Americans cheating Chinese aliens) and maybe another as the FBI raided a major EB-5-supported property in Arizona.

There's more information on the California case than the Arizona one, but the latter has the more interesting cast of characters.

Robert Yang, MD, of Redlands, Calif., and Claudia Kano of nearby Pomona, Yang's business manager, were charged by the Securities and Exchange Commission with fraudulent securities offerings involving 40 Chinese EB-5 investors and $20 million. The EB-5 (immigrant investor) program provides a set of green cards to alien families investing half a million in a DHS-approved, but not guaranteed, investment.

Yang and Kano, according to the SEC's indictment filed in the federal courts, said that they were using EB-5 funds to open three nursing homes in Southern California, but were really engaged "in a scheme to misappropriate, divert and misuse at least $10 million in investor funds. . . . as of today, none of these projects is operational and they may never be completed."

One of the diversions was to kick back 18 percent of each investment – $90,000 – to the "finder" in China. This is against the law. The two also charged $45,000 to each investor, and these fees are legal. So the math was the investor put up $545,000 but only $410,000 came anywhere near the projects; it was from the lower figure, the SEC states, that other diversions began, such as paying off loans for Dr. Yang, paying his personal taxes, and buying real estate unconnected to the EB-5 business.

Meanwhile, there was an FBI raid on a big mall complex in Arizona, The PhoenixMart, which has been funded by EB-5 investors from China. The CEO of the PhoenixMart is Elizabeth Mann. There was no immediate explanation as to why the FBI conducted the raid, but it is known that the agency has a continuing interest in the EB-5 program.

Mann, according to my colleague Jerry Kammer, who used to be a reporter for the Arizona Republic, has a number of high-level ties to the Chinese Communist government, and was named Ning Yu before she became a U.S. citizen in 1992. Two of her contacts have been linked to major scandals, and another was convicted of bank fraud in Georgia before coming to work for her.

She is, or was, among other things, the top Arizona executive of COFCO, a large corporation owned by the Chinese government. The Phoenix Business Journal article on the raid notes that until recently Mann's chief of staff was QuinQuin Quayle, daughter-in-law of the former Vice President.

This one may – or may not – prove to be interesting.