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HANNA MUSIDI:
Hi, my name is Hanna and today we have our US tax expert, Derren. We also have our US real estate and legal expert, Jay. We will be discussing Us real estate forensic.
VOICE-OVER:
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HANNA MUSIDI:
Hi, my name is Hanna and I’m based in Indonesia and currently, I’m working in a US tax firm. And today we will talk about your US real estate forensic with Jay Knight and Derren Joseph. Would you please introduce yourself, Derren?
DERREN JOSEPH:
Thank you, Hanna. So this would be the third installment series on US real estate for Asian investors. My name is Derren Joseph and I’m a tax professional, doing international tax in general but US international tax in particular. And in this context, we’re talking about investors in US real estate.
HANNA MUSIDI:
Jay?
JAY KNIGHT:
Alright, thanks, Hannah and Derren, thanks for having me here again. It’s great to be back. My name is Jay Knight. I’m a licensed real estate broker from the State of California, and I work with Asian investors who want a pathway to deal with someone in America to help them purchase the property. So that’s a little bit about my background and looking forward to our discussion tonight.
HANNA MUSIDI:
Would you please introduce the case, Derren?
DERREN JOSEPH:
Right. So we did some searching in some online databases, legal databases, where you can, because when a matter is taken before the court in the US, for the most part, it’s exceptions, of course, but for the most part, they’re a matter of public record. So we’re going to talk about a relatively prominent Indonesian family who invested in the US real estate attempted or has invested into the US real estate. We won’t name names. We don’t want to embarrass anyone. Everything is freely available online, but we don’t want to use any names in this conversation because it will be distracting. What we want to do is focus on what happened and perhaps the lessons that would be learned that will be applicable to anyone.
HANNA MUSIDI:
Do you have anything to add Jay?
DERREN JOSEPH:
Okay, cool. So, Jay, I mean, you know, this is your wheelhouse, so do you want to paint the scene?
JAY KNIGHT:
All right. Yeah. This was a very tragic situation, although it probably isn’t all that uncommon. If we did a little bit more searching, I’m sure that we would find quite a few of these, and basically, it is a real estate scam. One-on-one maybe not be that egregious because we don’t know the actual intent of, of the, of the, in this case, the defendants, but it sure seems like that from an outside look. And basically what happened was, was a very well-to-do Indonesian family had invested some money after going to a real estate seminar that was held in Indonesia, and they were convinced to basically invest some money in what would be a limited partnership, which that limited partnership would then buy bulks of properties in the state of Michigan and America. And as a result of this limited partnership and the amount that they invested, which was going to be over a million dollars, they were promised that they would be granted some sort of visa that would allow them a pathway towards a green card and then future residency. So that was really the impetus to this whole case was they wanted to invest the money and they wanted to, they were very enticed by the fact that they were promised high returns and good investments, and also that they would have a pathway to this residency in America. So that’s kind of like the outlining area of what happened, right. So maybe you want to add a little bit more, but that’s kind of in a nutshell in terms of the overview.
DERREN JOSEPH:
Okay. Sounds good
HANNA MUSIDI:
And now let’s talk about EB5, Derren?
DERREN JOSEPH:
Right, so EB5 for those who are not aware is an investment migration product or opportunity in the sense that there’s nothing illegal about it. Most countries in the world’s advanced economies have a way of attracting wealthy residents to come and live in their jurisdictions so whether it’s Australia, New Zealand or Western European countries, the US and Canada, UK. They all have a pathway to residing in their country as legal residents, assuming that you have the ability to invest a certain amount of money. In the US, the most popular option in terms of migration opportunities would be the EB5. Well, the EB5 as we mentioned is relevant to this case and I’ll step back and I’ll say, this is a nightmare. It’s literally the wild west. It is overwhelmingly said, anyone can just wake up and we started, you know, what I’m going to have for you. And it’s amazing. But the thing is that you want to connect more than someone who was approved in the development. So development in the US that has been certified by the government department, which means like if someone were to invest in it and it generates a certain number of jobs, then the investor has a chance of applying successfully to get a visa for him and his family at first was visa temporary had the opportunity to apply for a permanent residence, which is commonly known as a green card. It’s in the context of the case, but was applying for sleep number five was relevant to that case. Well, in the key fact pattern, what are the things that jump out? And this is a cautionary tale for Bruce. One more on what we do is we put some words in this video. One does a couple of years ago, caution around the and we pull and we quote some stuff from the relevant government websites, the video, yeah, just showing how dangerous it is. It is dangerous, and it’s dealing with this because a lot of unregulated people play in that space. And we also have to have interviews that we did separate from this with a reputable agency. Those agents will not license but recognize them as being completely 100% of whatever they were recognized by the government. So one of the problems with this visa, it as immigrants, investment of these opportunities is that it’s hard to tell who is legitimate and who will not exist. And as the interviews that we’ve done tell us is to look at the actual government websites. So if it is you investing, if you’ve been both seen to get a passport from a Caribbean country, you need to look on the relevant government department and see whether that person that you’re speaking to is listed there. If not, you’re talking to a broker, that’s an in-between guy and he and people in between him and the guy that you actually see in the website. Similarly, within US, you’ll see zones or projects in the US that have been recognized and accredited. If you’re not speaking with someone who’s directly affiliated with that development, and you can see us somehow, the credentials of that company is listed there. They told me to real quick yet. And again, we’re doing more than other people in between that person and the actual developer. So for the average foreign out in Asia, who may not understand what legally is, you may not understand how it works. And sometimes the English are difficult to understand. So it’s relatively easy to get. I’m not saying deceived, but it’s easy for some understandings to arise. And again, we love casting aspersions at any parties in this case, all of these things that obviously there was a misunderstanding, which is why we’re in court in the first place, and potentially parts of the misunderstanding have arisen because they may not have had the initial conversations. They may not have entered into a transaction with someone who is directly recognized as a developer of a project that qualifies to EB5. So that’s it.
JAY KNIGHT:
Yeah. Just to piggyback off that a little bit, a couple of things. Yeah. In this case, we don’t know the intent of the defendants and what their mind state rest. So we can’t speculate. We can’t just call them, you know, scammers. Cause we don’t really know, but just to lay a little bit more of the facts out, basically this couple from Indonesia met with this individual and there was the CEO of a company who wasn’t ricing in any capacity, at least not in real estate, but he had an, a real estate investment company. So you don’t need to be licensed to have an investment in a company for real estate. Anybody can own a real estate investment company and just advertise and not people come and invest money and promise them some kind of great returns as much as which they did. So we don’t know what their mindset was, but the couple invested over a million dollars and they will promise that they’re going to a bot about 40 different properties into a limited partnership, which then they realized that the investors who have been a partner or have ownership of this limited partnership. Well, of course, that never happened. And then they ended up going to court, the real estate investment company. And literally, they had not fulfilled the obligations that they were contracted to do. They entered into a settlement agreement to pay back the money that they had taken or they had received. And they have never actually paid the money back. I think they invested over a million dollars and they don’t even pay back a hundred thousand. So there was still almost $950,000. But this couple from overseas had invested in which they never got back. So again, we don’t know the exact circumstances of the mind state of the people that had the investment company, but the real key to this is this. They were not licensed. And when we want to do business with people, you have to make sure that they’re licensed. So that’s number one. Now, just to clarify, one thing that Derren had said earlier, you mentioned the term a broker a couple of times in that case where he’s referring to, I think, and I won’t put this in, but I think he needs is a middleman. I’m going to imagine that bill was in between people to make deals happen. As, as I mentioned, I’m a licensed real estate broker in California, and that’s a little bit different. I just don’t want to make those terms synonymous. Most brokers in California, that deal with real estate are licensed. They’re not a middleman, but really the case. So we want to make sure that you are dealing with these types of licensed professionals, not just these, any anybody out of the blue that can say, Hey, I owned a real estate investment company to come to invest in my company. The other thing I just want to touch on real quickly too, is that this type of advertising is very enticing for people overseas that have a lot of money. It’s like dangling the carrot in front of them. So they get excited or this is a perfect way for me. I got a lot of money I want to invest. I want to, and that way I have a perfect path to becoming a, eventually becoming a citizen. So these is some of these companies, do they advertise specifically targeting overseas investors to say, Hey, look, we have this great opportunity. Or you can become a US citizen. All you need to do is invest a million dollars and we’ll handle all the rest, blah, blah, blah, blah, blah. So this is one of the things that we really have to warn about and make sure that it’s out there, that this is what’s happening. So if you are interested in investing overseas, don’t be fooled by these kinds of Johnny come lately. Agencies make sure that you do in with world professionals.
HANNA MUSIDI:
There are so many scammers, like just like about the couple from overseas, they come, they get. But when we so many things that is like, seems like scamming, but it’s not scanning. It is scamming. So I think all of us have to be really careful in choosing which licensed broker to choose and be like, yeah. So make sure that it is a licensed broker or go directly to the estate company or something like that. So go ahead Derren, you want to say something?
DERREN JOSEPH:
One of the ideas Jay shared about marketing. It is very enticing. I remember seeing it was accused in China where someone who allegedly was related to Donald Trump or had some sort of connection election, I think it was 2016 or so that that person was already involved in the fight. When we just wrapped up the marketing and emphasized the connection to the Trump family in order to chase investors and someone called the camera and obviously they stopped doing it afterward, but someone bringing those credentials to him, it’s really hard to whether they are not, can be very, very enticing in terms of, you know, just like three takeaways and tools of sounds of fraud. The first thing that will be described as a whole monocle fraud is the promise of a visa to be a lawful permanent resident. So if someone promises you a green card, walk away because it’s subject to the application process. When it concerns most civilians can promise you something from the US government, the right application was confirmed or not. That’s up to the US government. So once someone is promising a visa from the US government, don’t just walk, run investment returns. One of the qualifications for a project to be considered as recognized with the EB5 program is that the model must be at risk. It was being a legitimate business, enterprise business, they then guarantee. So once, so it’s telling you, well, don’t worry. You will get your money back again. Don’t just walk. One block of fraud is guaranteed returns. So just what you mentioned, we’ll get you back. We’ll be talking about double-digit returns. And some of them it’s quite common cause I’ve been to quite a number of real estate presentations in Asia and they all talk about 20% retain 25% return. Once someone is talking about a guaranteed material on an EB5 project, don’t just walk, run.
JAY KNIGHT:
Yeah. Yeah, absolutely.
VOICE-OVER:
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