U.S. Sec. & Exch. Comm'n v. Kameli

Decision Date19 May 2020
Docket NumberCase No. 17 C 4686
CourtU.S. District Court — Northern District of Illinois

Judge Joan B. Gottschall


The U.S. Securities and Exchange Commission ("SEC" or "Commission") filed this enforcement action against Sayed Taher Kameli ("Kameli") alleging that he violated § 17(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. § 77q(a); and § 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder.1 Also named as defendants are two corporations owned byKameli: Chicagoland Foreign Investment Group, LLC ("CFIG") and American Enterprise Pioneers, Inc. ("AEP") (Kameli, CFIG, and AEP, "defendants"). Before the court is defendants' motion to dismiss the SEC's Second Amended Complaint ("SAC" or "the complaint"). For the reasons explained below, the motion is denied.

I. Background
A. The EB-5 Program

The securities fraud alleged by the SEC involved investments that Kameli offered pursuant to the U.S. Immigrant Investor Program, 8 U.S.C. § 1153(b)(5)(A). Created as part of the 1990 Immigration Reform Act, Pub. L. No. 101-649, 104 Stat 4978, the Program offers U.S. citizenship to foreign nationals who invest the requisite amount of capital in the U.S. (in this case, $500,000)2 leading to the creation of ten full-time jobs. The program is commonly referred to as the "EB-5 Program" because it is included among employment-based visas, and is ranked fifth in the order according to which employment-based visas are to be allotted. See U.S. Sec. & Exch. Comm'n v. Hui Feng, 935 F.3d 721, 725 n.2 (9th Cir. 2019).

Applicants begin by filing a petition referred to as a "Form I-526," presenting evidence that the petitioner has invested or is in the process of investing in a commercial enterprise that will create full-time positions for at least ten employees. If approved, the investor is granted aconditional green card conferring U.S. residency for a period of two years. The applicant then files a Form I-829, demonstrating that the investment has in fact created or preserved at least ten permanent full-time jobs for U.S. workers. If the Form I-829 is approved, the conditions on the investor's green card are removed and he or she becomes a lawful permanent resident. If not, the investor loses his or her conditional permanent residency and is not granted a visa.

B. The SAC's Factual Allegations

According to the SAC, whose allegations the court take as true for purposes of this motion, see, e.g., Plumbers & Pipefitters Local Union No. 630 Pension-Annuity Tr. Fund v. Allscripts-Misys Healthcare Sols., Inc., 707 F. Supp. 2d 774, 781 (N.D. Ill. 2010) (citing Killingsworth v. HSBC Bank, 507 F.3d 614, 618 (7th Cir. 2007)), Kameli is an immigration attorney who heads his own law firm. Beginning around 2009, the SEC alleges that Kameli began offering foreign nationals an opportunity to obtain EB-5 visas by investing in the creation and development of facilities providing memory care and/or assisted living services for senior citizens. Kameli initially planned four such facilities in Illinois: Aurora Memory Care, LLC d/b/a Bright Oaks of Aurora, LLC (the "Aurora Project"); Elgin Memory Care, LLC d/b/a Bright Oaks of Elgin, LLC (the "Elgin Project"); Golden Memory Care, Inc. d/b/a Bright Oaks of Fox Lake, Inc. (the "Golden Project"); and Silver Memory Care, Inc. d/b/a Bright Oaks of West Dundee, Inc. (the "Silver Project").3 A separate fund was created to lend money to each Project: Aurora Assisted Living EB-5 Fund, LLC (the "Aurora Fund"); Elgin Assisted Living EB-5 Fund, LLC (the "Elgin Fund"); Golden Assisted Living EB-5 Fund, LLC (the "Golden Fund"); and Silver Assisted Living EB-5 Fund, LLC (the "Silver Fund"), respectively.4 Each Fund used investors'money to make a loan to its associated Project for the development and construction of its affiliated senior living facility.

Later, Kameli followed the same pattern in Florida, planning the development and construction of four senior living facilities in various locations. He created four Funds: First American Assisted Living EB-5 Fund, LLC (the "First American Fund"); Naples Memory Care EB-5 Fund, LLC (the "Naples Fund"); Ft. Myers EB-5 Fund, LLC (the "Ft. Myers Fund"); and Juniper Assisted Living EB-5 Fund, LLC (the "Juniper Fund").5 Again, each Fund loaned money to its associated Project for the development of a senior living center: First American Assisted Living, Inc. (the "First American Project") for a facility to be located in Wildwood, Florida; Naples ALF, Inc. (the "Naples Project") for a facility to be located in Naples, Florida; Ft. Myers ALF, Inc. (the "Ft. Myers Project"), for a facility to be located in Ft. Myers, Florida; and Juniper ALF, Inc. (the "Juniper Project") for a facility to be located in Sun City, Florida.6

In addition to the Funds and Projects, Kameli created a number of other corporations to manage them. The Illinois Funds were managed by Chicagoland Foreign Investment Group ("CFIG"). The Florida Funds were managed by American Enterprise Pioneers ("AEP"), a CFIG subsidiary. In addition to management services, Kameli created several other corporations to provide development services to the various Projects. The development services were initially provided by CFIG. In 2013, however, Kameli created Bright Oaks Group, Inc. and Bright Oaks Development, Inc. (together, "Bright Oaks") to provide business and development services to the Projects. Nader Kameli ("Nader"), Kameli's brother, served as the CEO of CFIG and later, CEO of Bright Oaks.

The specific terms of the investments were set forth in Private Placement Memorandums ("PPMs"). Although the PPMs for each Fund differed in their details, the general terms of the investments were largely the same. Each individual submitted a Subscription Agreement along with a capital contribution of $500,000. Kameli also charged investors an administrative fee of between $35,000 and $75,000. Initially, investors' money was held in an escrow or investor holdings account pending approval of their I-526 Petitions. If denied, investors typically received their money back. If granted, the investor's money was released into the relevant Fund. Investors' money was pooled together and lent to the affiliated Project. Once the senior living facility became operational, the Project would begin repaying the loans from the Funds, allowing investors to recoup their principal plus interest. Loan interest was also to be used to pay CFIG and AEP for their management services, which meant that they would not begin receiving compensation until after the Projects had become operational. Most of all, creation of the senior living facilities would create the jobs necessary to fulfill the EB-5 Program's requirements.

In all, between 2009 and 2016, Kameli raised approximately $88.7 million in investment proceeds from at least 226 foreign investors. He also collected several million in administrative fees. According to the SEC, however, only one of the senior living facilities - the Aurora facility - is up and running (though several years behind schedule and at double the projected cost). The Commission alleges that the other Illinois Projects are behind schedule and have run out of money. Ground has yet to be broken on any of the Florida Projects. To date, most of the Illinois investors' I-526 Petitions have been granted. In the case of the Florida Funds, a number of First American Fund investors' I-526 Petitions have been granted. The petitions of investors in theother Florida Funds have for the most part not been acted on. The SAC does not specifically state whether any of the I-829 Petitions have been granted.7

C. The SAC's Causes of Action

According to the SEC, defendants engaged in a range of illegal conduct in their handling of the investments. The details of the alleged misconduct are discussed more fully below. However, the SAC's central allegations are that defendants: (1) charged several of the Funds and Projects more than $4 million in undisclosed fees; (2) used approximately $16 million of investors' funds to engage in securities trading; (3) used the money of certain Silver Fund investors as collateral to establish a line of credit ("the Silver Line of Credit"), which defendants then used for their own benefit and the benefit of Funds and Projects other than the Silver Fund; and (4) made an undisclosed profit of roughly $1 million by acquiring parcels of land through a separate entity owned by Kameli, Platinum Real Estate and Property Investments, Inc. ("Platinum"), and selling them at a higher price to the Florida Projects.

The Commission alleges that defendants' actions violated both § 17(a) of the Securities Act and § 10(b) and Rule 10b-5 of the Exchange Act. The statutes are very similar. The main difference is "that § 10(b) and Rule 10b-5 apply to acts committed in connection with a purchase or sale of securities while § 17(a) applies to acts committed in connection with an offer or sale of securities." S.E.C. v. Maio, 51 F.3d 623, 631 (7th Cir. 1995). Section 17(a) and Rule 10b-5 both include three subsections. Section 17(a)(1) makes it unlawful "to employ any device, scheme, or artifice to defraud"; subsection (2) makes it unlawful to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in orderto make the statements made ... not misleading"; and subsection (3) makes it unlawful "to engage in any transaction, practice, or course of business which operates or would operate as a fraud or...

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