SEC: 2 People Misspent Millions From Chinese Investors in EB-5 Visa Program

(Los Angeles Times/TNS) -

For a dozen Chinese investors, the building in Lynwood, Calif., was supposed to be a ticket to the United States.

A doctor turned developer promised to use their combined $6 million to convert the former adult day-care center into a nursing home, one that would get the investors green cards through a federal program aimed at boosting foreign investment.

Instead, nearly two years after construction was supposed to be finished, the building remains a tattered shell, walls down to the studs, no windows or doors and no sign of ongoing work.

Now federal regulators say those and other investors were duped by Dr. Robert Yang and his associate, Claudia Kano of Pomona, who are accused of misspending funds raised through the EB-5 visa program.

The Securities and Exchange Commission has filed civil fraud charges against them and frozen their assets in the agency’s latest enforcement action involving the program, which has been swept up in controversy and scandal.

The SEC has filed five EB-5 fraud cases this year after filing just one in 2014 and two the year before.

The 25-year-old visa program, which is coming up for reauthorization by Congress, allows foreign investors to gain permanent U.S. residency in exchange for investments that create American jobs, preferably in rural areas and neighborhoods with high unemployment.

But it has faced criticism because a disproportionate amount of EB-5 funding has helped build hotels, pricey condominiums and other projects in affluent urban areas.

Some developers also have been accused of stretching the rules through contrived maps that connect wealthy and poor neighborhoods into one high-unemployment area. Projects in such areas offer green cards to investors who put in just $500,000, half of the regular $1 million minimum investment.

The latest fraud case allegedly involves more run-of-the-mill investment fraud. The SEC declined to comment beyond the lawsuit and a news release about it. The lawsuit was filed last month against Yang, Kano and their business, Suncor Care Inc.

The lawsuit said Yang and Kano raised $20 million from 40 Chinese investors between late 2012 and April 2014.

The money would go toward building three homes, with each investor putting money into a single location.

Instead, the two misspent more than $10 million, in part by mingling funds and siphoning off money for personal use, the lawsuit said.

Yang is accused of spending more than $1 million to pay off loans from friends and family, to pay expenses for his medical practice and to buy property. About $3.5 million went to the “finder” who lined up the Chinese investors.

Meanwhile, the nursing homes have not opened, a problem for the foreign investors who are required to show that their investments created 10 jobs each before they qualify for green cards.

Mark Hiraide, an attorney for Yang, Kano and Suncor, said his clients have been cooperating with the SEC and are working to put a receiver in charge of Suncor to temporarily run the business. He said continuing construction of the nursing homes was a priority.

He would not comment on specific SEC allegations but defended his clients’ actions.

“We’re confident that we’ll be able to demonstrate their characterization of the events is not a fair characterization,” he said.

Kano could not be reached for comment. Calls to Yang’s office in San Bernardino were not returned.