MCALLEN, Texas - A South Texas business that helps the government recruit foreigners seeking U.S. visas in exchange for $500,000 job-creating investments is being investigated for running a possible Ponzi scheme, according to court documents that suggest some money was used to buy a Mercedes and settle legal disputes.
Search warrants indicate the FBI has been investigating USA Now Regional Center since at least early last year on suspicion of wire fraud, money laundering and transportation of stolen property. Federal agents searched the company's office and the owners' home in McAllen earlier this month.
USA Now is among hundreds of private businesses designated by U.S. Citizenship and Immigration Services to recruit foreign investors to the "EB-5" investor visa program. The so-called regional centres — which have boomed in recent years, but also attracted controversy — offer investment opportunities to foreigners and then pool their money for development projects ranging from hotels to a Vermont ski resort.
The government's objective is to attract foreign capital and create jobs. But the investors are primarily interested in getting permanent U.S. residency for themselves and their families, and any financial gain from the investment is generally considered a bonus.
No charges have been filed in the McAllen case. The FBI declined comment, citing its ongoing investigation.
The company's attorney, Tony Canales, told The Associated Press that the FBI doesn't understand the business. "We think the government's wrong. We think we can explain it," he said Wednesday, declining to go into details.
Bank records obtained by the FBI show that on the same days investors transferred their $500,000 payments to USA Now, the money was routed through other bank accounts. Those accounts were used to buy a new Mercedes for the company's owner, pay off the owner's civil lawsuit settlement and at least once to repay an investor who wanted out, according to court documents filed this month in federal court in McAllen.
The FBI seized the Mercedes and a pickup truck that it said was purchased with an investor's money, the court records show.
The FBI agent leading the case wrote in his request for the search warrants that he believed it was "a scheme executed by employees of USA Now Regional Center to defraud foreign investors by using investors' funds for personal gain and other illegitimate manners without the investors' knowledge or approval." The agent labeled it a "Ponzi scheme," showing how money from one investor was used to make interest payments to others.
The investigation was first reported by The Monitor newspaper in McAllen.
Congress created the EB-5 program in 1990, and regional centres were added as a pilot program in 1992. Now, more than 90 per cent of EB-5 applications are made through regional centres rather than through direct investment.
The advantage to using a regional centre is that investors become limited partners without responsibility for managing the business, yet they receive credit for the jobs it creates. That means their investments could be in McAllen while they live in Miami.
There were only 11 of these government-sanctioned businesses nationwide in 2007; now, there are more than 300. The centres became popular sources of investment income for U.S. developers when traditional credit markets tightened during the economic downturn.
Each investment — $500,000 in economically depressed areas, $1 million elsewhere — must create at least 10 jobs. But the investment alone does not guarantee the visa.
The government traces the source of the funds to ensure they're legal and requires the money be at risk. Once the investment is made, the investor is eligible for two years of temporary residency. After that period, if the jobs are created and everything else checks out they can apply for permanent residency. The program is capped at 10,000 visas annually.
If the project isn't built and the jobs aren't created in the required time frame, investors will not get a green card. Depending on how the deal was structured, they may not get their money back. Plus, investors are on their own to judge the prospective projects.
There have been EB-5 debacles in California with a proposed sewage treatment plant, in a South Dakota dairy and a plant in Missouri to produce an artificial sweetener.
There are other investor-type visas, but not all offer permanent residency. Experts say the residency bonus is the primary draw, noting that other routes toward green cards can take many years.
USA Now operates from a suite of offices in downtown McAllen just a few miles from the U.S.-Mexico border. Christopher Bentley, a spokesman for U.S. Citizenship and Immigration Services, said Wednesday that applications could be temporarily held or processed during ongoing investigations, depending on the specifics of the case.
The company's director of operations, Marco Ramirez, was named in the search warrants and did not return a call for comment on Wednesday. But in a July 2011 interview with The Associated Press, he said the company was focusing on Mexican investors because of their proximity and the deteriorating security situation across the border.
"The biggest reason is security, 60 per cent of the families that come through here have had a situation" such as extortion or kidnapping by organized crime, Ramirez said.
At the time of that interview, Ramirez said USA Now had nearly 200 investors and almost $100 million — just four months after the company had been approved as a regional centre by U.S. Citizenship and Immigration Services.
The government does not release any information about the number of applications filed through individual regional centres nor the number of their clients who successfully obtain visas.
In October 2011, an AP reporter attended a seminar in Mexico City on investment opportunities presented by USA Now. About 45 Mexicans gathered at a luxury tower hotel in an upscale neighbourhood to hear Ramirez pitch investment opportunities in South Texas that could earn them permanent residency.
Some wore suits, others were stylishly casual and toting hints of wealth such as iPads and iPhones. One young man asked if money from a trust fund could be used to make the $500,000 investment. Some of the attendees cited security concerns for wanting to both live and invest their money in U.S. rather than Mexico.
Ramirez pitched several opportunities that day including a high-rise condo project, a hospital and a retirement home. He said they charged $40,000 for the application process. When he asked the crowd how many were there "just for the investment," only one person raised a hand.
Associated Press writer Larry Kaplow contributed to this report from Mexico City.