SEC headquarters in Washington. (Photo: AP)

Justin Moongyu Lee, a Los Angeles-based immigration attorney, his wife and his law firm partner were charged by the Securities and Exchange Commission on Wednesday with conducting an investment scheme to defraud foreign investors trying to come to the U.S. through the EB-5 Immigrant Investor Program. In a parallel action, the U.S. Attorney’s Office for the Central District of California also announced on Wednesday criminal charges against Justin Lee.

The SEC alleges that Justin Lee along with his wife, Rebecca Taewon Lee, and partner Thomas Edward Kent raised nearly $11.5 million from two dozen investors looking to participate in the EB-5 program, which gives immigrants an opportunity to apply for a two-year U.S. residency by investing at least $500,000 in a domestic project to create jobs for U.S. workers. 

The Lees and Kent told investors, which according to the SEC’s complaint filed in U.S. District Court for the Central District of California were primarily of Chinese and Korean descent, they would be EB-5 eligible if they invested in an ethanol production plant they would build and operate in Ulysses, Kansas.  Instead of the ethanol plant project, the SEC reports that investors’ money was misappropriated for other uses. According to the SEC, the plant was never built nor the promised jobs created, but “the Lees and Kent continued to misrepresent to investors that the project was ongoing.”

“These immigration lawyers exploited a desire by foreign investors to participate in a program that would not only generate them a positive investment return, but also provide them a path to legal residency in the United States,” said Michele Wein Layne, regional director of the SEC’s Los Angeles office, in a press release. “Long after all construction had ceased, they continued to falsely tell investors that they were building the plant.”

According to the SEC’s complaint, Justin Lee and Kent applied to the U.S. Citizenship and Immigration Services (USCIS) in 2006 for designation as a “regional center” under the EB-5 program, claiming there would be “substantial economic benefit” and “thousands” of new jobs for this area in southwest Kansas.  But by mid-2008, construction of this ethanol plant at the site was no longer economically feasible, and the SEC says Lees and Kent concealed their failure to generate the jobs required by the EB-5 program by submitting false documents to the USCIS. 

Despite the halt of construction in 2008, the SEC’s complaint says the Lees set up investor seminars in Los Angeles where the purported ethanol plant project was the main part of the presentation, and Kent, who visited the site frequently in 2008 and 2009 and knew no construction was taking place, also participated in the seminars.

Investors continued to be misled in June 2010 when the business plan was updated and distributed to investors and falsely represented that construction was “ongoing” and the plant would be in operation before November 2011.

Meanwhile, the SEC alleges that “when Justin Lee was running low on cash and having difficulty obtaining financing, he took money out of investor escrow accounts without their knowledge prior to the approval of an investor’s application for residency.” The SEC complaint says Lee and his wife subsequently misused several million dollars raised from the ethanol plant investors for other undisclosed purposes such as financing an iron ore project in the Philippines and repaying investors in other unrelated offerings. 

The SEC’s complaint charges the Lees, Kent, and five companies founded and controlled by Justin Lee (American Immigrant Investment Fund I, Biofuel Venture IV, Biofuel Venture V, Nexland Investment Group and Nexsun Ethanol) with violating the Securities Act of 1933 and the Securities and Exchange Act of 1934.  The SEC’s complaint seeks disgorgement, prejudgment interest and penalties along with permanent injunctions. 

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