Former L.A. lawyer Justin M. Lee, who has languished in a South Korean jail for more than a year, was charged last week by two federal agencies on allegations he bilked dozens of investors of millions of dollars as part of a scheme to take advantage of U.S. immigration laws.
The alleged scheme orchestrated by Lee and his L.A. law office, Lee Law Group, has attracted suits by more than a dozen investors and, after a yearlong investigation, resulted in charges filed by both the Department of Justice and the Securities and Exchange Commission.
The Justice Department has charged Lee with nine counts of wire fraud and violations of securities laws. If he is tried here, Lee faces a maximum penalty on each count of 20 years in federal prison. The SEC’s civil complaint against Lee, which also names his wife and a former business partner, alleges violations of securities laws and seeks restitution of about $7.2 million taken from investors, along with interest and other penalties.
Whether Lee will face those charges, however, remains a question.
“We don’t have a defendant in the United States,” said Thom Mrozek, a spokesman for the U.S. Attorney’s Office in Los Angeles. “It’s unclear how this will move forward. There’s a possibility we will not see him prosecuted in the United States for this.”
Karen Matteson, an attorney in the SEC’s L.A. office, said the commission plans to seek Lee’s extradition but declined to comment on whether or not the commission would proceed with prosecution of the other defendants if Lee is not sent back.
The federal charges stem from Lee’s efforts to use the EB-5 visa program, which allows foreigners to obtain green cards if they invest between $500,000 and $1 million in U.S. projects that create jobs for Americans.
The EB-5 program became increasing popular in the wake of the recession as developers sought alternative ways to fund projects. A number of projects in Los Angeles were funded by EB-5 money. The program is intended to spur job growth in high-unemployment areas, but has been criticized for lackluster oversight and possible abuse.
The Business Journal first reported the saga surrounding the numerous allegations against Lee more than a year ago.
Lee, through his Koreatown law firm, is alleged to have collected tens of millions of dollars primarily from South Korean and Chinese investors who would get green cards for putting up about $540,000 each to help fund large-scale biofuel plants.
The plants never materialized, and the government says Lee and the others transferred large sums overseas to invest in other projects and used some of the investments to fund payments to early investors.
When the projects promised under the EB-5 program didn’t materialize, several investors reluctantly returned to Asia after their visa applications were denied.
(The U.S. Citizenship and Immigration Service, which oversees the EB-5 visa program, still lists two of Lee’s EB-5 investment vehicles as approved investment opportunities for immigrants.)
Wider net
The SEC claims Lee’s wife, Rebecca, aided in the fraud in her role as firm administrator. It claims she and her husband controlled multiple bank accounts that were said to hold millions of dollars collected from the foreign investors. She used that money, the commission says, for matters unrelated to the promised biofuel projects and knew those projects were not actually under construction.
L.A. attorney George Newhouse Jr., representing Rebecca Lee, said the SEC wrongfully accused his client of playing a role in the alleged scheme.
“She was a manager of a law firm executing duties given to her by her husband,” Newhouse said. “She was not knowingly involved in fraud.”
Newhouse said she was not named in the criminal action filed by the Department of Justice “for good reason,” noting that criminal charges face a higher burden of proof than do civil.
Newhouse confirmed his client is still in Los Angeles, living with other family members.
Also named in the SEC complaint is Thomas E. Kent, who was said to be Lee’s law partner. He’s accused of submitting false documents to the USCIS, knowing the status of construction at the plants and misleading investors.
Kent’s counsel, Encino attorney Jacob Arash Shahbaz, refused to discuss the most recent complaint against his client.
In January, Kent denied ever having been a partner at Lee Law Group in an e-mail to the Business Journal.
“I had no equity interest in his business,” he said in the e-mail. “I was an employee. He defrauded me into believing he would make me a partner. Justin Lee is a nightmare for me and my family.”
Lee, in his defense against similar allegations from the State Bar of California last year, put much of the blame of what went wrong with the EB-5 investments on Kent.
Both men were disbarred this summer; Lee for failure to pay dues and Kent as a result of findings by the U.S. Bankruptcy Court that he misappropriated more than $270,000 in unrelated disputes.
