Jeff Campion addresses the importance of EB-5 due diligence

Jeff Campion of Texas Urban Triangle RC at 2012 Shanghai Summit

 (Author: Jeff Campion) We recently learned that SEC with USCIS support halted an EB-5 project that involved more than 250 investors and over $145 million in securities.  The issue here, according to the SEC, is that the project – “A Chicago Convention Center (“ACCC”) with Intercontinental Regional Center Trust of Chicago (“IRCTC”) – and its owners made false statements to potential investors including a “comfort letter from Hyatt Hotels” and that the project had backup financing.  According to the SEC none of the hotel chains mentioned in the materials delivered to investors actually had executed franchise agreements.

As a result of this recent SEC inquiry, it becomes abundantly clear that investors must be careful and perform due diligence on the documents that are received when making their investments into the projects.  In fact a phone call to the flag hotels named in the offering in this case could have alerted possible investors as to an issue.  At the same time, the other challenge is knowing what documents were actually provided to the investors in their native language or translated to ensure that the documents that were signed were substantially similar to the information the investors reviewed to make the investment.  That is, the investor may have not read the information that was allegedly false because either (1) it wasn’t in the native language or (2) it wasn’t part of the information in the native language that was reviewed. 

This only highlights the necessity for the investors to perform due diligence on even basic facts contained in the offering documents and the other materials received.  While no one is immune from fraud, in this case it appears -- from the allegations in the SEC complaint -- that even a cursory due diligence would have at least given rise to caution regarding the investment.

(About the author: Mr. Campion practices immigration law, with a focus on the EB-5 Investor Program, and is CEO of Texas Urban Triangle Regional Center. Please see more information about Mr. Campion at http://www.eb5texastriangle.com.)