Harry Reid Pressured
DHS to Expedite $115 Million Foreign Investors EB-5 Visa Deal Critical to Son’s
Casino Client
by Michael Patrick Leahy26 Mar 2015
Details in this week’s Department of Homeland Security’s
Inspector General’s report reveal only part of the story behind Senate Minority
Leader Harry
Reid’s (D-NV) abuse of his
political office in 2012 and 2013. Through a brazen intervention, Reid
ultimately forced the Department of Homeland Security to bend to his will in a way that benefited his
political allies and family.
The report concluded that Reid pressured a compliant DHS
official to override normal departmental procedures and rush through 230 EB-5
foreign visa applications, thereby freeing up $115 million the applicants
invested in the SLS Hotel and Casino in Las Vegas. The report did not, however,
reveal the now confirmed fact that the owner of that casino project had hired
Reid’s son, Rory Reid, to provide legal representation for the project.
“At the request of Senate Majority Leader Harry Reid,
[current DHS
Deputy Secretary Alejandro] Mayorkas intervened to allow expedited review of
investor petitions involved in funding a Las Vegas hotel and casino [SLS],
notwithstanding the career staff’s original decision not to do so,” the report found.
“The career staff noted that the purported urgency was of
the applicant’s [SLS’s] own making and that the decision to expedite fell
outside EB-5 program guidelines,” the report stated.
“Nevertheless,” the report concluded, “Mr. Mayorkas
pressured staff to expedite the review. He also took the extraordinary step of
requiring staff to brief Senator Reid’s staff on a weekly basis for several
months.”
In 2007 Stockbridge/SBE Holdings purchased the Sahara, the
famous Las Vegas casino built in the 1950s at the beginning of the Frank
Sinatra Rat Pack era (it was the location where Sinatra’s classic 1960 movie Ocean’s
Eleven was filmed) for an estimated $300 million.
Stockbridge/SBE Holdings is a partnership between SBE Entertainment and Stockbridge Capital Partners,
a San Francisco based real estate investment firm. SBE Entertainment’s CEO, Sam Nazarian, is the son of one of the
co-founders of Qualcomm, the highly successful telecommunications firm.
The company closed the Sahara in 2011, and announced
plans to launch a refurbished new hotel at the same location when it obtained
sufficient financing.
In 2012 Stockbridge/SBE Holdings hired Harry Reid’s son.
Rory Reid was, at the time, a partner in Nevada’s largest law firm, Lawson,
Sawyer, and Collins. He represented the company as it prepared to convert the
old Sahara it purchased in 2007 to the new SLS Hotel and Casino it planned to
launch in 2014.
The law firm’s 2012 year end review
described the younger Reid’s critically important role in providing legal advice
to the owners of the casino project:
When Sam Nazarian, [CEO of Stockbridge/SBE Holdings and SBE
Entertainment] one of the most creative entrepreneurs in the hospitality
industry, turned his sights on Las Vegas, he recognized the opportunity to
revitalize a former Strip iconic property into a new exciting resort and the
benefit of working with Rory Reid of Lionel Sawyer & Collins. Mr. Reid’s
previous experience as Chairman of the Clark County Commission is put to good
use assisting with general legal advice for the project and helping navigate
through the maze of regulations required to access economic incentives offered
on the state and local levels.
Breitbart News phoned Rory Reid at his new Las Vegas law offices on Wednesday and spoke with him
briefly.
We asked him to confirm or deny press reports that he
represented Sam Nazarian’s SBE Entertainment at the same time his father was
pressuring DHS officials to expedite the processing of more than 230 EB-5 visas
from foreign investors who had committed more than $115 million to finance
SBE’s latest project, the SLS Hotel and Casino in Las Vegas.
“I don’t have any comment for you at all,” Rory Reid told
Breitbart News.
The timing of Rory Reid’s legal representation of SBE
Entertainment in 2012 and into 2013, at least, coincides exactly with the dates
of his father’s efforts to pressure the DHS to expedite the EB-5 visa
processing so critical to the SLS’s project success.
In April 2012, Stockbridge/SBE Holdings announced the
details of a $415 million financing plan that would fund the refurbishment of
the Sahara and its relaunching under the SLS Hotel and Casino name in 2014.
That financing was divided into two pieces: a $300 million
“first lien” loan, and a low-cost $115 million junior debt instrument consisting
entirely of investments made by what would turn out to be about 230 foreign
investors who secured valued green cards so they could stay in America under
the controversial EB-5 visa program.
It was a sweet deal for investors in the $300 million “first
lien” loan. Not only were they protected in the case of default by being in
“first lien” position, they also received an attractive interest rate. And
their money would be held in escrow until the $115 million in junior debt was
raised from foreign investors promised EB-5 visas.
Not a penny would be spent on building the new SLS Hotel and
Casino unless the $115 million in EB-5 visa junior debt was raised. If that
money wasn’t in by February, 2013, investors in the $300 million “first lien” loan
could demand their money back.
On April 4, 2012,
Moody’s Investor’s Services “assigned a B3 Corporate Family Rating rating to
Stockbridge/SBE Holdings, LLC (SBE) and a (P)B2 rating to its proposed $300
million first lien term loan. Upon receipt and review of the final documents,
the provisional designation will be removed and concurrently, a B2 rating will
be assigned to the first lien term loan.”
Moody’s said the failure of the proposed low cost $115
million junior debt offering could create problems for the company:
The issuer is targeting to obtain low cost junior debt
through a federal program sponsored by the U.S. Citizenship and Immigration
Services under the U.S. EB-5 visa immigrant investor program. If SBE is unable
to raise funds through this program, it can obtain other junior priority,
unsecured, mezzanine financing, preferred or common equity with a blended cash
rate of no more than 6% per annum. Moody’s notes per these terms, it is
possible for SBE to raise junior capital at a total cost greater than 6%.
Stockbridge/SBE Holdings hired JP Morgan Securities to raise
the first $300 million, and the company did so in only two weeks. But from
April 2012 until the end of 2013, that money would sit in an escrow account,
unavailable to the owners of the proposed SLS Casino and Hotel because the
second part of their financing—that $115 million in low cost debt provided by
foreign investors looking for EB-5 visas—was proving difficult to close.
The problem wasn’t lining up foreign investors. The problem
was getting the Department of Homeland Security to approve their EB-5 visa
applications so their investments, also placed in escrow until their visas were
approved, could be released from escrow and distributed to Stockbridge/SBE
Holdings.
In 2012, Stockbridge SBE/Holdings hired American Dream Fund, “which operates federally approved EB-5
Regional Centers throughout the nation,” to find foreign investors, and the
group succeeded in that task.
“On October 2, 2012, the first investor petition related to
a proposal for about 230 investors to partially fund SLS, an LVRC [Las Vegas
Regional Center of the DHS] project, arrived at USCIS [United States
Citizenship and Immigration Services]. Other investor petitions followed,” as
the DHS IG report stated.
The USCIS is the agency within the Department of Homeland
Security responsible for reviewing all EB-5 visa applications.
The USCIS approves private companies, like American Dream
Fund, to serve as Regional Centers who are authorized to present EB-5 visa petition
requests. When Regional Centers have high profile political connections
it raises red flags.
George W. Ekin, the CEO of American Dream Fund, is also an investment associate with
The Harris Group, a unit of the highly successful Marcus & Millichap Real
Estate company.
George M. Marcus, the CEO of Marcus &
Millichap, is a prolific contributor to Democratic candidates and
causes. He has contributed to Senator Harry Reid’s campaigns. He has also been
a major contributor to the Senate Majority PAC, a Super PAC closely associated
with Senator Reid.
On August 12, 2012, Marcus contributed $5,000 to the Senate
Majority PAC, according to FEC records.
One month later, On September 11, 2012, Marcus contributed
an additional $200,000.
In 2013 and 2014, Marcus contributed an additional
$1,250,000 to the Senate Majority PAC.
American Dream Fund appears to focus on Chinese EB-5
investors. CEO Ekins is fluent in Mandarin and worked in manufacturing in China
for many years until 2003.
A phone call to American Dream Fund’s Los Angeles offices
goes to a voice mail system that responds in both English and Mandarin.
But American Dream Fund’s success in finding foreign
investors had not yet translated into getting EB-5 visa approvals for those
investors.
In 2012, S & P warned that the
EB-5 financing could be problematic for the SLS project.
If SLS can’t raise most, if not all, of the $115 million in
junior-priority capital via EB-5 financing and uses an alternative source of
junior-priority funding, we believe that these alternative investors would
likely require an additional form of compensation, in addition to 6% cash
interest, such as pay-in-kind (PIK) interest, based on the risk of the project
and current market conditions. If the company needs to raise any meaningful
amount of junior-priority debt at current market interest rates, we believe
that, based on our performance expectations, the capital structure would be
unsustainable, and we would downgrade the company to the ‘CCC’ category. (emphasis
added).
In late 2012 those concerns seemed to be ringing alarm bells
for Rory Reid’s client, Stockbridge/SBE Holdings, the owner of the proposed SLS
Casino and Hotel. Rory Reid’s father, Senate Minority Leader Harry Reid,
appeared to echo those alarm bells in his communications with DHS.
“About two months after individual SLS investors started
filing petitions, USCIS began receiving congressional inquiries about the
petitions. On December 5, 2012, a member of Senator Harry Reid’s staff emailed
USCIS’ Office of Legislative Affairs asking whether USCIS could expedite
processing of the SLS investor petitions. By granting expedited processing, SLS
petitions would move ahead of previously filed petitions,” the DHS IG’s report
found.
“Senator Reid’s staff member asserted that the SLS investor
petitions needed expedited processing because the terms of the bank financing
for SLS required that 10 percent of all visas for the project be approved by
mid-January 2013. Failure to do so would result in losing the financing for the
project. At that time, 25 investor petitions had been submitted, with an
additional 205 to follow,” the report said.
But DHS staffers bristled at the Senator’s interventions and
application of political pressure. Their process is supposed to ensure that the
foreign investors who receive approval for the EB-5 visa program have the kind
of background that makes them likely candidates to be solid American citizens
eventually.
“The staff member indicated that the project had already
received a number of local government permits for construction, at a cost of
several hundred thousand dollars, which would expire in January. The staff
member forwarded correspondence to USCIS from LVRC claiming that submission of
the SLS petitions had been delayed because of potential changes to USCIS’
policy on tenant occupancy,” the report noted.
But despite their protests, Harry Reid’s political pressure,
applied to them through the then-director of the USCIS, Mr. Mayorkas,
continued.
“USCIS employees complained that, in January 2013, after
speaking with U.S. Senator Harry Reid, Mr. Mayorkas personally directed that
USCIS expedite processing of investor petitions related to the SLS Hotel and
Casino in Las Vegas (SLS) even though, in the staff’s view, there was no basis for
expediting the petitions,” the Inspector General wrote.
Not only did Mayorkas hold DHS employees to account, Senator
Reid held Mayorkas to account as well.
“We were told that, during a January 8, 2013, phone call
with Senator Reid, Mr. Mayorkas agreed to provide ‘regular’ weekly updates on
the status of the SLS petitions. Staff described providing updates to members
of Congress as routine, but not ‘down to that level and degree’ as with the SLS
case. According to one senior EB-5 official, from January through July 2013,
they were asked to provide weekly updates on the status of the SLS petitions to
the Office of Legislative Affairs; these updates purportedly went to Senator
Reid’s office,” the authors of the report wrote.
The political pressure continued throughout 2013.
“On January 31, 2013, Mr. Mayorkas had a teleconference with
Senator Reid’s staff. Afterward, Reid’s staff expressed appreciation to USCIS
officials that Mr. Mayorkas ‘took the time to call us personally, even though
it was to deliver bad news.’ The ‘bad news’ appeared to be that the substantive
issues could not be resolved by February 4, 2013,” the report stated.
Apparently, a sufficient number of EB-5 visas were approved
in time to satisfy the banks, the owners of SLS, and Senator Reid. But the
pressure continued.
“Mr. Mayorkas stated in his interview that he did not recall
agreeing to provide Senator Reid with weekly updates on the status of the SLS
petitions. When told we had been informed that weekly updates had been provided
for six months, Mr. Mayorkas said that sounded ‘ridiculous.’ More than three
months after the decision to expedite the SLS petitions, Mr. Mayorkas’ calendar
listed a meeting with Senator Reid on May 6, 2013, in which he was advised that
the ‘SLS expedite’ was one of the topics,” the report found.
By February 2014, all the EB-5 visas had been approved, the
$115 million of low cost junior debt had been raised and construction on the
SLS Hotel and Casino began.
SLS Hotel and Casino opened its doors in August 2014.
Breitbart News asked SBE Entertainment, StockBridge Capital,
and JP Morgan for comment but has not received a response.
They may not be eager to answer some of the questions
Breitbart News posed to them:
(1) Who were the 230 EB-5 investors that invested $115 million
in the low cost junior debt that financed the SLS Hotel and Casino?
(2) Were all of these foreign investors properly vetted or
do some of them present security threats to the United States?
(3) Who were the investors in the $300 million “first lien”
debt financing and did any of them contribute to Harry Reid?
One thing is clear from these recent revelations about the
Senate Minority Leader’s application of brute political force upon the executive
branch of the federal government: Harry Reid may represent as great a threat to
the rule of law in the United States of America as does President Barack Obama.
Sam Nazarian
Sam
Nazarian is the founder of the SBE
Entertainment Group, and Younes
Nazarian’s son.
Note: Younes Nazarian
is Sam Nazarian’s father, and a board
member for the Friends of the Israel
Defense Forces.
Marvin Josephson
was the chairman for the Friends of the
Israel Defense Forces, and is an overseer for the International Rescue Committee.
Foundation
to Promote Open Society was a funder for the International Rescue Committee, and the Aspen Institute (think
tank).
George
Soros was the chairman for the Foundation
to Promote Open Society.
ONE
Campaign is a partner with the International
Rescue Committee.
Susan
McCue was the founding president & CEO for the ONE Campaign, Harry Reid’s
chief of staff, and is a trustee at the Third
Way.
Michelle
Obama is an advocate for the ONE
Campaign, and was a lawyer at Sidley
Austin LLP.
William
M. Daley is a trustee at the Third
Way, a member of the Commercial Club
of Chicago, and was the chief of staff for the Barack Obama administration.
Sidley Austin
LLP is the lobby firm for Israel.
Barack
Obama was an intern at Sidley Austin
LLP.
R.
Eden Martin is counsel at Sidley
Austin LLP, and the president of the Commercial
Club of Chicago.
Newton
N. Minow is a senior counsel at Sidley
Austin LLP, a member of the Commercial
Club of Chicago, and the president of the Crown Family Foundation.
Commercial Club of
Chicago, Members Directory A-Z (Past Research)
Tuesday, December 17, 2013
James S.
Crown is a member of the Commercial Club of Chicago, and a trustee
at the Aspen Institute (think tank).
Lester Crown
was a lifetime trustee at the Aspen Institute (think tank), is the VP
for the Crown Family Foundation, and
a member of the Commercial Club of Chicago.
Crown
Family Foundation is a funder for the Friends
of the Israel Defense Forces.
Kathleen L. Brown
is a member of the Commercial Club of Chicago, and was an attorney at O'Melveny & Myers LLP.
Alejandro N.
Mayorkas was an attorney at O'Melveny
& Myers LLP, and is the deputy secretary at the U.S. Department of Homeland Security (DHS).
Thomas E. Donilon
is a partner at O'Melveny & Myers
LLP, was the White House deputy national security adviser for the Barack Obama administration, a trustee
at the Brookings Institution (think tank), a director at the American
Friends of Bilderberg (think tank), and a 2008 Bilderberg conference
participant (think tank).
Saban
Center for Middle East Policy is a policy center at the Brookings
Institution (think tank).
Haim
Saban is a benefactor for the Saban
Center for Middle East Policy, a trustee at the Brookings Institution
(think tank), the treasurer for the Saban
Family Foundation, a board member for the Friends of the Israel Defense Forces, and a friend of Shimon Peres.
Saban
Family Foundation was a funder for the Friends
of the Israel Defense Forces.
Crown
Family Foundation is a funder for the Friends
of the Israel Defense Forces.
Younes Nazarian
is a board member for the Friends of the
Israel Defense Forces, and Sam
Nazarian’s father.
Sam
Nazarian is Younes Nazarian’s
son, and the founder of the SBE
Entertainment Group.
Shimon
Peres is a friend of Haim Saban,
and the president of Israel.
Daniel B. Shapiro
is the U.S. ambassador for Israel, and
was Senator Dianne Feinstein’s legislative
assistant.
Dianne
Feinstein’s legislative assistant was Daniel
B. Shapiro, is a U.S. Senate
senator, and married to Richard C. Blum.
Richard
C. Blum is married to Dianne
Feinstein, an honorary trustee at the Brookings Institution (think tank),
and a regent at the University of
California.
Janet A.
Napolitano is the president for the University
of California, and the secretary at the U.S. Department of Homeland Security (DHS), for the Barack Obama administration.
George
M. Marcus was a regent at the University
of California, and is the founder & chairman of Marcus & Millichap.
Scott Louis
Weber was a senior counselor to the secretary for the U.S. Department of Homeland Security (DHS), and a partner at Patton Boggs LLP.
Patton Boggs LLP
is the lobby firm for Las Vegas (NV).
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