NEW ORLEANS (CN) – Twenty-seven foreign nationals claim in Federal Court that two men scammed them for $500,000 apiece by claiming they could arrange U.S. citizenship through a federal investor’s program – then diverted most of the $13.5 million into more than 30 sham companies.
“Plaintiffs individually invested $500,000 for limited partnership interests in the [NobleRealEstate]Fund (collectively totaling $13.5 million) and paid an additional ‘service fee’ of up to $60,000 each,” lead plaintiff Terrence K. Sumpter says in the federal complaint.
“The total amount invested in the Fund was $15.5 million through the purchase of limited partnerships interests by 31 investors (including plaintiffs), each of whom invested $500,000 for the interests they acquired.”
Sumpter claims lead defendants William B. Hungerford Jr. and Timothy O. Milbrath, principals of Noble-RealEstate-GP, “induced plaintiffs to invest in the fund based on representations that the U.S. Citizenship and Immigration Service (‘USCIS’) approved a pilot program authorizing foreign nationals who invest $500,000 in certain designated economic entities throughout the United States to obtain U.S. lawful permanent residency (the ‘EB-5 Immigrant Investor Pilot Program’).”
The immigrant investor program is a real one. Rome offered a similar program more than 1,000 years ago, in the waning days of its empire.
Sumpter claims Hungerford and Milbrath “carried out a scheme to defraud the fund by diverting the monies invested with the fund by these investors into separate corporate entities that Hungerford and Milbrath ultimately control.”
Hungerford and Milbrath set up more than 30 companies under the laws of Louisiana, Maryland, and Delaware to “aid and abet them in their scheme to defraud the fund,” according to the complaint.
Sumpter claims the two defendants also “contracted with the City of New Orleans to operate what is referred to as a ‘Regional Center,’ which is a designation that USCIS approves through an entity that Hungerford and Milbrath formed and controlled at all times material to this action – defendant NobleReach-NOLA.”
The fund was “supposed to invest in companies and businesses within the designated City of New Orleans Regional Center to create jobs and a positive return on investment for the fund’s investors in furtherance of their pursuit of residency in the United States through the EB-5 Immigrant Investor Pilot Program,” according to the complaint.
But Sumpter claims that defendants “diverted at least $6 million of fund monies to themselves for excessive and unwarranted ‘consulting services’; diverted approximately $3 million of fund monies that was specifically dedicated and reserved for investment into job-creating enterprises to pay excessive and unwarranted operating expenses of the New Orleans Regional Center’s operations, including financing the purchase of real estate in Maryland that benefited Hungerford and Milbrath; grossly mismanaged the construction of certain projects situated in New Orleans; grossly mismanaged the fund’s investments by causing the fund to pay exorbitant fees for minority ownership interests in sham companies formed, owned and controlled by Hungerford and Milbrath that do not generate any revenues or provide any legitimate services; breached fiduciary duties owed to the fund; and unjustly enriched Hungerford and Milbrath to the detriment of the fund.”
The plaintiffs seek appointment of a receiver in their shareholder derivative action, to take charge of the fund and the allegedly sham companies, and to “protect and/or preserve the plaintiffs’ immigration benefits that have been diverted to these entities,” and an injunction to stop defendants “from performing, making any payments or from conducting any further activities which will cause the fund harm, including disposing of any money or assets that should be returned to the fund.”
They are represented by Roy Cheatwood of Baker, Donelson, Bearman, Caldwell, and Berkowitz.
Hungerford and Milbrath both live in Maryland, according to the complaint.