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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

Elizabeth Berke-Dreyfuss (Bar No. 114651) 

WENDEL, ROSEN, BLACK & DEAN LLP 

1111 Broadway, 24th Floor 

Oakland, California 94607-4036 

Telephone: (510) 834-6600 

Fax: (510) 834-1928 

Email: edreyfuss@wendel.com 

Attorneys for Susan L. Uecker, Receiver 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

SECURITIES AND EXCHANGE 

COMMISSION, 

Plaintiff, 

vs. 

SAN FRANCISCO REGIONAL CENTER, LLC; 

THOMAS M. HENDERSON; CALIFORNIA 

GOLD MEDAL, L.P.; CALLSOCKET, L.P.; 

CALLSOCKET II, L.P.; CALLSOCKET III, 

L.P.; COMPREHENSIVE CARE OF 

OAKLAND, L.P.; NA3PL, L.P.; WEST 

OAKLAND PLAZA, L.P.; CALLSOCKET, 

LLC; CALLSOCKET II, LLC; CALLSOCKET 

III, LLC; COMPREHENSIVE CARE OF 

CALIFORNIA, LLC; IMMEDIA, LLC; and 

NORTH AMERICA 3PL, LLC, 

Defendants, 

-andCALLSOCKET HOLDING COMPANY, LLC; 

CALLSOCKET III HOLDING COMPANY, 

LLC; BERKELEY HEALTHCARE 

DYNAMICS, LLC; CENTRAL CALIFORNIA 

FARMS, LLC; and JL GATEWAY, LLC, 

Relief Defendants. 

 Case No. 3:17-CV-00223-RS 

RECEIVER’S RECOVERY PLAN

Case 3:17-cv-00223-RS Document 185 Filed 06/26/17 Page 1 of 48
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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 2 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

I. INTRODUCTION 

Pursuant to paragraphs 49 and 50 of the March 29, 2017, Order Appointing Receiver and 

Monitor (Docket No. 100) (“Order”), the Receiver is authorized, empowered, and directed to 

develop a plan for the fair, reasonable, and efficient recovery and liquidation of all remaining, 

recovered, and recoverable Receivership Property (the “Recovery Plan”)Within ninety (90) days 

of the entry of the Order, the Receiver shall file the Recovery Plan in the above-captioned action, 

and serve copies to counsel of record. 

II. IMMIGRATION OVERVIEW 

The immigration overview has been prepared by Robert C. Divine, Esq. of Baker 

Donelson, Bearman, Caldwell & Berkowitz, P.C. as special immigration counsel to the 

receivership. Mr. Divine’s declaration (“Divine Declaration”) regarding the immigration issues in 

this report is attached. (Exhibit 1). 

1. General Background on EB-5 Program 

(a) USCIS policy in such matters is not maturely developed, is arguably 

incorrect, and subject to change by legislation, regulation, or administrative policymaking or 

through litigation by the Regional Center (concerning termination of its designation) or by 

investors (seeking review of denial of their I-526 or I-829 petitions). Recent informal drafts of 

legislation prepared by staff of the Senate Judiciary Committee to reform the EB-5 program have 

contained proposals (1) to require USCIS to hold off from various actions in the wake of SEC 

enforcement to allow receivers and such parties to seek to recover diverted funds, (2) to allow 

investors to change sponsorship to other regional centers, and (3) to allow investors to change 

their investment to other projects and regional centers without losing their place in the queue for 

visa numbers. The prospects of such legislation are uncertain. In January 2017 USCIS issued an 

advance notice of proposed rulemaking asking wide ranging questions about the roles of regional 

centers, the grounds for their termination, and related issues (82 FR 3211, 1/11/17) and a proposed 

rule that would, among other things, allow an investor with an approved I-526 petition to retain his 

or her place in the queue for visa numbers in connection with a subsequently filed petition 

including for a different project (82 FR 4738, 1/13/17). (Exhibit 1, Divine Decl., ¶ 9). 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 3 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

(b) By way of background, USCIS administers a program that is 

intended to provide a means by which foreign nationals can obtain permanent resident status in the 

United States by investing a minimum of $500,000 in a “new commercial enterprise” principally 

doing business in a Targeted Employment Area in the United States in order to create a minimum 

of 10 full-time jobs for U.S. workers. This is commonly referred to as the “EB-5 Program.” (See 

8 U.S.C. §1153(b)(5), which is § 203(b)(5) of the Immigration and Nationality Act (the “Act”).) 

The statute sets up a two-step process. The investor submits a Form I-526 petition, together with 

evidence (a) of his or her legitimate source of investment funds and (b) of the job-creating capital 

investment project to be funded by the new commercial enterprise invested in. USCIS’ normal 

processing time for I-526 adjudication has ranged from one to currently 20 months,1

 but individual 

cases could take shorter or longer. Upon approval of the I-526 and availability of a visa number 

(for which investors born in mainland China may expect to wait for six or more years after I-526 

approval),2 the immigrant investor may process for admission as a conditional lawful permanent 

resident evidenced by a “green card” (Form I-551) valid for two years from such admission. 

During the 90-day window leading up to the expiration of that green card, the investor must 

submit a Form I-829 petition to remove the conditions on permanent residency by submitting 

documentation showing that the investor has sustained the investment in the enterprise and has 

created or within a reasonable time will finish creating the minimum of 10 jobs per EB-5 investor 

in the enterprise (i.e., permanent green card) (See 8 USC § 1186b, or INA § 216A). USCIS’ 

normal processing time for I-829 petitions currently is about 2.5 years. The regulations for this 

program can be found at 8 CFR §§ 204.6, 216.1, 216.2, 216.3, and 216.6. Most USCIS policy 

 

1

 USCIS processing times can be accessed from 

https://egov.uscis.gov/cris/processTimesDisplayInit.do. The user should click on “IPO Processing 

Dates” at bottom right for processing times for the USCIS Investor Program Office, the office that 

adjudicates EB-5 petitions. 

2

 The visa number system in this regard is explained in my article, “The Realities and Implications 

of Chinese EB-5 Investors' Wait for Visa Numbers,” available at 

https://www.bakerdonelson.com/files/Uploads/Documents/Divine%20The%20Realities.pdf. 

Newer data suggests that new investors from China may wait longer for visa numbers than as 

discussed in that article from January 2016. The wait has been growing since the worldwide limit 

starting being reached in 2014. 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 4 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

positions on the EB-5 program have been consolidated in late 2016 in the USCIS Policy Manual, 

Volume 6, Part G.3 (Exhibit 1, Divine Decl., ¶ 10). 

(c) USCIS has indicated that in order to meet the EB-5 requirements, all 

of the immigrant investor’s capital must be placed “at risk” in the new commercial enterprise upon 

which the investor’s I-526 petition is based. According to the USCIS’s Policy Manual on 

Investors (at Chapter 5(A)(2)), for I-829 approval, the investor must show that he or she sustained 

this at-risk investment through the period of conditional residence. The most conservative 

approach to satisfying this requirement is to make sure that the capital remains invested at risk in 

the job-creating activity of the job-creating enterprise as described in the I-526. However, USCIS 

recently has published policy that (1) an investor could meet the “sustainment” requirement in the 

event of a liquidation of the NCE’s interest in job-creating enterprises after the requisite jobs have 

been created if the NCE “redeploys” the proceeds (a) in some at risk activity “consistent with the 

scope of the NCE’s ongoing business” as set forth in the I-526 record (b) “within a commercially 

reasonable period of time” and for the remainder of the “sustainment period”; (2) once an investor 

has been admitted as a conditional resident the at risk re-deployment can exceed the scope that 

was contemplated in the I-526 papers and even if not all the required jobs had yet been created; 

and (3) the “sustainment period” ends on the day that an I-829 petition is due, which is at the end 

of the two-year period that begins upon the admission of the EB-5 investor as a conditional 

permanent resident, rather than 2.5 years later when it is finally adjudicated.4

 (Exhibit 1, Divine 

Decl., ¶ 11). 

(d) USCIS does not require that the jobs, once created, persist until the 

I-829 filing or approval in order to count toward I-829 approval. The recently-published USCIS 

Policy Manual states at Chapter 5(B): 

 

3

 Available at https://www.uscis.gov/policymanual/HTML/PolicyManual-Volume6-PartG.html. 

4

 See USCIS Policy Manual, Chapters 2.A.2, 4.C., 5.A.2, and 5.C.; Policy Alert, June 14, 2017, 

available at https://www.uscis.gov/policymanual/Updates/20170614-

EB5JobsAndCapitalAtRisk.pdf; and “USCIS Policy Manual Update: Finalizes EB-5 Sustainment 

and Redeployment of Capital” by Robert C. Divine, attached as Exhibit 2

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 5 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

In making the determination as to whether or not the immigrant 

investor has created the requisite number of jobs, USCIS does not 

require that the jobs still be in existence at the time of the petition to 

remove conditions adjudication in order to be credited to the 

investor. Instead, the job creation requirement is met if the investor 

can show that at least 10 full-time jobs for qualifying employees 

were created by the new commercial enterprise as a result of his or 

her investment and such jobs were considered to be permanent jobs 

when created. 

* * * * * 

Direct jobs that are intermittent, temporary, seasonal, or transient in 

nature do not qualify as permanent full-time jobs. However, jobs 

that are expected to last for at least 2 years generally are not 

considered intermittent, temporary, seasonal, or transient in nature. 

(Exhibit 1, Divine Decl., ¶ 13). 

(e) In the big picture, there are two general paths for EB-5 qualification: 

Direct: Under the encoded statute at INA § 203(b)(5), 8 USC § 

1103(b)(5), the investor must place the minimum amount of capital into a new commercial 

enterprise (“NCE”) that must be the employer of ten full time U.S. operational workers. 

Indirect: Under temporary, un-encoded legislation that has been 

extended periodically through appropriations bills since 1992,5

 the NCE may use indirect 

arrangements to place the full minimum capital in one or more job creating enterprises (“JCEs”), 

and the investors may be credited not only with employees of the JCEs but also with indirect 

impact jobs up and down the economic chain from the JCEs. This is allowable only if the 

investors are sponsored by a "regional center" approved by USCIS. SFRC is such a regional 

center. (Exhibit 1, Divine Decl., ¶ 13). 

2. San Francisco Regional Center, LLC Background 

(a) All but the first two of the Enterprises were organized to loan or 

invest funds into separate JCEs where the jobs would be created, and San Francisco Regional 

Center, LLC (“SFRC”) was the sponsor identified in each Investor’s I-526 petition. The three 

 

5

 See Section 610(a) of the Departments of Commerce, Justice, and State, the Judiciary, and 

Related Agencies Appropriations Act, 1993, Pub. L. No. 102-395, 106 Stat. 1828, 1874 (October 

6, 1992), as amended. 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 6 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

CallSocket NCE’s received funds directly into the enterprise to create the jobs, so that the NCE 

and JCE were the same, but they still planned to count indirect job creation (based on operational 

revenues) and so still required SFRC sponsorship for that. Comprehensive Care of Oakland, L.P. 

(“CCOO LP”) subscribed investors directly into the NCE/JCE and treated the first 16 under the 

"direct" program (apparently because SFRC was not yet approved when those investors’ I-526 

petitions were filed) and subscribed the last 9 investors under SFRC sponsorship enabling them to 

claim credit for indirect job creation. (Exhibit 1, Divine Decl., ¶ 14). 

(b) According to the SEC complaint, SFRC sponsored seven “new 

commercial enterprises” (the “Enterprises”) that were to invest in or loan money to a wide group 

of projects that were to create jobs in an array of industries in Alameda, San Francisco, and Tulare 

Counties in California (the “job creating enterprises” or “JCEs”). From review of the case list that 

came from USCIS and from James Yang, one of the investors’ counsel, it appears that the 

investors in the Enterprises (the “Investors”) collectively span the spectrum of stages in the 

process of pursuing permanent residence under the EB-5 program: some have I-526 petitions 

pending with USCIS; some have I-526 petitions approved but await availability of an immigrant 

visa number or await completion of processing for an immigrant visa or adjustment of status 

within the U.S.; some have been admitted as permanent residents and await the time to file Form 

I-829 with USCIS to remove conditions on permanent residence; some have filed I-829 petitions 

with USCIS and await adjudication; and some have received I-829 petition approval and have 

unconditional permanent residence. For the most part, the Investors in Enterprises that subscribed 

Investors earlier have Investors who are farther along in the process. For instance, all Investors in 

CCOO LP have approved I-526’s and have been admitted as conditional residents, almost all have 

filed I-829 petitions, and about half have I-829 approvals. Similarly, all but one of the 36 Investors 

in CallSocket, L.P. have filed their I-829s, and the one remaining Investor approaches the filing 

deadline for I-829. In the middle, about half of CallSocket III, L.P. Investors have I-526 petitions 

still pending but the other half have approved I-526 petitions and await visa numbers or have 

immigrated and await I-829 filings in 2018 or beyond. And on the other end of the spectrum all 

27 of the California Gold Medal, LP Investors have I-526 petitions pending. Mr. Divine did not 

Case 3:17-cv-00223-RS Document 185 Filed 06/26/17 Page 6 of 48
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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 7 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

have official access to information reflecting which of the Investors with approved I-526 petitions 

and without pending or approved I-829 petitions may have used such approval and available visa 

number to immigrate to the U.S. as conditional residents. This is important, because USCIS 

policy draws an important (and arguably arbitrary) line between those who have not yet been 

admitted as conditional permanent residents and those who have. However, Mr. Divine received 

confirmation from attorneys for some Investor groups concerning which Investors have been 

admitted as conditional residents. (Exhibit 1, Divine Decl., ¶ 15). 

(c) The SEC complaint alleges and the Declaration of Ellen Chen 

testifies that SFRC and its principals commingled the EB-5 capital for these Enterprises and 

diverted much of the capital to purposes other than those job creating activities for their respective 

Enterprises as allowed under the EB-5 program and that the Enterprises may not be on course to 

create the jobs projected. These actions and failures have negative implications for the ability of 

the Investors to meet the requirements to obtain the immigration benefits they sought through their 

investment. USCIS could determine that such actions preclude Investors from establishing that 

they met the requirement to “sustain investment” in at risk job creating activity, resulting in denial 

of their I-526 or I-829 petitions. USCIS also could use such actions as a basis to terminate 

SFRC’s designation as a regional center, creating an independent basis for denial or revocation of 

I-526 petitions of Investors for those investors not yet admitted as conditional residents. 

(Exhibit 1, Divine Decl., ¶ 16). 

3. Framework for Analysis of EB-5 Issues for SFRC-sponsored Investors 

(a) In deciding what to do with SFRC, and the Enterprises and the 

JCEs, the Receiver must assess the nature of the challenges to immigration qualification, the 

extent to which any deficiencies may be remediable, and the likelihood of immigration success of 

the investors under reasonably likely scenarios. If obtaining immigration benefits is essentially 

hopeless, then the Receiver may be well advised to ignore immigration considerations and manage 

or liquidate the entities accordingly. If obtaining immigration benefits seems reasonably likely, 

the Receiver may more reasonably consider choosing to undertake more business risk than she 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 8 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

would otherwise to pursue courses of action likely to result in achieving those immigration 

benefits. (Exhibit 1, Divine Decl., ¶ 17). 

(b) The comprehensive commingling of funds presents an additional 

challenge to the Receiver in making the above assessment, because it seems difficult to determine 

how much of the available funds should be credited to particular enterprises for possible use in 

pursuing their respective business plans. (Exhibit 1, Divine Decl., ¶ 18). 

(c) Mr. Divine noted that one might expect the Receiver to be able to 

consult with the agency about the best course of action in order to chart a course most 

advantageous to the investors. In his experience over the last several years USCIS has refused to 

engage in such discussions and takes adverse action against the regional center under receivership 

and against its sponsored investors without consultation despite urgent requests for such. The 

Receiver might consider asking the court to require USCIS to engage in such discussions or even 

to send representatives to the court for discussion of options and of USCIS policies, but Mr. 

Divine has not seen that done before. (Exhibit 1, Divine Decl., ¶ 19). 

(d) There are three essential requirements the Investors need to meet to 

maintain immigration qualification. Failure to meet any of the three requirements would be likely 

to result in EB-5 denials for the Investors, even if one or two of the other requirements are met. 

(Exhibit 1, Divine Decl., ¶ 20). 

4. Issue 1: The Investors are sponsored by a regional center in good 

standing with USCIS. 

(a) Because all of the Investors (other than the initial 16 investors in 

CCOO LP) were sponsored by a regional center in order to count indirect job creation, they face 

the risk of USCIS terminating the regional center designation of SFRC. From observation of other 

projects in which the SEC has intervened to stop diversion and commingling of invested funds, it 

seems likely that USCIS may swiftly seek to terminate the designation of SFRC on account of the 

failure of SFRC to “promote the economy of the region” using the EB-5 program properly, with 

special emphasis on the wrongdoing of the regional center principal(s) especially when they, 

through the regional center or independently, also happen to have controlled the NCEs or JCEs or 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 9 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

both. USCIS then tends to use the regional center’s termination as a sole basis upon which to 

deny and revoke the I-526 petitions of investors in the NCEs sponsored by the regional center, not 

even giving investors a chance to show that they have maintained their investment in the 

enterprise and have created the jobs (issues #2 and #3 below), and not even waiting for the 

regional center to complete any available administrative appeals process on the regional center 

termination. USCIS recently published policy that termination of a regional center before an 

investor’s admission as a conditional resident constitutes a material change requiring denial or 

revocation of the I-526, but for an investor who already obtained conditional residence it does not 

have an effect on I-829, even for claiming indirect job creation.6 Mr. Divine has seen a May 12, 

2017 USCIS notice of intent to deny an I-526 petition involving an investor in an enterprise 

unrelated to this action, stating that change of sponsorship from one regional center to another 

constitutes a material change requiring I-526 denial thus, it appears that USCIS policy requires 

denial of revocation of an I-526 of an investor not yet admitted as a conditional resident if the 

sponsoring regional enters is terminated or changed. (Exhibit 1, Divine Decl., ¶ 21). 

(b) In efforts to preserve Investors’ claims to immigration benefits, the 

Receiver could pursue one or more of the following courses of action: 

Seek to defend SFRC against termination by USCIS. Effort to avoid 

termination could include removing Mr. Henderson permanently from management and ownership 

of SFRC and placing it in the control and ownership of a new long term manager who has plans to 

use the SFRC for further development as well as a commitment to oversee the existing projects in 

compliance with USCIS policies. With Mr. Henderson removed from control of SFRC by the 

Receiver, SFRC could argue that it is not likely to repeat the wrongdoing of the past. USCIS has 

shown a tendency to give very heavy weight to the fact of past wrongdoing of the type alleged by 

 

6

 See USCIS Policy Manual, Vol 6, Chapters 4.C. and 5.C; “USCIS Finalizes EB-5 Sustainment 

and Redeployment of Capital Issues and Consequences of Regional Center Termination,” by 

Robert C. Divine (Exhibit 2). 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 10 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

SEC against Mr. Henderson without regard for the current receivership.7 USCIS also tends to cite 

the apparent lack of plans for use of the regional center to develop future job creating projects. In 

practice, it would be inconceivable for a new enterprise and its investors to choose sponsorship by 

SFRC until USCIS affirms the continued designation of SFRC in the aftermath of the receivership 

and other SEC enforcement. Thus, a new owner/manager of SFRC would need to try to establish 

a credible present intention to sponsor new projects once USCIS affirms SFRC’s designation. 

Contract with one or more alternative regional centers. The 

Receiver, on behalf of the respective Enterprises, could contract with a regional center already 

approved for the relevant geographic area (Alameda, San Francisco, and Tulare Counties in 

California) to take over sponsorship of the investors in the Enterprises. As stated above, USCIS 

policy is that change of regional center after an I-526 petition has been filed probably would 

constitute a material change requiring denial of pending I-526 petitions (and possibly revocation 

of approved petitions) with the opportunity for the investors to file new I-526 petitions under the 

new regional center’s sponsorship. And in Mr. Divine’s observation USCIS has failed to suggest 

to any investor the possibility of changing regional centers when USCIS issued notices of I-526 

denial purely on the basis of an administratively non-final regional center termination. I-526 denial 

and re-filing is very detrimental to investors born in mainland China, who would lose their place 

in the long and growing queue for limited visa numbers (delaying their actual immigration for 

years more) and whose children might consequently be deemed to have "aged out" of derivative 

eligibility for permanent residence if they have reached age 21. Any change of regional center 

would need to be only to support the possibility of a change in policy, regulation, or legislation, or 

to support investor lawsuits by denied or revoked investors challenging USCIS’ “material change” 

policy as arbitrary and capricious. 

Alternative transfer. The Receiver could consider making a 

contractual arrangement with a replacement regional center to take effect immediately only upon a 

 

7

 See, e.g., Matter of P-A-K- (AAO June 9, 2017), available at 

https://www.uscis.gov/sites/default/files/err/K2%20-

%20Regional%20Center%20Termination/Decisions_Issued_in_2017/JUN092017_01K2610.pdf. 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 11 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

termination of SFRC’s designation, thus giving full chance to avoid SFRC termination (and 

thereby to avoid the issue of the effect of a change of regional center) while still preserving the 

arguments that regional center change can be effective without need to deny or revoke petitions. 

Argue different treatment for admitted Investors. As mentioned 

above, USCIS recently has issued policy that for an investor who already obtained conditional 

residence regional center termination does not have an effect on I-829, even for claiming indirect 

job creation. This primarily affects investors in CCOO L.P., CallSocket, L.P., and maybe 

CallSocket II, L.P. and CallSocket III, L.P. Investors would assert this policy in their respective I829 petitions. 

(Exhibit 1, Divine Decl., ¶ 22). 

(c) Even if the problem of possible regional center termination could be 

overcome, at least two other significant problems outlined below still would need to be resolved. 

(Exhibit 1, Divine Decl., ¶ 23). 

5. Issue 2: The Investors “sustained the investment” in the NCE and all 

the way to the JCE in job creating activity in keeping with the business 

plan throughout the Investors’ periods of conditional residence. 

(a) USCIS requires that investors not only place the capital in the NCE 

and not receive any return of capital until the end of their conditional residence (which would be at 

least until the I-829 is due to be filed two years after admission), but also that the minimum 

required capital be substantially used for job creating activity in the NCE or, in the case of 

regional center sponsorship, in the JCE(s).8

 Non-compliant diversions include payment of 

marketing and other expenses of originating EB-5 capital, of administrative expenses of 

organizing the new commercial enterprise, of regional center or related fees, or of personal 

expenses of organizers. In other cases, USCIS repeatedly has taken the position that diversion of 

general capital of an NCE away from the required use in job creation activity precludes any of the 

 

8

 For this position USCIS primarily relies on Matter of Izummi, 22 I&N Dec. 169 (AAU 1998), 

available at https://www.justice.gov/sites/default/files/eoir/legacy/2014/07/25/3360.pdf. USCIS 

requires that the plan be to use every dollar in compliant investment, but at the I-829 stage the 

regulations allow “substantial” compliance, as discussed further below. 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 12 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

investors in that NCE (who invested only the minimum $500,000) from meeting this requirement. 

USCIS has taken the position in some recent adjudications of investors in entities (Jay Peak) that 

extensive commingling precludes investors from showing that they sustained their investment in 

the job creating project they invested to capitalize and therefore precludes approval of their I-829 

petitions to remove conditions from permanent residence at the end of the EB-5 immigration 

process. USCIS has made these findings even in the absence of any evidence that the investors had 

anything to do with or knowledge of the misconduct. Mr. Divine is not aware of any case in which 

the SEC has alleged commingling and diversion and then investors obtained approval of their 

outstanding I-526 and I-829 petitions. (Exhibit 1, Divine Decl., ¶ 24). 

(b) Out of the approximately $84 million that SFRC-sponsored 

Investors contributed in capital, the SEC complaint alleges that Mr. Henderson diverted $9.6 

million of EB-5 capital to his own personal expenses and unrelated business ventures and that he 

diverted $7.5 million more to pay extra commissions (beyond the separate administrative fee paid 

by investors on top of their capital contribution) to overseas marketing agents involved in 

originating the investors. Even as to moneys not alleged to be diverted, the SEC complaint alleges 

a “shell game” of commingling funds among the various NCEs and JCEs sponsored by SFRC. 

(Exhibit 1, Divine Decl., ¶ 25). 

(c) For investors who have not already reached the end of their period 

of conditional residence (again, the I-829 due date), a liquidation of NCE assets and distribution of 

proceeds to the NCE investors would prevent them from sustaining their investment in the NCE 

and thereby prevent approval of their I-829 petitions, even if job creation requirements already had 

been met. Therefore in regard to most of the NCE’s (but not CCOO LP and CallSocket LP), a 

choice must be made between liquidation and distribution of assets and preservation of 

immigration benefits. (Exhibit 1, Divine Decl., ¶ 26). 

(d) In an effort to overcome the immigration consequences of such 

commingling and diversion, the Receiver can pursue the following options: 

(i) Seek to restore all of the commingled and diverted funds and 

deploy them in job creating activity in keeping with the business plans filed with their I-526 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 13 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

petitions. USCIS has not published policy reflecting that restoring such funds can restore 

investors to qualification after the violation, and it is not clear to what extent restoration of less 

than all of mishandled funds would be sufficient even in the event of a generous interpretation 

from USCIS, or from a court after denial of petitions. The regulations for the I-829 adjudication 

stage at 8 CFR 216.6(a)(4)(iii) and 216.6(c)(1)(iii) seem to provide for a “substantiality” test on 

this issue, stating: 

The alien will be considered to have sustained the actions required 

for removal of conditions if he or she has, in good faith, 

substantially met the capital investment requirement of the statute 

and continuously maintained his or her capital investment over the 

two years of conditional residence. [emphasis added] 

Mr. Divine is not aware of any USCIS policy statement providing detailed interpretation of 

this language in the regulations, but the USCIS Policy Manual at Vol. 6, Part G, Ch. 5., § A.2. 

repeats this substantiality standard, stating: 

When filing a petition to remove conditions, the full amount of 

required capital does not need to have been invested, but the 

immigrant investor must provide evidence that he or she has 

substantially met the requirement. 

It would seem that the more the Receiver can recover for restoration, the greater the chance 

of success on this point could be. The Receiver must assess the likelihood that such restoration 

actually could be accomplished, even substantially. In connection with a prior state court action 

the Receiver already has sold some significant property that was acquired with commingled funds 

(not diverted from the collection of “EB-5 entities” as defined in paragraph 13.a. of the declaration 

of Ellen Chen). The Receiver may have information reflecting the likelihood of gaining title to 

and selling assets that Mr. Henderson bought for himself or for unrelated business interests. It 

may be quite challenging to figure out which NCE’s particular funds actually came from to credit 

them back properly. Some NCEs’ funds may be restored more substantially than others. The 

Receiver might seek to shame or sue the overseas marketing agents, seeking also to pursue assets 

that they or their principals may hold in the United States or Canada, but that may be found to be 

unrealistic or impractical. 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 14 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

(ii) Identify other capital to be deemed diverted. The Receiver 

may identify other capital in the JCEs’ financing stack that can be deemed to have been used for 

the otherwise inappropriate expenditures, so that the EB-5 Investors’ funds can be deemed 

properly spent. USCIS frequently has recognized that other sources could be attributable to 

expenditures that are not EB-5 compliant as long as the documents governing such sources do not 

specify uses to which that source’s funds were restricted (such as a construction loan limiting use 

of proceeds to construction expenditures through a draw process). It is not apparent from the SEC 

complaint or the offering documents Mr. Divine has reviewed that the JCEs here had any 

meaningful capitalization other than EB-5 capital through the NCEs. 

(iii) Add new capital to restore the diverted capital. Perhaps the 

Receiver could find additional capital to inject into the capital stacks of the JCEs, with the hope 

that those funds could be retroactively allocated to the non-qualifying expenses. This could 

include third party equity, loans, or even additional equity from the EB-5 investors injected 

through the respective NCEs. USCIS has not published policy recognizing this kind of approach, 

and there is a meaningful possibility that USCIS would find that, to use an analogy, the glass once 

broken cannot be glued back together. 

(Exhibit 1, Divine Decl., ¶ 27). 

(iv) Investors also could independently pursue their own 

arguments to overcome the diversion in their I-526 or I-829 petitions: 

Diversion from NCE is still capital at risk. Investors whose entire 

capital actually made it to the Enterprise could argue that they met their requirement to make and 

sustain their investment in the Enterprise as required by the statute, and if the job creation 

requirement can be met even with less than the intended capital for actual use in job creating 

activity, the Investors have met their requirements and should not be punished for someone else’s 

misuse of their capital without their knowledge. Mr. Divine would not expect USCIS to accept this 

argument, but an immigration judge or a federal court might accept it finding USCIS’ position 

arbitrary or capricious. 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 15 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

Substantial compliance. Even with diversion the investment was 

substantially used properly, as discussed above with a less than clear standard. 

(Exhibit 1, Divine Decl., ¶ 28). 

6. Issue 3: The NCEs/JCEs created the requisite jobs, directly or 

indirectly. 

(a) Please see above discussion about direct vs regional center/indirect 

arrangements. Other than the first 16 investors in CCOO LP the Investors all filed their I-526 

petitions for indirect job creation based on SFRC’s regional center sponsorship. Please note that 

creating the jobs is not sufficient by itself, so if the jobs were created but some of the minimum 

required capital were diverted, USCIS still could deny or revoke the Investors’ petitions. 

(Exhibit 1, Divine Decl., ¶ 29). 

(b) Direct jobs are shown by evidence of actual employment, such as 

payroll records, tax forms (W-2 and 941), I-9 employment verification forms, etc. For investors 

sponsored by a regional center, jobs can be shown by evidence of expenditures on construction,9

by evidence of operational revenues, and by economic analysis using reasonable methodologies to 

show the indirect effects of such expenditures or revenues or direct employment. (Exhibit 1, 

Divine Decl., ¶ 30). 

(c) At the I-526 stage, the investor must show USCIS that the jobs will 

be created within 2.5 years after USCIS adjudicates the I-526. The idea of USCIS policy is to 

approve I-526 petitions only for investors with credible plans to create the required jobs by the 

time they will need to file Form I-829 to remove conditions, and the 2.5 years is meant to allow 

six months for the investor to process for an immigrant visa and be admitted or to adjust status 

within the U.S. and then two years of conditional residence leading up to the I-829 filing.10 At the 

 

9

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two years or more, but otherwise only the “indirect” and “induced” jobs that arise from the 

construction. 

10 USCIS has not adjusted its policy to account for the reality that investors born in mainland 

China who invested after mid-2014 face lengthy waits for visa numbers that will delay their 

admission and thus their I-829. 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 16 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

I-526 stage, job creation is shown either by evidence of jobs already created or by a credible 

business plan showing how jobs will be created within the prescribed time. (Exhibit 1, Divine 

Decl., ¶ 31). 

(d) At the I-829 stage, the law requires a showing that the required 10 

new jobs per investor have been created or will be created within a reasonable time, which USCIS 

policy interprets to be one year in the absence of “extreme circumstances” such as force majeure. 

Mr. Divine is not aware of any USCIS policy determination about whether wrongdoing by 

principals of the NCE or JCE (in the absence of collusion by the investor) can be “extreme 

circumstances” justifying consideration of plans for job creation more than one year after filing 

Form I-829. (Exhibit 1, Divine Decl., ¶ 32). 

(e) USCIS policy gives credit for full-time jobs that were created by the 

new commercial enterprise as a result of the investor’s investment and were expected to last two 

years when created, even if the jobs no longer exist at the time the I-829 is filed or adjudicated. 

While USCIS’ Policy Manual does not mention exceptions to this policy, however, in some cases 

USCIS has determined that jobs on the NCE’s or JCE’s payroll could not be credited because they 

were not created in good faith, since the revenues of the enterprise were insufficient to justify the 

employment levels. In other words, investors may not be credited with full employment when an 

enterprise artificially uses up the EB-5 capital on an obviously unsustainable trajectory of 

employment without having or reasonably expecting the business to support that payroll. 

(Exhibit 1, Divine Decl., ¶ 33). 

(f) In the absence of an agreement among investors otherwise (such as 

in the Limited Partnership Agreement), USCIS credits jobs created by an NCE to the NCE’s 

investors in the order in which they file their I-829 petitions. At least one of the Enterprise’s 

Limited Partnership Agreement provides authority for the General Partner to allocate jobs among 

investors in the order in which they are admitted as conditional permanent residents. Since an 

investor’s Form I-829 is due exactly two years after such admission (but can be filed up to 90 days 

earlier), the USCIS default policy and the Enterprise’s policy are roughly equivalent. The 

Receiver must consider that actions to create some jobs, but less jobs than are required to meet the 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 17 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

requirements of all Investors in an Enterprise, may benefit earlier-immigrating investors while 

leaving later-immigrating investors unqualified for immigration approval. (Exhibit 1, Divine 

Decl., ¶ 34). 

(g) The Receiver must determine how many full-time jobs expected to 

last for two years have been created and could be created within the necessary time frames for the 

Enterprises’ respective Investors to be successful in their I-526 and I-829 filings. (Exhibit 1, 

Divine Decl., ¶ 35). 

7. Resulting Considerations 

Stepping back from the discrete requirements discussed above, in order to preserve 

opportunities for EB-5 investors sponsored by SFRC to obtain their immigration benefits (should 

the Receiver and Court determine that such benefits are likely enough to be realized to justify the 

effort and risk reduced economic returns in the process), the Receiver should consider the 

following steps and issues, not necessarily in this order: 

(a) Continue to seek guidance from USCIS concerning a number of 

issues identified above that are not clear in USCIS published policy. 

From Mr. Divine’s recent experience he does not expect useful 

response from USCIS, but one may keep asking. 

(b) If there seems to be a meaningful chance to meet the “sustainment” 

and job creation requirements otherwise for investors who have not 

yet been admitted as conditional residents: 

(i) Seek bids from qualified persons to buy and operate SFRC 

indefinitely, including to sponsor new projects, with or apart 

from its ownership and control of the NCEs and JCEs; or 

(ii) Seek bids from regional centers approved for the relevant 

counties to replace SFRC as the sponsor of the Enterprises 

and their investors, to take effect either immediately or upon 

termination of SFRC’s designation by USCIS, to preserve 

arguments for investors in litigation against USCIS. 

(c) Prepare to defend SFRC from the USCIS Notice of Intent to 

Terminate the regional center designation of SFRC that is expected 

to be issued soon. 

(d) Forensically assess the flow of capital from escrows through NCEs 

and beyond and asses the feasibility and extent of restoration of 

capital to the rightful NCEs and JCEs. Determine whether all or 

substantially all funds could be restored to some or all such entities 

to meet USCIS standards for “sustainment of the investment.” 

Case 3:17-cv-00223-RS Document 185 Filed 06/26/17 Page 17 of 48
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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 18 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

(e) Determine the state of development and operations of each 

NCE/JCE pairing, how much capital has been spent legitimately in 

the JCE, how much more capital actually is available or can be 

recovered, how many jobs have been created, and how many more 

jobs could be created. 

(f) Report to the Court and the Investors the assessment of the 

feasibility of immigration success and the risks of losing capital that 

otherwise could be liquidated and obtain input from investors about 

their interest in taking further business risk to seek immigration 

benefits. 

(g) Determine whether to liquidate one or more of the entities or to 

pursue the business plans toward job creation to support 

immigration efforts of the Investors. 

(h) To the extent projects are pursued rather than liquidated, prepare the 

required documents about the project’s planned or actual use of 

capital and job creation. Given the SEC’s allegations of 

improprieties by the principal of SFRC, which in turn seems to have 

controlled the NCEs and JCEs, one could expect USCIS to 

scrutinize more heavily than usual the assertions in the filings 

already made. Prior packages for I-829s might need to be reviewed 

for accuracy. 

(Exhibit 1, Divine Decl., ¶ 36). 

B. IMMIGRATION ISSUES - PROJECT BY PROJECT 

The immigration issues section titled “I-526 And I-829 Status And Risks” on a project by 

project basis was also prepared by Robert C. Divine, Esq. of Baker Donelson, Bearman, Caldwell 

& Berkowitz, P.C. as special immigration counsel to the receivership. (Exhibit 1). 

(a) Having outlined above the more general considerations and 

challenges, the following attempts to apply the considerations to what is to understood about the 

specific projects sponsored by SFRC. The documents reviewed are set forth in the Divine 

Declaration (Exhibit 1, ¶ 6). The USCIS case chart does not indicate the date as of which it was 

current, it does not show if or when any investor who has not filed I-829 petition was admitted as 

a permanent resident, and it does not show when the I-526 petitions were filed (which would give 

a hint as to whether the investors who have not filed I-829 might have entered the U.S., since as of 

June 1, 2017 Investors born in mainland China could obtain a visa number only if their I-526 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 19 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

petition had been filed before June 8, 2014).11 James Yang has provided some of that information 

informally. (Exhibit 1, Divine Decl., ¶ 37).

(b) The allegations of commingling and diversion of capital seem to 

affect all projects, and to that extent all Investors are at risk of denial based purely on the failure to 

sustain the investment. The comments below are not informed by any data or analysis about the 

exact nature or extent of commingling and diversion affecting particular projects other than some 

general conclusions suggested by Ellen Chen in her declaration. Thus, they do not suggest any 

project-specific course of action to attempt to remedy the threat of denial. It is entirely possible 

that all other efforts could prove useless (1) if the Receiver cannot arrange to restore the EB-5 

funds to be properly spent on job creation in their originally intended project and USCIS accepts 

such remediation as curative of the problem, or (2) if USCIS or reviewing courts will not accept 

the argument that it was sufficient for the investors to have placed and kept their capital at risk in

the NCE and created sufficient jobs in the JCE without regard to diversion of some of the capital 

from the intended job creating uses without knowledge of the investors. (Exhibit 1, Divine 

Decl., ¶ 38).

(c) The threat posed by termination of the designation of SFRC as a 

regional center hangs over some or all of the investors in most of the projects who have not 

already have been admitted as conditional residents. 

C. COMPREHENSIVE CARE OF OAKLAND AND COMPREHENSIVE 

CARE OF CALIFORNIA - 1833 10TH AVENUE, OAKLAND, CA 

1. Overview 

Comprehensive Care of Oakland, L.P. (“CCOO”) and, its general partner, Comprehensive 

Care of California, LLC (“CCOC”) operate a 99 bed skilled nursing facility with 66 beds 

designated as sub-acute care located at 1833 10th Street, Oakland, CA (Facility Property). The 

members are as follows: 

 

11 For current and historical Visa Bulletins, see https://travel.state.gov/content/visas/en/law-andpolicy/bulletin.html, and the relevant date in each chart is under "A. Final Action Dates for 

Employment-Based Preference Cases" in the final row for "5th Regional Center (I5 and R5)." 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 20 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

CCOO: 

CCOC 40 % interest 

Investors 60% interest 

EB-5 Investor Limited Partners 

CCOC: 

Shirley Ma 50% interest 

SFRC 50% interest12

2. Business Plan And Investor Information 

Under its Business Plan, CCOO was to be capitalized with $12.5 million from 25 EB-5 

Investors. CCOO currently has title to the Facility Property. The Business Plan provided for the 

usage of EB-5 funds as capital to acquire the property and complete renovations in the interior 

space with a budget of $2.3 million as well as to hire and train 291 full-time employees when fully 

operational within a five year period. Both of the entities, CCOO and CCOC, have consolidated 

operations to include both the business and real estate. 

After review of the USCIS information submitted to the SEC (USCIS Records), Central 

Escrow information, and 2015 CCOO Tax Return, the EB-5 Investor funds invested for the CCOO 

Project would total $12,500,000 (25 investors x $500,000 each). Typically each Investor deposited 

$500,000+ and then various costs were charged for escrow, syndication and other fees. 

Per CCOO USCIS Records, twenty CCOO Project Investors have had I-829 Receipts 

issued and eleven Investors have had I-829 approved. There are noted Investor Exceptions 

outlined as follows: 

(i) Only two CCOO Investor funds went through Central 

Escrow. To date, Receiver is unable to identify deposits of the balance of Investor funds for 

CCOO Investors which did not go through Central Escrow. (Exhibit 3). 

 

12 The Receiver is informed that Ms. Ma contends that she purchased SFRC’s or Thomas 

Henderson’s interest in CCOC, and that she is now the sole member. The Receiver contests that 

transaction and is investigating it further, and reserves all rights with respect to that transfer. 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 21 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

This entity is different from the other EB5 entities as it started as direct job creation 

without escrow accounts and then added the SFRC Regional Center allowing for indirect job 

creation and escrow accounts for Investor funding. 

3. Current Business And Real Estate Status 

The business was recently placed into the Receivership. The Receiver is working with the 

Administrator to continue operations. The Receiver has been advised that some 160 jobs have 

been created while 185 are required. The goal would be to complete the job requirement by 2018. 

The Receiver is advised not all Investor funds were provided to the entity, and that CCOO is short 

some $4 million+. However a loan of $2 million was obtained and secured by the property in 

order to fund cash flow. 

4. I-526 And I-829 Status And Risks For CCOO 

CCOO is both the Enterprise and the JCE, without any separate investment enterprise. 

The project was organized and the first 16 Investors subscribed and filed I-526 petitions to USCIS 

as “direct” Investors without any regional center sponsorship before SFRC was approved by 

USCIS as a regional center on November 30, 2011. This means that these 16 Investors only can 

claim jobs for 160 direct employees of CCOO. All 16 Investors were admitted as conditional 

permanent residents, since the USCIS chart assigns an “alien number” to them, which normally 

only happens at the point of immigrant admission. Nine of the 16 appear to have received I-829 

approval, and the USCIS chart shows a case number but no action on the other seven direct 

Investors’ I-829 petitions. (Exhibit 1, Divine Decl., ¶ 40).

Of the nine regional center sponsored Investors, who could also claim indirect job creation, 

one was denied or withdrew at the I-526 stage and never immigrated (and presumably was 

refunded), two have I-829 petitions approved, and two have I-829 pending with USCIS. The other 

four have been admitted as conditional residents but have not reached the point of filing their I829 petitions or the end of their conditional residence period. (Exhibit 1, Divine Decl., ¶ 41).

All CCOO investors at least have been admitted as conditional residents. Therefore, under 

newly announced USCIS policy, termination of the regional center will not hinder the regional 

center sponsored Investors from claiming credit for the indirect job creation they need to qualify 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 22 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

for I-829 approval. They must maintain their investment in the NCE through the end of 

conditional residence, which is when their respective I-829 petitions are due. CCOO is a going 

concern skilled nursing facility apparently operating profitably, so as long as the owners or 

Receiver do not sell the NCE before the end of their conditional residence (the date their I-829 

petitions are due), the investors can have a chance of meeting the requirement to sustain their 

investment, subject to issues discussed below. (Exhibit 1, Divine Decl., ¶ 42).

The economic analysis prepared for the regional center sponsored Investors (and approved 

by USCIS when it approved the I-526 petitions) projected that if 185 direct jobs were created, this 

would result in 55 indirect and induced jobs, for a total of 240, which would be just enough for the 

24 investors who have immigrated. CCOO currently employs about 160 workers, but it has 

reasonable plans to increase employment to 185. Thus, it appears that all 24 Investors can meet 

their job creation requirement through continued operation of CCOO. (Exhibit 1, Divine 

Decl., ¶ 43).

However, it appears that only $8 million of the $12 million invested by the 24 active 

CCOO Investors actually made it to CCOO, with $4 million diverted through SFRC. It appears 

from the Declaration of Ellen Chen that some of the $8 million might have been first used to buy 

assets or pay other expenses for CallSocket or other entities but then other capital commingled 

from other Enterprises was restored to CCOO , and it is not clear what USCIS might make of that. 

The Receiver can try to recover and restore some of the net diverted funds to CCOO and use them 

perhaps to repay financing that someone might have had to invest in order to cover for the missing 

EB-5 capital, treating that other capital as bridge financing that USCIS policy allows EB-5 capital 

to repay. Or restored capital might be used for marketing or other expenses to expand operations 

to the point that the last of 185 direct employment positions could be filled, as is needed. Even 

without any restoration, investors could argue in their I-829 petitions that they substantially met 

the investment requirement because (1) they invested in good faith with no knowledge or 

expectation of or participation in the diversion, (2) two thirds of their capital made it to and was 

spent in job creation in the Enterprise, and (3) the required jobs have been created. USCIS might 

find that failure of the missing EB-5 capital to make it to the Enterprise constitutes a more material 

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failure to substantially meet the investment requirement. Investors can argue that they had no 

control over that and should not be penalized for it and it should not make a difference at which 

level Mr. Henderson diverted the funds. It is not clear how USCIS would consider this. 

(Exhibit 1, Divine Decl., ¶ 44).

Because CCOO is a functioning and apparently self-sustaining business on its way to 

create the necessary number of jobs, and because all of its investors have been admitted as 

conditional residents, the major problem is meeting the “sustainment of investment” 

requirements. (Exhibit 1, Divine Decl., ¶ 45).

While USCIS might deny remaining I-829 petitions on that basis alone, there is a credible 

opportunity for the Investors to be approved on the basis of substantially meeting the sustainment 

requirement. The last four investors need CCOO to remain operational in order to maintain their 

investment until they reach the end of their conditional residence period. Id. 

5. Recommendation 

These Entities (CCOO and CCOC) were added to the Receivership on June 5, 2017 

pursuant to the Order Extending Scope of Receivership. The Receiver is working with the existing 

Administrator regarding ongoing operations. It appears that this entity may be able to complete the 

job creation requirement and would try to work through the use of investment funds requirement 

in order to obtain the final I-829’s for the Investors. 

The Receiver anticipates obtaining a valuation of the business and real estate assets. 

D. CALLSOCKET, L.P. 

1. Overview 

CallSocket, L.P. and CallSocket, LLC (CS) funded and operated a call center business in 

Oakland and an incubator technology business ( Runway) in San Francisco, CA. The members 

are as follows: 

CallSocket, LP: 

CallSocket, LLC 40% interest 

Investors 60% interest 

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CallSocket, LLC: 

SFRC 85% interest 

Clement Chin 10% interest 

Max Shapiro 5% interest 

SFRC: 

Thomas Henderson 50% interest 

Matthew Henderson 50% interest 

2. Business Plan And Investor Information 

Under the EB-5 program, CallSocket, LP is the New Commercial Enterprise (“NCE”) and 

the Job Creating Entity (“JCE”). The Business Plan provided for the use of EB-5 funds of $15 

million from 30 investors. (Exhibit 4). The loan proceeds were to be used to facilitate the call 

center operations 24 hours a day and 7 days a week and build out the call center premises located 

at the Tribune Tower in Oakland and the incubator space at the Twitter building at 1355 Market 

Street, San Francisco, CA. CS was to create 191 direct full-time jobs and 267 indirect jobs for a 

total of 458 jobs within 24 months of operation. CS also planned to hire and train 500 full time 

employees when fully operational within five years. 

After review of the USCIS investor status information submitted to the SEC, (“USCIS 

Records”), Central Escrow information and the 2015 CS Tax Return, the EB-5 Investor funds 

invested for the CS Project would total approximately $18,000,000 (36 Investors x $500,000 

each). Typically each Investor deposited $500,000+ and then various costs were charged for 

escrow, syndication and other fees. 

Per the CS USCIS Records, 33 of the CS Project Investors have had I-829 Receipts issued. 

There are noted Investor Exceptions outlined as follows: 

(i) The Receiver received funds in April 2017 from Central 

Escrow for one CS investor in the amount of $550,000.00. These funds are being held by the 

Receiver. 

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(ii) One investor, whose investment funds were received by 

Central Escrow and transferred to CS, does not appear on the CS USCIS Records but does appear 

on CS 2015 Tax Return. 

(iii) Three investors appear on CS USCIS Records and 2015 CS 

Tax Return but no receipt/transfer of investor funds reflected on Central Escrow summary or 

identified as deposited directly to CS account. (Exhibit 5). 

3. Current Business And Real Estate Status 

The call center business was closed on July 20, 2016 pursuant to an order of the State 

Court issued in the State Court Action13 due to insufficient revenues to sustain the business. The 

sale of the assets of Runway was approved by minute order (Docket No. 183) entered on June 22, 

2015 by the the District Court. 

CallSocket Holding Company, LLC (“CSHC”) held title to the real estate located at 409 

13th Street in Oakland, CA. However based on the tracing of funds prepared by Marvin Tate CPA 

in the State Court Action (“Tate Tracing”), the property was purchased with CS, LP funds of 

$500,000 and SFRC/CSHC/CCOO, L.P. funds of $1,340,000. (Exhibit 6). The real property was 

sold on December 29, 2016 for $20,400,000 gross and $10,326,326 net per the settlement 

statement. (Exhibit 7). 

4. I-526 And I-829 Status And Risks For CS 

Like CCOO , CS, L.P. also was both the Enterprise and the JCE, although apparently all 

Investors were sponsored by SFRC and planned to take credit for indirect job creation through the 

operation of a call center business. Thirty-six Investors placed capital in CS, even though the 

Business Plan only called for 30. It appears that all of the Investors have been admitted as 

conditional residents, and all but one have filed their I-829 petitions (Hong Zhao, due August 4, 

2017). The packages filed with USCIS for the I-829 petitions asserted ultimately that all of the $18 

million EB-5 capital investment had been spent in the project (much of it in buying and renovating 

 

13 Young v. Henderson et al., Case No. RG15778891, pending before the Superior Court of the 

State of California, County of Alameda. 

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office space) and that all of the required jobs had been created through the direct employment of 

more than 230 direct full-time workers and 146 indirect and induced jobs determined by 

multiplying the 230 direct jobs by a multiplier provided in the RIMS II economic model for the 

broad industry category for business support services. (Exhibit 1, Divine Decl., ¶ 46). 

USCIS policy requires that the Investors sustained their investment until their I-829 

petitions were due. Almost all of the CS Investors had filed their I-829 petitions (within 90 days 

of when due) before the Receiver started selling assets associated with CS. It seems unlikely that 

USCIS would find that these sales prevented them from meeting their “sustainment" requirement.” 

What may be evaluated in the I-829 adjudication, in light of the SEC allegations and investigation, 

is whether the capital that came into CS was used properly by and remained in CS. Diversion of 

capital from CS into other entities or to Mr. Henderson personally and commingling with other 

entities, all before the Investors reached the end of their “sustainment period,” could be found to 

undermine the “Investors” eligibility even if the jobs were created and even if the capital actually 

started at CS. (Exhibit 1, Divine Decl., ¶ 47). 

USCIS might audit and challenge CS claims of employees, but it is not currently apparent 

that the workers claimed were not in fact employed at the time the respective filings were made to 

USCIS. The facility at the Twitter Building at 1355 Market Street in San Francisco was referred 

to in all immigration filings as a sales office for the call center business when in fact it was a 

technology incubator. If this “Runway’ technology incubator business was pursued before the 

Investors were admitted to the U.S. as conditional residents, USCIS could use this inconsistency 

with the business plan as “material change” and thus a basis to deny I-829 petitions on the ground 

that the I-526 petitions were approved in error. Investors would counter that the number of 

workers involved in the Runway incubator (reportedly only about six in 2017) is immaterial, the 

salaries of those particular incubator employees were unusually high (so that their indirect effect 

was even greater than each call center worker), and the industry of “business support services” 

would cover the incubator workers anyway. If the use of the Twitter facility for a technology 

incubator rather than a call center sales office occurred after the investors were admitted as 

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conditional residents, USCIS policy would not support a challenge even to a material change to 

the business plan. (Exhibit 1, Divine Decl., ¶ 48). 

CS employment dwindled and ultimately ended, but USCIS policy allows the workers to 

be counted as long as the jobs were created originally with the intention that they be permanent (to 

last at least two years). There is no evidence that such intention did not exist. (Exhibit 1, Divine 

Decl., ¶ 49). 

Most importantly, because almost all of the Investors have reached the end of their 

“sustainment period” and created enough jobs before filing I-829 petitions, and because the 

overwhelming majority of operations of CS have been disposed of, it does not appear that 

prospective action in managing or disposing of the remaining CS business operations will have 

meaningful impact on the adjudication of the Investors' pending I-829 petitions. The main issue of 

concern is whether substantially all of their investment made it into CS and remained there 

through the end of their sustainment period. If it did not, then the Receiver faces challenges of 

recovering diverted funds and what to do with them if diverted. (Exhibit 1, Divine Decl., ¶ 50). 

More likely, Investors would need to rely on arguments of substantial compliance as 

discussed above. Id. 

5. Recommendation 

CS I-829’s should continue to be processed by USCIS. (USCIS does not require that the 

jobs, once created, persist until the I-829 filing or approval in order to count toward I-829 

approval.) 

The Receiver recommends the completion and closing of the Runway asset sale. 

E. CALLSOCKET II, LP 

1. Overview 

CallSocket II, LP and CallSocket II, LLC (“CS II”) funded and currently operate a call 

center business with limited personnel in Oakland, CA. The members of CS II are as follows: 

CallSocket II, LP: 

CallSocket II, LLC 61.666657% interest 

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Investors 48.333343% interest 

CallSocket II, LLC: 

SFRC 50% interest 

Allan Young 50% interest 

SFRC: 

Thomas Henderson 50% interest 

Matthew Henderson 50% interest 

2. Business Plan And Investor Information 

Under the EB-5 program, CallSocket II, L.P. (“CS II”) is the NCE and the JCE. The 

Business Plan provided for the use of EB-5 Funds in the amount of $15 million from 30 investors. 

(Exhibit 8). The loan proceeds were to be used by CS II to facilitate the call center operations 

twenty-four hours a day, seven days a week, located on four floors of 519 17th Street (Dufwin 

Building), Oakland, CA. During the State Court Action receivership, CS II was initially located at 

the Tribune Tower and subsequently moved to one floor of the Dufwin Building. CS II was 

projected to create 458 direct and indirect jobs and will create 300 direct full-time jobs within 24 

months. They planned to hire and train a total of 373 employees when fully operational in five 

years. The Receiver obtained a CS II, USCIS Expenditures submittal from Marvin Tate, CPA with 

a summary attached. (Exhibit 9). Based on the filing of I-829’s, it appears that a CS II submittal 

was filed with USCIS. The summary brings to light issues relating to use of funds and job 

creation. In particular in the “Wages” category under CS allocation and SFRC allocation columns 

indicates at April 30, 2016 a total of $2,782,381 and at May 31, 2016 at total of $3,316,060 before 

any CS II employees were hired or jobs created. 

After review of the USCIS information submitted to the SEC (USCIS Records), Central 

Escrow information and 2015 CS II Tax Return, the EB-5 Investor funds invested for the CS II 

Project would total approximately $15,000,000-$16,000,000 (30-32 Investors x $500,000 each). 

Typically each Investor deposited $500,000+ and then various costs were charged for escrow, 

syndication and other fees. 

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Per the CS II UCIS Records, no CS II Investor has had an I-829 Receipt issued. There are 

noted Investor Exceptions outlined as follow: 

(i) One Investor, whose investment funds were received by 

Central Escrow and transferred to CS II, does not appear on the CS II USCIS Records or 2015 CS 

II Tax Return (but does appear on NA3PL, L.P. I-526 Case Investor listing). 

(ii) One Investor appears on CS II USCIS Records and 2015 CS 

II Tax Return but no receipt/transfer of investor funds reflected on Central Escrow summary or 

identified as deposited directly to CS II account. 

(iii) Two investors, had investment funds refunded by Central 

Escrow but still appear on CS II USCIS Records but are not reflected as Investors on 2015 CS II 

Tax Return. (Exhibit 10). 

3. Current Business And Real Estate Status 

After the sale of the Dufwin Building, the call center entered into a month to month lease 

for the full fourth floor offices where the business is currently operating on a limited basis. The 

State Court ordered a hiring freeze and so employees have not been hired since the move to the 

Dufwin Building in the Fall of 2016 and attrition leaves the call center with only a dozen or so 

employees. 

There are two options available for the call center as follow: 

(i) operate the call center; or 

(ii) close the call center business. 

The Receiver has a proposal with a summary business plan that includes financials with 

assumptions and strategies from a call center operator, Akila Digital, (Exhibit 11) that would 

require funding of approximately $2.15 million to gear up operations in order to create jobs for CS 

II. The primary issue in operating the call center is the source of funds necessary for substantial 

hiring and ongoing operations. It appears that there are two sources of funding available with 1) 

direct funding from Investors who may benefit from the job creation; or 2) use of existing 

receivership estate funds. The difficulty with using the receivership estate funds is that the 

commingling and diversion of funds makes it difficult to separate out ownership of the funds by 

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each entity (in the absence of a forensic accounting) so that the only funds used to operate the CS 

II call center are truly CS II funds. 

CS II. held title to the real estate at 519 17th Street (Dufwin Building) and 1750 Broadway, 

both which are located in Oakland, CA. However, based on the Tate Tracing, the Dufwin Building 

was purchased with funds from CS II Investors but 1750 Broadway was purchased with 

$1,650,000 in funds from CS,and over $1 million in funds from SFRC. (Exhibit 12). 

The Dufwin Building was sold on November 30, 2016 for a $8,400,000 gross and 

$7,901,068 net, while the 1750 Broadway property was sold on October 16, 2016 for $9,200,000 

gross and $2,382,135 net.14 (Exhibits 13-14). 

4. I-526 And I-829 Status And Risks For CS II 

Like CS, CS II was both the Enterprise invested in and the JCE. The original offering 

documents were quite vague about the business plan and arrangements, but a response to a USCIS 

“request for evidence” apparently used identically for all Investors reflected that SFRC planned to 

operate CS , CS II, and CS III (as defined below) as one business with commingled accounts and 

operations. (Exhibit 1, Divine Decl., ¶ 51). 

The RFE response's cover memorandum boldly acknowledges that $100,000 of the Dufwin 

Towers purchase was provided from CS, and states: 

SFRC has transferred capital from its two CallSocket projects to its own accounts 

to develop and pay the expenses of all three of its CallSocket projects. CallSocket, 

LP, CallSocket II, LP, CS II, and CallSocket III, LP are three phases of the same 

project: the development and operation of customer contact centers in the bay area. 

They share the same senior management, same business model, same name, same 

affiliate structure with SFRC, although they are separate limited partnerships 

located in separate buildings in Oakland. 

A declaration of Tom Henderson in the RFE response includes this statement at 

paragraph 8: 

As the check registers also demonstrate, SFRC has withdrawn capital from 

CallSocket, LP and CallSocket II, LP for SFRC to purchase the “I. Magnin” 

building on behalf of CallSocket Ill, LLC, which owns it in trust for CallSocket Ill, 

 

14 The Dufwin Building and 1750 Broadway were collateral for the same Opus Bank loan. The 

sale proceeds for 1750 Broadway were offset by payment in full of the joint loan resulting in 

lower net proceeds compared to the Dufwin Building which was no longer encumbered by the 

loan at the time of sale. 

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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 31 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

LP and other owners. The purchase of this building completes the real estate 

purchases for all three CallSocket projects. Funds are now being raised for 

CallSocket III, LP. Once acquired these funds will be used to repay the other 

CallSocket limited partnerships. The CallSocket group will then be fully funded 

and will complete its business development and hiring. 

Id. 

Apparently USCIS approved the CS II Investors’ I-526 petitions after reviewing the RFE 

Response. (Exhibit 1, Divine Decl., ¶ 52).

Twenty-nine EB-5 Investors subscribed to the offering and obtained I-526 approvals. 

Some of those approvals were as early as February of 2014, and at least some of the Investors 

have been admitted as conditional residents and maybe even have reached the end of their 

sustainment period. The government charts do not reflect any immigration progress or filings by 

any CS II investors after their I-526 approval and do not reflect the I-526 filing date that marks the 

place in the queue for visa numbers, applicable as a practical matter to investors born in mainland 

China.15 The declaration of Tom Henderson dated November 16, 2016 supporting an I-829 

petition states that as of that time half of the CS II investors had been admitted as conditional 

residents and the others awaited visa numbers. A chart provided by James Yang reflects that all 

but two CS II Investors have been admitted as conditional residents, 10 CS II Investors have filed 

I-829s, one is due to file I-829 on June 28, and the rest are due to file I-829s in November 2017 or 

beyond. Therefore, all but two Investors are immune to effects of regional center termination and 

new material changes to the Business Plan, but most need to sustain their investment for more 

time, and many for substantially more time. (Exhibit 1, Divine Decl., ¶ 53). 

The economic analysis submitted in I-526 filings based the creation of direct and indirect 

jobs based on revenues, applying a multiplier times the projected annual revenues to derive a total 

number of direct and indirect jobs. At the I-829 stage, a different economic analysis has been 

supplied using direct operational jobs times a RIMS II multiplier of just under 1.6 to yield the total 

 

15 Currently the State Department's Visa Bulletin shows that the EB-5 investors born in mainland 

China who are at the front of their queue for visa numbers, based on the date of I-526 filing, filed 

their I-526 before June 8, 2014. See the State Department's monthly Visa Bulletin available at 

https://travel.state.gov/content/visas/en/law-and-policy/bulletin.html. 

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direct and indirect jobs created. In December of 2016 the project papers submitted with an I-829 

claimed creation of 63 direct jobs for a total of 100 direct and indirect jobs. USCIS may find a 

basis to challenge the direct jobs. It is unknown how many creditable direct full-time jobs were 

created in CS II before jobs were lost. According to the Receiver only about a dozen employees 

remain at CS II. (Exhibit 1, Divine Decl., ¶ 54). 

The overwhelming majority of CS II Investors who already were admitted as conditional 

residents may claim all direct and indirect jobs even if the regional center becomes terminated. 

The few who have not been admitted might suffer I-526 revocation based on regional center 

termination, failure to sustain the investment (particularly in light of commingling and diversion), 

and material change in the credibility of the plan to reach the necessary level of job creation. 

(Exhibit 1, Divine Decl., ¶ 55).

It is unknown the extent to which capital of CS II was diverted from CS II. The Receiver 

could consider above strategies concerning diversion and commingling. This issue could 

independently give rise to I-526 revocations and prevent I-829 approvals. (Exhibit 1, Divine 

Decl., ¶ 56). 

For Investors who had been admitted as conditional residents already, the Receiver's 

closing down of CS II operations might not be independently fatal to the Investors' immigration 

pursuits if the Receiver were able to use proceeds from sale of buildings to re-establish call center 

operations. Given the purported interdependency of the operations of the three CallSockets, it is 

not clear whether jobs created already for CS and CS II and then lost would be counted or 

disregarded in USCIS analysis of job creation for CS II in a resurgence of call center operations. 

USCIS could argue that newly created jobs cannot count again without subtracting the previously 

created and lost (and credited) call center jobs. Investors could argue the opposite. (Exhibit 1, 

Divine Decl., ¶ 57). 

USCIS could use the liquidation of CallSocket assets (particularly the sale of the Duffwin 

building) as a basis for denial of some Investors, asserting that the liquidation occurred before the 

jobs were created that would be credited for those investors. Id. 

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In summary, CS II presents probably the “closest call” whether the overwhelming majority 

of investors have a meaningful chance to retain immigration benefits. Some liquidated assets are 

available to re-deploy in the original business plan for a call center. Given the commingling, it 

might not be clear which NCEs’ investors should have the opportunity to use the assets available 

to the Receiver. If that problem can be resolved so that enough capital is available to make a 

credible effort to create 182 direct jobs (times a multiplier of 1.6 to yield 290 direct and indirect 

jobs), most of the Investors could have a basic argument for I-829 approval. USCIS could choose 

many grounds, discussed above, to deny those petitions, and the chances of success are well below 

50%. The interest of the Investors in pursuing immigration benefits at the risk of losing any 

liquidation interest and ultimate return should be solicited and considered. (Exhibit 1, Divine 

Decl., ¶ 58). 

5. Recommendation 

CS-II could operate with funding from Investors, if available or receivership funds, if 

approved by the Court. The likelihood of immigration success under CS II may be a possibility 

(under 50%) but certainly has associated risks. CS II would need to sustain the investment per the 

Business Plan and create the required amount of jobs. 

The alternative is to seek court permission, on notice to interested parties and Investors, to 

close the call center. 

F. CALLSOCKET III, LP 

1. Overview 

CallSocket III, LP and CallSocket III, LLC (“CS III”) were funded to operate a call center 

business in Oakland, CA. The members are as follows: 

CallSocket III, LP: 

CallSocket III, LLC 34.999987% interest 

Investors 65.000013% interest 

CallSocket III, LLC: 

SFRC 99.00% interest 

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Hu Kexing 1.00% interest 

SFRC: 

Thomas Henderson 50% interest 

Matthew Henderson 50% interest 

2. Business Plan And Investor Information 

Under the EB-5 program, CallSocket III, LP (“CS III”) is the NCE and the JCE. The 

Business Plan provided for the use of EB-5 Funds of $15 million from 30 investors. A ten year 

lease for 50,000 sq ft was proposed for the call center operations along with renovations to the 

property located at the I. Magnin Building at 2001 Broadway in Oakland, CA. (Exhibit 15). CS 

III was to create 300 direct jobs within the first two years of operations. They planned to hire and 

train 373 employees when fully operational within 5 years. The Receiver does not believe that any 

jobs were created or that all of the Investor funds were used for this project. Upon her appointment 

in the State Court Action, CS III was not operational and the I. Magnin Building had already been 

sold. 

After review of the USCIS information submitted to the SEC (USCIS Records), Central 

Escrow information and 2015 CS III Tax Return, the EB-5 Investor funds invested for the CS III 

Project would total approximately $20,000,000-$21,000,000 (40-42 investors x $500,000 each). 

Typically each investor deposited $500,000+ and then various costs were charged for escrow, 

syndication and other fees. 

Per CS III USCIS Records, no CS III Project Investor has had I-829 Receipt issued. There 

are noted Investor Exceptions outlined as follow: 

(i) Three (3) investors whose investment funds were received 

by Central Escrow and transferred to CS III Project do not appear on the CS III USCIS Records or 

2015 CS III Tax Return. 

(ii) Four investors appear on CS III USCIS Records and 2015 

CS III Tax Return but no receipt/transfer of investor funds reflected on Central Escrow summary 

or identified as deposited directly to CS III account. (Exhibit 16). 

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3. Current Business And Real Estate Status 

CallSocket III Holding Company, LLC held title to the real estate at 2001 Broadway (I. 

Magnin building) located in Oakland, CA. However based on the Tate Tracing, the property was 

purchased with funds from CS in the amount of $400,000, CS II in the amount of $2.3 million and 

SFRC in the amount of $2.9 million. (Exhibit 17). 

The I. Magnin Building was sold in February 2016 prior to the appointment of the receiver 

in the State Court Action. (Exhibit 18). The State Court Action receiver took possession of the net 

proceeds of sale from the bank account in late March/early April 2016. The call center was never 

built out for the call center operations and the business was never started. 

4. I-526 And I-829 Status And Risks For CS III 

Like the other two CallSockets, CS III is both the Enterprise and the JCE. It sought 

initially $15 million from 30 Investors but ended up subscribing $19.5 million from 39 investors. 

The initial filings and even an RFE response did not recite the details of commingling funds 

revealed in the CS II RFE responses, but they did say that “The two prior CallSocket projects are 

closely related to and integrated with CallSocket III in that they all provide the same service, share 

the same business model and marketing platform, and are managed by the same experienced 

management team.” The plan proposed to operate from the same I. Magnin building in Oakland as 

part of CS II, with expectation of 300 direct workers within two years and project revenues of 

$10.5 million in year 1, $16.5 million by year 2, and $20.5 million by year 5. An economic report 

presumed the $16.5 million revenues from year 2, applied a multiplier and projected 338 jobs. 

(Exhibit 1, Divine Decl., ¶ 59). 

About half of the I-526 petition are approved, and the rest are mostly pending with a very 

few apparently withdrawn. Only one Investor is shown by James Yang to have immigrated. Only 

six more with approved I-526 petitions have a place in the visa number queue (marked by their I526 filing date) earlier than the currently published cut-off date of June 8, 2014, so no more than 

those seven could have immigrated. The rest are awaiting a visa number or I-526 adjudication. 

No I-829 petitions are due or filed or anywhere close. (Exhibit 1, Divine Decl., ¶ 60). 

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Without having reached the end of the “sustainment period,” the sale of assets and closing 

of call center business could prevent investors from meeting their sustainment of investment 

requirement unless the Enterprise were to re-deploy the capital. For Investors not yet admitted as 

conditional residents (all but one Investor), that re-deployment would need to be in call centers, 

the only industry mentioned in the I-526 package. (Exhibit 1, Divine Decl., ¶ 61). 

As with the other projects, diversion and commingling may pose the greatest challenge to 

Receiver and Investors. It appears from the Declaration of Ellen Chen that almost all of the CS III 

capital was commingled into SFRC and spent on other projects or diverted to uses outside the EB5 entities. It seems likely that USCIS will terminate the regional center and use that to deny and 

revoke the I-526 petitions of the CS III Investors before they could immigrate. The lone 

conditional resident is likely to have conditional residence terminated or be unable to show 

sustainment of investment and job creation. It seems unlikely that the Receiver could recover 

capital sufficient to start another call center from scratch and create 390 jobs. Therefore, the 

chances of preserving immigration benefits for CS III Investors seem quite low. (Exhibit 1, 

Divine Decl., ¶ 62). 

5. Recommendation 

In order to operate CS III, it would require a full start-up with extensive capital funding for 

the call center build-out, set up, operations and job creation. Since obtaining immigration benefits 

is essentially hopeless in CS III due to lack of job creation and missing Investor Funds, the 

Receiver does not recommend proceeding with operations. 

G. NA3PL, LP 

1. Overview 

NA3PL, L.P. (“NA3PL”) and North America 3PL, LLC (“3PL”) operate a warehousing 

logistics business located at 1700 20th Street, Oakland, California (“20th Street Warehouse”) for 

which title is held by Berkeley Healthcare Dynamics, LLC . The members are as follows: 

NA3PL: 

SFRC 38.33% interest 

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Limited Partners 61.67% interest 

3PL: 

Thomas Henderson (“Henderson”) 40% interest 

Clement Chin (“Chin”) 25% interest 

Kevin Shimamoto (“Shimamoto”) 25% interest 

Jennifer Bronson (“Bronson”) 10% interest 

BHD: 

SFRC, LLC 40% interest 

Chin 25% interest 

Shimamoto 25% interest 

Bronson 10% interest 

SFRC: 

Thomas Henderson 50% interest 

Matthew Henderson 50% interest 

2. Business Plan And Investor Information 

Under the EB-5 program, NA3PL, is the NCE with capitalization of $20 million from 40 

EB-5 Investors. The Business Plan requires NA3PL to provide a six year loan of the funds to 

3PL. (Exhibit 19). 3PL is the JCE with its location at the 20th Street Warehouse. The loan 

proceeds were to be used by 3PL to fund the startup expenses of the company, including the 

development and construction of a state of the art warehouse, purchase of equipment and 

furnishing the initial salary and wages, and working capital. The $20 million in loan funds came in 

to 3PL and $15 million of the funds went back out to SFRC. It appears that a substantial portion of 

the investor funds have not been used in this project. 

3PL was projected to directly hire 338 permanent full time jobs by 2017. When 

considering indirect and induced jobs created by the company based on its economic impact, a 

total of 596.8 jobs will have to be created by 2017. The March 2017 current 3PL employee listing 

indicates a total of 29 salary and hourly employees. The company has not met the job creation 

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requirement and it does not appear that it could ever attain the employment goals set forth in the 

Business Plan. 

After review of the USCIS information submitted to the SEC (USCIS Records), Central 

Escrow information and 2015 NA3PL Tax Return, the EB-5 Investor funds invested for the 3PL 

Project would total approximately $18,0,000-$20,500,000 (36-41 Investors x $500,000 each). 

Typically each Investor deposited $500,000+ and then various costs were charged for escrow, 

syndication and other fees. 

Per USCIS Records, no NA3PL Project Investor has had an I-829 Receipt issued. There 

are noted Investor Exceptions outlined as follow: 

(i) The Receiver received funds in April 2017 from Central 

Escrow for one NA3PL Investor in the amount of $560,024.00. These funds are being held by the 

Receiver. 

(ii) One Investor, whose investment funds were received by 

Central Escrow and transferred to the NA3PL Project, does not appear on the NA3PL USCIS 

Records but does appear on 2015 NA3PL Tax Return. 

(iii) Five investors appear on the NA3PL USCIS Records and 

Investment funds deposited to Central Escrow and transferred to the NA3PL Project but do not 

appear on 2015 3PL Tax Return. (Exhibit 20). 

3. Current Business And Real Estate Status 

As contemplated under the Business Plan, 3PL is the main tenant at the 20th Street 

Warehouse. The business has a CES designation and a non-transferable contract with U.S. 

Customs and Border Patrol. There are a few other commercial tenants at the warehouse. 

Berkeley Healthcare Dynamics, LLC (“BHD”) holds title to the real estate at 1700 20th 

Street Broadway located in Oakland, CA. However based on the Tate Tracing, the property was 

purchased with funds from CS. (Exhibit 21). 

These Entities (NA3PL, 3PL, and BHD) were subject to the Court ordered monitorship 

pursuant to the March 29, 2017 Order Appointing Receiver and Monitor. Each of those Entities 

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were recently added to the Receivership pursuant to the terms of the Court’s June 5, 2017 Order 

Extending Scope of Receivership. 

4. I-526 And I-829 Status And Risks For 3PL 

NA3PL, L.P. (NA3PL) used the more common model in which the Enterprise planned to 

raise $15 million of EB-5 investment from 30 Investors and in turn loaned the capital to the JCE, 

North America 3PL, LLC (3PL) for development and operation of a warehousing, third-party 

logistics, and export trading business in leased space in Oakland to be renovated. The economic 

analysis presumed year 2 revenues of $37.9 million found to correlate through the model to 338 

direct operational jobs and 244 indirect jobs, and presumed $2.6 million expenditure on 

construction hard costs found to correlate through the model to 14.8 indirect construction jobs for 

a total of 596 jobs creditable. (Exhibit 1, Divine Decl., ¶ 63). 

In fact NA3PL subscribed 40 investors, with almost half receiving I-526 approval and the 

rest pending I-526 adjudication. None have been admitted as a conditional resident, and only one 

investor filed I-526 before the current visa number cut-off date for investors born in mainland 

China, so only a couple of investors born in Vietnam could have immigrated. Thus, termination of 

regional center would give rise to I-526 denial or revocation, which seems likely, and any 

liquidation of assets would need to lead to prompt re-deployment in similar industry. (Exhibit 1, 

Divine Decl., ¶ 64). 

As with the other projects, diversion and commingling may pose the greatest challenge to 

Receiver and Investors. Only about 30 people are employed in NA3PL JCEs, and it is not likely 

that the requisite jobs could be created. (Exhibit 1, Divine Decl., ¶ 65). 

Therefore, the chances of Investors being able to obtain I-526 approval, admission, and I829 approval seem quite low. (Exhibit 1, Divine Decl., ¶ 66). 

5. Recommendation 

Both Entities and the Relief Defendant, BHD were added to the receivership on June 5, 

2017. The Receiver is working with existing staff regarding ongoing operations. However, it does 

not appear that the existing entity will be able to create the required amount of jobs or be able to 

account for the use of all Investor funds into the entity. 

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H. WEST OAKLAND PLAZA, L.P. 

1. Overview 

West Oakland Plaza, LP (“WOP”) and West End Market, LLC (“West Oakland”) were 

established to operate a shopping center and grocery store in Oakland, CA. The members are as 

follows: 

WOP: 

SFRC 95% interest 

Investor 5% interest 

Note: Per 2015 WOP Tax Return 

Note: Most Investor funds received in 2016 

West End Market, LLC: 

No Information Available 

JL Gateway, LLC: 

SFRC 75% interest 

WOMAC Properties, Inc. 25% interest 

SFRC: 

Thomas Henderson 50% interest 

Matthew Henderson 50% interest 

2. Business Plan And Investor Information 

Under the EB-5 program, West Oakland Plaza, LP is the NCE with capitalization of $10 

million from 20 EB-5 Investors. The Business Plan provided for a loan of the EB-5 Funds to West 

End Market, LLC (“West End”) the JCE. (Exhibit 22). The loan proceeds were to be used to 

develop a grocery store and commercial kitchen space in a neighborhood retail center. The 

development was to include 1) a full-service grocery store that will feature affordable, high quality 

grocery products and sundries; 2) an in-house restaurant; and 3) a commercial kitchen or 

commissary space from which it will prepare food for the deli section of the grocery store. The 

funds were also to renovate the grocery located in the shopping center with a lease of 24,000 sq ft 

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at $50,000 per month. WOP was to create 204 direct jobs or up to 300 with induced and indirect 

impact. 

After review of the USCIS information submitted to the SEC (USCIS Records) , Central 

Escrow information and 2015 WOP Tax Return, the EB-5 Investor funds invested for the WOP 

Project would total approximately $2,000,000 (4 Investors x $500,000 each). Typically each 

Investor deposited $500,000+ and then various costs were charged for escrow, syndication and 

other fees. (Exhibit 23). 

Per USCIS Records, no WOP Project Investor has had an I-829 Receipt issued. 

3. Current Business And Real Estate Status 

The grocery store business was never started, no improvements were ever made to the 

proposed space within the shopping center and no employees were hired. 

JLGateway, LLC holds title to the retail shopping center complex located at 800- 900 

Market Street, Oakland, CA. The shopping center contains approx. 58,500 sq feet of leasable area. 

The site area is 6.52 acres or 283,796 square feet, which includes 1.35 acres or 58,935 sq ft of land 

comprising a common area condominium site that was approved for development of an additional 

14,000 sq ft of retail space within a larger adjacent senior apartment complex. However based on 

the settlement statement, the property was purchased in December 2014 with a deposit of 

$150,000 from SFRC. (Exhibit 24). 

This property has been valued at $10,400,000 by Colliers - Broker Opinion of Value 

(Exhibit 25). The title report shows a loan of approximately $7 million in debt indicating potential 

net sale proceeds. (Exhibit 26). 

The property was placed under state court receiver in late February 2017 and the Receiver 

has engaged a property management company to manage and operate the shopping center. 

4. I-526 And I-829 Status And Risks For West Oakland Plaza, L.P. 

West Oakland Plaza, L.P. (“WOP”) is the Enterprise intended to raise $10 million from 20 

EB-5 Investors and loan that capital to West End Market, LLC as the JCE to develop and operate a 

grocery store, restaurant, and commercial kitchen in a retail center in West Oakland, CA. The 

economic analysis presumed from the JCE's business plan that it would employ 204 direct 

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employees (123 in grocery, 47 in commissary, 12 in restaurant/café, and 22 cross-over jobs) and 

concluded that this would create 96.5 indirect jobs for a total of 300.5 jobs created. (Exhibit 1, 

Divine Decl., ¶ 69). 

Only four Investors subscribed and filed I-526 petitions, which are pending with USCIS. 

Thus, termination of regional center would give rise to I-526 denial or revocation, which seems 

likely, and any liquidation of assets would need to lead to prompt re-deployment in similar 

industry. To be eligible for I-526 approval, Investors would need to show credibility of the 

Business Plan, which may be heavily undermined by the interruption of fundraising arising from 

the receivership, SEC complaint and allegations, etc. Any diversion or commingling of capital 

also would pose challenges to I-526 approval. I-526 approval for the WOP Investors appears 

quite unlikely. (Exhibit 1, Divine Decl., ¶ 70). 

5. Recommendation 

This entity never raised the required investor funds and never started the grocery store 

business as proposed under the Business Plan. It appears that WOP will not be able to create the 

required amount of jobs or sustain the investment (which was never fully funded.) 

The Receiver recommends that the property be marketed and sold. 

I. CALIFORNIA GOLD MEDAL, L.P. 

1. Overview 

California Gold Medal, LP (“CGM”) and Crystal Golden, LLC (“Crystal Golden”) planned 

to support the development and operations of a dairy processing company to source California 

milk and process it into UHT (ultra-high temperature) dairy products specifically for the export 

market. The members16 are as follows: 

CGM: 

SFRC 93 % interest 

Investors 7% interest 

 

16 Per 2015 CGM Tax Return. Most investor funds received in 2016 

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Crystal Golden: 

SFRC 50 % interest 

Steven Weststeyn 40% interest 

Red Rock Capital Mgmt Corp 10% interest 

Central Golden California Farms, 

LLC: 

SFRC 50% interest 

Jake Weststeyn 50% interest 

SFRC: 

Thomas Henderson 50% interest 

Matthew Henderson 50% interest 

2. Business Plan And Investor Information 

Under the EB-5 program, California Gold Medal, L.P. (“CGM”) is the NCE while Crystal 

Golden, LLC is the JCE with its location at the Tipton Plant. The Business Plan provided for the 

use of EB-5 Funds of $50 million from 100 Investors. (Exhibit 27). The loan proceeds were to be 

used by Crystal Golden to fund the startup expenses of the company including sourcing milk and 

the ground up renovation of an existing dairy processing facility. The loan will be due and payable 

in five years after the execution of the promissory note. 

After review of the USCIS information submitted to the SEC (USCIS Records), Central 

Escrow information and 2015 CGM Tax Return, the EB-5 Investor funds invested for the CGM 

Project would total approximately $13,500,000-$24,000,000 (27-48 Investors x $500,000 each). 

Typically each Investor deposited $500,000+ and then various costs were charged for escrow, 

syndication and other fees. 

 Per CGM USCIS Records, no CGM Project Investor has had I-829 Receipt issued. There 

are noted Investor Exceptions outlined as follow: 

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(i) The Receiver received funds in April 2017 from Central 

Escrow for 32 CGM Investors in the amount of $15,746,217.00. These funds are being held by the 

Receiver. 

(ii) 27 Investors appear on CGM USCIS Records. 11 of those 

investors’ Investment funds were turned over to the Receiver. 14 of those Investors’ investment 

funds went to CGM Project. 

(iii) One Investor’s investment funds were transferred to CGM 

Project but the investor does not appear on CGM USCIS Records. 

(iv) Only 6 Investors appear on CGM 2015 Tax Return likely 

due to the balance of Investor funds being transferred post 2015. (Exhibit 28). 

3. Current Business And Real Estate Status 

In May 2016, CGM entered into an agreement with Shambaugh & Son LP (“Shambaugh”) 

for design build services for UHT/Aseptic Milk Plant at the Tipton plant. In January 2017, 

Shambaugh completed a Scope of Work/Pricing/Schedule Proposal to commence UHT milk 

production. Shambaugh Guaranteed Maximum Pricing sets forth a cost of approximately $66 

million. (Exhibit 29). 

In December 2016 and January 2017 there was an auction of a majority of the equipment 

located at the plant which netted sale proceeds of $259,033.00. No auction proceeds were turned 

over to the Receiver. Equipment remains for which the auctioneer, M. Davis Group, has submitted 

a proposal to 1) auction the remaining equipment for an estimated auction price of $25,000.00-

$45,000.00 or 2) purchase the remaining equipment directly for $25,000.00. (Exhibit 30). 

The facility has never operated since its purchase in November 2015 for $4 million. 

Property Issues: 

(i) Authorized removal of the auctioned equipment appears to 

have caused extensive damage to portions of the property, including fire safety system no longer 

functioning, power to northern end of building disconnected, portions of walls removed, general 

debris. 

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(ii) There were issues with 3 wells on the property. Two were 

repaired (outstanding invoice due for work $46,000+); one well was determined to be 

unrepairable. Proposal to dig a new well on the property was prepared by Arthur Orum Well 

Drilling but not performed due to permitting issues on a portion of the property. 

(iii) The Tipton property currently accrues costs of approximately 

$10,000.00 per month for basic services (minimal required security, electricity, sewer and guard 

trailer) which amount currently does not include loan payments, secured property tax payments or 

insurance. 

Central California Farms, LLC owns the real estate at 417 and 615 N Burnett Road, 

Tipton, CA. The title report indicates a loan of $1.5 million at interest only of $15,000/month 

payments with Mid-Valley Financial, Inc. Interest has been paid through June 2017. The loan 

comes due on November 1, 2017 at which time the full $1.5 million will be due. Interest payments 

for July through October will be an additional $60,000.00. (Exhibit 31). The real property taxes 

are delinquent in the approximate amount of $160,0000. The commercial liability and umbrella 

insurance coverage (due to expire 11/3/2017) are at issue due to unoccupied building status. 

The current value based on a recent Broker Opinion of Value and reinspection after the 

equipment auction (removal) is $1.1 million which is less than the current debt on the property. 

(Exhibit 32). 

4. I-526 And I-829 Status And Risks For CGM 

California Gold Medal, L.P. (“CGM”) is the Enterprise that is to make a business of 

loaning EB-5 capital to Crystal Golden, LLC (the JCE) to develop and operate a new Ultra-High 

Temperature milk processing and production facility in Tipton, CA for sale and export to global 

markets. The JCE was to spend the capital in renovating and upgrading a leased facility, buying 

equipment, and startup of operations. The plan was to raise $50 million from 100 EB-5 Investors, 

and job creation projections were based on an assumption of over $6 million in construction 

expenditures, $23 million in equipment purchases, and $241 million revenues in operational year 

2. The economist projected 1,565 direct and indirect jobs from operations and equipment 

expenditures and indirect jobs from construction expenditures. The USCIS chart reflects 27 

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Investors filed I-526 petitions, while the chart from James Yang reflects 47 investors who filed I526, but both charts reflect that all petitions are pending at USCIS. Thus, termination of regional 

center would give rise to I-526 denial or revocation, which seems likely, and any liquidation of 

assets would need to lead to prompt re-deployment in a similar industry. (Exhibit 1, Divine 

Decl., ¶ 67). 

To be eligible for I-526 approval, Investors would need to show credibility of the business 

plan, which may be heavily undermined by the interruption of fundraising arising from the 

receivership, SEC complaint and allegations, etc. Any diversion or commingling of capital, which 

appears to be substantial, also would pose challenges to I-526 approval. I-526 approval for CGM 

investors appears quite unlikely. (Exhibit 1, Divine Decl., ¶ 68). 

5. Recommendation 

It does not appear that this Entity will be able to create the required amount of jobs or be 

able to account for the use of all investor funds. 

The Receiver recommends the sale of the remaining equipment to M. Davis and immediate 

removal. 

The Receiver will seek Court approval to negotiate with the lender to accept a deed in lieu 

of foreclosure or stipulate to a non-judicial foreclosure. 

J. San Francisco Regional Center, LLC (“SFRC”) 

As of the date of the appointment of the Receiver, SFRC operated as the Regional Center 

from the Tribune Tower located at 409 13th Street, Oakland California (. The members of SFRC 

are as follows: 

SFRC: 

Thomas Henderson 50% interest 

Matt Henderson 50% interest 

The Immigration Overview describes in detail the Regional Center issues. 

SFRC has interests in entities as follows: 

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(a) This Is their Restaurant, LLC is a restaurant located in the Tribune 

Tower of which SFRC owns a 75% interest. The other members have proposed a buy-out of the 

SFRC interest however extensive construction work is anticipated which may affect the value. The 

Receiver will be seeking a valuation of the business. 

(b) The Receiver believes there may be additional SFRC interests 

available to the estate and is investigating. 

K. Project Summary With Priorities 

The Receiver will be filing motions relating to specific project issues with priorities as 

follows: 

CS II – File a motion seeking authority to either operate the call center with a funding 

source that addresses the current funding issues, or to shut down the operation; 

CGM – File a motion for authority to sell the remaining equipment and either provide the 

lender with a deed in lieu of foreclosure or to stipulate to a non-judicial foreclosure; 

WOP – File a motion for authority to retain a broker to market and sell the real estate; 

3PL – Meet with the necessary parties to discuss future operations, wind down, and sale of 

real estate; 

CCOO – Obtain business and real estate valuations; 

SFRC – Liquidation of interests in other entities; and 

Forensic Accounting – expand scope of CPA engagement. 

L. FORENSIC ACCOUNTING 

In the course of preparing the Recovery Plan, it became apparent to the Receiver and her 

professionals that a forensic accounting is required in this case. One of the recommendations for 

preservation of Investors’ immigration benefits is a forensic accounting to assist the Receiver to 

trace the Investors’ funds from the escrows through the NCEs and beyond in the hopes of 

restoring those funds to the rightful NCEs. In addition, the forensic accounting will assist the 

Receiver in following the flow of funds from each of the NCEs to SFRC and beyond in analyzing 

litigation claims against third party claims for the recovery of Investor funds wrongly transferred, 

and the feasibility of recovery of those funds. Last, the forensic accounting will assist the 

Case 3:17-cv-00223-RS Document 185 Filed 06/26/17 Page 47 of 48
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009589.0024\4756117.1 RECEIVER’S RECOVERY PLAN 48 3:17-CV-00223-RS Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24t h Floor Oakland, California 94607-4036 

Receiver in determining actual ownership of the comingled funds presently held in the 

receivership estate as the proceeds of real property sales, so that those proceeds can be restored to 

the rightful NCE Entities. 

The Receiver has requested a proposal for a complete forensic accounting along with a cost 

estimate from the Receiver’s accountants, Bachecki, Crom & Co., LLP, CPAs. 

M. LITIGATION 

The Receiver is investigating and reviewing numerous causes of action and claims against 

third parties and when appropriate, will seek Court authority to pursue those claims pursuant to 

Paragraphs 39 and 40 of the Order Appointing Receiver and Monitor. 

DATED: June 26, 2017 

By: /s/ Susan L. Uecker 

 Susan L. Uecker, Receiver 

Case 3:17-cv-00223-RS Document 185 Filed 06/26/17 Page 48 of 48