The US Attorney's office, FBI, Securities and Exchange Commission, and the US Customs and Immigration Service are investigating possible abuses by officials from PhoenixMart, for its involvement in a program that trades foreign investment for US "Green Cards."
In November, the FBI raided the PhoenixMart headquarters. Most of the investigation is under seal, but documents filed in case PhoenixMart officials brought against the US government in an effort to retrieve confiscated computers sheds some light on the government's accusations against the company.
PhoenixMart is a development in Casa Grande, which is billed as a product sourcing center, where manufacturers, wholesalers, and retailers will be able to connect to buyers. The development is advertised as creating between 8,000 and 10,000 jobs.
The developers are funding the project with money from from foreign investors who are taking part in the government's EB5 Visa program. Under EB5 guidelines, foreign nationals can invest $500-thousand in a program that creates a certain number of jobs in the US, in exchange for up to 10 "green cards."
According the court documents CBS 5 Investigates obtained from US District Court, PhoenixMart's parent company, AZ Sourcing, LLC, collected $150-million from 303 foreign investors. The developers are said to have already spent more than 25-percent of that money.
The documents allege, "Other than a ground-breaking ceremony in 2013, clearing of open land, construction of a minor entryway in 2014, and recent pouring of multiple concrete footers, virtually no significant construction has taken place. In other words, despite receiving nearly $40-million between 2010 and 2014, the movants (developers) have made no significant progress in constructing the Phoenix Mart project which was originally slated to be completed in 2013."
The documents reference an SEC subpoena for financial documents, as well as a US Customs and Immigration Service "Notice of Intent to Terminate" PhoenixMart's involvement in the EB5 program, which was filed under seal.
The documents indicate the developers are believed to have "altered many of the seized documents" in violation of federal law.
PhoenixMart and AZ Sourcing officials declined several interview requests, but released the following statement tom CBS 5 Investigates:
"PhoenixMart is working closely with all governmental agencies that have an interest in the project. PhoenixMart is an important project for Pinal County and Arizona. Construction spending alone has, to date, led to the creation of 220 jobs on our 21st century global commerce center. PhoenixMart has the continued support of local and regional governmental leaders who all understand the significant economic impact the project has had and will continue to have on the local and regional economy. Late last year, the City of Casa Grande approved permits for our 585-acre project to begin pouring slab-on-grade foundation for the main building and moving forward on the underground utility work. We continue to work diligently to bring this landmark development to completion.”
A spokesperson for PhoenixMart also forwarded a detailed list of expenses that the development has incurred. Phoenix Mart, LLC Investment in Economy (as of October 31, 2015): Total EB-5 Funds placed into Phoenix Mart LLC $40,500,000 Capital Contributions from AZ Sourcing $2,313,935 Escrow and Security Deposits $1,916,000 Inter Company Advances (AZS and CAzRC) $1,080,924 Account payable and other payables $1,057,703 Phoenix Mart Total Sources of Funds $46,868,562 Project Vendor Payments $13,790,744 All other Capitalized Project Costs (including Land) $9,502,047 All other Assets $5,942,425 Operating Expenses Prior Years (2009-2014) $11,733,227 Operating Expenses Current Year to 10-31-15 * $5,900,119 Phoenix Mart Total-Use of Funds $46,868,562
During a US Senate panel hearing last week, Senators heard testimony about problems with the EB5 program, which has become a popular method for developers to gain access to capital for building projects. The program is up for renewal later this year.
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