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SECURITIES AND EXCHANGE COMMISSION FILES COMPLAINT AGAINST SAN FRANCISCO REGIONAL CENTER, ET AL

The Securities and Exchange Commission has filed charges against Thomas Henderson, San Francisco Regional Center (“SFRC”) and other companies owned or controlled by Henderson.   Beginning in 2010 Henderson allegedly raised over $100 million from 215 investors.  He allegedly raised this money primarily from Chinese investors supposedly to fund one of 7 projects.  Each investor invested at least $500,000.00.  An investment of this size qualified them for the EB-5 program.  This program allows foreign nationals to attain permanent residency in the U.S. as long as they invest in a company that will create at least 10 jobs for United States workers.

 

Henderson has allegedly sponsored at least 7 companies under the EB-5 program.  These projects included a nursing home, 3 call centers, a warehousing/third-party logistics business, a retail grocery and restaurant business and a dairy processing business.    Henderson allegedly did not use all of the investors’ money for the businesses in which it was supposed to be invested.  He allegedly co-mingled the money with his private accounts and then used that money to help himself.  He allegedly used at least $9.6 million from the SFRC investments for personal use.  He allegedly used $346,000 towards the purchase a $1.4-million home, $3.8 million to build out and operate 2 restaurants on Oakland, California, and $5.1 million from SFRC accounts to fund 3 more non-EB-5 businesses.

 

The EB-5 program required investors to pay a syndication fee.  These fees range from $40,000.00 to $60,000.00.  Henderson’s marketing materials stated that these fees would be used to pay for costs related to the offering.  This included paying a finder’s fee to overseas agents.  The material also states that all the contributions of investors would be used for “job-creating” investments.  Instead, Henderson used most of the syndication fees to pay the overseas marketing agents.  The total used to pay overseas agents was $7.5 million.

 

The $500,000 investment that each investor gave to Henderson was to go to a specific investment.  Henderson co-mingled the funds and used them for multiple projects.  This practice jeopardized the investor’ ability to receive a good return on their investment and to obtain permanent residency.

If you want to read more about this case, then click on the following link: https://www.sec.gov/litigation/complaints/2017/comp-pr2017-17.pdf.  This case provides a good example of the need for investors to research the companies in which and through which they are investing.  It also highlights the fiduciary duties and obligations owed to investors.  If you have any questions about the legal issues raised by this case in connection with your own activities, then please contact Tomlinson & Shapiro at (312) 715-8770.

This post was written by Michael Tomlinson

Michael Shapiro
(312) 715-8770
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