SEC Charges Businessman and Lawyer in Fraudulent Eb-5 Scheme

6/11/2018/US SEC

The Securities and Exchange Commission charged a businessman and a California-based attorney with defrauding investors seeking to participate in the EB-5 immigrant investor program, stealing their money to fund personal expenses.

The SEC’s complaint alleges that Robert A. Ferrante and attorney Marilyn R. Thomassen participated in a fraudulent scheme with PDC Capital Group and its principal, Emilio Francisco, to defraud at least 135 investors out of $9.5 million using 19 different EB-5 offerings made primarily to investors in China. In 2016, the SEC charged Francisco and PDC Capital with defrauding investors seeking to participate in the EB-5 immigrant investor program. PDC Capital marketed investments in EB-5 projects that included opening Caffe Primo restaurants, developing assisted living facilities, and renovating a production facility for environmentally friendly agriculture and cleaning products. Under the EB-5 program, foreign investors can apply to permanently live and work in the U.S. by investing money in certain projects that bring about American jobs.

According to the complaint, Ferrante was Francisco’s partner in the operation of PDC Capital, and the two diverted $19.2 million of investor funds to PDC Capital, and outright stole at least $9.5 million. Thomassen served as the escrow agent for all 19 offerings and contrary to representations to investors, allowed Francisco and Ferrante to divert at least $19.2 million of investors’ funds deposited into escrow accounts to accounts controlled by PDC Capital. Prior to engaging in the fraud, Thomassen was Francisco’s law partner. Over $900,000 of the stolen investor money was used to pay Ferrante’s personal expenses.

The SEC’s complaint charges Ferrante and Thomassen with violating the antifraud provisions of the federal securities laws, Section 17(a)(1) and (3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and (c). The SEC seeks disgorgement of ill-gotten gains, interest, penalties and permanent injunctions from Ferrante. Thomassen has agreed, without admitting or denying the SEC’s allegations, to the entry of permanent injunctions against further violations of the charged provisions of the federal securities laws, a court order prohibiting her from participating in EB-5 offerings and from issuing or selling any security, and to pay a monetary penalty of $187,767. This settlement is subject to court approval.

The SEC’s investigation was conducted in the Los Angeles office by Adrienne D. Gurley, Jasmine Starr, and Christopher M. Conte, and supervised by Spencer Bendell. The SEC’s litigation is being led by John B. Bulgozdy and supervised by Amy Longo. The SEC appreciates the assistance of the U.S. Citizenship and Immigration Services.

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