A regional center in New Orleans is being sued in Federal Court by 27 EB-5 investors. The complaint claims that defendants, William B. Hungerford Jr. and Timothy O. Milbrath, principals of Noble-RealEstate-GP, misused immigrant investors funds that were invested into their regional center. The suit alleges that the defendants diverted $13.5 million from the investment fund into more than 30 sham companies created under the laws of Louisiana, Maryland, and Delaware that Hungerford and Milbrath ultimately controlled.
Specifically, the plaintiffs claim that the regional center principals diverted at least $6 million of fund monies to themselves for excessive and unwarranted consulting services; diverted approximately $3 million of fund monies that was specifically dedicated and reserved for investment into job-creating enterprises to pay excessive and unwarranted operating expenses of the New Orleans Regional Center’s operations, including financing the purchase of real estate in Maryland that benefited Hungerford and Milbrath; grossly mismanaged the construction of certain projects situated in New Orleans; grossly mismanaged the fund’s investments by causing the fund to pay exorbitant fees for minority ownership interests in sham companies formed, owned and controlled by Hungerford and Milbrath that do not generate any revenues or provide any legitimate services; breached fiduciary duties owed to the fund; and unjustly enriched Hungerford and Milbrath to the detriment of the fund.”
Interestingly, the suit requests that a receiver be appointed to take charge of the regional center, as well as the 30-odd sham companies created and managed by the defendants, to “protect and/or preserve the plaintiffs’ immigration benefits that have been diverted to these entities.” The suit also requests that the court grant an injunction to prevent the regional center principals “from performing, making any payments or from conducting any further activities which will cause the fund harm, including disposing of any money or assets that should be returned to the fund.”
It will be interesting to follow this case to see if USCIS will offer any relief to the EB-5 investors who contributed their funds to the regional center in good faith with the understanding that the funds would be used towards job creation purposes by the entities identified in their business plan and economic report. Suits like this may also be a precursor to the enactment of enforcement mechanisms by the Department of Homeland Security within the EB-5 program
Kate Kalmykov focuses her practice on business immigration and compliance. She represents cl... read more »