Saturday, November 9, 2013

Crooks are like opium addicts, they're addicted to OPM (Other People's Money). I believe that E3 Investment Group is a scam, and will definitely cause losses to EB-5 visa investors who choose them.

I saw a pretty snazzy press release being touted by Nenad Radu about E3 group (!) , and decided to speak with their Managing Director, Matt Gordon to understand their business model. After a detailed conversation with Mr. Gordon, I have come to the conclusion that E3 Investment Group's EB-5 visa offering is terrible and most likely fraudulent too for the reasons listed below:

1) Mr. Gordon told me that they will return the money after the investor gets his EB-5 visa, but they don't put it in writing in order to avoid running afoul of USCIS rules. Well Mr. Gordon, it is a good idea to not violate laws and what you just did is ILLEGAL. If you dispute this fact, please dispute it under penalty of perjury and then let me offer some interesting rebuttal evidence.

2) He also told me that the administrative fee they charge is $60,000 and the immigration lawyer charges $15,000 or more to file the I-526, which makes the total cost rise to $75,000. This is about the same that we'd charge, except we offer a 100% fee refund guarantee in case of denial on our part at any stage, while they don't.

3) Mr. Gordon mentioned that the EB-5 investor would get a 51% stake in the venture for a $500,000 investment while their firm would get a 49% equity stake without putting in a penny of equity. In US markets, deals like these are rejected by investors.

4) Mr. Gordon mentioned that that they are targeting a 6% annual return to the investor AFTER taking a $15,000 monthly management fee for themselves on top of other expenses such as payroll, taxes, etc. Mr. Gordon mentioned that they would take any profits on top of the 6% paid to the investor. This is truly absurd, as it means that the annual management "fee" charged by E3 is more than the returns an investor would earn over 3 years.

5) Mr. Gordon mentioned that the investor would get their $500,000 back and any capital gains (which I expect to be in excess of $2-300,000) would go to them. Mr. Gordon acknowledged that till date they haven't received a single I-526 approval and I believe they are violating securities laws by failing to offer CPA audited financial statements as part of their offering.

What E3 is doing is basically what regional centers are doing: Offering zero management in exchange for a lion's share of the operating profits and pushing all the risk onto the EB-5 investor without investing a penny of their own. In contrast, our clients usualy see about 4-6 times more in annual returns and also get the advantage of capital gains when (and IF) they choose to sell. Even EB-5 investors who manage their business part time usually earn at least 4-5 times what an investor would earn from E3 Investment Group. The E3 proforma financials forecasts a return of capital in 5 years (if the EB-5 investor is lucky) and is designed to prolong the entire EB-5 visa process. Our clients actually have a much shorter process simply because we know that the longer it takes our client, the more we end up paying to the attorney and CPA. Our clients can exit the day after they get their I-829 approval, while those who opt for E3 are STUCK as they'd be stuck in regional centers or other dubious partnerships. At the end of the day, there is too much conflict of interest, where the EB-5 visa investors funds are used to pay Hussar owned entities for "services", without disclosing just how much additional profit Hussar is making off the services related businesses that have a captive market in the form of the EB-5 visa investor's business.

EB-5 visa seekers should ask the following questions of regional centers and partnerships to detect and prevent fraud:

1) What is the lock in period for capital in your partnership / regional centers?

EB-5 visa investors are usually stuck for 5-9 years in partnerships & regional centers.

2) What is the mean and median annual ROI that is offered by the partnership / regional center?

EB-5 visa investors usually earn 1% or less in regional centers and partnerships and ALWAYS earn a lot less than they'd earn in Direct investment businesses.

3) Are the business founders, CFO and CEO willing to offer written guarantees of FULL disclosure of material facts on an ongoing basis as well as guarantee freedom from fraud and conflict of interest?

Avoid those who refuse to guarantee this in a notarised affidavit.

4) Are you offering and selling securities in full compliance of US and overseas securities laws?

Avoid those who refuse to confirm this in a notarised affidavit.

A simple way for EB-5 visa investors to detect & prevent fraud is to demand the following safeguards from those who offer EB-5 visa related services:

1) A written guarantee by the top 5 officers of the regional center / partnership firm AND the marketer, confirming that they will clearly disclose all material information on an ongoing basis, as failure to do so is classified as SECURITIES FRAUD.

2) A written guarantee that the marketer and regional center / partnership officers will NOT engage in conflict of interest, and will procure goods / services and hire employees in a transparent and competitive manner.

3) A written guarantee to fully refund an investor's fees in case the investor's petition is rejected due to the fault of the regional center.

4) A full disclosure of the amount of capital that the firm's founders and investors have invested and the percentage of ownership stake and profits that they will get.

If you're an EB-5 visa investor interested in getting your green card in a safe, quick and usually profitable manner without any conflict of interest and with easy exit strategies, please contact us. You'll be really glad you did.

Yours truly
Mohammed Shaikh, MBA, CFE, Licensed Business & RE Broker (CA & FL)

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