Investors Say Hotel Developers Can’t Shake EB-5 Fraud Suit

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Chinese investors claiming they were duped into sinking $500,000 apiece into a Florida hotel development project through the EB-5 visa program said the companies behind the project can’t shake their fraud suit.

The group of investors told a Florida federal judge Thursday that their allegations against the developers, referred to as the Greystone entities after the hotel project, are specific and detailed, despite the contentions of the companies’ lackluster motion to dismiss the claims against them.

“It is ironic that Greystone defendants would argue that plaintiffs’ over 500 paragraph amended complaint is a ‘shotgun’ pleading and at the same time provide no analysis of the law they cite in their motion to dismiss and no specific references to the amended complaint to support their arguments that there are pleading deficiencies — it is a shotgun motion,” the investors said.

In the suit filed last year and amended in December, the investors claim they lost both their money and their shot at obtaining U.S. permanent residency through the EB-5 visa program, which allows foreign investors who invest in U.S. enterprises that create American jobs to live in the U.S, when the head of an EB-5 regional center allegedly transferred the investors’ funds into personal accounts for
his own benefit.

The amended complaint asserts claims against the EB-5 center head, Joseph Walsh, as well as PNC Bank for allegedly housing a fake escrow account for Walsh’s use and against the Greystone entities for allegedly misrepresented key details of the fund to investors, such as how the money would be spent and the loan conditions.

According to the investors, the people and entities behind the deal, including the managers of the Greystone limited partnership and EB-5 fund, helped Walsh misappropriate funds or at least should have known about his misconduct.

The Greystone entities said in a Jan. 2 motion to dismiss that the lawsuit “lumped together” the investors and left out any individualized details, slamming the lengthy complaint as containing “repetitive and conclusory allegations.”

The investors responded Thursday that the developers haven’t pointed to any case law or authority that prohibits the “lumping” of plaintiffs, as no such authority exists, and are trying to cherry pick allegations in the complaint to argue that it fails to meet pleading standards, despite its many detailed explanations and paragraphs.

“The amended complaint … does not allege statements made by ‘defendants’ but instead specifically lists the individual defendants who made the statements, specifies each statement alleged to be misleading, and explains why that statement was misleading,” the investors said. “However, even if it did group them together, it would be permissible in this context.”

The suit adequately alleges that the individuals in charge of the Greystone entities knew that the documents they prepared and distributed to the investors contained false promises of return of investments, misrepresentations about the legitimacy of the project and lies about the ability for the investors to obtain green cards, according to the investors.

The complaint also adequately alleges the developers benefited from the fraud, the investors said, because even if they had not intentionally made misrepresentations, they were nonetheless unjustly enriched by funds that did flow to the development project.

“Either way, and without question, Greystone defendants benefitted from the several million dollars invested by the plaintiffs,” they said.

“We think the motion to dismiss is meritless and a lot of the arguments are far reaching,” Jordan Shaw, an attorney for the investors, told Law360 on Friday.
“The Greystone parties anticipate the court will grant their motion to dismiss the amended complaint,” Stephen Mendelsohn, an attorney for the developers, told Law360.

The investors are represented by Jordan A. Shaw, Candace Phillips and Steffani M. Russo of Zebersky Payne LLP and Kevin Qi of SMS Law Group.

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

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

–Additional reporting by Suzanne Monyak. Editing by Alyssa Miller.

Original Article published at Law360 on Februay 7, 2020.

Jordan A. ShawInvestors Say Hotel Developers Can’t Shake EB-5 Fraud Suit

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