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Investors Claiming EB-5 Visa Fraud Fight With Centennial Bank to Get Money Back

Kenneth Murena

Kenneth Murena, a partner at Damian & Valori in Miami/courtesy photo

Foreigners who say they were tricked into investing $10 million in a Royal Palm Beach office project have redirected their fight from the alleged swindlers to a bank.

The investors and Centennial Bank are facing off in state court with each one arguing it should be first in line to get paid out from the partially finished venture.

Centennial Bank's claim stems from an $8.5 million mortgage it issued on the property. The investors say they were promised their loans would be secured by a first-priority mortgage, but they say they were duped and that mortgage never was recorded.

The issue started as another EB-5 investment visa fraud case tied to South Florida real estate, at least the third one since last summer. The federal visa program gives green cards to foreigners who invest at least $500,000 in a U.S. commercial venture that creates at least 10 jobs.

In this case, 19 foreigners from China, Vietnam and Russia said they invested in the 60-unit Royal Palm Business Plaza at 9200 Belvedere Road based on false promises about how the venture would work.

Investor attorney Kenneth Murena said some of the money was diverted from the project, and federal authorities have denied the visa requests because the offices weren't built-out.

The investors filed a federal lawsuit last September and amended it Feb. 5 to accuse Joseph Walsh Sr. of being the ringleader who defrauded them by routing their money through a series of limited liability companies.

Walsh, who didn't return a request for comment by deadline, founded a regional conduit that connected foreigners with EB-5 investment opportunities in the U.S. The South Atlantic Regional Center LLC is authorized by the U.S. Citizenship and Immigration Service, which administers the EB-5 program.

Attorney Galen Criscione, a founding partner at Criscione Ravala in Fort Lauderdale, temporarily represented Walsh and other defendants but withdrew in January, citing irreconcilable differences among the defendants. The filing said Walsh lives in China, and the two communicated only by email.

The unresponsiveness of Walsh and other defendants has worked in the investors' advantage.

A clerk's default was entered April 3 on a request from Murena.

"We will not be fighting with Walsh and the entities any more unless they respond to our motion for default final judgment," said Murena, a partner at Damian & Valori in Miami. He noted undoing a clerk's default is difficult.

Murena said he will seek $30 million in damages with the civil theft and civil Racketeer Influenced and Corrupt Organizations Act violation counts allowing treble damages.

"The fight in this case regarding our claims alleged in the first amended complaint, that fight is over," Murena said. "We will be focusing on the fight with Centennial Bank in the foreclosure action."

Centennial Bank 

Arkansas-based Centennial, which wasn't a defendant in the federal suit, got involved when the office's owner, Royal Palm Development I LLC, took out the mortgage.

The bank last October filed a state foreclosure suit against Royal Palm Development, Walsh and others, claiming a $7.7 million default on the loan and arguing it should be first in line for payment.

The investors, however, argue there's more to the story. Walsh took out the mortgage pledging the offices as collateral and promising the investors a first-priority mortgage to secure their loans.

The investors have sought to intervene as plaintiffs in the state case.

"We believe that the bank knew or should have known that this was an EB-5 project and that the property was purchased with investor funds, and that the investors .... were promised a first-position lien in the property that well predates the loan made by Centennial Bank," Murena said.

The bank's attorney, Andrew Pineiro of Pineiro Byrd in Jupiter, declined comment.

Separately, a property receiver has come into play. In the federal investors' suit, U.S. District Judge Donald Middlebrooks on March 13 agreed with the investors' request to appoint a receiver.

Attorney Daniel Newman, a partner at Nelson Mullins Broad and Cassel in Miami, was named the receiver for Royal Palm Development I and Royal Palm Town Center IV LLLP, the company in which each investor became a limited partner.

Newman must respond to Centennial's complaint. He told the Daily Business Review he is assessing how to proceed.

Palm Beach Circuit Judge Janis Keyser, who presides over the foreclosure case, issued an order April 11 approving Newman's motion to vacate a clerk's default in that case.

Project Status

Investors claim they were induced to put in money with a report that Connect Insurance Group Inc. had been secured as a 10-year tenant, according to the their complaint. The understanding was Connect would finish building out the offices in exchange for six rent-free months followed by rent of $1 million a year.

Instead, the lawsuit said at some point money started flowing in a reverse direction — $9 million, at least some of it investors' money, went to Connect .

The company is led by Deborah Johnson, Walsh's ex-wife, according to a status report Newman filed  Friday in federal court. He reported 22 units in the complex are occupied and generating rent, and Centennial has collected $133,763 in rent.

Murena said Connect built out some of the units, which have been rented.

About 50 foreigners invested in the project. Of Murena's 19 clients, all but two still want green cards, while the other two are more interested in getting their money back.

Related stories: 

Chinese EB-5 Investors in Royal Palm Beach Office Claim $6.5M Fraud on Green Cards

Receiver Sought for Royal Palm Beach Office Venture Where EB-5 Investors Claim Fraud