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.