jina l. choi (ny bar no. 2699718) 1 erin e. schneider (cal ... · motion for preliminary injunction...

MOTION FOR PRELIMINARY INJUNCTION AND APPOINTMENT OF RECEIVER

CASE NO. 3:17-CV-00223-RS

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JINA L. CHOI (NY Bar No. 2699718) ERIN E. SCHNEIDER (Cal. Bar No. 216114) [email protected] STEVEN D. BUCHHOLZ (Cal. Bar No. 202638) [email protected] ANDREW J. HEFTY (Cal. Bar No. 220450) [email protected] SUSAN F. LAMARCA (Cal. Bar No. 215231) [email protected] THOMAS J. EME (Ill. Bar No. 6224870) [email protected]

Attorneys for Plaintiff SECURITIES AND EXCHANGE COMMISSION 44 Montgomery Street, Suite 2800 San Francisco, CA 94104 (415) 705-2500

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

v.

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; NORTH AMERICA 3PL, LLC;

Defendants,

CALLSOCKET HOLDING COMPANY, LLC; CALLSOCKET III HOLDING COMPANY, LLC; CENTRAL CALIFORNIA FARMS, LLC; BERKELEY HEALTHCARE DYNAMICS, LLC; JL GATEWAY, LLC;

Relief Defendants.

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

PLAINTIFF SECURITIES AND EXCHANGE COMMISSION’S MOTION FOR PRELIMINARY INJUNCTION AND FOR APPOINTMENT OF RECEIVER, AND MEMORANDUM IN SUPPORT THEREOF

COURTROOM: 3, 17th Floor

DATE: Thursday, March 2, 2017

TIME: 1:30 p.m.

Case 3:17-cv-00223-RS Document 10 Filed 01/20/17 of 39


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TABLE OF CONTENTS

I. INTRODUCTION .......................................................................................................... 2

II. STATEMENT OF FACTS ............................................................................................. 3

A. Henderson, Using Entity Defendants He Controls, Raised Funds and Issued Securities to Develop Seven EB-5 Projects ............................. 3

B. Henderson Used At Least $9.6 Million from SFRC Accounts with Commingled Investor Funds to Benefit Himself .......................................... 4

C. Henderson Improperly Used $7.5 Million in Capital Contributions to Pay “Finders” ............................................................................. 8

D. Henderson Purported to Create Seven Separate EB-5 Projects ............................ 8

1. Comprehensive Care of Oakland Nursing Facility Project ....................................................................................................... 8

2. The Three CallSocket Call Center Projects ............................................ 10

3. NA3PL, L.P. Warehousing Project ......................................................... 12

4. West Oakland Plaza Retail Center Project ............................................. 13

5. California Gold Medal Dairy Processing Project ................................... 14

E. Henderson Improperly Commingled and Misappropriated Investor Funds in an Elaborate Shell Game ....................................................... 16

III. ARGUMENT ................................................................................................................. 20

A. Standard For Injunctive Relief In SEC Enforcement Actions ............................ 20

B. The SEC Has Made a Prima Facie Showing That Defendants Have Violated, and Continue to Violate, the Securities Laws ........................... 21

1. Defendants Henderson, SFRC, the Limited Partnerships and Their General Partners Made Materially False and Misleading Statements .......................................... 21

2. Defendants Engaged in an Illegal Scheme to Defraud ........................... 24

C. Defendants’ Violations Will Likely Continue .................................................... 26

IV. THE COURT SHOULD APPOINT A RECEIVER OVER ALL OF THE DEFENDANTS AND RELIEF DEFENDANTS ........................................ 27

A. Standard for Appointment of a Receiver ............................................................ 27



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B. Appointment of a Receiver Is Critical to Rectify Defendants’ Fraud ................................................................................................................... 28

C. The Court Should Enjoin the State Receivership ............................................... 29

V. CONCLUSION ............................................................................................................. 33



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TABLE OF AUTHORITIES

Cases

Aaron v. SEC, 446 U.S. 680 (1980) ....................................................................................................................... 23

Avis Budget Group, Inc. v. California State Teachers’ Retirement System, 552 U.S. 1162 (2008) ........................................................................................................................ 24

Basic Inc. v. Levinson, 485 U.S. 224 (1988) ....................................................................................................................... 23

City of Monroe Emps. Ret. Sys. v. Bridgestone Corp., 399 F.3d 651 (6th Cir. 2005) ......................................................................................................... 25

City of Roseville Employees’ Ret. Sys. v. EnergySolutions, Inc., 814 F. Supp. 2d 395 (S.D.N.Y. 2011) ........................................................................................... 22

Cooper v. Pickett, 137 F.3d 616 (9th Cir. 1997) ......................................................................................................... 24

In re Cylink Secs. Litig., 178 F. Supp. 2d 1077 (N.D. Cal. 2001) ................................................................................... 24-25

Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976) ....................................................................................................................... 23

Hicks ex rel. Feiock v. Feiock, 485 U.S. 624 (1988) ....................................................................................................................... 26

Hollinger v. Titan Capital Corp., 914 F.2d 1564 (9th Cir. 1990) ................................................................................................. 23-25

Matter of Izumi, 22 I&N Dec. 169 (Assoc. Comm’r 1998) ...................................................................................... 23

Janus Capital Group, Inc. v. First Derivative Traders, 564 U.S. 135 (2011) ....................................................................................................................... 22

SEC v. Capital Consultants, LLC, 397 F.3d 733 (9th Cir. 2005) ......................................................................................................... 27

SEC v. Capital Cove Bancorp, LLC, 2015 WL 9704076 (C.D. Cal. Sept. 1, 2015) ................................................................................ 21

SEC v. Credit First Fund, LP, 2006 WL 4729240 (C.D. Cal. Feb. 13, 2006) ......................................................................... 21, 28

SEC v. eAdGear, Inc., 2014 U.S. Dist. LEXIS 170159 (N.D. Cal. Dec. 8, 2014) ............................................................. 26

SEC v. Fehn, 97 F.3d 1276 (9th Cir. 1996) ......................................................................................................... 26

SEC v. Fifth Ave. Coach Lines, Inc., 289 F. Supp. 3 (S.D.N.Y. 1968) .................................................................................................... 27


https://1.next.westlaw.com/Link/Document/FullText?findType=Y&serNum=2010526467&pubNum=0000780&originatingDoc=I28f170e0c3dc11e394ccc6c66db0403a&refType=RP&originationContext=document&transitionType=DocumentItem&contextData=(sc.Keycite)


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SEC v. First Fin. Group, 645 F.2d 429 (5th Cir. 1981) ......................................................................................................... 27

SEC v. Dain Rauscher, Inc., 254 F.3d 852 (9th Cir. 2001) ......................................................................................................... 21

SEC v. Hardy, 803 F.2d 1034 (9th Cir. 1986) ................................................................................................. 27, 31

SEC v. Homestead Props., L.P., 2009 WL 5173685 (C.D. Cal. Dec. 8, 2009) ................................................................................. 21

SEC v. Jensen, 835 F.3d 1100, 1118-19 (9th Cir. 2016) ......................................................................................... 25

SEC v. Manor Nursing Centers, Inc., 458 F.2d 1082 (2d Cir. 1972) ........................................................................................................ 29

SEC v. Mgmt. Dynamics, Inc., 515 F.2d 801 (2d Cir. 1975) .......................................................................................................... 21

SEC v. Murphy, 626 F.2d 633 (9th Cir. 1980) ......................................................................................................... 26

SEC v. Pac. West Capital Group, Inc., 2015 WL 9694808 (C.D. Cal. June 6, 2015) ................................................................................. 21

SEC v. Schooler, 902 F. Supp. 2d 1341 (S.D. Cal. 2012) .......................................................................................... 21

SEC v. Sells, 2012 WL 3242551 (N.D. Cal. Aug. 10, 2012) .............................................................................. 25

SEC v. Trabulse, 526 F. Supp. 2d 1008 (N.D. Cal. 2007) ......................................................................................... 26

SEC v. Unique Fin. Concepts, Inc., 196 F.3d 1195 (11th Cir. 1999) ..................................................................................................... 21

SEC v. United Fin. Group, Inc., 474 F.2d 354 (9th Cir. 1973) ................................................................................................... 21, 26

SEC v. Universal Fin., 760 F.2d 1034 (9th Cir. 1985) ....................................................................................................... 28

SEC v. Wencke, 577 F.2d 619 (9th Cir. 1978) ......................................................................................................... 32

SEC v. Wencke, 622 F.2d 1363 (9th Cir. 1980) ........................................................................................... 26-28, 32

SEC v. Wencke, 783 F.2d 829 (9th Cir. 1986) ......................................................................................................... 27

SEC v. Zandford, 535 U.S. 813 (2002) ................................................................................................................. 25-26

Simpson v. AOL Time Warner Inc., 452 F.3d 1040 (9th Cir. 2006) ....................................................................................................... 24



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In re Software Toolworks, Inc., 50 F.3d 615 (9th Cir. 1994) ........................................................................................................... 23

In re Stillwater Capital Partners Inc., 858 F. Supp. 2d 277 (S.D.N.Y. 2012) ........................................................................................... 22

United States v. Odessa Union Warehouse Co-op, 833 F.2d 172 (9th Cir. 1987) ......................................................................................................... 26

Vernazza v. SEC, 327 F.3d 851 (9th Cir. 2003) ................................................................................................... 23-24

Statutes

8 U.S.C. § 1153(b)(5)(A) ..................................................................................................................... 8

15 U.S.C. § 77q(a) ....................................................................................................................... 21, 24

15 U.S.C. § 77t(b) .......................................................................................................................... 1, 20

15 U.S.C. § 78j(b) ................................................................................................................... 21-22, 24

15 U.S.C. § 78u(d) ......................................................................................................................... 1, 20

28 U.S.C. § 2283 ................................................................................................................................ 32

Federal Rules and Regulations

8 C.F.R. § 204.6(m) .............................................................................................................................. 8

17 C.F.R. § 240.10b-5 ............................................................................................................. 22, 24-25

Fed. R. Civ. P. 66 .................................................................................................................................. 1



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MOTION FOR PRELIMINARY INJUNCTION AND FOR APPOINTMENT OF RECEIVER

Plaintiff Securities and Exchange Commission (the “SEC” or “Commission”), on Thursday,

March 2, 2017 at 1:30 p.m. (or as soon thereafter as the Court may order), will move the Court for a

preliminary injunction against defendants 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 (collectively “defendants”). In particular, the Commission moves for

an order: (1) enjoining defendants from violating the antifraud provisions of the federal securities

laws; (2) enjoining defendants from directly or indirectly participating in the issuance, offer, or sale

of any security of any entity controlled by, or under joint control with, any of them; and (3)

prohibiting the destruction of documents by defendants, and by relief defendants CallSocket Holding

Company, LLC; CallSocket III Holding Company, LLC; Central California Farms, LLC; Berkeley

Healthcare Dynamics, LLC; and JL Gateway, LLC (collectively “relief defendants”). The

Commission also moves for an order appointing a receiver over all defendants except Thomas M.

Henderson and all relief defendants to ensure that their remaining assets are not dissipated or

unnecessarily subject to loss in value during the pendency of this litigation.1

The Commission’s motion for a preliminary injunction is brought pursuant to Section 20(b) of

the Securities Act of 1933, 15 U.S.C. § 77t(b), and Section 21(d) of the Securities Exchange Act of

1934, 15 U.S.C. § 78u(d), which authorize injunctions upon the Commission’s proper showing. The

Commission’s motion for appointment of a receiver is brought pursuant to these same provisions and

pursuant to this Court’s inherent equitable authority, which empowers the Court to make ancillary

orders to effect complete equitable relief in SEC enforcement matters. The motion is also made in

conformity with Federal Rule of Civil Procedure 66 and Local Civil Rule 66-1. 1 Because the facts supporting the request for a preliminary injunction overlap with those supporting the request for a receiver, the Commission brings these related requests as a single motion with a contemporaneously filed administrative motion under Local Civil Rule 7-11 to extend the page limit specified by Local Civil Rule 7-4(b).



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The Commission’s motion is supported by the Memorandum herein; the simultaneously filed

Declarations of Thomas J. Eme and Ellen Chen and the exhibits thereto; the [Proposed] Order

Granting Preliminary Injunction; and the [Proposed] Order Appointing a Receiver.

MEMORANDUM IN SUPPORT OF MOTION

I. INTRODUCTION

Since September 2010, defendants Thomas Henderson and his companies have defrauded at

least 215 persons who have invested approximately $107 million in businesses under Henderson’s

control, along with an additional $8.9 million in fees. Henderson used his companies, including San

Francisco Regional Center, LLC (“SFRC”), to entice foreign nationals to invest in specific businesses

that purportedly qualified under the Employment-Based Immigration Fifth Preference program, also

known as the EB-5 program, a federal program administered by the U.S. Citizenship and Immigration

Services (“USCIS”) that provides a means for foreign nationals to qualify for U.S. residency by

investing $500,000 or more in a specified project determined to have created or preserved at least 10

jobs for United States workers.

Over the past five years, Henderson, through SFRC, has sponsored a total of seven business

projects under the EB-5 program (“EB-5 Projects”). He and the entities he controls solicit funds from

investors using Private Placement Memoranda (“PPM”) and Business Plans unique to each project.

Each investor invests $500,000 in exchange for a security constituting an interest in a limited

partnership that purports to use the investors’ money to operate, or make loans to, a specific, job-

creating business.

Rather than using each investor’s funds solely for the project for which they were solicited,

Henderson siphoned off millions of dollars of investors’ funds for his own use and to fund his non-

EB-5 business ventures. Henderson also sent millions of dollars of investors’ contributions to

overseas marketing agents, contrary to representations to investors and the law governing the EB-5

program. Finally, Henderson engaged in an elaborate shell game of using funds solicited for one EB-

5 Project to fund other EB-5 Projects, which was again contrary to representations to investors who

were told their investment would be used for a specific EB-5 Project. Henderson’s actions have

seriously jeopardized both the investors’ prospects for an economic return, as well as their ability to



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obtain permanent residency through the EB-5 program. To halt this fraud, the SEC seeks an order

enjoining defendants from further violations and specifically prohibiting defendants from soliciting

new investments. The SEC also seeks the appointment of a receiver to marshal and preserve the

entity defendants’ and relief defendants’ assets during the pendency of this action.

II. STATEMENT OF FACTS

A. Henderson, Using Entity Defendants He Controls, Raised Funds and Issued Securities to Develop Seven EB-5 Projects

Beginning in September 2010, Henderson began soliciting investors for his first EB-5 Project,

a skilled nursing facility in Oakland, California. A year later, Henderson received authorization from

USCIS to operate SFRC as an EB-5 “Regional Center” that would sponsor EB-5 projects in and

around Oakland, California. Declaration of Thomas J. Eme in Support of Motion for Preliminary

Injunction and for Appointment of Receiver (“Eme Decl.”), ¶ 37, Ex. 36. Over the next five years,

Henderson used SFRC to sponsor continued investments in the skilled nursing facility as well as six

additional EB-5 Projects, including three call centers, a warehousing/logistics business, a retail

grocery and restaurant business, and a dairy processing business.

For each EB-5 Project, Henderson reviewed and approved a Business Plan and a Private

Placement Memorandum (“PPM”) used to solicit prospective investors. See Eme Decl. ¶ 2, Ex. 1 at

37:24-39:10, 177:14-180:14, 181:4-20. Each PPM identified a limited partnership as the issuer of

securities, a general partner as the entity that would control and manage the project, and Henderson

as the person who controlled the general partner. See generally infra Section II.D.

The PPMs for each EB-5 Project represented that the investors’ capital contributions of

$500,000 per investor would be used for the particular project in which they invested. See, e.g., Eme

Decl. ¶ 7, Ex. 6 at 4-5, 18. The PPMs for each EB-5 Project also represented that a separate

syndication fee, which ranged from an additional $40,000 to $60,000, depending on the project,

would be used to pay (1) the initial expenses associated with the establishment of each partnership

and the offering of the partnership units, including legal and promotional fees, including a finder’s

fee, and (2) the legal fees incurred in connection with preparation of partnership related documents

that the investors request for submission of their application for classification as an alien entrepreneur



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(hereafter referred to as “offering expenses”). See, e.g., id., Ex. 6 at 4-5, 8-9. The separation of the

syndication fees from investors’ capital contributions was intended to assure that the full amount of

investors’ capital contributions was available to the EB-Projects for job-creating investments. See id.

A total of approximately $8.9 million was paid in syndication fees by investors across the

seven EB-5 Projects. See Declaration of Ellen Chen in Support of Motion for Preliminary Injunction

and for Appointment of Receiver (“Chen Decl.”), ¶¶ 8, 27 and Tables 2, 10. Henderson paid far in

excess of that amount – approximately $16.6 million – in finders’ fees, at least $7.5 million of which

came directly from investor capital contributions. Id. ¶¶ 27-28, Tables 10, 11 and Ex. 40. Henderson

also diverted millions of dollars for purposes that did not further job creation by the EB-5 Projects,

including for his own personal use, as described below. B. Henderson Used At Least $9.6 Million from SFRC Accounts with

Commingled Investor Funds to Benefit Himself

Rather than use investor funds solely to develop the projects, as he represented to investors,

Henderson diverted millions of dollars from accounts commingled with investor money to support his

non-EB-5 business ventures, to acquire a personal residence, and to pay himself, none of which was

disclosed in the offering materials he provided to investors. From approximately March 2011

through November 2016, the SFRC-related EB-5 entities obtained approximately $107.3 million in

so-called “capital contributions” from EB-5 investors. Chen Decl. ¶ 8 and Table 2. But instead of

using this money solely for the respective EB-5 Projects for which it was solicited – as he and SFRC

had promised to investors – Henderson commingled the funds from all seven EB-5 Projects into bank

accounts he controlled, principally in the name of SFRC, as well as, in some cases, Immedia, LLC.2 2 From approximately October 2010 through December 2014, Henderson opened at least nine bank accounts in the name of SFRC. Chen Decl. ¶¶ 7, 13 and Table 1. Henderson was the sole signatory on all those accounts, Id. ¶ 7 and Table 1, and he controlled them along with bank accounts used by the EB-5 Projects, Eme Decl. ¶ 2, Ex. 1 at 42:13-19, 43:23-44:12, 48:14-19, and 88:4-89:25. Beginning in November 2015 (which, as indicated below, is shortly after a lawsuit was filed in California state court against SFRC and Henderson), Henderson opened two bank accounts in the name of an entity called Immedia, LLC (“Immedia”). Chen Decl. ¶¶ 7, 13 and Table 1. Henderson was the sole signatory on those two accounts. Id. ¶ 7, Table 1. According to SFRC’s own accounting records and as confirmed by bank records, Henderson routinely moved EB-5 investor funds (and at times revenues from the EB-5 Projects) from the EB-5 limited partnership accounts into accounts for SFRC, and later Immedia. Id. ¶¶ 7-16 and Tables 1-8. Immedia, wholly owned by Footnote continued on next page



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He then diverted the money from these accounts on an ad hoc basis for whatever purposes he chose,

including siphoning off millions of dollars for himself.

For example, in November 2014, Henderson used approximately $346,000 of funds that had

been obtained from investments for one of the “call center” EB-5 Projects, called CallSocket III, L.P.,

towards the purchase of his $1.4 million personal residence in Oakland, California. Chen Decl. ¶¶

62-65, Diagram H, and Exs. 62-63. And from December 2011 through November 2015, Henderson

caused SFRC to pay $394,000 from its commingled accounts to himself or for items and services for

his personal benefit. Chen Decl. ¶¶ 58-61 and Exs. 60-61.

Henderson also used millions of dollars from accounts commingled with investor funds on

non-EB-5 business ventures that personally benefited him. For example, Henderson used

approximately $3.8 million from commingled SFRC accounts with investor funds to build out and

operate two restaurants in Oakland, California. Chen Decl. ¶¶ 66-67, Ex. 64. Henderson had an

indirect ownership interest in both restaurants, as well as a right to net profits, through his ownership

interest in SFRC. Eme Decl. ¶¶ 2, 33, Ex. 1 at 9:1-25; Ex. 32. Neither restaurant is related to any of

the EB-5 Project businesses, and the offering materials provided to EB-5 investors by Henderson and

other defendants did not disclose that their funds would be used for these restaurants. Eme Decl. ¶ 2,

Ex. 1 at 66:10-76:13; 83:3-84:5; 84:8-86:14; see generally Eme Decl. ¶¶ 3-7, 9-20; Exs. 2-6, 8-19.

Similarly, at Henderson’s direction, from January 2013 to December 2013, a net of

approximately $257,000 was paid to or on behalf of Starr Brand, LLC from an SFRC account. Chen

Decl. ¶ 13.G. Starr Brand, LLC is an entity in which Henderson held an indirect ownership interest

through SFRC. Eme Decl. ¶¶ 2, 43; Ex. 1 at 9:1-25, Ex. 42. According to Henderson, Starr Brand,

LLC never conducted any business. Eme Decl. ¶ 2, Ex. 1 at 164:13-21. And the offering materials

provided to EB-5 investors by Henderson and other defendants failed to disclose that their funds

would be paid to or on behalf of Starr Brand, LLC. See generally Eme Decl. ¶¶ 3-7, 9-20; Exs. 2-6,

8-19.

Henderson and SFRC, appears to have operated purely as a conduit for opening bank accounts to take in SFRC-related money and does not appear to have any other business operations. See Eme Decl. ¶¶ 2, 42; Ex. 1 at 149:24-151:10 and Ex. 41.



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Likewise, in November 2012, Henderson, making transfers through SFRC, used

approximately $2.5 million from investors in CallSocket I to purchase a warehouse located at 1700

20th Street in Oakland, California. Chen Decl. ¶¶ 46-48, Exs. 52-53. He placed title in non-party

Berkeley Healthcare Dynamics, L.P., an entity in which he has an indirect ownership interest. Eme

Decl. ¶¶ 2, 28, 41, 44; Ex. 1 at 9:1-25; Exs. 27, 40, 43; Chen Decl. ¶ 46, Ex. 52. Over the period

November 2012 through January 2014, Henderson transferred an additional approximately $2.2

million from SFRC bank accounts with commingled investor funds to this same non-party. Chen

Decl. ¶ 26 and Ex. 39. In February 2014, Henderson then formed the limited partnership NA3PL,

L.P. for a new warehouse EB-5 Project, which received its first investor funds in May 2014. Chen

Decl. ¶ 26; Eme Decl. ¶ 16, Ex. 15 at 1. That EB-5 Project is located at the warehouse property and,

for at least some period of time, paid rent to the current title holder, Relief Defendant Berkeley

Healthcare Dynamics, LLC, another entity in which Henderson has either a direct or indirect

ownership interest. Eme Decl. ¶¶ 2, 32, 41, 45, Ex. 1 at 9:1-25, 138:16-25, 146:19-147:24, 149:4-9,

Ex. 31 at 7, Ex. 40, Ex. 44; Chen Decl. ¶ 49, Ex. 54.3

Further, in December 2014, Henderson commingled funds from NA3PL, L.P. and CallSocket

III and on December 17, 2014 used $150,000 of the commingled funds toward the purchase of a

shopping complex located at 800-900 Market Street in Oakland, California. Chen Decl. ¶¶ 53-56,

Exs. 57-58 and Diagram G. Henderson placed title in Relief Defendant JL Gateway, LLC, which is

owned 75 percent by SFRC, an entity owned in part by Henderson. Chen Decl. ¶ 53, Ex. 57; Eme

Decl. ¶¶ 2, 38, 46; Ex. 1 at 9:1-25, 160:20-161:5, Ex. 37, Ex. 45. The PPMs and business plans for

NA3PL, L.P. and CallSocket III did not disclose that investors’ funds for those Projects would be

used to purchase this property. See Eme Decl. ¶¶ 13-16, Exs. 12-15. Instead, the Business Plan for

the West Oakland Plaza EB-5 Project states that that Project would develop a grocery store/restaurant

and commercial kitchen at the 800-900 Market Street location. See Eme Decl. ¶ 18, Ex. 17 at 1, 8,

10. But the limited partnership for that Project was not even formed until January 16, 2015 – a month 3 Even after forming this EB-5 Project, Henderson continued to fund it from unauthorized sources. From April 2016 to August 2016, Henderson caused West Oakland Plaza, L.P. to pay approximately $786,000 of investors’ funds to North America 3PL, LLC. Chen Decl. ¶ 11 and Table 5.



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after the purchase of the property – and the first investor funds raised specifically for that Project

were not received until November 2015. Eme Decl. ¶ 18, Ex. 17 at 2; Chen Decl. ¶ 8, Table 2.

Furthermore, from at least May 2016 to November 2016, West Oakland Plaza made rent payments to

JL Gateway, LLC, an entity in which Henderson has an indirect ownership interest through SFRC.

Eme Decl. ¶¶ 2, 46; Ex. 1 at 9:1-25, Ex. 45; Chen Decl. ¶ 57, Ex. 59. Thus, Henderson used investor

funds from two EB-5 Projects towards the purchase of property that would come to be used by a third

EB-5 Project that pays rent to an entity in which Henderson has an indirect ownership interest – and

Henderson also gave himself an ownership interest in the underlying property itself.

Henderson thus siphoned off at least $9.6 million from accounts with commingled investor

funds. And, as discussed below, this figure does not include Henderson’s use of an additional $2.48

million from another EB-5 limited partnership, California Gold Medal, L.P., to purchase real estate

that he ultimately placed in another entity he part owns. See infra Section II.E; Chen Decl. ¶¶ 50-52

(describing purchase pertaining to relief defendant Central California Farms, LLC).

Finally, in addition to taking cash to purchase his private residence and to fund his restaurants

and other personal ventures, Henderson also converted assets that were purchased with EB-5 investor

funds to his own purposes. For instance, Henderson purchased the landmark Tribune Tower in

Oakland using capital contributions from investors in the nursing facility EB-5 Project,

Comprehensive Care of Oakland, L.P. See infra Section II.E. But Henderson used the Tribune

Tower to benefit himself and his businesses. He thus allowed one of his restaurant ventures to

operate from the building for a period without paying rent. Eme Decl. ¶ 2, Ex. 1 at 84:6-85-7. In

addition, as of November 2016, several companies with which Henderson is associated, including a

law firm that has provided services to Henderson, were occupying space in the building, either

without paying rent or paying significantly below-market rent. Id. ¶ 25, Ex. 24 at 7 and Ex. B.

In addition to converting money and property that belonged to the various EB-5 Projects to

himself or his own business ventures, Henderson also carried out a more complex scheme in which

he moved the money from investors in and out of SFRC’s bank accounts in an elaborate shell game,

as described below.



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C. Henderson Improperly Used $7.5 Million in Capital Contributions to Pay “Finders”

Contrary to representations to investors, Henderson used capital contributions to pay finders’

fees to overseas agents who marketed the EB-5 Projects to investors. As indicated below, the PPMs

for each Project represent that promotional/finders’ fees would be paid from the Syndication Fees

that investors paid, to assure that the entire $500,000 capital contribution was available to the

Partnership for job-creating investments. The Limited Partnership Agreements likewise state that

promotional/finders’ fees would be paid from Syndication Fees, and also made clear that none of the

capital contribution would be used to pay promotional/finders’ fees. Despite these representations,

Henderson used at least $7.5 million of capital contributions to pay finders’ fees to overseas agents.

Chen Decl. ¶¶ 27-30, Tables 10-11, Diagram C.4

Indeed, adherence to these representations was critical to ensure that investors could submit

EB-5 petitions for U.S. residency in connection with their investments in the EB-5 Projects sponsored

by SFRC, since the relevant statute and regulations require that all investor capital contributions be

used for job creation activities in the United States. See 8 U.S.C. § 1153(b)(5)(A) (EB-5 capital

invested must “benefit the United States economy and create full-time employment for not fewer than

10 United States citizens or aliens lawfully admitted for permanent residence or other immigrants

lawfully authorized to be employed in the United States”); 8 CFR §204.6(m) (EB-5 investors may

count indirect jobs created toward requirement, but jobs must still be for qualifying employee,

defined as United States citizen, lawfully admitted permanent resident, or other immigrant lawfully

authorized to be employed in the United States).

D. Henderson Purported to Create Seven Separate EB-5 Projects

1. Comprehensive Care of Oakland Nursing Facility Project

Comprehensive Care of Oakland, L.P. (“CCOO”) was formed in September 2010. Eme Decl.

¶ 4, Ex. 3 at 1. During its first year, CCOO acted as a stand-alone EB-5 enterprise. See id. ¶¶ 3, 37; 4 In total, Henderson caused the payment of at least $16.6 million to overseas marketing agents or finders, including approximately $13.6 million from the accounts of SFRC and Immedia and approximately $3 million from EB-5 Project accounts that he controlled. Chen Decl. ¶ 27 and Table 10.



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Ex. 2 at 2, Ex. 37. After Henderson received approval from USCIS in 2011 for SFRC to be a

“Regional Center,” investors were solicited for CCOO as an SFRC-sponsored project. See id.

According to the Business Plan provided to investors after SFRC began to sponsor the project,

sixteen investors filed petitions with USCIS “based on CCOO as a stand-alone EB-5 enterprise,” with

others contributing to CCOO “as a project of the San Francisco Regional Center.” Id. ¶ 3, Ex. 2 at 2.

CCOO ultimately raised a total of approximately $12 million in capital contributions from 24

investors, plus syndication fees totaling approximately $440,000. See Chen Decl. ¶ 8 and Table 2.

Investors in CCOO were provided with both a Business Plan and a PPM, each of which was

approved by Henderson. See Eme Decl. ¶¶ 2-6, Ex. 1 at 37:24-39:10, 177:14-180:14, 181:4-20, Exs.

2-5. The PPM states that “the investment objective of the Partnership [CCOO] is to invest [amount

of capital contributions raised] into the Comprehensive Care of Oakland, LP business” and that “the

Partnership intends to invest all of each investor’s capital contribution of $500,000 in Comprehensive

Care of Oakland, LP that should protect the principal amount of investment as much as reasonably

possible.” Id. ¶¶ 4, 6; Ex. 3 at iii, 20, Ex. 5 at iii, 18-19. The Business Plan also represents that

investor money will be used by CCOO to capitalize, own and operate a subacute care skilled nursing

facility in Oakland, California. See id. ¶¶ 3, 5; Ex. 2 at 1-2; Ex. 4 at 1, 6. It provides an analysis of

the use of investors’ funds, including the purchase of an existing skilled nursing facility and other

expenditures for renovations, insurance, staffing, and operating expenses. See id. Ex. 2 at 7-8, Ex. 4

at 6-7. According to the PPM, CCOO is managed and operated by its general partner,

Comprehensive Care of California, LLC, of which Henderson was Managing Member, President and

CEO. See id. ¶¶ 4, 6; Ex. 3 at 1, 33; Ex. 5 at 1, 31. The Limited Partnership Agreement also

identifies SFRC as a managing member of the general partner. Id. Ex. 3 at SEC-USCIS-E-0016741,

Ex. 5 at SEC-USCIS-E-0022526.

The PPM also provides that a separate $40,000 to $60,000 “Syndication Fee” – paid by

investors in addition to the $500,000 capital contribution – is to be used to pay offering expenses. Id.

¶¶ 4, 6; Ex. 3 at iii, n.2, 8-9; Ex. 5 at 8-9. The additional Syndication Fee is described as the means

for paying the “finder’s fee;” and the separation of these fees from the capital contribution is

“intended to assure that the entire Unit Price of $500,000 is capital contribution and available to the



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Partnership for job-creating investments.” Id. Ex. 3 at 4-5, Ex. 5 at 4. The PPM attached the Limited

Partnership Agreement, which similarly provided that “[n]o part of the initial Capital Contribution

made by a Limited Partner (i.e. $500,000) shall be diverted to pay expenses of the Partnership

incurred in connection with (i) the formation of the Partnership and the Offering of the Units . . .

including a ‘finders’ fee.’” Id. Ex. 3 at SEC-USCIS-E-0016746-47, Ex. 5 at SEC-USCIS-E-0022532.

Henderson, as Managing Member of SFRC, signed the Limited Partnership Agreement for

Comprehensive Care of California, LLC (the General Partner of CCOO). Id. Ex. 3 SEC-USCIS-E-

0016779, Ex. 5 at SEC-USCIS-E-0022567.

2. The Three CallSocket Call Center Projects

Beginning in 2011 after SFRC was designated a Regional Center, Henderson formed three

“call center” EB-5 Projects. The first, CallSocket, L.P. (“CallSocket I”), was formed in September

2011. Eme Decl. ¶ 8, Ex. 7 at 1. The PPM identifies the general partner as either SFRC or

CallSocket, LLC, with Henderson as Managing Member, Principal, and CEO of SFRC. Id. ¶¶ 7, 9;

Ex. 6 at 1, 31; Ex. 8 at 1, 31. See also id. ¶ 8, Ex. 7 (Certificate of Limited Partnership identifying

CallSocket, LLC as general partner of CallSocket I). According to the PPM, the offering is for up to

30 units of limited partnership interests for $550,000 per investor, consisting of a $500,000 “capital

contribution” and a $50,000 “Syndication Fee.” See id. ¶ 7, Ex. 6 at 2-3, 37. CallSocket I ultimately

raised approximately $18 million in capital contributions from approximately 36 investors, plus

syndication fees totaling approximately $1.8 million, from April 2012 to June 2013. Chen Decl. ¶ 8

and Table 2.

Henderson formed the second call center EB-5 Project, CallSocket II, L.P. (“CallSocket II”),

in June 2012. Eme Decl. ¶ 11, Ex. 10 at 1. Consistent with the first, its general partner is called

“CallSocket II, LLC,” whose Managing Member is SFRC; the PPM also identifies Henderson as the

Managing Member, Principal, and CEO of SFRC. Id. Ex. 10 at 1, 31. Also like the first call center,

each investor was to pay a total of $550,000 each, divided into a $500,000 “capital contribution” and

a $50,000 “Syndication Fee.” Id. Ex. 10 at 2-3, 37. CallSocket II raised a total of $15.5 million in

capital contributions from 31 investors, plus syndication fees totaling approximately $1.5 million,

from November 2012 to June 2014. Chen Decl. ¶ 8 and Table 2.



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Henderson formed the third call center EB-5 Project in January 2013, as CallSocket III, L.P.

(“CallSocket III”). Eme Decl. ¶ 13, Ex. 12 at 1. The PPM specifies the same structure as provided

for the first two call centers: the General Partner is CallSocket III, LLC; SFRC is the Managing

Member of CallSocket III, LLC; and Henderson is identified as the Managing Member, Principal,

and CEO of SFRC. Id. Ex. 12 at 1, 31. The limited partnership interests are also sold for $550,000

each, with the same split of $500,000 toward a “capital contribution” and $50,000 toward a

“Syndication Fee.” Id. Ex. 12 at 2-3, 37. CallSocket III raised approximately $19.5 million in capital

contributions plus a total of approximately $1.6 million in syndication fees from 39 investors, from

November 2013 to January 2016. Chen Decl. ¶ 8 and Table 2.

Investors for each of the three CallSocket EB-5 Projects were provided with both a Business

Plan and a PPM for the respective entity in which they were investing, and these offering materials

were approved by Henderson. See Eme Decl. ¶¶ 2, 7, 9-14; Ex. 1 at 37:24-39:10, 177:14-180:14,

181:4-20, Exs. 6, 8-13. The Business Plans for each respective CallSocket entity elaborate on the

particular call center business, describing, for example, their planned locations in different buildings,

and specifying each of the three Projects’ startup expenses by categories such as “Design and

Engineering,” “Equipment and Furnishings,” “[Office] Startup Expenses,” and “Labor and Payroll

Expenses,” which total $15 million for each of the three CallSocket Projects. See id. ¶¶ 10, 12, 14;

Ex. 9 at 11-12; Ex. 11 at 11-13; Ex. 13 at 11-13.

The PPMs for each of the three investments describe the separate uses of the “capital

contribution” and the “Syndication Fee,” stating that “the investment objective of the [limited]

Partnership is to invest $15 million into CallSocket, LP [and for II and III, CallSocket II, LP and

CallSocket III, LP] business” and that “the Partnership intends to invest all of each investor’s capital

contribution of $500,000 in CallSocket, LP [and for II and III, CallSocket II, LP and CallSocket III,

LP] that should protect the principal amount of investment as much as reasonably possible.” Id. ¶¶ 7,

11, 13; Ex. 6 at 18, Ex. 10 at 18, Ex. 12 at 18. The PPMs further provide that the Syndication Fee is

to be used to pay offering expenses, including a “finder’s fee,” which is “intended to assure that the

entire Unit Price of $500,000 is capital contribution and available to the Partnership for job-creating

investments.” Id. Ex. 6 at 4-5, Ex. 10 at 4-5, Ex.12 at 4-5. And, the PPMs each attach a Limited



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Partnership Agreement which states that “[n]o part of the initial Capital Contribution made by a

Limited Partner (i.e. $500,000) shall be diverted [at least one Agreement uses “expended”] to pay

expenses of the Partnership incurred in connection with (i) the formation of the Partnership and the

Offering of the Units . . . including a ‘finders’ fee.’” Id. Ex. 6 at SEC-SFRC-E-0003333, Ex. 10 at

SEC-SFRC-E-0003202, Ex. 12 at SEC-SFRC-E-0003912. Henderson, as Managing Member of

SFRC, signed each of the attached Limited Partnership Agreements for the respective general partner.

Id., Ex. 6 at SEC-SFRC-E-0003366, Ex. 10 at SEC-SFRC-E-0003235, Ex. 12 at SEC-SFRC-E-

0003945.

3. NA3PL, L.P. Warehousing Project

In February 2014, Henderson formed another of the EB-5 Projects, a warehousing business

called NA3PL, L.P. See Eme Decl. ¶ 16, Ex. 15 at 1. NA3PL, L.P. raised approximately $20 million

in capital contributions and approximately $2 million in Syndication Fees from approximately 40

investors from May 2014 to March 2016. Chen Decl. ¶ 8 and Table 2.

The PPM provided to investors for NA3PL, L.P. and approved by Henderson identifies SFRC

as the general partner and Henderson as the Managing Member, Principal, and CEO of SFRC. Eme

Decl. ¶¶ 2, 15; Ex. 1 at 37:24-39:10, 177:14-180:14, 181:4-20; Ex. 14 at 1, 31. According to the

PPM, up to 40 units of limited partnership interests would be sold for $560,000, consisting of the

$500,000 “capital contribution” and the $60,000 “Syndication Fee.” See id. ¶ 15, Ex. 14 at 37. The

PPM describes how the limited partnership that issues the securities will make a “$20 million dollar

[sic] loan to North America 3PL, LLC to fund the development, construction, and initial operating

expenses of a warehouse/3rd party logistics facility.” Id. Ex. 14 at 2.

Like the earlier projects, the PPM specifies that “the Partnership intends to invest all of each

investor’s capital contribution of $500,000 in NA3PL, LP that should protect the principal amount of

investment as much as reasonably possible.” Id. Ex. 14 at 18. The Business Plan provided to

investors and approved by Henderson states that NA3PL, L.P. “will raise $20M [million] of equity

from up to 40 EB-5 investors and loan the $20M to NA3PL, LLC (the Job Creating Entity)” which

“will use the funds to support its development and operations of a warehousing/third-party logistics

business that supports importers and exporters moving goods through the Port of Oakland.” Id. ¶¶ 2,



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16; Ex. 1 at 37:24-39:10, 177:14-180:14, 181:4-20; Ex. 15 at 3. Like the earlier EB-5 Projects, the

Business Plan sets forth the budget with costs and expenses totaling $20 million. See id. ¶ 16, Ex. 15

at 46-47. Ultimately, North America 3PL, LLC is to pay back the loan to the limited partnership,

NA3PL, L.P., plus interest paid in quarterly installments. Id. Ex. 15 at 1-2.

The PPM further states that the Syndication Fee will be used to pay offering expenses, and

this is “intended to assure that $500,000 of each Subscription Price is capital contribution and

available to the Partnership for job-creating investments.” Id. ¶ 15, Ex. 14 at 9. The PPM similarly

attaches the Limited Partnership Agreement, signed by Henderson, Managing Member of SFRC, for

the general partner, SFRC, which states that the Syndication Fee includes a “finders’ fee,” and makes

clear that “[n]o part of the initial Capital Contribution made by a Limited Partner (i.e. $500,000) shall

be diverted to pay expenses of the Partnership incurred in connection with (i) the formation of the

Partnership and the Offering of the Units . . . including legal and promotional fees, including a

‘finders’ fee.’” Id. Ex. 14 at SEC-SFRC-E-0004177-78, 4181, 4214.

4. West Oakland Plaza Retail Center Project

In January 2015, Henderson and SFRC formed the next EB-5 Project, West Oakland Plaza,

L.P. (“West Oakland Plaza”) to develop and operate a retail food service and grocery business in

West Oakland, California. Eme Decl. ¶ 17, Ex. 16 at 1-2. West Oakland Plaza has raised

approximately $2 million in capital contributions and $210,000 in Syndication Fees from four

investors, from November 2015 to September 2016. Chen Decl. ¶ 8 and Table 2.

The PPM Henderson approved for content and distribution to investors for West Oakland

Plaza identifies SFRC as its general partner and Henderson as the Managing Member, Principal, and

CEO of SFRC. See id. ¶¶ 2, 17; Ex. 1 at 37:24-39:10, 177:14-180:14, 181:4-20; Ex. 16 at 1, 31. The

PPM is for the sale of up to 20 units of limited partnership interests for $550,000 per investor,

consisting of a $500,000 “capital contribution” and a $50,000 “Syndication Fee.” Id. ¶ 17, Ex. 16 at

2-3. Similar to the NA3PL, L.P. warehousing project, the investment was to be structured so that the

limited partnership makes a $10 million “loan” to another entity, in this case West End Market, LLC,

“to fund the development, construction, and initial operating expenses of a food service and grocery

business.” Id. Ex. 16 at 2. The PPM states that “the Partnership intends to invest all of each



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investor’s capital contribution of $500,000 in WEST OAKLAND PLAZA, L.P. in a manner that

should protect the principal amount of investment as much as reasonably possible.” Id. Ex. 16 at 18.

The Business Plan for West Oakland Plaza provided to investors and approved by Henderson

similarly describes how the “loan” of $10 million from the limited partnership to “West End Market,

LLC (a California Limited Liability Company) – the job creating entity,” is to be used for

“development and operations of a grocery store/restaurant and related commercial kitchen in an

existing shopping complex.” Id. ¶¶ 2, 18; Ex. 1 at 37:24-39:10, 177:14-180:14, 181:4-20; Ex. 17 at

3. According to the Business Plan, “[t]he entire $10 million will be used to fund the renovation and

operational startup of the grocery store, including in-store dining, and a commercial kitchen in West

Oakland.” Id. ¶ 18, Ex. 17 at 1. The Business Plan provides a general timetable for repayment of the

loan, as well as a summary of start-up expenses, that totaled $10 million. See id. Ex. 17 at 1, 57-58.

Like the other projects, the additional $50,000 Syndication Fee is to be used for offering

expenses, and the PPM states that it is “intended to assure that the entire Unit Price of $500,000 is

capital contribution and available to the Partnership for job-creating investments.” Id. ¶ 17, Ex. 16 at

4-5. Also like the prior projects, the PPM attached the Limited Partnership Agreement, signed by

Henderson, Managing Member of SFRC, for the general partner, SFRC, specifying that “[n]o part of

the initial Capital Contribution made by a Limited Partner (i.e. $500,000) shall be diverted to pay

expenses of the Partnership incurred in connection with (i) the formation of the Partnership and the

Offering of the Units, including legal and promotional fees.’” Id. Ex. 16 at SEC-SFRC-E-0004041,

4044, 4077.

5. California Gold Medal Dairy Processing Project

In March 2015, Henderson and SFRC formed the last of the EB-5 Projects that is the subject

of this motion, California Gold Medal, L.P. (“California Gold Medal”), to fund the development,

construction and initial operating expenses of a “production and worldwide distribution facility for

dairy products.” Eme Decl. ¶ 19, Ex. 18 at 1-2. California Gold Medal has, as of November 30,

2016, raised approximately $21.5 million in capital contributions and $1.1 million in Syndication

Fees from 43 investors from August 2015 to November 2016. Chen Decl. ¶ 8 and Table 2. As of



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November 30, 2016, approximately $15.2 million of the total raised was held in California Gold

Medal’s accounts. Chen Decl. ¶ 12 and Table 6.

The PPM provided to investors and approved by Henderson identifies SFRC as the general

partner of California Gold Medal and Henderson as the Managing Member, Principal, and CEO of

SFRC. See Eme Decl. ¶¶ 2, 19; Ex. 1 at 37:24-39:10, 177:14-180:14, 181:4-20; Ex. 18 at 1, 31.

According to the PPM, up to 100 limited partnership units would be sold for $560,000 per investor,

consisting of the $500,000 “capital contribution” and the $60,000 “Syndication Fee.” See id. ¶ 19,

Ex. 18 at 3.

The PPM describes the use of funds in a structure similar to the NA3PL, L.P. and West

Oakland Plaza, L.P. EB-5 Projects, in which the limited partnership is to make a $50 million “loan”

to another entity, in this case Crystal Golden, LLC, “to fund the development, construction, and

initial operating expenses of a production and worldwide distribution facility for dairy products.” Id.

Ex. 18 at 2. The Business Plan for California Gold Medal, also provided to investors and approved

by Henderson, further describes how the limited partnership will “raise $50 million from 100 EB-5

investors and loan these funds to Crystal Golden, LLC (the Job Creating Entity),” which will “use the

funds to support its development and operations of a dairy processing company that will source

California milk and process it into UHT dairy products specifically for the export market.” Id. ¶¶ 2,

20; Ex. 1 at 37:24-39:10, 177:14-180:14, 181:4-20; Ex. 19 at 1, 3. According to the Business Plan,

“[t]he entire $50 million loan will be used by Crystal Golden, LLC . . . to fund the start-up expenses

for the company, including milk sourcing and the ground up renovation of an existing, but sorely out

of date, dairy processing facility.” Id. ¶ 20, Ex. 19 at 1. The Business Plan provides a general

timetable for repayment of the loan, as well as a summary of projected start-up expenses of $50

million. See id. Ex. 19 at 1, 47-48.

The PPM contains the same limitations on the use of funds as the prior projects, including that

the additional Syndication Fee is to be used to pay offering expenses in order “to assure that the

entire Unit Price of $500,000 is capital contribution and available to the Partnership for job-creating

investments.” Id. ¶ 19, Ex. 18 at 4-5. Like the other projects, the PPM attaches the Limited

Partnership Agreement, signed by Henderson, Managing Member of SFRC, for the general partner,



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SFRC, which makes clear that “[n]o part of the initial Capital Contribution made by a Limited

Partner (i.e. $500,000) shall be diverted to pay expenses of the Partnership incurred in connection

with (i) the formation of the Partnership and the Offering of the Units, including legal and

promotional fees.’” Id. Ex. 18 at SEC-SFRC-E-0003638, 3641, 3674.

E. Henderson Improperly Commingled and Misappropriated Investor Funds in an Elaborate Shell Game

Despite the clear dictates of the PPMs and Business Plans provided to investors to use funds

raised from investors solely for the designated EB-5 Project, Henderson routinely used funds

solicited for one project to fund other EB-5 Projects. Indeed, as described below, Henderson’s fraud

continued even in the face of a state court lawsuit brought by one of his partners against him.

The bank accounts for SFRC and Immedia were the primary tools Henderson used to both

misappropriate funds among the EB-5 Projects and siphon funds away from them entirely.

Henderson routinely commingled funds from the EB-5 Projects in these two entities’ accounts and

then used them indiscriminately for whatever he chose.

For example, on November 1, 2013, Henderson transferred approximately $470,000 from an

investor in CallSocket II to an account for SFRC which at the time held only $22,000. Chen Decl. ¶

20. That same day, several payments were made from the account, including $200,000 to CallSocket

I, $100,000 to Berkeley Healthcare Dynamics, L.P. (a non-party in which SFRC holds an ownership

interest), $70,000 to CallSocket Holding Company, LLC, $30,000 to CallSocket III Holding

Company, LLC, and $20,000 to Starr Brand, LLC (a non-party in which SFRC holds an ownership

interest). Id. ¶¶ 20-21, Table 9 and Ex. 36.

Similarly, on December 29, 2015, Henderson transferred $250,000 from West Oakland Plaza

to Immedia, where it was commingled with $4,711. Id. ¶ 22, Diagram B, Ex. 37. Henderson then

transferred $248,000 from this commingled Immedia account to other entities, with $48,000 going to

CallSocket II, $165,000 going to CallSocket I, and $35,000 going to Immedia’s payroll account. Id.

These examples just scratch the surface. Between November 2010 and June 2016, Henderson

transferred a total of approximately $90.9 million of capital contributions, syndication fees, and to

some extent revenues from EB-5 Project-related entities into SFRC and Immedia. Chen Decl. ¶¶ 13-



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15 and Table 7.5 During this same period of time, he transferred $45.7 million back to these EB-5

Project entities’ accounts, resulting in a net deficit of $45.2 million for the EB-5 Projects. Id. The

following are among the larger net transfers:

• From November 2012 to March 2016, Henderson transferred a net of approximately $14.8 million from CallSocket II to SFRC and Immedia that was not returned to the account for CallSocket II. Chen Decl. ¶ 15 and Table 8. _

• From March 2013 to March 2016, Henderson transferred a net of approximately $19 million, including a net of approximately $16.5 million in capital contributions, from CallSocket III to SFRC and Immedia that was not returned to the account for CallSocket III. Id. ¶ 9 and Table 3.

• From March 2014 to March 2016, Henderson transferred a net of approximately $17.4 million from NA3PL, L.P. and North America 3PL, LLC, including at net of at least $15.3 million in capital contributions, to SFRC and Immedia that was not returned to the accounts for NA3PL, L.P. or North America 3PL, LLC. Id. ¶ 10 and Table 4.

• From March 2011 to June 2016, Henderson transferred a net of approximately $4.7

million from CCOO to SFRC and Immedia that was not returned to the account for CCOO. Id. ¶ 15 and Table 8.

• From April 2015 to November 2016, Henderson transferred a net of approximately $1.4 million from California Gold Medal to Immedia and SFRC that was not returned to the account for California Gold Medal. Id. ¶ 12 and Table 6.6

And it is clear why the resulting deficit is so large. In addition to siphoning off at least $9.6

million for himself and his own separate businesses and misappropriating at least another $7.5

million in capital contributions to pay overseas marketing agents or so-called “finders” (as described

above), Henderson also used EB-5 Project money to make large real estate purchases. At least seven

times, Henderson used funds solicited for one EB-5 Project to purchase property that was used by

5 These EB-5 Project-related entities include the following: Defendants CCOO; CallSocket I; CallSocket II; CallSocket III; NA3PL, L.P.; North America 3PL, LLC; West Oakland Plaza; California Gold Medal; and relief defendants CallSocket Holding Company, LLC; CallSocket III Holding Company, LLC; Central California Farms, LLC; and JL Gateway, LLC. Chen Decl. ¶ 13.A. 6 The transfers that result in the approximately $45.2 million deficit are described in “net” terms to account for Henderson’s frequent transfers in and out of the bank accounts. See Chen Decl. ¶ 13 and Table 7. In addition, SFRC’s accounting records attribute a net of approximately $9 million toward expenses that were paid by SFRC and Immedia, some of which may have been incurred by the various EB-5 Projects. Id. ¶ 13.H. and Table 7. But even if all of the expenses were spent for the EB-5 Projects (and there is not a record to support such an assumption), it would only decrease the deficit to approximately $36.1 million. Id. ¶ 14.



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another Project. Henderson would place title to the property in an entity that did not reflect the

source of the funds used, and he often owned some or all of the title-holding entity, as follows:

• In December 2011, Henderson used $1.3 million of CCOO’s capital contributions toward the

purchase of the Tribune Tower in Oakland, California. Chen Decl. ¶¶ 31-33 and Diagram D.

The PPM and Business Plan for CCOO did not disclose that investor funds would be used for

this purchase. See Eme Decl. ¶¶ 3-6, Exs. 2-5. Instead, the Business Plan for the CallSocket I

EB-5 Project stated that CallSocket I would operate from the Tribune Tower. Id. ¶ 10, Ex. 9

at 11. Henderson recorded title in the name of relief defendant CallSocket Holding Company,

LLC, an entity owned 80% by SFRC (which is, in turn, owned in part by Henderson). Eme

Decl. ¶¶ 2, 21, 24; Ex. 1 at 9:1-25; Exs. 20, 23. Further compounding the misuse of CCOO

investor funds, Henderson then caused SFRC to execute a “Resolution of Trust Declaration”

and a “Declaration of Trust” stating that the property was held in trust for the benefit of the

limited partners of CallSocket, L.P. Id. ¶¶ 22-23, Exs. 21 and 22. As described above,

Henderson further misused this asset by allowing businesses affiliated with him, and a law

firm providing services to him, to occupy space in the building while paying no or below-

market rent. See supra Section II.B. In December 2016, the receiver appointed by a state

court over the assets of the CallSocket entities sold the Tribune Tower, generating

approximately $10.3 million in proceeds. Eme Decl. ¶ 27, Ex. 26.7

• As described above, in November 2012, Henderson used approximately $2.5 million from

CallSocket I, including at least $1.95 million in capital contributions, to purchase a

warehouse. The PPM and Business Plan for CallSocket I do not disclose that investor funds

would be used for this purchase. Henderson placed title in an entity in which he has an

indirect ownership interest, and North America 3PL, LLC has rented the property for at least

7 On July 22, 2015, Alan Young, one of Henderson’s alleged business partners on the CallSocket Projects, sued Henderson and SFRC and others in California Superior Court, Alameda County. Eme Decl. ¶ 34, Ex. 33. As described in detail below (Section IV.C), a Receiver was appointed in March 2016 and has liquidated some of the properties.



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some period from another entity in which Henderson has a direct or indirect ownership

interest, not CallSocket I. See supra Section II.B.8

• In June 2013, Henderson used at least $2.4 million in capital contributions from CallSocket I

and CallSocket II to purchase the I. Magnin Building in Oakland, California. Chen Decl. ¶¶

41-45, Exs. 49-51. The Business Plan for CallSocket III stated that it would be located in that

building and would “enter into a 10 year lease agreement for approximately 50,000 square

feet.” Eme Decl. ¶ 14, Ex. 13 at 11. However, CallSocket III never started operations. See

id. ¶ 2, Ex. 1 at 47:5-22, 152:1-25. Henderson caused title to be put in the name of relief

defendant CallSocket III Holding Company, LLC, an entity at least 99% owned by SFRC,

which is part owned by Henderson. See id. ¶¶ 2, 21, 48-49; Ex. 1 at 9:1-25; Exs. 20, 47-48.

He then caused this holding company to execute a “Declaration of Trust” stating that the

property was held in trust for the purpose of promoting and supporting SFRC EB-5 Projects

and to benefit the limited partners of CallSocket III – not CallSockets I and II. Eme Decl. ¶

39, Ex. 38. The I. Magnin Building was sold in or about March 2016 for net proceeds of

approximately $9.8 million. Eme Decl. ¶ 32; Ex.31 at 4.9

• As described above, in or about December 2014, Henderson used commingled investors’

funds from NA3PL, L.P. and CallSocket III towards the purchase of a shopping plaza, placing

8 In October 2014, a promissory note was executed on behalf of Berkeley Healthcare Dynamics, LLC purporting to reflect that it owed SFRC—not CallSocket I—approximately $2.7 million for funds provided for the purchase of the warehouse property. Eme Decl. ¶ 29, Ex. 28. 9 Henderson continued his pattern of using funds from one CallSocket business to buy property for other CallSocket businesses. Thus, in December 2012, Henderson purchased the Dufwin Towers in Oakland, California using at least $453,000 in capital contributions from CallSocket I (Chen Decl. ¶¶ 37-40, Exs. 47-48), but placed title to the property in CallSocket II, L.P. Eme Decl. ¶ 21, Ex. 20. Yet, one of the business purposes for raising funds for CallSocket II, according to its own Business Plan, was to purchase this building. Eme Decl. ¶ 12, Ex. 11 at 11-12. Similarly, in October 2012, Henderson used at least $797,000 of capital contributions from CallSocket I to purchase the 1750 Broadway Building in Oakland, California, known as the Community Bank Building (Chen Decl. ¶¶ 34-36, Diagram E, Exs. 44-45), but placed title in CallSocket II, L.P. Eme Decl. ¶ 21, Ex. 20. The Business Plan for CallSocket II also stated that purchasing this building was to be one of the uses of funds raised from investors. Eme Decl. ¶ 12, Ex. 11 at 11-12. The Receiver appointed in the state court action sold the Dufwin Towers and Community Bank Buildings in the fall of 2016 for total proceeds of approximately $10.3 million. Eme Decl. ¶ 30, Ex. 29.



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title in an entity in which he has a 75% ownership interest. The PPMs and business plans for

NA3PL, L.P. and CallSocket III did not disclose that investors’ funds would be used to

purchase this property. Instead, the Business Plan for the West Oakland Plaza EB-5 Project

states that that Project would develop a grocery store/restaurant, and commercial kitchen on

the property. See supra Section II.B.

• In or about November 2015, Henderson used at least $2.48 million of California Gold Medal

capital contributions to purchase property in Tipton, California. Chen Decl. ¶¶ 50-52,

Diagram F, Exs. 55-56. He placed title to the property in relief defendant Central California,

Farms, LLC, which is 50% owned by SFRC (which is part owned by Henderson). Eme Decl.

¶¶ 2, 31, 47; Ex. 1 at 9:1-25, Exs. 30 and 46. Henderson failed to adhere to the

representations in the Business Plan and PPM, which told investors that their capital

contributions would be loaned to Crystal Golden, LLC to buy the property. See supra Section

II.D.5.10

III. ARGUMENT

A. Standard For Injunctive Relief In SEC Enforcement Actions

Section 20(b) of the Securities Act of 1933 (“Securities Act”) and Section 21(d)(1) of the

Exchange Act of 1934 (“Exchange Act”) provide that “[w]henever it shall appear to the Commission

that any person is engaged or about to engage in any acts or practices which constitute . . . a violation

of [federal securities laws],” the SEC “may . . . bring an action in [the] district court of the United

States . . . to enjoin such acts or practices, and upon a proper showing, a permanent or temporary

injunction or restraining order shall be granted without bond.” 15 U.S.C. §§ 77t(b), 78u(d). In

seeking injunctive relief, the SEC appears before the Court “not as an ordinary litigant, but as a

statutory guardian charged with safeguarding the public interest in enforcing the securities laws.”

10 Henderson has used another approximately $1.8 million of California Gold Medal investors’ funds to directly pay for expenses and services. Chen Decl. ¶ 12, Table 6. Even if these expenses were used for the California Gold Medal EB-5 Project – and they may not have been – direct payment of such expenses from investor funds is contrary to the representations to investors that their capital contributions would be loaned to an entity that would start and run the dairy processing business.



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SEC v. Mgmt. Dynamics, Inc., 515 F.2d 801, 808 (2d Cir. 1975). Thus, “[u]nlike private actions,

which are rooted wholly in the equity jurisdiction of the federal court, SEC suits for injunctions are

‘creatures of statute,’” brought under federal securities laws that establish a more lenient standard

than those applicable to private civil litigants. Id.

A “proper showing” under the statutes warranting an injunction is established by

demonstrating “(1) a prima facie case of previous violations of federal securities laws, and (2) a

reasonable likelihood that the wrong will be repeated.” SEC v. Unique Fin. Concepts, Inc., 196 F.3d

1196, 1199 n.2 (11th Cir. 1999). This standard has been adopted by numerous district courts in the

Ninth Circuit. See, e.g., SEC v. Capital Cove Bancorp, LLC, 2015 WL 9704076 at *6 (C.D. Cal.

Sept. 1, 2015); SEC v. Pac. West Capital Grp., Inc., 2015 WL 9694808, at *4 (C.D. Cal. June 6,

2015); SEC v. Schooler, 902 F. Supp. 2d 1341, 1344-45 (S.D. Cal. 2012); SEC v. Homestead Props.,

L.P., 2009 WL 5173685, at *2 (C.D. Cal. Dec. 8, 2009); SEC v. Credit First Fund, LP, 2006 WL

4729240, at *14 (C.D. Cal. Feb. 13, 2006).11

B. The SEC Has Made a Prima Facie Showing That Defendants Have Violated, and Continue to Violate, the Securities Laws

The record establishes a prima facie case that the defendants have violated, and continue to

violate, the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the

Exchange Act and Rule 10b-5 thereunder. Section 17(a) prohibits fraud in the offer or sale of

securities, and Section 10(b) and Rule 10b-5 prohibit fraud in connection with the purchase or sale of

any security. See 15 U.S.C. § 77q(a); 15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5; SEC v. Dain

Rauscher, Inc., 254 F.3d 852, 855 (9th Cir. 2001). Defendants have violated both provisions.

1. Defendants Henderson, SFRC, the Limited Partnerships and Their General Partners Made Materially False and Misleading Statements

Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder make it unlawful for any

person to make any untrue statement of material fact in connection with the purchase or sale of a

11 The Ninth Circuit has never addressed the applicability of the Unique Financial Concepts test. However, consistent with the above authority, the Ninth Circuit has acknowledged that when shown by the SEC, a “prima facie case of the probable existence of fraud and mismanagement . . . is sufficient to call into play the equitable powers of the court.” SEC v. United Fin. Grp., Inc., 474 F.2d 354, 358 (9th Cir. 1973).



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security. 15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5(b). Section 17(a)(2) of the Securities Act also

prohibits any person from obtaining money or property in the offer or sale of any security by means

of any untrue statement of material fact or any omission of a material fact. 15 U.S.C. § 77q(a)(2).

The “maker” of a statement for purposes of Section 10(b) and Rule 10b-5(b) is “the person or entity

with ultimate authority over the statement, including its content and whether and how to

communicate it.” Janus Capital Grp., Inc. v. First Derivative Traders, 564 U.S. 135, 142 (2011).

“[I]n the ordinary case, attribution within a statement or implicit from surrounding circumstances is

strong evidence that a statement was made by—and only by—the party to whom it is attributed.” Id.

at 142-43. Also, individuals who sign company documents are “makers” of those statements. See

City of Roseville Employees’ Ret. Sys. v. EnergySolutions, Inc., 814 F. Supp. 2d 395, 417 (S.D.N.Y.

2011) (all of the directors and/or officers who signed registration statements “made” the statements);

In Re Stillwater Capital Partners, Inc. Litig., 858 F. Supp. 2d 277, 287-88 (S.D.N.Y. 2012) (president

who signed documents at issue made the alleged misstatements).

Several defendants made numerous material misrepresentations and omissions of fact in

violation of these provisions. In particular:

• Henderson, as Managing Member of SFRC, signed the Limited Partnership Agreements (all attached to PPMs provided to investors) for the respective general partners for each of the seven EB-5 Projects, which falsely stated that no part of the investors’ $500,000 capital contributions would be diverted to pay finders’ fees. See Eme Decl. ¶¶ 4, 6, 7, 11, 13, 15, 17, 19; Exs. 3, 5, 6, 10, 12, 14, 16, 18.

• In the PPMs and Business Plans for CCOO and CallSockets I, II, and III, Henderson, the

limited partnerships, the general partners, and SFRC each falsely claimed that the capital contributions would be available to the limited partnership for job-creating investments and that the EB-5 monies for each of these projects would be used to capitalize or establish and grow the respective project. Id. ¶¶ 3-7, 9-14; Exs. 2-6, 8-13.

• Similarly, in the PPMs and Business Plans for NA3PL, L.P., West Oakland Plaza, and

California Gold Medal, Henderson, the limited partnerships, and SFRC (as general partner) all made false statements claiming that investors’ $500,000 capital contributions would be loaned to another corporate entity to fund the development, construction, and initial operating expenses of the respective businesses. Id. ¶¶ 15-20; Exs. 14-19.

Each of these false statements was made in connection with the purchase or sale of a security

since Henderson commingled and misspent investor funds contrary to those statements at the same

time that he was selling the securities to the investors. And all of these misrepresentations are



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“material,” as there is a substantial likelihood that a reasonable investor would consider them

important in making an investment decision. See Basic Inc. v. Levinson, 485 U.S. 224, 231-32

(1988). In particular, defendants’ actions substantially changed the risks outlined in the Business

Plans, and because the uses of capital differed from the plans approved by USCIS, defendants further

put at risk the investors’ ability to make the necessary showing to receive permanent residency.12

Henderson and the other defendants who made the misrepresentations did so intentionally or

recklessly, and therefore with scienter – a “mental state embracing intent to deceive, manipulate, or

defraud.” Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n.12 (1976); Hollinger v. Titan Capital

Corp., 914 F.2d 1564, 1569 (9th Cir. 1990) (scienter demonstrated where a defendant acts recklessly,

engaging in misconduct that is “so obvious that the actor must have been aware of it”). Scienter may

be inferred from circumstantial evidence suggesting an obvious risk of misleading investors that is so

great that it is simply implausible that defendant did not know about it. See Vernazza v. SEC, 327

F.3d 851, 860-61 & n.8 (9th Cir. 2003); In re Software Toolworks Inc., 50 F.3d 615, 627 (9th Cir.

1994).13

Henderson knew, or was reckless in not knowing, the falsity of the above representations. He

approved the content of the PPMs and Business Plans and therefore knew, or was reckless in not

knowing, that the funds solicited for each EB-5 Project could not be used to fund different EB-5

Projects, or to fund non-EB-5 businesses. He also knew, or was reckless in not knowing, that capital 12 As the PPMs acknowledge, each investor files “an I-526 Petition with the USCIS, accompanied by proof of investment in a commercial enterprise, a comprehensive business plan for the commercial enterprise,[and other items];” and investors’ receipt of first, a two-year provisional visa, and later, permanent residence in the U.S., is conditioned on establishing the job creation criteria, among other things. See, e.g., Eme Decl., ¶ 11, Ex. 10 at 14-17. But USCIS has made it clear that “if there are material changes to a Form I-526 at any time after filing, the petition cannot be approved.” USCIS May 30, 2013 Policy Memorandum, at 24 (attached at ¶ 40, Ex. 39 to Eme Decl.) (citing Matter of Izummi, 22 I&N Dec. 169 (Assoc. Comm’r 1998)). In fact, USCIS has stated that pending EB-5 petitions will be rejected if the facts included in the petition differ materially from what was actually done with investor funds, and that any changes or deviations cannot be cured by revisions to the petition, but rather require that an entirely new EB-5 petition be filed. See id. at 24-25 (“[a] deficient Form I-526 petition may not be cured by subsequent changes to the business plan or factual changes made to address any other deficiency that materially alter the factual basis on which the petition was filed”). 13 Claims under Section 10(b) and Rule 10b-5 and Section 17(a)(1) require proof of scienter. However, scienter is not required to prove violations of Sections 17(a)(2) or (3) of the Securities Act – negligence is sufficient. Aaron v. SEC, 446 U.S. 680, 701-02 (1980).



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contributions could not be used to pay finders’ fees, as his own materials so explicitly stated. Since

Henderson controlled the bank accounts through which the funds constantly flowed (see Chen Decl. ¶

7, Table 1), he also knew, or was reckless in not knowing, that funds were being used for these

unauthorized purposes. Finally, Henderson’s scienter is imputed to the entity defendants, as

Henderson was the managing member of the general partners, which controlled the limited

partnerships. See Hollinger, 914 F.2d at 1578 (respondeat superior gives rise to entity liability in

securities cases); In re Cylink Sec. Litig., 178 F. Supp. 2d 1077, 1088 (N.D. Cal. 2001) (describing

Ninth Circuit authority holding entities vicariously liable for securities fraud by officers).

2. Defendants Engaged in an Illegal Scheme to Defraud

Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) make it unlawful for any

person to employ any scheme to defraud or to engage in any course of business to defraud, in

connection with the purchase or sale of securities. 15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5(a), (c).

Sections 17(a)(1) and 17(a)(3) of the Securities Act prohibit the same conduct in the offer or sale of

securities. 15 U.S.C. §§ 77q(a)(1), (a)(3). To be liable for scheme to defraud, a defendant must

“commit[] a manipulative or deceptive act in furtherance of the scheme.” Cooper v. Pickett, 137 F.3d

616, 624 (9th Cir. 1997); see also Simpson v. AOL Time Warner, Inc., 452 F.3d 1040, 1048 (9th Cir.

2006), vacated on other grounds sub nom., Avis Budget Group, Inc. v. California State Teachers’

Retirement System, 552 U.S. 1162 (2008) (defendant “must have engaged in conduct that had the

principal purpose and effect of creating a false appearance of fact in furtherance of the scheme.”);

SEC v. Sells, 2012 WL 3242551, at *7 (N.D. Cal. Aug. 10, 2012).

All of the defendants have engaged in a scheme to solicit funds from foreign investors and to

misappropriate those funds for Henderson’s personal benefit. And each of the defendants engaged in

the following manipulative or deceptive acts in furtherance of this scheme:

• Henderson, SFRC, the other general partners, and the limited partnerships solicited funds by creating the false appearance that each of the EB-5 businesses was a distinct business that complied with USCIS requirements and provided investors with both the possibility of a return on their investment and a means to obtain U.S. residency under the EB-5 program.

• Henderson and SFRC used bank accounts in the names of SFRC and Immedia and numerous, multi-step transactions, to commingle funds for the EB-5 businesses, masking the true sources of the funds and creating a virtual slush fund to pay expenses and finders’ fees, buy property, and enrich Henderson.


https://1.next.westlaw.com/Link/Document/FullText?findType=Y&serNum=2010526467&pubNum=0000780&originatingDoc=I28f170e0c3dc11e394ccc6c66db0403a&refType=RP&originationContext=document&transitionType=DocumentItem&contextData=(sc.Keycite)


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• North America 3PL, LLC and Immedia aided and abetted one or more defendants in carrying out their fraudulent scheme.14 North America 3PL, LLC, through Henderson, substantially assisted the scheme by facilitating Henderson’s misuse and misappropriation of investor funds and by making it appear to investors that the EB-5 Project had an operating affiliate that would use investors’ capital contributions to execute the business plan. Immedia provided substantial assistance in the form of its opening new bank accounts into which Henderson funneled capital contributions belonging to EB-5 Projects.

In carrying out this scheme, defendants acted with scienter. Because Henderson controlled

the bank accounts through which Henderson repeatedly cycled funds, he knew, or was reckless in not

knowing, that the true purpose of the commingling and the multi-step transactions was to disguise the

sources of funds being used. For several years, Henderson repeated his practice of creating purported

EB-5 Projects and soliciting new investors through misrepresentations, to fund his own business

ventures and to simply enrich himself. Courts have found schemes using devices to misappropriate

investor funds to violate Exchange Act Section 10(b) and Rule 10b-5(a) and (c). See SEC v. Zanford,

535 U.S. 813, 820-21 (2002) (defendant misappropriated clients’ assets by writing a series of checks

to himself on their brokerage account which resulted in the sale of their securities; each sale was

deceptive as it was neither disclosed nor authorized by the clients and was in furtherance of the

scheme to defraud them). As a senior officer of SFRC and of each of the general partners, which

control the limited partnerships, Henderson’s scienter is imputed to the corporate defendants, and the

entities are vicariously liable for his securities fraud. See City of Monroe Emps. Ret. Sys. v.

Bridgestone Corp., 399 F.3d 651, 688 (6th Cir. 2005); Hollinger, 914 F.2d at 1578 (respondeat

superior gives rise to entity liability in securities cases); In re Cylink Sec. Litig., 178 F. Supp. 2d at

1088.

14 Under Section 15(b) of the Securities Act and Section 20(e) of the Exchange Act, aiding and abetting is established where a defendant “knowingly or recklessly provides substantial assistance to” another person’s violation of one of the provisions of the Acts. The Ninth Circuit has stated that to establish aiding and abetting liability, the Commission must show “(1) the existence of an independent primary wrong . . . , (2) actual knowledge or reckless disregard by the alleged aider and abettor of the wrong and of his or her role in furthering it, and (3) substantial assistance in the wrong.” SEC v. Jensen, 835 F.3d 1100, 1118-19 (9th Cir. 2016) (emphasis in original) (citation and quotes omitted).



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C. Defendants’ Violations Will Likely Continue

The existence of past violations of the securities laws gives rise to an inference that there will

be future violations. See SEC v. Murphy, 626 F.2d 633, 655 (9th Cir. 1980); United Fin. Grp., Inc.,

474 F.2d at 358-59; see also U.S. v. Odessa Union Warehouse Co-Op, 833 F.2d 172, 176 (9th Cir.

1987). The likelihood of future violations will depend upon the totality of the circumstances, and

courts consider factors such as the degree of scienter involved, the isolated or recurrent nature of the

violative conduct, the defendant’s recognition of the wrongful nature of the conduct, the likelihood

that, because of the defendant’s occupation, future violations may occur, and the sincerity of

defendant’s assurances (if any) against future violations. See Murphy, 626 F.2d at 655; SEC v. Fehn,

97 F.3d 1276, 1295-96 (9th Cir. 1996).

Defendants’ securities laws violations will likely be repeated in the absence of a preliminary

injunction. Defendants have engaged in a deliberate, recurrent scheme to defraud investors. Their

fraudulent conduct has persisted for years. California Gold Medal, L.P. has continued to receive

investor money through at least November 2016. Chen Decl. ¶ 8, n.3. An order prohibiting

defendants from violating the antifraud provisions of the securities laws is therefore necessary to

deter defendants from continuing with their fraud, as a violation of such an order may be met with

contempt sanctions. See, e.g., Hicks ex rel. Feiock v. Feiock, 485 U.S. 624, 627 (1988) (contempt of

Court’s order shown by existence of a valid order, defendant’s knowledge of the order, and

defendant’s failure to comply with the order). Further, the Commission’s proposed order also

includes a preliminary injunction that would require defendants to cease raising new funds. See, e.g.,

SEC v. Trabulse, 526 F. Supp. 2d 1008, 1017-18 (N.D. Cal. 2007) (among other things, prohibiting

hedge fund manager from withdrawing any money pursuant to his advisory agreement prior to

completing an accounting); SEC v. eAdGear, Inc., 2014 U.S. Dist. LEXIS 170159, at *8-9 (N.D. Cal.

Dec. 8, 2014) (issuing preliminary injunction against offer and sales of certain types of securities).

Finally, the Court’s broad equitable powers in SEC enforcement actions include the ability to

order ancillary relief to prohibit document destruction. See SEC v. Wencke, 622 F.2d 1363, 1369 (9th

Cir. 1980) (“Wencke II”). Here, the Commission’s proposed order would prohibit the destruction of

documents to prevent any loss of important evidence.



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IV. THE COURT SHOULD APPOINT A RECEIVER OVER ALL OF THE DEFENDANTS AND RELIEF DEFENDANTS

A receiver is needed over all the defendants and relief defendants so that the remaining

investors’ assets, including businesses, real estate and cash, can be marshalled and preserved against

further misappropriation and dissipation by defendants. A receiver is immediately needed to (1)

prevent further misappropriation of investors’ assets; (2) investigate claims the entities might have;

(3) determine which businesses should continue to function; (4) decide whether to solicit additional

funds for certain businesses; (5) determine an appropriate plan of redistribution of assets taken from

investors; and (6) marshal assets taken by Henderson to fund his non-EB-5 businesses or otherwise

benefit himself.

A. Standard for Appointment of a Receiver

The Court has broad discretion to appoint an equity receiver in Commission enforcement

actions. See Wencke II, 622 F.2d at 1365. The breadth of this discretion “arises out of the fact that

most receiverships involve multiple parties and complex transactions.” SEC v. Capital Consultants,

LLC, 397 F.3d 733, 738 (9th Cir. 2005) (quoting SEC v. Hardy, 803 F.2d 1034, 1037 (9th Cir.

1986)). A receiver plays a crucial role in preventing further dissipation and misappropriation of

investors’ assets. SEC v. Wencke, 783 F.2d 829, 836-37 n.9 (9th Cir. 1986) (“Wencke III”). As the

Ninth Circuit described in Wencke II, a receiver can be the means to achieve the “ultimate goals of

SEC intervention,” which are “protection of innocent shareholders and enhancement of investor

confidence in the securities markets.” Wencke II, 622 F.2d at 1372.

Critical to the determination of federal courts in weighing the need for a receiver are facts

putting at issue the integrity of management, and thus the likelihood of future misuse of assets. See

SEC v. First Financial Group of Texas, 645 F.2d 429, 438 (5th Cir. 1981) (“The district court’s

exercise of its equity power in this respect is particularly necessary in instances in which the

corporate defendant, through its management, has defrauded members of the investing public; in such

cases, it is likely that, in the absence of the appointment of a receiver to maintain the status quo, the

corporate assets will be subject to diversion and waste to the detriment of those who were induced to

invest in the corporate scheme and for whose benefit, in some measure, the SEC injunctive action

was brought.”). See also SEC v. Fifth Ave. Coach Lines, Inc., 289 F. Supp. 3, 42 (S.D.N.Y. 1968),



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aff’d 435 F.2d 510 (2d Cir. 1970); SEC v. Credit First Fund, 2006 WL 4729240, at *15 (C.D. Cal.

Feb. 13, 2006).15

B. Appointment of a Receiver Is Critical to Rectify Defendants’ Fraud

As described above, Henderson created numerous corporate entities, including both those

associated with the seven EB-5 Projects and unrelated entities, and indiscriminately shuffled money

among these corporate entities for years. He also sent significant sums to marketing agents overseas,

and used investor funds to enrich himself at the expense of investors, funding his own personal

business ventures and even purchasing his home. As a result, the “financial affairs of the entities

need[] to be clarified for the benefit of innocent shareholders,” and a receivership should be

appointed to “conduct [an] independent investigation of claims the entities might have against former

management or other parties, prosecution of which would benefit investors and deter future

violations.” Wencke II, 622 F.2d at 1372. A receiver is likewise needed so that “defenses against

possibly fraudulent or collusive actions brought against the entities [can] be discovered and asserted.”

Id.

In particular, a receiver is necessary in this case to determine the financial condition of several

of the EB-5 Projects, including CallSocket II, North America 3PL, L.P., CCOO, and West Oakland

Plaza, all of which appear to be operating. Further, to the extent each should remain in business, a

receiver is necessary to continue conducting business since Henderson cannot be relied on to do so in

a manner that preserves the investors’ stake in those EB-5 Projects. Similarly, a receiver may need to

unwind the numerous, circuitous transactions by which some entities continue to be enriched at the

expense of others.

Moreover, for California Gold Medal, which has collected a total of $21.5 million in capital

contributions and $1.1 in Syndication Fees (Chen Decl. ¶ 8 and Table 2), a receiver will need to

ensure that the large amount of investor funds that are currently held in a bank account are not

dissipated or misused for other ventures. Henderson’s history of using funds from one Project to

15 Because posting of a bond by the receiver would only serve to deplete further the resources available to investors, the Commission requests that the Court not require the receiver to post a bond. See SEC v. Universal Fin., 760 F.2d 1034, 1039 (9th Cir. 1985).



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benefit another, siphoning off investor money for his own benefit, and using investor funds for non-

EB-5 Projects precludes his being the appropriate person to make decisions regarding this Project.

A receiver is also indispensable in this case to marshal and preserve other existing assets, both

known and unknown. Henderson used at least $9.6 million from SFRC accounts commingled with

investor funds to fund his non-EB-5 businesses ventures, to buy his house, and to pay himself.

Henderson also diverted at least $7.5 million in capital contributions to pay finders. A receiver may

be able to discover any additional dissipation of funds in the vast empire that Henderson and SFRC

controlled, and to determine whether there are reasonable prospects for recovery of the prior

dissipations. See SEC v. Manor Nursing Centers, Inc., 458 F.2d 1082, 1105 (2d Cir. 1972) (receiver

was necessary to help preserve the status quo while unraveling various transactions to obtain an

accurate picture of what transpired).

Furthermore, a receiver will be important in determining the fate of proceeds resulting from

the sale of Henderson’s real estate ventures, which used significant EB-5 investor money. For

example, recent sales of the Tribune Tower, the Dufwin Tower, and the Community Bank Building

together generated net proceeds of approximately $20 million, and the sale of the I. Magnin Building

generated another approximately $9.8 million. Eme Decl. ¶¶ 27, 30, 32; Exs. 26, 29, and Ex. 31 at 4.

It would only further exacerbate defendants’ fraud if those proceeds are not used to undo the harm to

the EB-5 Projects from which funds were taken to purchase or maintain these properties.

C. The Court Should Enjoin the State Receivership

As described above, in July 2015, one of Henderson’s alleged business partners for the

CallSocket Projects, Alan Young, filed a civil case against Henderson, SFRC and others in California

Superior Court, Alameda County. Young’s state court action is fundamentally different than this

action by the Commission. The Commission alleges federal securities law violations against

Henderson and numerous entities concerning seven EB-5 Projects. Young’s suit, in contrast, is based

on a business dispute with his alleged partners in just the CallSocket EB-5 Projects, and his claims

are based on California state law. See Eme Decl. ¶ 34, Ex. 33. He asserts twelve state law causes of

action, including breach of contract, breach of implied covenant of good faith and fair dealing, and



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breach of fiduciary duty, which are asserted individually and derivatively on behalf of the CallSocket

entities and their members/limited partners. See id. Ex. 33 at 29-43.

In March 2016, Young moved for the appointment of a receiver “to protect the interests of

plaintiff and other CallSocket investors.” Eme Decl. ¶ 50, Ex. 49 at 7. Young argued, among other

things, that “defendants [were] quickly selling off the corporate assets in a further effort to avoid a

proper adjudication of the rights plaintiff asserts through this litigation” and that he “ha[d] no remedy

available to him to protect his interests other than the appointment of a receiver.” Id. Ex. 49 at 4, 7.

The state court agreed with Young and on March 25, 2016, entered an order finding “that there is

good cause to believe that the property or funds of the CallSocket Entities are in danger of being lost,

removed, or materially injured,” and appointed Susan L. Uecker as receiver. Id. ¶ 35, Ex. 34 at 1.

Because the receiver in the state court action was appointed to protect Young’s and the

CallSocket Investors’ interests, it is more limited in scope than the receivership sought by the

Commission. Specifically, the state court receivership covers only the CallSocket entities and their

related property.16 The state court receivership was never meant to, and cannot fully, protect the

investors in the other four EB-5 Projects, namely: (1) the California Gold Medal dairy processing

business; (2) the Comprehensive Care of Oakland skilled nursing facility; (3) the NA3PL, L.P.

warehousing business; and (4) the West Oakland Plaza retail center. For example, CCOO has at least

a $1.3 million claim against CallSocket I. See supra Section II.E. But the state court receiver has no

explicit obligation to CCOO or its investors, and may be expected to marshal receivership assets first

and foremost to make the CallSocket entities whole, and then to satisfy Young’s judgment.

To protect all of the investors defrauded by defendants and to effectuate the relief sought by

the Commission, the Court should exercise its authority to enjoin the state court receivership and

Young’s state court lawsuit in order to bring the entirety of the EB-5 Project businesses at issue into

16 The entities include: (1) the CallSocket limited partnerships (CallSocket, L.P.; CallSocket II, L.P.; and Callsocket III, L.P.); (2) the CallSocket general partners (CallSocket, LLC, CallSocket II, LLC, CallSocket III, LLC); and (3) relief defendants CallSocket Holding Company, LLC and CallSocket III Holding Company, LLC. Eme Decl. ¶ 35, Ex. 34 at 2. In addition, a warehouse located at 1700 20th Street in Oakland, which is being used by the NA3PL, L.P. Project, is included in the state court receivership as property related to the CallSocket entities. Id.



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one receivership estate. Doing so will ensure that all investors are treated equitably. Consequently,

and for the following reasons, only a unified, federal receivership will effectively serve a “primary

purpose of equity receiverships” which “is to promote orderly and efficient administration of the

estate by the district court for the benefit of creditors.” See SEC v. Hardy, 803 F.2d at 1038.

First, an alternative outcome, in which there exist two receiverships – one in federal court and

one in state court – would very likely result in unnecessary disputes. For example, the state court

receiver currently has “possession, custody, and control” over the “warehouse property located at

1700 20th Street in Oakland,” which the state court order deemed property related to the CallSocket

entities. Eme Decl. ¶ 35, Ex. 34 at 2. This warehouse was purchased using $2.5 million from

CallSocket I. See supra Section II.B. However, North America 3PL, LLC rents this building to

conduct its warehousing business, and relief defendant Berkeley Healthcare Dynamics, LLC holds

title to the building and collects the rent payments. Id. Absent a stay, both receivership estates would

necessarily have some authority and control over this one asset. Any dispute – including over

continued use of the property or a potential sale – would necessitate adjudication in federal court. A

single receivership, however, would avoid such disputes as the receiver would be able to ensure that

certain entities or investors are not favored to the disadvantage of others. As a further example, if

there were two separate receiverships, and the state court receiver took actions concerning the

CallSocket entities (defendants in this action) that the SEC opposes, the SEC would need to seek

appropriate relief in federal court enjoining such actions on a piecemeal basis, which would prejudice

the SEC and unnecessarily consume the resources of this Court.

Second, the existence of two receiverships would prevent both receivers from acquiring the

information and control needed to unravel the complex web of fraud at issue. A single receiver with

comprehensive and unfettered access to the books and records of SFRC and all seven EB-5 Projects

is necessary to meticulously and methodically wade through thousands of transactions and determine

what happened. Henderson used the accounts for SFRC and Immedia as essentially one big slush

fund. Over $90 million from numerous EB-5 Project-related entities flowed into these accounts over

a span of several years, where it was commingled with other funds and then distributed by Henderson

back out to the EB-5 Projects, to Henderson’s non-EB-5 business ventures, to foreign marketing



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agents, and to Henderson personally. See Chen Decl. ¶¶ 13, 13.A-13.L, and Table 7. In addition,

divided receiverships would each lack the necessary access to the information and control of the

projects in the other receivership estate, making it impossible for either to properly and completely

assess the harm and, ultimately, the claims between and among the seven EB-5 Projects. A single,

federal court receiver, whose mandate is informed by the need to redress harm caused by violations

of the federal securities laws, is necessary to (1) evaluate transactions and claims among the seven

EB-5 Projects; (2) investigate transactions between the Projects and non-EB-5 entities and persons;

and (3) independently assess which remaining assets should be used for which businesses.

The Commission, in its Proposed Order Appointing Receiver, therefore proposes enjoining all

separate proceedings, which would include Young’s state court action. This Court has jurisdiction to

stay the state court proceedings. As the Ninth Circuit has previously held, where the SEC seeks

enforcement of the federal securities laws, the federal district court has jurisdiction to enjoin a state

court receivership. See SEC v. Wencke, 577 F.2d 619, 623 (9th Cir. 1978), cert denied 439 U.S. 964

(“Wenke I”).17

To promote efficiency, the Commission suggests appointment of the current state court

receiver, Susan L. Uecker, as the receiver in federal court. Ms. Uecker has agreed to act as the

receiver in this action if so appointed. Her appointment would benefit investors as it would conserve

resources given her familiarity with many of the facts in this case. Ms. Uecker is highly qualified and

has significant experience as a receiver, including in equity receiverships in SEC cases, and for

entities that managed and owned significant real estate assets. She is located in the Bay Area, and

has experience in cases in the Northern District of California. Her C.V. and a representative sample

of cases are appended as Exhibit 50 to the Declaration of Thomas Eme filed in support of this motion.

17 The Ninth Circuit in Wenke I specifically held that the federal statute that generally prohibits federal injunctions of state court proceedings, 28 U.S.C. § 2283, does not apply to an action by the Commission. See Wenke I, 577 F.2d at 623. The Ninth Circuit later held in the same action that the district court’s authority extends to nonparties to the federal action. See Wencke II, 622 F.2d at 1368-69.



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V. CONCLUSION

For the reasons set forth above, the Commissions respectfully requests that the Court grant the

Commission’s Motion and enter the requested relief.

Dated: January 18, 2017 Respectfully submitted,

/s/ Andrew J. Hefty Andrew J. Hefty Susan F. LaMarca Thomas Eme Attorneys for Plaintiff SECURITIES AND EXCHANGE COMMISSION


jina l. choi (ny bar no. 2699718) 1 erin e. schneider (cal ... · motion for preliminary injunction...

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