The Securities and Exchange Commission (SEC) announced a series of enforcement actions against lawyers across the country charged with offering EB-5 investments while not registered to act as brokers.
In one case, the lawyer and his firm are charged with defrauding foreign investors in the government’s EB-5 Immigrant Investor Program, through which they seek a path to U.S. residency by investing in a specific project that creates or preserves at least 10 jobs for U.S. workers.
“Individuals and entities performing certain services and receiving commissions must be registered to legally operate as securities brokers if they’re raising money for EB-5 projects,” said Andrew J. Ceresney, Director of the SEC Enforcement Division. “The lawyers in these cases allegedly received commissions for selling, recommending, and facilitating EB-5 investments, and they are being held accountable for disregarding the relevant securities laws and regulations.”
In a complaint filed in federal district court in Los Angeles, the SEC alleges that New York-based immigration attorney Hui Feng and the Law Offices of Feng & Associates not only acted as unregistered brokers by selling EB-5 investments to more than 100 investors, but they also defrauded clients by failing to disclose they received commissions on the investments in breach of their fiduciary and legal duties. They also allegedly defrauded some entities offering the EB-5 investments. The complaint seeks disgorgement, prejudgment interest, and penalties along with permanent injunctions.
“We allege that Feng abused his role as an immigration attorney to illicitly operate as a broker and engage in a scheme to secretly receive commissions for selling EB-5 securities,” said Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office.
The SEC also entered into orders instituting settled administrative proceedings against several other lawyers and firms for broker registration violations, including:
- Various EB-5 regional centers or their managers paid commissions to the attorney or law firm for each new investor they successfully sold limited partnership interests.
- These payments were separate from legal fees received to provide legal services to the same clients.
- The lawyers and firms engaged in activities necessary to effectuate the transactions, such as recommending one or more EB-5 investments, acting as a liaison between the regional center and the investor, or facilitating the transfer or documentation of investment funds to the regional center.
- The lawyers thereby acted as unregistered brokers in violation of Section 15(a)(1) of the Securities Exchange Act of 1934.
Without admitting or denying the SEC’s findings, the following individuals and firms agreed to cease and desist from acting as unregistered brokers:
- Austin, Texas-based Mehron P. Azarmehr and Azarmehr Law Group, agreed to pay disgorgement of $30,000, prejudgment interest of $2,965, and a penalty of $25,000.
- Miami-based Michael A. Bander and Bander Law Firm, agreed to pay disgorgement of $228,750, prejudgment interest of $19,434, and a penalty of $25,000.
- Miami-based attorney Roger A. Bernstein, who agreed to pay disgorgement of $132,500, and prejudgment interest of $8,243.
- Hoboken, N.J.-based attorney Allen E. Kaye.
- Los Angeles-based attorney Taraneh Khorrami, agreed to pay disgorgement of $60,000, prejudgment interest of $7,843, and a penalty of $25,000.
- Los Angeles-based Mike S. Manesh and Manesh & Mizrahi, agreed to pay disgorgement of $85,000 and prejudgment interest of $11,159.
- China-based resident Kefei Wang, agreed to pay disgorgement of $40,000, prejudgment interest of $1,590, and a penalty of $25,000.