MOBILE, Ala. (WALA) – A federal jury here this week will sort out the remaining loose ends in a fraud investigation that somehow connects a local strip club, a foreign company that cleans railway cars and wealthy Chinese businessmen.
The civil trial starting Tuesday will determine the fate of millions of dollars frozen in U.S. bank accounts that prosecutors contend were part of a fraudulent scheme to provide a pathway for Chinese businessmen seeking to immigrate to America.
Diamonds Exclusive Men’s Club on Airport Boulevard, known for its nightly offering of adult entertainment, became an unlikely player in an international immigration scheme. It was one of a number of U.S. businesses listed on immigration documents as sponsors of Chinese investors who entered joint business ventures.
But Diamonds owner Sherry Vellianitis testified at a 2017 criminal trial that those documents were bogus. She told jurors that her gentleman’s club was not even in the same ballpark as the Chinese firm it supposedly was going into business with, Zhingtie Fu Hong Cleaning Service of Beijing, a company that cleans train stations and railroad cars.
Vellianitis also testified that she never received the $300,000 investment that purportedly was going to be invested in Diamonds. Likewise, she said, she had no knowledge of a Chinese woman named Gui Hong He, who immigration documents indicated was going to become the “executive manager” of the club.
The woman’s listed salary was $40,000 per year. Asked by a prosecutor at trial if anyone at the club made that much money, Vellianitis answered, “At the moment, not even me.”
Vellianitis testified there were other inaccuracies. She said job positions listed on the documents did not exist. One of those was “kitchen manager,” but Vellianitis told jurors that Diamonds does not have a kitchen. She said it has not served food since the 1980s, before he husband’s death, when it briefly had a buffet. But Vellianitis said the business had to stop “because the girls were gaining weight.”
Feds get convictions
The trial ended with the conviction of south Florida resident David Jesus Jimenez on charges of conspiracy to commit visa fraud, conspiracy to commit money laundering and money laundering. His father-in-law and his uncle also have pleaded guilty to fraud-related charges, as has Fairhope resident Christopher Allen Dean.
At Jimenez’s trial, Dean testified that he first met the defendant in 2010 when he was looking for money to add demolition services to the family-owned Eight Mile auto parts business where he worked. The business has not been accused of wrongdoing, and its owners say Dean has not worked there since shortly after he began working with Jimenez.
Jimenez, according to the testimony, recruited Dean to help match American businesses with Chinese investors under the federal government’s EB-1C visa program, which gives beneficiaries permission to move to the United States and puts them on a fast track to green cards. The rationale is that foreigners whose companies create joint ventures with American companies are of value in building those businesses and creating jobs.
Critics have derided the EB-1 program as “citizenship for sale” and point to fraud charges associated with the program all over the country.
Dean testified that he started trying to be a legitimate broker but ended up conspiring with his co-defendants to submit fraudulent documents. In some cases, he admitted, documents were back-dated so that Chinese investors could get the visas for their children before they turned 21 and became too old to immigrate with their parents.
Dean testified that he netted about $250,000 annually for three years in referral fees and that Jimenez was making $1 million.
Twenty-two of the businesses listed on immigration forms were located in south Alabama, but they also were from Florida, Georgia, Mississippi, Texas and the U.S. Virgin Islands.
Federal authorities froze more than $4 million offered by the Chinese investors. Of those 19 investors, five voluntarily surrendered their money, but 14 are contesting the seizures that collectively total more than $3.3 million. The trial beginning Tuesday will determine if the government can keep the money.
‘My clients are victims’
Attorney Stewart Hanley, who represents three of the investors, said his clients had nothing to do with the criminal conspiracy. He said they intended to expand their pharmaceutical and construction businesses to the United States.
“My clients are victims. They were innocent owners of this money,” he said. “And it was used – or it’s alleged to be used … without their knowledge or purpose by them, whatsoever.”
Attorney Richard Shields, who represents Lixin Zhao, said his client was one of the only ones – perhaps, the only one – who actually traveled to the United States to check out the investment opportunity. He said Zhao, who runs an advertising and marketing business in Beijing, met with a Citronelle air conditioning installation business.
Shields said his client decided to pass on the opportunity but ultimately agreed to a joint venture with a compounding pharmacy in San Antonio and wired $191,261 to a Bank of America account.
“He doesn’t really do anything. He doesn’t submit anything. He doesn’t file anything,” he told FOX10 News. “He doesn’t do anything. He just enters into this agreement to invest in the business in Texas.”
Zhao did not find out about the alleged fraud until he received notice from the bank that the funds had been frozen, Shields said.
Shields said his client never had any intention to immigrate to the United States or become an American citizen. The benefit of the EB-1C visa to Zhao is that it would have allowed him to stay in the United States for longer than 90 days during extended business trips before having to return home, the attorney said.
“All of these claimants, none of them know each other,” Shields said. “They don’t have any dealings with each other, no business arrangements, no contact.”
Hanley said his clients believed they were making a legitimate investment and had no reason to believe the company they hired to match them with American companies was engaged in fraud.
“Notably, they have never been accused of a crime, indicted of any crime, arrested or anything like that,” he said.
But federal prosecutors handling the civil forfeiture case contend the Chinese businessmen were aware of the fraud whether they were active participants or not.
“Whether the Claimants have criminal culpability in the visa fraud scheme is irrelevant to whether they are innocent owners of the Funds,” prosecutes wrote in a court filing.
Under the law, prosecutors must prove that the disputed funds were part of the fraudulent enterprise. After that, the burden shifts to the investors to prove they had no knowledge of it.
Updated to Oct. 16, 2019, to clarify that the auto parts business that Christopher Allen Dean worked for had no involvement in the immigration visa program or the criminal fraud investigation.