Last updated on 2015.12.03
On October 18, 2011, EB-5 investors Zhang Zhen, Feng Wei, Ma Yirong, and Yao Xiao Ping sued SDRC Inc., South Dakota Investment Fund LLC 6, and Joop Bollen for providing them with incomplete and inaccurate disclosures about the project they were investing in, Northern Beef Packers, and for mismanaging the investment fund in violation of their contract and SDIF 6's fiduciary duties. After some rotation of complainants, both sides agreed to drop the lawsuit, and Judge Karen Schreier dismissed the lawsuit without prejudice on March 27, 2012.
Without prejudice means litigants can refile their lawsuit. That lawsuit may be afoot:
NBP’s second batch of EB-5 investors, namely the 70 Chinese investors in group LP6, have organized to sue Bollen, seeking reparations for their lost investments....
According to the group’s attorney, James A. Lombardi, NBP’s EB-5 investment prospectus and memorandums are under significant suspicion of having purposely misled investors. The prospectus never divulged NBP’s financial troubles to investors, and also never showed Bollen’s previous failure with another South Dakota EB-5 program. Lombardi says that the statute of limitations on the case is six years, meaning that the suit must be filed before November of 2015 since the initial prospectuses were released in November of 2009... [Yuxuan Li (trans. Jack Chen), "NBP Scandal Rocks Chinese EB-5 Applicants," World Journal, 2014.09.04].
One member of the litigating investor group says South Dakota beef backers filled them full of bull to get their money:
Ms. Lu, one of the members of the group, said that she received a text in 2010 from an immigration middleman recommending this South Dakota, government-backed EB-5 program. At the time, the middleman touted the program as a safe, reliable, and quick route to a green card that could also recoup the initial investment within five years. Following up, Ms. Lu attended a middleman-organized meeting at a five-star hotel in Beijing, a mixer for potential investors and investees. At the meeting were ill-fated South Dakota state economic development director Richard Benda and NBP assistant Oshik Song, who pitched Chinese investors feverishly on NBP, touting it as the largest beef packing industry in America for decades with a bright future and government backing. Investors need not worry about their green cards and returns, they said [Li, 2014.09.04].
Investor Lu says that Bollen forced investors to give up some of their contractual rights in what looks like an effort to bolster White Oak Global's chances of acquiring Northern Beef Packers in bankruptcy:
According to Ms. Lu, after some of NBP’s problems surfaced, Bollen and his middlemen called a meeting with LP6 group members in Beijing, where they claimed to have received financial backing and assistance from a White Oak group based in San Francisco. At the meeting, they told Chinese investors that they must relinquish their mortgage rights and high place in the pecking order. With Bollen emphasizing that only White Oak’s assistance could get the plant working again, thus allowing the Chinese investors’ to actually receive a return as well as their green cards, LP6 had no choice but to sign over their mortgage rights [Li, 2014.09.04].
I'm still looking for more information on this new litigation. Stay tuned!