by T. GormanPosted on Posted in SECActions

The EB-5 program was designed to create a path to becoming a permanent residence in the U.S. for certain immigrants while facilitating job creation in the United States. Initiated in 1990, the program gives a foreign applicant a path to permanent residency following an investment of $1 million, or $500,000 in a targeted employment area. The investment must be in a USCIS approved U.S. commercial enterprise, defined as any for-profit activity formed for the ongoing conduct of lawful business. The applicant obtains a conditional green card following the investment. It is good for two years. If the investment creates or preserves at least 10 full time jobs during the two year period the applicant may obtain a permanent green card.

While the program has been successful at spurring investment in the U.S. and giving applicants an opportunity to obtain a permanent green card, there have been difficulties. In the past the SEC has brought fraud actions based on the investment program. Now the Commission has brought its first action charging individuals with acting as unregistered brokers in connection with the EB-5 program. In the Matter of Ireeco, LLC, Adm. Proc. File No. 3-16647 (June 23, 2015).

Respondents in the proceeding are Ireeco, LLC and Ireco Limited. LLC is a Florida limited liability company, while Limited in a Hong Kong entity. Both were founded by Stephen Parnell and Andrew Bartlett. Between January 2010 and May 2012 LLC solicited foreign investors who wished to invest in the program through regional centers – an entity involved with the promotion of economic growth approved by the USCIS to administer projects. Applicants through a center are only required to invest $500,000.

LLC solicited potential investors through a website which claimed the firm had extensive experience in the area and could guide applicants to the correct center for them. In 2012 Messrs. Parnell and Bartlett formed Limited. It became a managing member of LLC. Eventually LLC became the contracting party. Solicitation continued through the website.

Applicants who contacted Respondents were eventually guided to a regional center. The firm earned fees under the “referral partner agreements” it had with regional centers for brining in customers. The fee was paid once a conditional green card was approved by USCIS. The fee was a commission based on a fixed portion of the administrative fee the investor paid to the center, on average about $35,000 per investor.

From January 2010 to present Respondents were paid fees for actively soliciting 158 foreign investors. The applicants invested about $79 million in the regional centers. The Order alleges violations of Exchange Act Section 15(a)(1).

To partially resolve the proceeding Respondents consented to the entry of a cease and desist order based on Exchange Act Section 15(a). They also agreed to a censure. A hearing will be conducted to determine if it is appropriate to order disgorgement and/or civil penalties.

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by T. GormanPosted on Posted in SECActions

IAP Worldwide Services Inc., a Virginia based facilities management firm, entered into a non-prosecution agreement with the Department of Justice and agreed to pay a $7.1 million penalty to resolve FCPA charges. A vice president of the firm pleaded guilty to one count of conspiracy to violate the FCPA. He is scheduled to be sentenced in September 2015.

The decision to enter into a non-prosecution agreement was based not just on the cooperation of the company but “a variety of factors,” according to the DOJ. The agreement requires the company to continue cooperating, conduct a review of its existing internal controls, policies and procedures and make any necessary modifications to ensure compliance in the future. Under the terms of the agreement the firm will report periodically to the Department of Justice regarding remediation and implementation of its compliance program and internal controls and policies and procedures.

The underlying conduct centers on the efforts of IAP to secure a contract for the Kuwait Security Program, initiated by the Kuwait Ministry of Interior. The project, initiated in 2004, was designed to provide nationwide surveillance capabilities for several government agencies, generally through the use of closed-circuit television. Phase I focused on planning. Phase II was the instillation period. The second phase was generally considered to be the more lucrative portion of the project.

To ensure that it would obtain Phase II, IAP sought to obtain the first part of the project. This would permit it to design favorable standards. Firm vice president James Rama and others were successful in securing Phase I and eventually the second phase. To secure Phase I in 2005 Mr. Rama and others set up shell company Ramaco. IAP and Mr. Rama then agreed with others that half of the Phase I contract, valued at $4 million, would be channeled through the shell company to a consultant. Some or all of the money was to be used to pay bribes to government officials. Eventually, about $1,783, 688 was channeled through an IAP account to Ramaco used for that purpose. IAP was successful in securing Phase II.

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