Harbourside Place and Nicholas Mastroianni II
Nearly 80 Chinese investors have filed suit against EB-5 fundraiser and Jupiter developer Nicholas Mastroianni II, alleging he defrauded them of their EB-5 investments.
Mastroianni, who’s been tied to President Trump’s longtime attorney, Michael Cohen, as well as to the Kushner Companies, founded the U.S. Immigration Fund for EB-5 investment. He’s known to have raised EB-5 funds for a number of major developers.
According to a lawsuit filed in Palm Beach County Circuit Court last week, Mastroianni raised $99.5 million from 199 EB-5 investors for the Harbourside Place development in Jupiter. The complaint, filed by Miami-based Levine Kellogg Lehman Schneider + Grossman, alleges Mastroianni intentionally structured the EB-5 investments so that he was one investor short for a $100 million, first-priority, secured construction loan. The alleged purpose of that was to eventually control the new senior lender.
More than 60 of the 78 plaintiffs who are suing Mastroianni, Harbourside Place GP, the U.S. Immigration Fund LLC, Florida Regional Center LLC, Allied Capital and Development of South Florida, Richard Yellen and R. Bowen Gillespie, have received their green cards, according to their attorneys, Jeffrey Schneider and Marcelo Diaz-Cortes. But they have not been paid back, Schneider and Diaz-Cortes said.
Harbourside Place, a $170 million entertainment and hotel project, was completed in December 2014, according to Allied Capital and Development of South Florida’s website. Mastroianni, who did not return requests for comment, is president of the firm. Tenants at Harbourside Place include The Woods Jupiter, BurgerFi, Regus and Subculture Coffee.
The Chinese investors are alleging they were never paid back for their $500,000 investments, plus interest. The visa program gives green cards to foreign investors in exchange for a $500,000 investment.
“By some wild coincidence, Mastroianni, who has been called the ‘hottest money-raiser’ in the EB-5 program, raised only $99.5 million,” the lawsuit alleges. Mastroianni, in addition to obtaining an $18 million line of credit, allegedly took the EB-5 money and invested it into a limited partnership that acted as the lender, then defaulted on the loan and sought to foreclose on the EB-5 investors.
“To me it’s inconceivable that he wasn’t able to find one investor. That was part of the fraud,” Schneider said, adding that “this has been a continuing fraud that started at the very beginning but [the investors] didn’t realize it until very recently.”
Mastroianni has been sued for his alleged role in EB-5-funded projects before. Earlier this year, 124 Chinese EB-5 investors in the 701 Seventh Avenue skyscraper in Manhattan pushed to stop the U.S. Immigration Fund (USIF) and Mastroianni from moving their funds into a nearby project being built by the same developer.
The Harbourside Place lawsuit marks another example of alleged fraud using the EB-5 program. The visa program received another short-term extension through Dec. 7, as part of a spending package signed by the president at the end of September.
In Fort Lauderdale Beach, a development group raised at least $30 million from 60 EB-5 investors to fund construction of a 12-story, 136-room hotel – but fell into financial trouble earlier this year, defaulting on its loan. In August, a U.S. Bankruptcy Court approved the sale of the unfinished 550 Seabreeze Boulevard hotel to a subsidiary of Magna Hospitality Group for $39.1 million. The new owner agreed to comply with certain reporting guidelines that will assist the EB-5 investors who helped finance the project in obtaining their visas.
And in Palm Beach, the former developer of the Palm House condo-hotel project now faces allegations of fraud by the Securities and Exchange Commission and a group of EB-5 investors. The Related Companies emerged last week as the stalking horse bidder for the project, which stalled in 2014.
EB-5 investment “has become a replacement for capital structure financing,” Schneider said. “Despite that massive change, there’s very little government oversight and regulation.”
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