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EB-5 Fraud Suit Tied To Failed Hotel Sees Key Settlement

EB-5 Fraud Suit Tied To Failed Hotel Sees Key Settlement

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A Florida federal judge has approved a settlement between a group of Chinese investors and a man they say aided a fraud scheme that duped them into investing in a failed hotel with the hopes of securing EB-5 visas, with the man poised to assist the litigants in exchange for claims against him being dropped.

In their motion for approval, the investors said that upon the court’s acceptance of the agreement, they would move for dismissal of their claims against Anthony Reitz, who they accused of helping alleged mastermind Joseph Walsh Sr. dupe investors into funneling millions of dollars into the Greystone Hotel project in Miami Beach. U.S. District Judge Darrin P. Gayles issued his approval in a paperless order Wednesday.

The investors’ deal with Reitz marks the latest turn in the lawsuit, launched in October 2019. The investors say they each invested about $500,000 toward the Greystone project. They made their investments through a regional center run by Walsh that coordinated the funds under the federal EB5 program, which allows foreign investors in U.S. enterprises that create American jobs to obtain visas to live in the United States.

The investors claim Walsh duped them out of their money by getting them to deposit their funds into a bogus escrow account, called the WWB Trust LLC, at PNC Bank with the help of Reitz, who signed the escrow agreements and was the account’s chief financial officer. Walsh then transferred the money to personal accounts for his own benefit, the suit says.

At least some funds were loaned from Walsh’s EB-5 operation to the Greystone project, the investors say, but none of their funds were actually used to develop the property, and no EB-5 approved jobs were created. As a result, they did not qualify for EB-5 visas and lost the opportunity for permanent residency in the United States in addition to losing their money.

The settlement agreement says Reitz denies all liability but has handed over documents that the investors say substantiate some of their allegations against the other defendants. The agreement says Reitz has agreed to cooperate with the investors in the litigation in exchange for the claims against him being dismissed.

The original complaint describes Reitz as a former PNC Bank employee with “extensive knowledge of PNC’s policies,” but the bank, through its attorneys and a spokeswoman, has disputed that he ever worked there.

The complaint accused the bank and its employees of aiding and abetting breach of fiduciary duty and fraud in the inducement, as well as conversion by Walsh and his associates. The suit also asserted several counts of conspiracy, including under the federal and Florida Racketeer Influenced and Corrupt Organizations acts.

In September, Judge Gayles tossed the RICO claims for good and dismissed the remaining claims with leave to amend. In December, the investors notified the court that they had struck a confidential deal with PNC to resolve the claims against the bank, and the court entered defaults against Walsh and his son for failure to appear or respond to the complaint.

On Monday, the investors filed an amended complaint against the Greystone defendants, who include Walsh and the managers of a Greystone limited partnership.

In their motion for approval, the investors said the Greystone defendants have refused to stipulate to the dismissal of Reitz, meaning a court order is needed.

Jordan Shaw of Zebersky Payne Shaw Lewenz LLP, who is representing the investors, told Law360 that Reitz has provided them with some useful information on specific investments and loans related to the Greystone defendants.

“We’re taking this case step by step,” he said Thursday. “We’ve had two resolutions now that we’re happy about, and we’re going to press forward.”

Counsel for the Greystone entities declined to comment. Contact information for Reitz wasn’t immediately available.

The investors are represented by Jordan A. Shaw, Zachary Ludens and Steffani M. Russo of Zebersky Payne Shaw Lewenz LLP and Kevin Qi of SMS Law Firm APC.

PNC is represented by Nicholas A.R. Kato, Aliza R. Karetnick, Mansi G. Shah and Peter D. Hardy of Ballard Spahr LLP and Nina Stillman Mandel of Mandel & Mandel LLP.

Reitz represents himself.

The Greystone entities are represented by Stephen A. Mendelsohn of Greenberg Traurig LLP.

Counsel information for Walsh was not available.

The case is Yuanxiao Feng et al. v. Joseph Walsh et al., case number 1:19-cv-24138, in the U.S. District Court for the Southern District of Florida.

— Additional reporting by Dorothy Atkins. Editing by Karin Roberts.

Original Article published at Law360 by Nathan Hale on

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