Class Action Alleges EB-5 Immigrant Investors Defrauded by Luxury Queens Hotel/Convention Center Developers

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A proposed class action alleges at least 110 EB-5 immigrant investors were defrauded into pouring hundreds of thousands of dollars into what they were led to believe was a project to build a nearly 1.2 million-square foot, 29-story luxury hotel and convention center in Queens County, New York. 

According to the 22-page lawsuit, defendants Fleet New York Metropolitan Regional Center; EEGH II, L.P.; LaGuardia Performance Center and Richard Xia, the project’s general partner, made representations to EB-5 immigrant investors that “had no reasonable basis in fact at the time they were made.” In truth, the complaint alleges, the defendants grossly misrepresented the scope of the hotel and convention center project, its overall square footage, the development timeline and the number of jobs the project was to create. 

“Defendants’ misrepresentations of the Project constitute fraud, and their failure to act with diligence to pursue development constitutes breach of fiduciary duty and aiding and abetting such breach,” the lawsuit, filed on September 17 in New York federal court, alleges. “Given the fraud and breaches of fiduciary duty committed by Defendants, each Class Member has suffered damages, both from failure to recoup their monetary investment as well as the failure to obtain a permanent green card.” 

Those the lawsuit looks to cover are foreign nationals who invested $500,000 into the Queens project pursuant to the U.S. Citizenship and Immigration Services’ EB-5 Immigrant Investor Program, which allows investors, and by way of extension their spouses and unmarried children under 21, to apply for a permanent green card as long as they make the requisite investment in a commercial enterprise in the United States that results in the creation or preservation of 10 permanent full-time jobs for qualified American workers, the lawsuit states. Per the suit, proposed class members’ capital was pooled with that of Fleet New York Metropolitan Regional Center and EEGH II, L.P.’s other investors and loaned to developer LaGuardia Performance Center, an affiliate of Xia. 

Proposed class members were solicited for investments in the project beginning in 2014 or 2015, with LaGuardia representing that the EB-5 funds would be used for the construction and development of a luxury hotel complex in Corona, Queens County, New York, according to the case. Per the complaint, the offering documents provided to proposed class members represented that the project would have: 

• A total floor area of 1,199,578 square feet;
• A 29-story building, consisting of 25 floors of “5-star ocean-view hotel rooms” overlooking Manhattan, and four additional stories consisting of a convention center, retail and restaurant space and a parking garage;
• 792 luxury hotel rooms;
• A modern convention center with 105,964 square feet;
• “One of the largest modern performing arts centers in Northeastern USA”;
• Six floors of retail space and five floors of restaurant space;
• The creation of more than 3,000 jobs within the first five years of operation;
• Jobs that were to be created by the two-year anniversary of the investor’s admission as a conditional permanent resident or adjustment to conditional permanent resident;
• Total projected revenue of roughly $293 million; and
• A total development time of 44 months, with 30 months for construction. 

The lawsuit alleges the defendants, in reality, misrepresented to EB-5 investors: 

• The scope of the project in that, according to Department of Buildings filings, “no such convention center, performing arts center or retail center was ever part of the plan”;
• The project’s square footage, in that applicable zoning regulations, contrary to what proposed class members were told, limited the project to as little as 150,000 square feet;
• The development timeline, in that construction, which was to take 44 months to complete as represented back in 2014/2015, “has barely begun” as of the lawsuit’s filing on September 17; and
• Job creation numbers, in that the project, to date, has fallen short of creating the number of jobs necessary, approximately 110 jobs in total for each investor, in order to permit the individuals to obtain permanent green cards. 

As the lawsuit tells it, the defendants, as early as 2014, before offering documents were provided to proposed class members, had no intention of constructing the luxury hotel and convention center project as they’d represented. According to the suit, an affiliate of LaGuardia filed an application around that time with the New York City Department of Building that revealed the plan was to “construct a 12-story (not a 29-story) building with a total zoning area of 350,186 feet (not 1,199,578 feet).” 

“There is no convention center, retail space, or restaurant in the plan,” the case charges. 

Overall, the defendants did not disclose to EB-5 investors that zoning and Department of Buildings regulations made it impossible to build a hotel with the promised size, nature and features without first obtaining certain variances, the suit says. 

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