Complaint,Petition: HONGFEI QU ET AL VS HENRY GLOBAL CONSULTING ET AL

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JEFFREY T. BELL SBN 184876

LAW OFFICES OF JEFFREY T. BELL
11001 VALLEY MALL, SUITE 300

EL MONTE, CA 91731

TEL: 626-280-8787 | FAX: 626-226-5699
JEFF@JTBLWYER.COM

ATTORNEY FOR PLAINTIFFS

Nov 30 2017
R. carter Executor OF +!
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SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES, CENTRAL DAIS, 0 3 5

HONGFEI QU;
HONGYAN LAI;
XIONGXIAN ZHENG;
RONGXIN FU;

YUE YI;

PENG JI;

HANMEI ZOU;
PEIHONG DUAN;
YAN LIANG;

SHAO MEI LU;
LIWEN RONG;

BIN WU;

MEI XU;

LAN LUO;

CHAOLI LEI;

JIANG CHUNHONG;
XUPING HU;
GUANGYU WU;
XIAOFENG ZHAO;
SHUAI WANG;
CHANGQIAN DU;
TING HE;

JIANJU HE;
XIAOYUN DONG;
LI YAO;

BAOPING WANG;
ZHE LIAO;
BOLONG DU;
JINSHAN HU;

RAN NI;

BINBIN YU;

WEI XIU;
JUNYANG HUANG;
ZHIZHONG ZHANG;
SHENGCHAO TANG;
CHUNYU ZOU;

CASE NO.

COMPLAINT FOR:

1. FRAUD

2. BREACH OF FIDUCIARY DUTY
3. BREACH OF CONTRACT

4. INJUNCTIVE RELIEF

5. ACCOUNTING

6. RELEASE OF RECORDS

7. B&P § 17200

HON.
DEPT.

TRIAL DATE: NONE
COMPLAINT FILED:

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COMPLAINT

“ertETOCIOLF TT

CITACASE: BC6S5035
LEA SDEF#:

RECEIPT #: CCHSOS376094

GATE PAID: 11/3017 02:41 PM

PAYMENT: $435.00
RECEIVED:
CHECK :
CASH:
CHANGE :
CARD:

SiG

$435.00
$0.00
$0.00
$0.00SHENG HONG CHENG;
RUI LI;

YIYUN HU;

DANXIA ZHEN;

DA XU;

YING XU;

MEILING ZHANG;
NIMING WANG;
XIAOLE CHEN;
BINGHUI ZHENG;
BAO WANG;

YUAN LI;

HONGHUI DAT;
MAO HU;

WEIHUA LI;

XIAOLI CHEN;
HANZHENG WANG;
XIULAN WU;

JUN XU;

JING LIU;

QING DONG;
ZHIYING CHENG;
YING WANG; and
PEIHUA MA, in their individual and
representative capacity,

Plaintiffs,
vs.

HENRY GLOBAL CONSULTING;
CELONA ASSET MANAGEMENT (USA)
LIMITED,

AMERICAN DREAM FUND, LLC;

LAS VEGAS REGIONAL CENTER;

LAS VEGAS RESORT INVESTMENT
COMPANY, LLC;

SLS TRANCHE 1 LENDER, LLC;

LAS VEGAS RESORT HOLDING, LLC;
STOCKBRIDGE CAPITAL GROUP, LLC;
SBE VOTECO COMPANY, LLC;

SBEHG LAS VEGAS I, LLC;

SBE ENTERTAINMENT GROUP;
EVANS, CARROLL & ASSOCIATES,
INC.;

PAN-AMERICA BUSINESS
CONSULTING LIMITED;

GOLDSTONE ADVISORS LIMITED;
DOES 1 TO 200, INCLUSIVE,

Defendants.

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I. INTRODUCTION

1. Plaintiffs are Class B Members of the SLS Tranche 1 Lender, LLC (Hereafter
“Phase II, LLC”) and each invested $545,000 into the Phase II, LLC as part of an immigrant
investor program that would provide both a USA green card and a return on their investment.
All Plaintiffs were non-USA citizens and were not accredited investors at the time of their
investment. All Plaintiffs, except for five or six, have limited English language skills. None of
the Plaintiffs have any real level of knowledge regarding USA investments of the type involved
in this matter. None of the Plaintiffs had independent USA legal counsel to review any of the
documents prior to signing them or investing in the Phase II, LLC. Many of the investment
documents were only provided in English. Plaintiffs were not given time to review the
documents before signing them. The documents were hidden from the Plaintiffs after they
signed them. Plaintiffs were not even given some of the critical documents to review. The
Plaintiffs relied on the Defendants for translation/explanation of the English documents.

2. The total investment by all Class B Members of the Phase II, LLC combined was
$198,000,000. The Class B Members’ money was used to give a Loan to Defendant Las Vegas
Resort Investment Company, LLC for remodeling the old Sahara Casino in Las Vegas to become
the current SLS Las Vegas Hotel. Although Phase II, LLC was named SLS Tranche 1 Lender,
LLC. In reality, SLS Tranche 1 Lender was the second Phase of immigrant investor financing.
The SLS Lender, LLC (Hereafter “Phase I, LLC”) was the first group of immigrant investors
that invested a combined $200,000,000 to similarly remodel the old Sahara Hotel in hopes of
getting a USA green card and return on their money. This play on words, where Tranche | really
means Phase 2, is synonymous of the deception that was employed by the defendants in this
matter.

3. Because the Loan was designed to allow the Plaintiffs to obtain a USA green
card, there were restrictions on how the Phase II, LLC member funds could be invested and how
the recipient of those funds could operate their business until Phase II, LLC members obtained
their permanent green cards. These restrictions, which were set forth in the marketing material

given to Plaintiffs and the Private Placement Memorandum prepared by the Defendants, were
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used to convince the Plaintiffs that their investment would allow them to obtain a USA green
card and obtain a return on their money. Eventually, the restrictions, in a sometime contradictory
fashion, were laid out in the Loan Agreement and other contractual documents between the
Defendants and the Plaintiffs.

4. Phase I, LLC’s Loan was signed on May 1, 2013. The Phase II, LLC’s Loan was
signed on January 31, 2014. The Loan money from both Phase I, LLC and Phase II, LLC was
depleted by April 15, 2015. Both loans had five-year maturity dates and had an interest rate of
0.5% which was not required to be paid until the loan maturity date. Construction commenced in
February 2013 with a total budget of $320,000,000. When the construction was finished and the
SLS Hotel opened in August 2014, the total construction budget had risen to over $422,000,000.
Once the SLS Hotel opened, it has allegedly not turned a profit from day one and is currently on
the verge of bankruptcy. Defendant Las Vegas Resort Investment Company, LLC and all the
other Defendants are currently attempting to sell the SLS Hotel. However, if the sale is
completed as currently structured would violate many of the immigrant investor program
restrictions. Therefore, the Plaintiffs’ investment in the Phase II, LLC will be completely wiped
out and many of the Plaintiffs will not be able to get their permanent green cards.

5. During the pending SLS Hotel sales process, the Defendants had to provide
Plaintiffs’ legal counsel with various financial information and supporting documentation. It
was only after receipt of these documents, in October 2017, that Plaintiffs were able to discover a
series of agreements between the Defendants for the payment of commissions and management
fees from the Phase II, LLC loan proceeds. The Defendants have refused to produce or even
acknowledge the existence of these agreements, yet the financial records show payments totaling
more than $50,000,000 in these types of fees being paid with another $50,000,000 still being
owed. The payment of these fees violates the agreements between Plaintiffs and Defendants.

6. In this case, the Plaintiffs primarily seek to require the Defendants to abide by the
Loan restrictions so that the Plaintiffs can get their USA green cards and a chance of getting a
return on their investment. The Plaintiffs also seek damages for multiple other acts of fraud,

deceit and concealment carried out by the Defendants. These damages would include the return

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of the improperly earned fees mentioned above. While the claims related to the failure to comply
with the Loan restrictions are straightforward, the other wrongful acts of the Defendants are a
part of a very complex and often confusing series of business transactions that were intentionally
designed to make it almost impossible to uncover the truth of what the defendants were doing
with the Plaintiffs’ investments.
II. PARTIES

7. Plaintiff Yue Yi is an individual and resides in Los Angeles County. Yue Yi is a
Class B member of the SLS Tranche 1 Lender, LLC.

8. Plaintiff Hanmei Zou is an individual and resides in Los Angeles County. Hanmei
Zou is a Class B member of the SLS Tranche 1 Lender, LLC.

9. Plaintiff Lan Luo is an individual and resides in Los Angeles County. Lan Luo is
a Class B member of the SLS Tranche 1 Lender, LLC.

10. Plaintiff Hongfei Qu is an individual. Hongfei Qu is a Class B member of the SLS
Tranche 1 Lender, LLC.

11. Plaintiff Hongyan Lai is an individual. Hongyan Lai is a Class B member of the
SLS Tranche 1 Lender, LLC.

12. Plaintiff Xiongxian Zheng is an individual. Xiongxian Zheng is a Class B member
of the SLS Tranche 1 Lender, LLC.

13. Plaintiff Rongxin Fu is an individual. Rongxin Fu is a Class B member of the SLS
Tranche 1 Lender, LLC.

14. Plaintiff Peng Ji is an individual. Peng Ji is a Class B member of the SLS Tranche
1 Lender, LLC.

15. Plaintiff Peihong Duan is an individual. Peihong Duan is a Class B member of the
SLS Tranche 1 Lender, LLC.

16. Plaintiff Yan Liang is an individual. Yan Liang is a Class B member of the SLS
Tranche 1 Lender, LLC.

17. Plaintiff Shao Mei Lu is an individual. Shao Mei Lu is a Class B member of the

SLS Tranche 1 Lender, LLC.
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18. Plaintiff Liwen Rong is an individual. Liwen Rong is a Class B member of the
SLS Tranche 1 Lender, LLC.

19. Plaintiff Bin Wu is an individual. Bin Wu is a Class B member of the SLS
Tranche 1 Lender, LLC.

20. Plaintiff Mei Xu is an individual. Mei Xu is a Class B member of the SLS
Tranche 1 Lender, LLC.

21. Plaintiff Chaoli Lei is an individual. Chaoli Lei is a Class B member of the SLS
Tranche 1 Lender, LLC.

22. Plaintiff Jiang Chunhong is an individual. Jiang Chunhong is a Class B member
of the SLS Tranche 1 Lender, LLC.

23, Plaintiff Xuping Hu is an individual. Xuping Hu is a Class B member of the SLS
Tranche 1 Lender, LLC.

24. Plaintiff Guangyu Wu is an individual. Guangyu Wu is a Class B member of the
SLS Tranche 1 Lender, LLC.

25. Plaintiff Xiaofeng Zhao is an individual. Xiaofeng Zhao is a Class B member of
the SLS Tranche 1 Lender, LLC.

26. Plaintiff Shuai Wang is an individual. Shuai Wang is a Class B member of the
SLS Tranche 1 Lender, LLC.

27. Plaintiff Changqian Du is an individual. Changqian Du is a Class B member of
the SLS Tranche 1 Lender, LLC.

28. Plaintiff Ting He is an individual. Ting He is a Class B member of the SLS
Tranche 1 Lender, LLC.

29. Plaintiff Jianju He is an individual. Jianju He is a Class B member of the SLS
Tranche 1 Lender, LLC.

30. Plaintiff Xiaoyun Dong is an individual. Xiaoyun Dong is a Class B member of
the SLS Tranche 1 Lender, LLC.

31. Plaintiff Li Yao is an individual. Li Yao is a Class B member of the SLS Tranche

1 Lender, LLC.
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32. Plaintiff Baoping Wang is an individual. Baoping Wang is a Class B member of
the SLS Tranche 1 Lender, LLC.

33. Plaintiff Zhe Liao is an individual. Zhe Liao is a Class B member of the SLS
Tranche 1 Lender, LLC.

34. Plaintiff Bolong Du is an individual. Bolong Du is a Class B member of the SLS
Tranche 1 Lender, LLC.

35. Plaintiff Jinshan Hu is an individual. Jinshan Hu is a Class B member of the SLS
Tranche 1 Lender, LLC.

36. Plaintiff Ran Ni is an individual. Ran Ni is a Class B member of the SLS Tranche
1 Lender, LLC.

37. Plaintiff Binbin Yu is an individual. Binbin Yu is a Class B member of the SLS
Tranche 1 Lender, LLC.

38. Plaintiff Wei Xiu is an individual. Wei Xiu is a Class B member of the SLS
Tranche 1 Lender, LLC.

39. Plaintiff Junyang Huang is an individual. Junyang Huang is a Class B member of
the SLS Tranche 1 Lender, LLC.

40. Plaintiff Zhizhong Zhang is an individual. Zhizhong Zhang is a Class B member
of the SLS Tranche 1 Lender, LLC.

41. Plaintiff Shengchao Tang is an individual. Shengchao Tang is a Class B member
of the SLS Tranche 1 Lender, LLC.

42. Plaintiff Chunyu Zou is an individual. Chunyu Zou is a Class B member of the
SLS Tranche 1 Lender, LLC.

43. Plaintiff Sheng Hong Cheng is an individual. Sheng Hong Cheng is a Class B
member of the SLS Tranche 1 Lender, LLC.

44. Plaintiff Rui Li is an individual. Rui Li is a Class B member of the SLS Tranche 1
Lender, LLC.

45. Plaintiff Yiyun Hu is an individual. Yiyun Hu is a Class B member of the SLS

Tranche 1 Lender, LLC.
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46. Plaintiff Danxia Zhen is an individual. Danxia Zhen is a Class B member of the
SLS Tranche 1 Lender, LLC.

47. Plaintiff Da Xu is an individual. Da Xu is a Class B member of the SLS Tranche 1
Lender, LLC.

48. Plaintiff Ying Xu is an individual. Ying Xu is a Class B member of the SLS
Tranche 1 Lender, LLC.

49. Plaintiff Meiling Zhang is an individual. Meiling Zhang is a Class B member of
the SLS Tranche | Lender, LLC.

50. Plaintiff Niming Wang is an individual. Niming Wang is a Class B member of the
SLS Tranche 1 Lender, LLC.

51. Plaintiff Xiaole Chen is an individual. Xiaole Chen is a Class B member of the
SLS Tranche 1 Lender, LLC.

52. Plaintiff Binghui Zheng is an individual. Binghui Zheng is a Class B member of
the SLS Tranche 1 Lender, LLC.

53. Plaintiff Bao Wang is an individual. Bao Wang is a Class B member of the SLS.
Tranche 1 Lender, LLC.

54. Plaintiff Yuan Li is an individual. Yuan Li is a Class B member of the SLS
Tranche 1 Lender, LLC.

55. Plaintiff Honghui Dai is an individual. Honghui Dai is a Class B member of the
SLS Tranche 1 Lender, LLC.

56. Plaintiff Mao Hu is an individual. Mao Hu is a Class B member of the SLS
Tranche 1 Lender, LLC.

57. Plaintiff Weihua Li is an individual. Weihua Li is a Class B member of the SLS
Tranche 1 Lender, LLC.

58. Plaintiff Xiaoli Chen is an individual. Xiaoli Chen is a Class B member of the
SLS Tranche 1 Lender, LLC.

59. Plaintiff Hanzheng Wang is an individual. Hanzheng Wang is a Class B member

of the SLS Tranche 1 Lender, LLC.
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60. Plaintiff Xiulan Wu is an individual. Xiulan Wu is a Class B member of the SLS
Tranche 1 Lender, LLC.

61. Plaintiff Jun Xu is an individual. Jun Xu is a Class B member of the SLS Tranche
1 Lender, LLC.

62. Plaintiff Jing Liu is an individual. Jing Liu is a Class B member of the SLS
Tranche 1 Lender, LLC.

63. Plaintiff Qing Dong is an individual. Qing Dong is a Class B member of the SLS
Tranche 1 Lender, LLC.

64. Plaintiff Zhiying Cheng is an individual. Zhiying Cheng is a Class B member of
the SLS Tranche 1 Lender, LLC.

65. Plaintiff Ying Wang is an individual. Ying Wang is a Class B member of the SLS
Tranche 1 Lender, LLC.

66. Plaintiff Peihua Ma is an individual. Peihua Ma is a Class B member of the SLS
Tranche 1 Lender, LLC.

67. The individuals from paragraphs 7 to 66 are hereinafter collectively known as the
“Plaintiffs.”

68. Defendant American Dream Fund, LLC (Hereafter “ADF”) is incorporated under
the laws of the state of California and has its principal executive offices in El Segundo,
California. ADF is the Class A Member and Manager of the SLS Tranche 1 Lender, LLC as
well as the Class A Member and Class A and Class B Manager of the SLS Lender, LLC.

69. Defendant Las Vegas Resort Investment Company, LLC formerly known as
Stockbridge/SBE Investment Company, LLC (Hereafter “Developer”) is incorporated under the
laws of the State of Delaware and has its principal executive offices in Las Vegas, Nevada. The
Developer is the owner and operator of the SLS Las Vegas Hotel.

70. Defendant Las Vegas Regional Center (Hereafter “Regional Center”) is
authorized under the United States Citizenship & Immigration Services under the EB-5
Immigrant Investor Pilot Program to establish and solicit investment from foreign investors

under the EB-5 pilot program.
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71. Defendant Stockbridge Capital Group, LLC (Hereafter “Stockbridge”) is
incorporated under the laws of the state of Delaware and is a registered foreign corporation with
in the state of California with its principal executive offices in San Francisco, California.
Stockbridge is the owner and operator of Developer.

72. Defendant SBE Entertainment Group (Hereafter “SBE”) is incorporated under the
laws of the state of Delaware and is registered foreign corporation in the state of California with
offices in Los Angeles, California.

73. Defendant Celona Asset Management (USA) Limited (Hereafter “Celona”) is
incorporated in Hong Kong. Celona is the Class B Manager of the SLS Tranche 1 Lender, LLC.
74. Defendant SLS Tranche 1 Lender, LLC (Hereafter “Phase II, LLC”) is a

Delaware limited liability corporation with principal offices in Leas Vegas, Nevada. Defendant
SLS Tranche 1 Lender, LLC is the limited liability company of which the Plaintiffs are members
as EB-5 investors. SLS Tranche 1 Lender, LLC was created as a new commercial enterprise for
the purpose of raising the $199 million-dollar loan for the reconstruction and creation of the SLS
Hotel & Casino.

75. Defendant Las Vegas Resort Holding, LLC formerly known as Stockbridge/SBE
Holdings, LLC (Hereafter “Holdings”) is a Delaware limited liability company. Defendant Las
Vegas Resort Holding, LLC is the owner of the property formerly known as Sahara Hotel and
Casino in Las Vegas, Nevada.

76. Defendant SBE Voteco Company, LLC (Hereafter “Voteco”) now known as Las
Vegas Resort Voteco Company, LLC is a Delaware limited liability company. Defendant SBE
Voteco Company, LLC is one of the two Class A Members of Las Vegas Resort Investment
Company, LLC and holds 100% of the voting rights with no economic interest.

77. Defendant SBEHG Las Vegas I, LLC is a Nevada limited liability company
(Hereafter “SBEHG”). Defendant SBEHG Las Vegas I, LLC is a subsidiary of SBE Las Vegas
Holdings, LLC that managed and operated the hotel, food and beverage facilities and retail
facilities, including performing the accounting, cash management, budgeting, operational, sales,

advertising, legal, personnel and purchasing functions up until October 2015.
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78. Defendant Evans, Carroll & Associates, Inc. is a Florida company (Hereafter
“Evans”). Evans, Carroll & Associates, Inc. prepared the economic study that Plaintiffs relied on
before becoming investors.

79. Defendant Pan-America Business Consulting Limited is an entity of unknown
form (Hereafter “Pan-America”). Defendants have represented in various documents that Pan-
America Business Consulting Limited was an EB-5 agent for Phase II LLC.

80. Defendant Goldstone Advisors Limited is an entity of unknown form (Hereafter
“Goldstone”). Phase II LLC bank records show that Defendant Goldstone Advisors Limited
received more than $22 million dollars in wire transfers out of the account. They are referenced
in the loan agreement as a party to a management fee agreement that is still yet to be discovered.

81. | Defendant Henry Global Consulting is an immigration consulting business
operating in China, Canada, and Alhambra, California (Hereafter “Henry Global”). Defendant
Henry Global Consulting operates several offices in China designed to market and solicit
investors for numerous EB-5 immigrant investor programs in the United States. Their Alhambra
office is used to provide their services in the United States.

82. In this case, Defendant Henry Global Consulting was retained by ADF, Phase I,
LLC and Phase II, LLC and Developer to market and solicit investors for the Phase I, LLC and
Phase II, LLC. In exchange for these efforts, Defendant Henry Global Consulting charged each
Plaintiff $5,000 up front and then received additional commissions and fees. The compensation
agreements and the details of the agreements were concealed by all Defendants and are still
being concealed by the Defendants to this date: However, the audited financial records of the
Developer set forth in-specific detail that Defendant Henry Global Consulting has been paid
more than $50,000,000 for commissions and fees and is owed another $50,000,000. This money
has been paid in part to Defendant Goldstone Advisor Limited.

83. | Defendant Henry Global Consulting was apparently able to demand these high
fees because of the service it was willing to provide. Put simply, Defendant Henry Global
Consulting was willing to say and do anything to mislead, lie, conceal or cheat the Plaintiffs out

of their money. Defendant Henry Global Consulting was able to accomplish this task because
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they completely controlled the Plaintiffs and the information given to the Plaintiffs along with
Defendant ADF.

84. Defendant Henry Global Consulting provided their own marketing material to the
Plaintiffs. Defendant Henry Global Consulting was the entity that explained and translated all
the contractual documents signed by the Plaintiffs to join the Phase II, LLC. Defendant Henry
Global Consulting provided the attorneys for the Plaintiffs for their immigration documents. In
fact, most of the Plaintiffs have never spoken or communicated with their Immigration Attorneys
and have relied exclusively on Defendant Henry Global to provide information.

85. Now that the Plaintiffs have found their own attorneys and have stepped away
from the control of Defendant Henry Global Consulting, Defendant Henry Global Consulting has
stepped up their efforts to lie, mislead and conceal facts from the Plaintiffs. They are making
threats and harassing Plaintiffs to do whatever they could to stop the Plaintiffs from bringing this
lawsuit.

86. The true names and capacities, whether individual, corporate, associate, or
otherwise, of defendants sued herein as Does | through 200, inclusive, are currently unknown to
Plaintiffs, who therefore sue defendants by such fictitious names under California Code of Civil
Procedure § 474. Plaintiffs are informed and believe, and based thereon allege, that each of the
defendants designated as a Doe is legally responsible in some manner for the unlawful acts
referred to herein. Plaintiffs will seek leave of court to amend this Complaint to reflect the true
names and capacities of the defendants designated hereinafter as Does when such identifies
become known.

87. The parties referenced in paragraphs 68 to 86 are collectively known as the
“Defendants.”

88. Conspiracy: Plaintiffs contend that due to the complexity and vast nature of the
wrongful conduct in this case that the Plaintiffs were the victims of a conspiracy amongst all of
the name Defendants along with the Does 1 to 200, inclusive. Each Defendants, including all of
them, were aware and/or had agreed to take whatever action, omission or concealment that was

necessary to convince Plaintiffs to invest in the Phase II, LLC, to keep Plaintiffs money invested
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as long as possible and to conceal accurate information about the Plaintiffs’ investment so as to
allow the Defendants to take as much financial gain from the plan as possible. Defendants and
each of them in this case agreed with the above described plan, actively participated in the plan
as will be more fully described in this Complaint and took whatever action possible to help all of
the Defendants to hide and conceal their plan from the Plaintiffs. The Defendants and each of
them want their plan to work and the Defendants to this date are still following their plan.
Plaintiffs as will be described herein have been harmed by the Defendant conspiracy. As co-
conspirators, the Defendants and each of them should be responsible for all of the wrongful
conduct as alleged in this matter.
Ill. VENUE & JURISDICTION

89. This Court is the proper Court because a defendant principle place of business
within Los Angeles County and the wrongful conduct, in part, took place in Los Angeles County.

90. The relief sought by Plaintiffs is within jurisdiction of this Court to grant such

relief.

IV. GENERAL FACTUAL ALLEGATIONS

91. In 2007, Developer purchased the Sahara Hotel and Casino for roughly
$350,000,000. The entity used about $50,000,000 of its own money to purchase the hotel while
obtaining financing to cover the rest of the purchase. The Developer’s name was representative
of the two different entities with ownership in Developer. 90% of Developer was owned by
Defendant Stockbridge Capital Group and its various affiliated investment LLC and limited
partnerships. While the balance of Developer was owned by Defendant SBE Entertainment
Group headed by Sam Nazarian. Mr. Nazarian had become an entertainment icon for his brand
SLS which stands for “Service, Luxury, Style.” Mr. Nazarian was the driving force behind SLS
brand image. The plan was to run the Sahara until financing could be obtained to construct a
mega hotel and casino under the SLS brand name. However, the economy went into recession
and the plans were altered several times. Eventually, the plan was to simply remodel the existing

Sahara Hotel & Casino and rebrand it under the SLS banner. However, Developer was not able

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to secure traditionally financing for the plan and instead turned to mix of loan vehicles including

EB-S5 Investor Financing.
JP Morgan Loan-First Lender Loan

92. On May 2, 2012, Developer entered into a loan agreement with JP Morgan, but
this was not a traditional bank loan. Instead, JP Morgan had secured a group of investors that
would loan the money under the JP Morgan name. The loan amount was $300,000,000 but with
a 5% or $15,000,000 upfront financing costs that made the actual amount received $285,000,000.
The person at JP Morgan in charge of this capital raising was Sam Bakhshandehpour. The JP
Morgan loan was secured by a deed of trust and contained several restrictions prior to the release
of funds. Primarily, Developer was required to secure an additional $115,000,000 in financing
before any of the JP Morgan fund would be released, which also had time limits by which the
funds would be required to be obtained without penalties.

EB-S Investor Financing

93.  EB-5 Program: The United States Immigration Laws, which are carried out by
the United States Custom and Immigration Service or USCIS, allow for foreign citizens to obtain
a green card, which can eventually lead to US Citizenship, if they invest money into the United
States. The requirements of the typical EB-5 program for the immigrant investor appears to be
quite straightforward: (1) the investor must invest $500,00 and put their money at risk into an
employment generating economic enterprise; (2) the invested funds must be lawfully obtained; &
(3) the investor must create 10 full-time jobs from the invested money. However, there are
several significant restrictions related to the EB-5 program beyond the rather simple upfront
requirements. Some of these restrictions and those that are pertinent to this case are as follows:

(i) There cannot be a “material change” in the Business Plan or Business Operation of
the economic enterprise that received the investor’s money during the first 24 months the
investor has a green card.

(ii) The economic enterprise must create the 10 full-time jobs within 24 months of the
investor obtaining initial approval of his or her green card.

(iii) The investor must play an active role in the management of the economic enterprise

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receiving the invested money.

(iv) The investor must “sustain” their investment in job creating activities for at least 24
months after obtaining their initial green card.

(v) The investor will initial receive a “Conditional Green” that is valid for 2 years and
then will need to apply to remove the conditions in order to receive a “Permanent Green.”

94. Asis apparent from most of the above restrictions, many restrictions disappear
after the investor has their initial green card for 24 months. In this case, none of the Plaintiffs
have received permanent green cards. Only a small few have reached 24 months after receiving
their initial green card. Most of the Plaintiffs have not even received their initial green card yet.
There also many Plaintiffs that have an initial green card but have not had it for 24 months. The
Plaintiffs are attempting to obtain their investor green cards through an EB-5 Pilot Program.
Under the Pilot Program, the foreign investor invests their money into large projects overseen by
entitles called “Regional Centers” that are to invest in Target Employment Areas under certain
conditions. These projects typically involve the investors becoming a limited partner or a
member of a LLC in exchange for the $500,000 investment. Thereafter, when a large enough
investor group is formed, the limited partnership or limited liability company will loan money to
a larger entity for some type of construction related project that requires large capital outlays.
This matter involves a EB-5 Pilot Program investment project.

95. The unique aspect of the EB-5 Pilot Program is how the investors’ capital
investment is invested into the Project. Because the investor’s money must be invested and at
risk to obtain a green card, the USCIS allows investors to place their money in escrow accounts
that require that the investor’s money be disbursed and put at risk upon the approval of the
investor’s initial green card application. It is important to note that this initial approval does not
mean the investor has a green card. Instead, the investor will still need to wait about a year for
the investor’s home country USA embassy to interview the investor and give final approval to
the green card.

96. Las Vegas Regional Center EB-5: To secure the $115,000,000 additional

financing needs to allow the release of the JP Morgan loan funds, Developer had already secured
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an agreement with the Regional Center, owned and operated by ADF, to secure EB-5 funds. The
initial plan was to obtain $115,000,000 with the option of securing an additional $85,000,000, if
possible. To put this plan in action, the Developer created the Matter of Ho Business Plan dated
June 19, 2012 (Hereafter “Original Business Plan”). For a point of clarification, the Matter of
Ho is an EB-5 case that deals with the requirements of a business plan associated with EB-5
businesses. The Original Business Plan called for the creation of the Phase I, LLC that would
solicit up to 400 foreign investors willing to invest $500,000 into the limited liability company
along with a $45,000 per investor administration fee. In exchange for the investments, the
investors would qualify to obtain EB-5 green card as well as become equity owners in the Phase
I, LLC. By May 1, 2013, a Loan agreement was signed between Phase I, LLC and the
Developer for up to $200,000,000 in EB-5 financing, which was secured by a deed of trust on the
hotel property. A revised business plan called the Addendum to Matter of Ho Business Plan
dated August 1, 2013 was issued in August 2013. This revised business plan called for an
additional $100,000,000 of EB-5S investor money to be raised with the option of $100,000,000 to
allow up to $400,000,000 in EB-5 investor money. This new money would be invested into the
Phase II, LLC and by January 31, 2014 a Loan Agreement was signed by the Phase II, LLC and
the Developer which was also secured by a deed of trust that would be senior to the Phase I, LLC
deed of trust. However, the job allocation for green card purposes would go first to the Phase I,
LLC members. By April 15, 2015, all of Phase I, LLC Loan money had been withdrawn by
Developer and $199,000,000 of Phase II, LLC Loan money had been withdrawn by Developer.

97. EB-5 Loan Restrictions: Because the Phase II, LLC Loan was part of an EB-5
Pilot Program, the Loan itself as well as all of the documents associated with the Loan
Agreement contained restrictions so that the Developer would comply with all EB-5
requirements for the specific benefit of the Plaintiffs. The most broad and important of
Restriction is contained in section 5.14(a) of the Phase II, LLC Loan where it states that the
Developer must, “Adhere in all material respects to that certain Business Plan Dated July 19,
2012 and the Addendum to the Business Plan dated August 1, 2013...” In looking at the

Matter of Ho Business Plan, it also contains a broad and important Restriction. On Page 12 of
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the Addendum of Matter of Ho Plan, the documents states in bold letters “All EB-5 funds will
be invested in job creating activities and not held in reserve.” Another Restriction relates to
the raising of a $22,500,000 credit facility to be used to cover initial operating expenses. Both
the Loan Agreement (Section 6.01(f)) and the Business Plan limit amount of any credit facility to
$22,500,000. A further Restriction involves the repayment of the Loan prior to its maturity date.
The Loan Agreement prohibited the prepayment of the Loan and disbursement of any funds back
to the Phase II, LLC Class B Member unless that Class B Member had already received an
approved permanent green card.
SLS Las Vegas Hotel

98. Construction of the SLS Las Vegas Hotel commenced in February 2013 and was
completed by July 2014 with the SLS Las Vegas Hotel opening on August 24, 2014. The
original construction budget was $298,400,000, but by the time the Hotel was completed the
actual final construction costs, according to the Defendants, had ballooned to $422,000,000.
Since its opening, the SLS Las Vegas Hotel has, according to the Defendants, lost money and
has yet to turn a profit. Four months after its opening, the Las Vegas Gaming Board denied Sam
Nazarian’s application to personally operate the SLS Las Vegas Hotel. It was discovered that
Mr. Nazarian had a cocaine and alcohol problem and that he had lied to Gaming Board
investigators during their interview about some other matters. Upon this news, Mr. Nazarian
completely withdrew from the SLS Las Vegas Hotel project, which left the project leaderless.
Eventually in October 2015, Defendant SBE sold its interest in the SLS Las Vegas Hotel to
defendant Stockbridge. Once SBE is out of the project, W Hotel leased an entire tower of the
hotel and operated it under the W brand.

Meruelo Sale

99. In May 2017, SLS Las Vegas Hotel announced it was being sold to the Meruelo
Group. The Defendants and Meruelo are on the 3 Revised Proposal which is slated to be
completed by February 2018. The 3" Revised Proposal does detrimentally effect and harm the
Plaintiffs both financially and for the green card. As to the financial harm, the Phase II, LLC

Loan will be replaced or exchanged for a new Loan, which still has not been shown to the
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Plaintiffs. It has been represented by the Defendants that the new Loan contains the following
changes:

(i) A new borrower who is still to be identified;

(ii) A loss of lien priority whereby any new financing will be superior in line to the
Phase II, LLC Loan;

(iii) Phase II, LLC Loan will not be superior to the Phase I, LLC Loan;

(iv) A new maturity date in 2023;

(v) The new borrower will not be required to pay the balance of the loan when due but
instead a contingent amount based on a percentage of the equity value of the property (14%)
when the maturity date occurs;

(vi) A portion of the Phase I, LLC Loan will get repaid prior to the Phase II, LLC Loan;

(vii) The new Loan will be interest free; and

(viii) The borrower is permitted to make prepayments to Defendants Celona and ADF so
that Defendant Celona and ADF can pay their legal costs for being sued by the Plaintiffs and
others related to their wrongdoing by agreeing to the 3 Revised Proposal.

100. Without addressing the merits of the proposal, the Meruelo sale violates the
original Loan Agreement and the Phase II, LLC Operating Agreement. Further, Phase II], LLC

Manger Celona has already agreed and signed the 3 Revised Proposal on behalf of the Phase II,

| LLC, despite the fact a vote of the Class B Members is require before Defendant Celona could

enter into the agreement.

101. While the 3rd Revised Proposal provides money for legal fees for Defendant
Celona and ADF, there is no mention on how the Phase II, LLC will have money to operate. As
promised in the Business Plan and Private Placement Memorandum, the Phase II, LLC operating
costs would be paid by Defendant Developer. These Operating Costs are substantial in that there
are more than $20,000,000 in management fees that would be due from the new loan agreement
not to mention the apparent $50,000,000 that is still outstanding. Defendant Henry Global
Consulting has now started to threaten the Plaintiffs that they will be responsible for these fees if

they file a lawsuit.
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102. As to the Plaintiffs' green cards, the 3rd Revised Proposal would result in a
"material change" in the Business Plan submitted to the USCIS. It would further result in a
repayment of the loan which will result in the Plaintiffs being unable to show that they have
"sustained" their investment during their green card period. For some, this is from the fact that
they have not even received their green card and Defendants have already withdrawn money
from the investment.

FIRST CAUSE OF ACTION-FRAUD
(Against All Defendants)
103. The Plaintiffs incorporate by reference paragraphs 1 to 100 as fully set forth
herein. Count One-Fraud in the Inception

104. The Defendants and each of them represented to the Plaintiffs that the following
facts were true:

105. (i) EB-5 Processing Deception by Defendants: The marketing material from the
Defendants as well as the verbal representations by Henry Global Consulting representatives
provided a deceptive and false timeline on how long it would take Plaintiffs to get both their
conditional and permanent green cards. On Page 72 of the Matter of Ho Business Plan, the
Developer provided a flow chart detailing the timeline from initial green card application to the
filing of the application for a permanent green card. A process at that time took nearly 4 to 4%
years was represented to take only 2 % years. What was intentionally omitted from the flow
chart was the processing time from when the initial green card was approved to when the
immigrant was interviewed in their home country which added an additional 12 months to the
process. They also represented that there would be almost instant approval of their I-526, which
was important to the Plaintiffs.

106. The Defendants misrepresented this time line for the sole purpose of getting the
Plaintiffs to invest in the Phase II], LLC. The Defendants faced the following marketing
problem:

107. For the USCIS to approve the initial green card application, the applicant’s money

would need to be invested upon the approval of the green card application. However, the
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applicant would still need to wait up to a year or more before they would have a green card to
enter the United States. Put simply, investors did not want their money invested until they had a
green card to enter the United States. While the Defendants wanted the money as quickly as
possible so they could finish the remodeling project.

108. The solution to this problem was simple. Lie about the processing time to make it
appear that there was no waiting time between the green card application and receipt of the green
card to enter the United States.

109. One may suggest that the Plaintiffs should have known better to rely on the
Defendants’ lies. However, this is where the political maneuvering of then Senate Majority
Leader, Senator Harry Reid, comes into play. Senator Reid had been a backer of the SLS Las
Vegas project from the beginning and even offered a letter of support that was provided to each
Plaintiff as proof that the project had the United States Government backing. Senator Reid was
not done yet. There is a United States Inspector General Report in 2015 that details the efforts
made by Senator Reid that resulted in the expedited approval of the Plaintiffs’ initial green cards
applications. This aided the Defendants by allowing them to show that the green card
applications were getting quickly approved and allowing for the Defendants to get the invested
money disbursed as quickly as possible. The only problem is that Senator Reid apparently could
not manipulate the time it took for the Plaintiffs’ home country to process their actual green
cards so while the Plaintiffs’ money was invested in the project a large portion of the Plaintiffs
are still waiting to get their actual green cards to enter the United States.

110. The Defendants’ misrepresentation and concealment of the actual time helped the
Defendants’ overcome the problem they faced with the actual time it was taking to get EB-5
green card approvals. However, this deception and the actions of Senator Reid has created
another series of problems for the Plaintiffs, which has to do with another USCIS EB-5 rule.
The rule in question essentially requires that all of the EB-5 project jobs be created within 2
years of the initial green card approval or I-526 approval. In this case, the problem arises from
the fact that the majority of the jobs would be created from the hotel’s revenue after it reopened.

Only about 25% jobs came from the actual construction of the hotel itself. The issue arises from
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COMPLAINTthe fact that the almost immediate green card approvals meant that the clock for job creation
started to run while the defendants still needed another year to construct the hotel. This meant
that there was only one year of hotel revenue that would be available to use for job creation
numbers with USCIS. To make matters worse, the SLS Hotel revenue was less than 50% of
what was projected so the project has not created sufficient jobs to allow all investors, including
some of the Plaintiffs, to get green cards for all members of the Phase II, LLC. To hide this fact,
the Defendants, specifically Mr. Evans, has created a fake job creation report that has only been
shown to Plaintiffs and other Phase II, LLC members to try to convince them that there is
sufficient job creation, but this fabricated report is not the report that is being submitted by the
Plaintiffs and others as part of their I-829 applications to get their permanent green cards.
Defendants Celona and ADF controlled the material contained in the I-829 material so they were
providing the USCIS with one report that showed there was not enough jobs created but at the
same time show their investors a different report to pacify them into believing everything is OK.

111. Here again, the importance of this restriction cannot be unstated. For EB-5
immigrant investors to obtain a green card, they must invest $500,000 but that investment must
directly or indirectly result in the creation of 10 full-time jobs. Using the Loan funds for other
than job creating purposes has the potential to result in an insufficient number of jobs being
created to allow the Plaintiffs to get a green card. Moreover, using the Loan funds for non-job
creating activities also jeopardizes the viability of the project and the Plaintiffs’ investment.
Both of these events have occurred in this case by the improper use of the Loan Funds as will be
described below in more detail. Additionally, there were not sufficient jobs created to allow all
members of Phase II, LLC to get green cards and a substantial portion of the Loan Funds were
not used for job creating activities but instead went into the pockets of the Defendants.

112. (ii) Use of Proceeds Deception: Defendants promised on page 12 of the Matter
of Home Business Plan Addendum that “All EB-5 funds will be invested in job creating
activities and not held in reserve.” Additionally, the Private Placement Memorandum also
contained similar language on the use of Loan Proceeds. The majority of the EB-5 funds were

not used for job creating activities. Instead, more than $150,000,000 was used to pay
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commissions, fees, salaries and other expenses of the Defendants that had nothing to job creating
activities. The Defendants hid these commissions, fees, salaries and other expenses from the
Plaintiffs. Some of these expenses are part of a Management Fee Agreement with Defendant
Goldstone Advisor Limited that is made reference to in the Loan Agreement, which was never
provided to the Plaintiffs’ until October 2017, but the actual agreement has never been provided
to the Plaintiffs. The fees and expenses were hidden as General Operating Expenses within the
SLS Hotel Financial Statement. One example of how the fees were hidden is where at the end of
the construction project, the SLS Hotel allegedly spent $20,000,000 on stationary for the Hotel.
113. (iii) Cap on Management Fees: Page 37 of the Private Placement Memorandum,
states “NO PORTION OF AN INVESTING MEMBER’S CAPITAL CONTRIBUTION SHALL
BE USED TO PAY THE ADMINISTRATION FEE, OFFERING COSTS, SALES
COMMISSIONS, FINDERS’ FEES OR IMMIGRATION EXPENSES.” This statement is
repeated several times in the Private Placement Memorandum. Despite this clear prohibition set
forth in the Private Placement Memorandum, the actual Phase II, LLC Loan Agreement
specifically allows the Developer to use the Loan proceeds to pay the administration fees,
operating costs, sales commissions, finders’ fees and immigration expenses from the Loan
Proceeds. The Defendants had no money other than the Loan proceeds to pay the nearly
$50,000,000 in fees that were due on or before the hotel opening. The Defendants went to great
lengths to hide this fact from the Plaintiffs which is evidence by the fact they never provided the
Loan Agreement to the Plaintiffs and have still not provided the Management Fee Agreement.
114. (iv) $22,500,000 Credit Facility and Capital Reserve: Defendants represent in
the Matter of Ho Business Plan that Defendant Developer would not acquire any Credit Facility
greater than $22,500,000 for operating capital and that there would be an $81,000,000 capital
reserve in place when the Hotel opened for business. However, because the Hotel did not have
revenue and the Defendants did not want to put their own money to operate the hotel, the
Defendants used all of the $81,000,000 Capital Reserve to pay the fees and costs related to the
financing of the project. When this money ran out, the Defendants obtained a $64,000,000 line

of credit. The Defendants knew that they would never have sufficient revenue to pay the
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Management Fees and Costs and that would have to use the Loan Proceeds to pay this money
from the very beginning.

115. (v) Financing Cost Deception: The Defendants represented in the Matter of Ho
Business Plan and to the USCIS in green card applications that the EB-5 Loans would reducing
the debt financing costs and would allow the Defendants to have sufficient capital to repay the
Loans and to operate the business. This representation was false and deceptive. While the interest
rate on the EB-5 Loans was only 0.5%, the financing costs in the form of Management Fees and
other immigration related fees made the actual financing costs more than the original lenders on
the project.

116. (vi) Job Creation Deception: The Defendants represented in the Matter of Ho
Business Plan that the project would create 8,700 new jobs more than enough for all EB-5
investors. This job creation claim was false and deceptive. The actual job creation numbers that
have been submitted to the USCIS in support of actual green card applications has be no greater
than 7,600 when actual expenditures are put in place. The Defendants have continued to provide
more false and deceptive information to the Plaintiffs regarding the job creation numbers. While
the actual green card applications show only 7,600 jobs created, the Defendants, including
Defendant Evans, have prepared special job creation reports showing more than 8,100 jobs being
created. These special reports were created to convince the Plaintiffs to approve one of the
Meruelo Sales Proposals. Defendants are still claiming the 8,100 numbers is accurate to the
Plaintiffs even though they report a different number to USCIS.

(i) The Defendants representations as set forth above were false.

(ii) The Defendants knew that their representations were false when they made them
and/or they made them recklessly and without regard for the truth.

(iii) The Defendants intended that the Plaintiffs would rely on their representations.

(iv) Plaintiffs were harmed by the Defendants false representations.

(v) Plaintiffs’ reliance on the Defendants’ representations was a substantial factor in
causing the Plaintiffs Harm.

Count Two-Concealment
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117. Defendants and Plaintiffs had a fiduciary relationship as follows: (1) Defendants
Celona, ADF and Regional Center had a contract with the Plaintiffs whereby the agreed to have
a fiduciary relationship with the Plaintiffs and be bound by the obligations of a fidu