Newsday finally (too gently) looks into EB-5 middleman Nick Mastroianni, of the U.S. Immigration Fund.

So, what to make of Newsday's 8/14/21 profile of Nick Mastroianni II, who somehow parlayed his role as middleman in EB-5 investor visa fundraising (via his company, the deceptively-named U.S. Immigration Fund) into controlling the Nassau Coliseum lease and playing a role in the development of the surrounding hub?

Well, at least they published something--about a year after his potential role surfaced and six months after it was announced.

But Challenges mount for Nassau Coliseum leaseholder hardly gets at Mastroianni's dubious business practices, or his dubious takeover of the Coliseum lease--or the inherently sketchy world of EB-5. So it falls way short of what's needed.

My guess--and it's just a guess--is that Newsday is loath to push too hard on a businessman who controls an iconic Long Island venue, owned by Nassau County and supported by see-no-problem county officials, and who also is likely to advertise significantly. But c'mon--the red flags are plentiful.

Here's a key framing:

In Mastroianni, the county is entrusting the arena, and to a significant extent the massive Hub redevelopment, to a man who in recent years has become well known for his successful use of a federal loan program that raises money for construction projects in the United States from immigrant investors.

In return, they gain a pathway to U.S. citizenship.

Mastroianni's career record shows he has no experience in operating sports and entertainment arenas and no involvement in any large-scale developments on Long Island.

But he says he can handle the Coliseum job.

That's a lot of trust for "he says," especially since Mastroianni, no dummy, "declined to be interviewed and provided answers to questions through a spokesman."

I'd say "well-known for his successful use" of EB-5 is one way of putting it. 

Another might be "well-known for deceptively marketing projects to investors," as I've documented.

And sued periodically, as well.

Meanwhile, he's gotten very rich, rich enough to buy a $7.25 million mansion earlier this year, though he had to return it due to "seller's remorse."

A "tangled past" 

Asked by Newsday about issues excavated in a major October 2014 article in Fortune, The tangled past of the hottest money-raiser in America's visa-for-sale program, such as lawsuits and bankruptcy filings, Mastroianni stated: "You are referencing business events that are over 20 years ago and were resolved long ago."

But those, of course, are not the only reasons to question him, since he's had a lot more recent controversy. That Fortune article deliciously summarized the world of EB-5:

But because the EB-5 industry is virtually unregulated, it has become a magnet for amateurs, pipe-dreamers, and charlatans, who see it as an easy way to score funding for ventures that banks would never touch. They've been encouraged and enabled by an array of dodgy middlemen, eager to cash in on the gold rush. Meanwhile, perhaps because wealthy foreigners are the main potential victims, U.S. authorities have seemed inattentive to abuses.

The implication, of course, is that Mastroianni is among the "dodgy."

About EB-5

From Newsday:

To finance the Coliseum's 2017 renovation, Mastroianni raised $100 million from 200 Chinese investors, U.S. Immigration Fund officials told the Nassau County Legislature in filings and testimony.

In exchange for a $500,000 investment, the investors each were to get a U.S. visa and receive their money back within five years.

It's very much unclear that the investors in this case will get their money back, especially in the time expected, since Mastroianni has "written to his Coliseum investors encouraging them to move their money to a Times Square hotel project," noting that the Coliseum is losing money.

What's not explained is that Mastroianni, as middleman (via his company, a so-called "regional center"), can take a larger share of the interest paid by the borrower in the Times Square project and, not coincidentally, that also lowers the obligation he must pay off.

Also unexplained: how Mastroianni, as agent for the borrowers, gained control of an asset (the Coliseum lease) that the borrowers should control. It's unclear whether he put any money in. As I wrote, language in the prospectus, a Private Placement Memorandum, said the loan would be “be secured by mortgages on the Coliseum Ground Lease."

Investors would gain “the right to assume (or the right to designate a qualified developer/operator to assume) the Coliseum Ground Lease following any… an event of default.”

But that was also subject to other language in the prospectus, apparently enabling the switcheroo. “Manager has the exclusive management and control,” it stated, “of all aspects of the business of the Company.”

Moreover, it warned that “there can be no assurance that [transactions] will be resolved equitably or to the benefit of the Members.” That suggests that investors would not have the right to designate a developer/operator.

Unmentioned: the fact that Mastroianni publicly admitted, as I wrote in 2017, that the entire rationale for EB-5 is bogus, since the investors' money doesn't create jobs.

"Projects that don't typically need the capital are the projects that we look to lend money on," he stated at at a session in Shanghai. "If a project can't be developed without the EB-5 capital, it's not a project that you should be looking to invest in, because you've got a desperate situation." But then the program has no need to exist. Public assets produce no public benefit.

A deceptive name

Unmentioned: the U.S. Immigration Fund's deceptive name.

Anyone who's covered EB-5 knows that regional centers use names, as I wrote in 2012, that attempt to "convey to unwary investors the patina of officialdom," even though they're private companies.

Interestingly, Invest in the USA (IIUSA), the trade group for regional centers, now says that using "U.S." in a name goes against best practices. Mastroianni's firm is not a member.

About politics

From the article:

Stephen Yale-Loehr, professor of immigration law practice at Cornell Law School in Ithaca, described Mastroianni as "a major player" in the EB-5 loan world.
...Yale-Loehr noted that in dealing with potential investors, Mastroianni also "touts his political connections."

Well, Yale-Loehr may have a Cornell Law position, but he's made a lot of money promoting EB-5. He's also of counsel at Miller Mayer, a boutique law firm that represents EB-5 promoters and projects, and he's the former Executive Director of Invest in the USA.

The article notes that Mastroianni’s USIF has provided funding to developments by the family of Trump son-in-law Jared Kushner in New Jersey:

Charles Kushner, Jared Kushner's father and the founder of the company, told Newsday in an interview: "I couldn't be prouder to have Nick as my close friend and my partner. Nick is one of the smartest and most honorable business people I know."

Well, Charles Kushner went to prison "for tax evasion and making illegal campaign donations," as the Chicago Tribune put it, so he's not exactly the authority on honorable business.

It should be mentioned that Mastroianni's political connections include significant campaign contributions. C'mon, if a public policy is this obscure and this wired, doesn't it merit a little more scrutiny?

Flashback 2015

The article contains a rather limited account of a 2015 Nassau Legislature meeting regarding the proposed EB-5 investment in the Coliseum:

At that legislative meeting, only Legis. Kevan Abrahams (D-Freeport), the minority leader, raised concerns about Mastroianni’s background, after reading passages aloud from the Fortune story.

"I would be hard found and hard pressed to think why would this legislative body consider going into business with somebody that has a … past like this?" Abrahams said.

Josh Meyer, the county's outside counsel on Coliseum matters, said Mastroianni's background was not a concern.

"He apparently has a colorful past, I guess," Meyer said at the hearing. "But he's a lender in this instance. So it's not something that I would say would have an impact here."

As I wrote, Mastroianni was not a lender, but rather a packager of loans. I described the exchange in more detail.

"Is there any risk to the county at all?" Meyer was asked, "because of the history that Legislator Abrahams just brought up?"

"The money comes in to a special purpose entity," Meyer said, "and ultimately it would be no different than if you were going to a bank... and if there was anything that went wrong, you'd be in no different position than if you had an institutional investor."

Not necessarily, I wrote. If things went wrong, then 180 Chinese immigrants--actually 200-- might have a piece of the project. And Mastroianni, with his "checkered past," might play a role. That's different from a bank.

And that's what happened, but I didn't anticipate how Mastroianni would so easily wrest control from the actual people who put up the money.

County under pressure

From the new article:

Last summer, just as the COVID-19 pandemic was putting a stop to all mass gatherings, Prokhorov shuttered the Coliseum.

County officials said they were faced with two options for the arena: Take their chances if Prokhorov entered bankruptcy, and risk years of litigation, or work with Mastroianni to take Prokhorov’s place as leaseholder.

County officials chose the latter.

As part of the their deal with Mastroianni, he paid the $2.2 million Prokhorov owed in rent.

The county then allowed Mastroianni to delay payment of $4 million in annual rent until six months after all pandemic restrictions are lifted from arenas.

That sounds like Mastroianni reached into his pocket to pay the rent, somehow hoping to make up that expenditure from the Coliseum's constrained revenues.

Actually, as I wrote in February, EB-5 investors were told that, as part of a settlement with Prokhorov, the latter's firm “paid approximately $7 million to Nassau Live” to pay various costs, including back rent, interest, utilities, and closing costs. 

So that's where the money came from.