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EB5 Scam with Mamtek US Inc.?

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EB5 Scam with Mamtek US Inc.?

Gov. Nixon talks with Mamtek Chairman Bruce Cole Friday after the announcement.

Gov. Nixon talks with Mamtek Chairman Bruce Cole Friday after the announcement.

With half of the time that the EB-5 program has been passed being rife with scams, and the reputation that all of that is behind the USCIS, a few glitches come to the forefront and present themselves as possible scams.

Many cities and towns around the nation are in the throws of full fledged death.  Of course, companies know this.  Business people make it their business to know who, what, when and where people are hurting financially.  Also, there is no end to how much you can bend and snap people with the leverage of their own greed.  Whole city councils and legislatures can be lured deep deep into a dark pit, with no end in sight, with but a promise of 50 jobs, yes 50 jobs.

Enter the village of Moberly.  Moberly is a village in Randolph County, Missouri, United States. According to the 2008 census bureau estimate, the population was 14,227.  The city was incorporated 1868. The Moberly Micropolitan Statistical Area consists of Randolph County. Bob Riley is the current mayor.

Upon this poor unsuspecting village comes a company that is not a company.  They claim to be called Mamtek US Inc. a subsidiary of Mamtek International.  However, with but 2 seconds of looking them up on dunn and bradstreet, one immediately can see that this “corporation” has no officers.  Anyone doing 5 more minutes of research could have found that Mamtek International doesn’t even exist.  Those claiming to be the CEO, claim that they have a very large facility in Fujian, China, manufacturing Sucralose [ a cancer causing artificial sweetener ].

In a Columbia ad for a Mamtek Operations Manager, a description of the company is given: “Mamtek was launched five years ago in the Chinese province of Fujian when senior market leaders from related industries declared their accelerating need for the sugar alternative called sucralose. … Our first and second-generation sucralose manufacturing facilities were built by Mamtek International in China….”

“Mamtek sought to expand its operations from Fujian, China, into the United States to capitalize on America’s reputation for manufacturing quality explains Thomas Smith, CEO of Alexandria, Va.-based Capital Business Development Associates.”

The address for the China headquarters of Mamtek International is listed as 183 Queen’s Road, Hong Kong. Other reporters could not find an address for the plant in Fujian.

Bruce Cole

Bruce Cole

But a quick call to the largest Sucralose manufacturer in China is equally revealing. JK Sucralose, the largest producer of sucralose in China. A representative of the company told another reporter he had never heard of Mamtek. He contacted the reporter at a later time and said he had “asked around” and no one he had contacted had heard of Mamtek International either. Generally companies keep track of competitors so it is unusual the top producing company would not know of Mamtek.

Corey Mehaffy, president of Moberly Area Economic Development Corporation, explained that bringing the company to Moberly, a normal six to nine month process, was accomplished in 72 days. The company was in a hurry because they had prepaid contracts in hand that had to be filled as soon as possible.

“The fact that we have in-hand large, long-term contracts from global customers, even before breaking ground on the new factory, attests to the high demand for our product,” said Bruce Cole, Mamtek Chief Executive Officer.

“Mamtek U.S., Inc. has a location in Irvine, CA. Mamtek U.S., Inc. has no known officers.Mamtek U.S., Inc. filed as a Statement & Designation By Foreign Corporation on Thursday, October 14, 2010 in the state of California and is currently active.” Dun & Bradstreet

So clearly the village of Moberly, Mo. is in for trouble.  But, wait, they are not alone.  Why bring one small town down, when you can bring a state or even almost another country down with it.

The State awarded Mamtek $7.6 million in Missouri Quality Jobs Program tax credits and $6.8 million in Missouri BUILD program tax credits. The state also provided $2 million in Community Development Block Grant Industrial Infrastructure Program grant funds; $800,000 in funding for job training; and $368,000 for employment recruitment and referral services.

The City of Moberly did its part in attracting the business. It is providing $37 million in bond sales and $8 million from private investors. Moberly also offered another $500,000 in grants and services to the company.

That is a combined investment from the State of Missouri and Moberly of over $63 million.

 

Moberly Mo

Moberly Mo

Corey Mehaffy, president of Moberly Area Economic Development Corporation, said $37 million in bonds were sold through the company of Morgan-Keegan. Proceeds will come to the Industrial Development Authority who will pay the city who will give it to Mamtek. The City of Moberly will be the owner of the structural facility until the bonds are paid.

For its part, Mamtek US Inc. highlighted a little-known U.S. visa program as an added enticement to lure Chinese investors for the failed effort to build a taxpayer-subsidized artificial sweetener factory in Moberly.

Chinese-language investor website promoting Mamtek (this website is in Chinese, but web browsers such as Google Chrome can translate the text to English.)

On a Chinese-language investor website, Mamtek sought 15 people willing to put $500,000 each into the project. In return, investors would receive an EB-5 visa from the U.S. Citizenship and Immigration Service, good for bringing themselves and their entire immediate family — up to three generations — to the United States.

In the solicitation, on a site whose name translates as “Well Trend Immigration Investment VIP,” Mamtek asks investors to put up the money for five years. In return, they will receive stock in Mamtek.

The investment amount — $500,000 — is the minimum to qualify in a designated distressed area such as Moberly; five years is the minimum time for the investment to have qualified for the visa.

Each $500,000 investment must also result in 10 new jobs.

“Investors can make their own decision whether to keep the stocks or not after 5 years,” the Well Trend website says. The website, and a similar solicitation for investors in Chinese on the Moberly Area Economic Development Corp., or MAEDC, website, was translated as part of a joint effort by the Tribune and Missouri Digital News.

The Mamtek investment is included on the USCIS online listing of 184 “regional centers,” with one in almost every state, where investments would result in issuance of an EB-5 visa.

“The companies we list on our website are companies that have been approved as EB-5” issuers, said Marilu Cabrera, spokeswoman for the USCIS North Central Region in Chicago. The region includes Missouri.

Mamtek in 2010 was approved for $17.6 million in state tax incentives and other aid, and Moberly issued $39 million in industrial development bonds to finance construction of its factory. The company was supposed to put up $8 million in private investment.

The incentives were based on a promise that the company would create up to 612 jobs within five years.

Mamtek defaulted on its first bond payment, due Aug. 1, and on Sept. 2 laid off the few people it had hired. The debt payment was made up from reserve funds held by bond trustee UMB Bank. The collapse triggered a downgrading yesterday by Standard & Poor’s of the rating on both those bonds and any future debt Moberly might issue.

Mamtek told the state it had $8 million in private investment, but the Chinese-language solicitation on the MAEDC website says the deal includes $500,000 of Mamtek funding. Finding 15 EB-5 investors would provide the other $7.5 million.

As of this morning, the USCIS website continued to list Mamtek as an approved investment. Cabrera said she was uncertain what would happen to anyone who received a visa as a result of an investment in Mamtek now that the company has apparently gone under.

“We don’t have information on the number of visas, if any, issued to this company,” Cabrera said in an email.

MAEDC Executive Director Corey Mehaffy did not return a call seeking comment. The MAEDC website continues to tout Mamtek as a Moberly success story.

Missouri Department of Economic Development spokesman John Fougere said DED was aware of a local application for federal EB-5 status, but approval of these applications is a federal matter.

Attorney Dan Harris of Seattle, author of the China Law blog on news and advice for people intending to do business in China, said the EB-5 visas explain many things about the Mamtek deal. Some communities rejected Mamtek because the promoters were too pushy and wouldn’t reveal financial details.

“This whole EB-5 thing — right when you told me that, that explains a lot,” Harris said. “They would have made a lot of money off of this.”

Harris’ law firm, Harris and Moure PLLC, specializes in helping American and Chinese companies navigate laws in each country.

He wrote about Mamtek last week on his blog after extensive email conversations with a Moberly resident.

The EB-5 program is limited to 10,000 visas per year. Chinese applications have soared as growing wealth in the nominally communist country has made it a global economic engine.

The USCIS scrutinizes EB-5 applications from China carefully, Harris said, watching out for scams.

“It has mushroomed in the last few years,” Harris said of EB-5 applications from China. “I can’t remember the statistic, but over half the new EB-5s are from people in China. Basically, it is a way to buy U.S. citizenship.”

Harris said he knows bogus EB-5 investment schemes when he sees them because he has been approached repeatedly to set them up.

“There are a couple of reasons why this investment would have been more attractive than legitimate EB-5 investment,” he said. “One is that it would have been a fake.”

The lack of details from Mamtek should have been a warning sign, he said. “The thing that people do — Chinese companies do this to American companies, and smart American companies don’t buy it — is when you start pressing them for information, they act like you are being overly suspicious and things are done differently in China.”

Once an EB-5 visa is issued, the immigrants receive green cards, good for two years in the U.S. After that, they receive permanent residency status.

“I believe if you scratch deeply enough, 95 percent of all Chinese would like to be American citizens,” Harris said. “Especially those who have money.”

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