We received the notice from our attorney today that SEC filed a civil complaint against us alleging our EB5 business in violation of broker dealer registration and disclosure requirements of United States Securities Laws. We do not understand and feel angry that SEC will make such a mistake of law and facts.
As everyone in the EB5 industry knows, Chinese clients invest in EB5 projects for the purpose of obtaining immigration benefits not for any investment return. If there is no immigration benefits, almost no one will ever invest in any EB5 projects. According to the legalopinion of our securities attorney and John Coffee, a nationally well-known securities law expert and a professor at Columbia Law School, unless an EB5investment has a real potential for profit, it is lacking the “for profit“ requirement to be found as “securities” according to the US Supreme Court caselaws. So far, the EB5 products that wehave helped our clients engaged in do not have any potential for real profit (generally speaking, the investment amount is $500,000; the average term is 5 years; and management fee for such program is typically $50,000; the typicalannual return to a client is below 1%; so a client will typically put in $550,000 and get $525,000 back.) So itis very obvious that any client engages in this kind of net-loss investment is for the purpose of obtaining immigration benefits, not for any net investment return. Therefore, this kind of investment does not meet the definition to be “securities”. We are providing immigration services not so called investment brokering services. We are not Brokers, but immigration attorneys. If EB5 products are not “securities”, then disclosure of finder’s fees is not a securities law issue. In general business transactions other than handling securities, there is no requirement to disclose finder’s fees in the common law. Therefore, SEC’s lawsuit against us for failing broker dealer registration requirement and failing to disclose the finder’s fees are completely without any legal basis.
In the past 6 years of providing EB5 related legal services, we have done our due diligence on EB5 projects on behalf of our clients and only recommended projects with the safest prospect of obtaining immigration benefits to our clients. The related work includes reviewing project legal documents, conducting research on EB5 project developers to verify their quality and experience, communicating with regional centers to confirm their integrity and experience. So far, all the EB5 projects we have clients in are 100% successful in obtaining immigration benefits, all the I-526 applications we have submitted on behalf of our clients are 100% successful in obtaining approvals. All our clients arealso 100% successful in obtaining conditional and permanent green cards.
Based on the data released by the USCIS, as of September 30, 2015, there are total 39,645 I-526 applications submitted since 2008, among them, 34,660 applications are approved, and 4,985 applications are denied. Approval rate is only 87%. Due to more problems recently exposed in EB5 projects, the recent quarter data shows there are only 2185 I-526 applications being approved and 377 applications being denied, the approval rate is only 85%. Through our effort, our approval rate always maintains at 100%. It shows the value of our services to our clients.
Since February 2015, based on the suggestions of our securities attorney, we have disclosed the fact that the overseas consulting company we worked with may receive finder’s fees from regional centers or project companies and the potential conflict of interest thereof.
United State is a country with a rule of law. This is the belief that all immigrants have when they come to America from other countries with abusive government and bureaucrats. Government agency, however, does frequently make mistakes or misunderstands the law. Recently, there are several cases of Chinese American scientists being mistakenly charged for espionage by United States Department of Justice. Some charges are clearly racially motivated or biased. These actions are not tolerated by either American legal system or American public in general.
Immigration attorneys obtain certain referral fees by introducing clients to reliable EB5 projects are common practice in EB5industry. From the press release today, SEC reached settlements with several other law firms without them admitting ordenying any wrong doing, but chose to file a law suit against us because we refuse to settle with SEC on their terms. Since October 2014, we have cooperated fully with SEC LA office headedby Megan Bergstrom for their investigation of our EB5 practice. We fully understand this is her job and the purpose is supposedly for the healthy development and administration of EB5program and we never thought we violated any laws, including the securities laws.
We did not settle with SEC becausewe honestly believe we did not commit any violations and their accusations are without any legal basis or merit. SEC’s selective enforcement of securities laws against us is by itself unjust and unfair. This action committed by agovernment agency like SEC is a disgrace to our cherished American values of democracy, freedom and justice.
So far the key issue involved in the SEC law suit is about whether EB5 products that we handled are “securities” and whether securities laws should apply to our business. The outcome of this issue won’t affect our clients’ EB5 adjudications at USCIS.
We are actively seeking advice from our securities law legal counsel and will keep all the immigration attorneys, industry expertsand the regional centers we have business relationships informed about the progress of our legal defense against SEC’s law suit. We will pursue all legal means to clarify all facts and legal issues and prove that SEC has committed a serious error in trying to enforce securities laws in this case.
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