A top military aide to three former U.S. presidents and his partner have been found guilty of defrauding 31 EB-5 investors in what was supposed to be a post-Katrina recovery project in New Orleans. The pair misappropriated investor capital and each pocketed $4.7 million. U.S. Attorney states, “It all comes down to greed.”
Milbrath was top White House aide to 3 presidents
Retired Air Force colonel Timothy O. Milbrath, 63, served as the White House Military Office’s chief of staff under Presidents Ronald Reagan, George. H. W. Bush, and Bill Clinton. But he couldn’t properly serve 31 foreign nationals looking for an EB5 green card. Milbrath and his fellow Maryland business partner William “Bart” Hungerford were found guilty by a federal jury of nine counts of fraud. The charges include mail fraud, wire fraud, immigration fraud, and money laundering.
The plans — and the personal spending
The pair told foreign investors looking for a Green Card that they would be investing in job-creating companies to help rebuild New Orleans after the devastation of Hurricane Katrina. They started an EB5 regional center called NobleOutReach LLC. The regional centers’ operations were contracted with the city of New Orleans. 31 EB-5 investors handed them $15.5 million with expectations that they would fund an extended-stay hotel, a café, and a restaurant. The diversification, investors were told, would minimize risk. But the EB-5 projects never moved past the demolition stage.
Apparently, some of the investor funds did create some jobs, but not the ones approved by U.S. Citizenship and Immigration Services (USCIS). So while the investors received temporary Green Cards, none of them became permanent residents.
The trial revealed that much of the investor capital was used for Milbrath’s and Hungerford’s personal use. They would write themselves checks from the investor capital and identify it as a “loan” or “loan repayment.” The two created several companies to divert and conceal the money trail. Some of the personal use of the investor money included the purchase of vacation and rental real estate, tuition for their children, and salaries for both their wives. In total, each man misappropriated $4.7 million for personal use. Milbrath even spent $300,000 on vintage postcards.
Unrepentant Milbrath claims political persecution
The defense team said it was clear to investors that they would be keeping millions in management fees, salaries, and outside capital. “It’s not fraud for a business to fail… or not produce enough jobs,” argued defense attorney Eddie Castaing.
Milbrath himself dug his heels in to defend his actions and freely citied his former career credentials: “I’ve lived by the creed I’ve always lived by, and that the military teaches you, that you do not lie, cheat, or steal.”
To defend the use of investor funds to pay their two wives, Milbrath continued to leverage his political past: “I was in charge of the president. If something happened to the president and there was a change in leadership I was in charge of making sure that worked smoothly. So, if anything happened to us, I chose my wife and Mrs. Hungerford because they knew what they were doing.”
And just what could happen to the two? For one thing, Milbrath felt he was innocent of EB-5 fraud and being unjustly persecuted because of his criticism of Barack Obama’s USCIS director, Alejandro Mayorkas. If this narrative of persecution were true, it would be a reprisal spanning both a Democratic and Republican administration.
Condemnation & charges
The prosecution didn’t buy that rather tenuous argument of persecution and was clear in their condemnation of Milbrath and Hungerford. Defense attorney Strasser denounced their actions in hurricane-ravaged New Orleans as a “scheme to defraud our community, taxpayers and those lawfully seeking permanent residency in the United States… in the wake of one of the most turbulent times in our city’s history.”
FBI Acting Special Agent in Charge Anthony Riedlinger added this: “These crimes truly victimized an entire community and are not tolerated by the FBI nor should they be tolerated by any citizens.”
For each of six charges of wire fraud, conspiracy to commit wire and mail fraud, Milbrath and Hungerford face a maximum of twenty years in prison, a $250,000 fine, and up to three years of supervised release. The money laundering conspiracy charge also carries a maximum of up to 20 years jail time, and three years of supervised release, but with a $500,000 fine. Conspiracy to commit immigration fraud has a maximum of five years in prison with the same supervised release, and a $250,000 fine. The two will be sentenced on December 17, 2019.
Defense attorney Castaing says they are “very disappointed with the verdict. We will continue to fight, with post-trail motions and appeals.”
An investor story: dreams & money lost — living in limbo
While this EB-5 fraud story can easily incite frustration and even anger, it’s worthwhile to look past the perpetrators to absorb the loss and toll it has taken on the innocent victims, the investors.
One such investor, Suzette Lopez took the stand in this case, talking through tears about what Milbrath and Hungerford have done to her and her family. The Jamaican mother of three (all born in U.S.) moved to New Jersey in 2001 on a temporary work visa.
In 2007, she scrambled to put together $560,000 from her real estate, her parents, and credit cards to forge a permanent future in America. But her petition, predicated on EB-5 job creation that Milbrath and Hungerford never delivered on, was denied. She now has to apply every second year to extend her temporary stay in the country.
“I’m in limbo right now,” Lopez told the jury. “At any point, I’m at the risk of deportation.”
We can only hope the current political scrutiny of the program and desire for reform can make tragedies like this just a sad memory.
Read the WWL-TV story about the case
Read the Nola.com story about Suzette Lopez