2016-01-01 SEC Press complaint 97 KB 48,385 chars

SEC v. Emilio Francisco; PDC Capital Group, LLC; Caffe Primo International, Inc.; SAL Assisted Living, LP; SAL Carmichael, LP; SAL Citrus Heights, LP, et al., No. 8:16-cv-02257, Central District of California (Jan. 1, 2016) — Complaint

raw: Securities and Exchange Commission v Emilio Francisco Et Al

Securities and Exchange Commission v Emilio Francisco Et Al, No. 8:16-cv-02257 (Jan. 1, 2016)

Caption: SEC v. Emilio Francisco, et al.

Exhibit of SEC Charges Lawyer With Stealing Investor Money in EB-5 Offerings

summary

Emilio Francisco and PDC Capital Group, LLC defrauded 131 investors of $72.05 million through fraudulent EB-5 offerings by falsely promising that capital contributions would fund assisted living facilities and restaurants, while misappropriating at least $9.5 million for Francisco’s luxury lifestyle and diverting over $12.65 million in administration fees, violating Sections 17(a) and 10(b) of the securities laws.

paragraph

Emilio Francisco and PDC Capital Group, LLC orchestrated a fraudulent EB-5 scheme from 2013 to 2016, raising $72.05 million from 131 primarily Chinese investors through offerings tied to assisted living facilities and Caffe Primo restaurants. They misrepresented that $500,000 capital contributions would be used solely for project development, while diverting at least $12.65 million in administration fees—$9.5 million of which funded Francisco’s personal luxuries, including a yacht—and commingling funds across projects in violation of offering disclosures. The SEC charged them with violations of Sections 17(a) and 10(b) of the Securities Act and Exchange Act, respectively, and Rule 10b-5, seeking asset freezes, disgorgement, civil penalties, and a receiver.

narrative

Emilio Francisco and PDC Capital Group, LLC orchestrated a fraudulent EB-5 investment scheme from January 2013 through September 2016, defrauding at least 131 investors—primarily from China—of approximately $72.05 million through 19 separate offerings tied to assisted living facilities and Caffe Primo restaurants. Defendants falsely assured investors that their $500,000 capital contributions would be used exclusively for the designated project, with only administration fees covering operational expenses, yet diverted at least $12.65 million in administration fees beyond what was legitimately owed, misappropriating at least $9.5 million for Francisco’s personal luxury expenses, including yacht purchases and maintenance. They commingled investor funds across unrelated projects, contrary to explicit representations in offering materials, and failed to disburse $1.5 million held in escrow for two offerings. Francisco, who controlled all defendant entities and their bank accounts, used shell companies and deceptive disclosures to conceal the true use of funds and falsely promised job creation and project viability to satisfy EB-5 visa requirements. The SEC alleges violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5, and seeks injunctive relief, asset freezes, disgorgement with interest, civil penalties, and the appointment of a receiver to recover and repatriate overseas funds.

Enriched metadata

Scheme: advance-fee (95%)
Court: Central District of California
Case No.: 8:16-cv-02257
Victim loss: $72,050,000
Victims: 131

Classified advance-fee(confidence 95%). No EDGAR filing fingerprint (criminal/DOJ-side scheme). detection rule →

Extracted insights

Dollar amounts 21

$72.05M $72.05 million $10M–$100M
$65.50M $65.5 million $10M–$100M
$19.20M $19.2 million $10M–$100M
$12.65M $12.65 million $10M–$100M
$12.65M $12.65 million $10M–$100M
$9.50M $9.5 million $1M–$10M
$6.55M $6.55 million $1M–$10M
$1.65M $1.65 million $1M–$10M
$1.65M $1.65 million $1M–$10M
$1.50M $1.5 million $1M–$10M
$1.00M $1 million $1M–$10M
$550K $550,000 $100K–$1M

Entities 30

person Emilio Francisco ×2
person Adrienne D. Gurley
person alka n. patel
organization Caffe Primo International, INC
organization Caffe Primo Management 102, LP
organization Caffe Primo Management 103, LP
organization Caffe Primo Management 104, LP
organization Caffe Primo Management 105, LP
organization Caffe Primo Management 106, LP
organization Caffe Primo Management 107, LP
organization Caffe Primo Management 108, LP
organization Caffe Primo Management, LP
organization Clear Currents West, LP
person fraudulent scheme
person john b. bulgozdy
person John W. Berry
person Michele Wein Layne
company pdc capital group, llc
organization PDC Capital Group, LLC
organization SAL Assisted Living, LP
organization SAL Carmichael, LP
organization SAL Citrus Heights, LP
organization SAL Kern Canyon, LP
organization SAL Phoenix, LP
organization SAL Westgate, LP
organization Securities and Exchange Commission
organization Summerplace At Clearwater, LP
organization Summerplace At Correll Palms, LP
organization Summerplace At Sarasota, LP
organization TRC Tucson, LP

Triples 5

Emilio Francisco engaged in fraudulent scheme
PDC Capital Group, LLC engaged in fraudulent scheme
Defendants raised $72.05 million
Defendants made offerings in assisted living facilities, Caffe Primo restaurants, and a packaging facility
Defendants represented investor’s entire $500,000 capital contribution would be used to develop a specific project

PDF

Securities and Exchange Commission v Emilio Francisco Et Al · Source

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Extracted body text (48,385c)

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JOHN B. BULGOZDY (Cal. Bar No. 219897)
Email: [email protected]
ADRIENNE D. GURLEY
Email: [email protected]

Attorneys for Plaintiff
Securities and Exchange Commission
Michele Wein Layne, Regional Director
Alka N. Patel, Associate Regional Director
John W. Berry, Associate Regional Director
444 S. Flower Street, Suite 900
Los Angeles, California 90071
Telephone: (323) 965-3998
Facsimile: (213) 443-1904
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
vs.
EMILIO FRANCISCO; PDC CAPITAL
GROUP, LLC; CAFFE PRIMO
INTERNATIONAL, INC.; SAL ASSISTED
LIVING, LP; , SAL CARMICHAEL, LP; SAL
CITRUS HEIGHTS, LP; SAL KERN
CANYON, LP; SAL PHOENIX, LP; SAL
WESTGATE, LP; SUMMERPLACE AT
SARASOTA, LP; SUMMERPLACE AT
CLEARWATER, LP; SUMMERPLACE AT
CORRELL PALMS, LP;TRC TUCSON, LP;
CLEAR CURRENTS WEST, LP; CAFFE
PRIMO MANAGEMENT, LP;
CAFFE PRIMO MANAGEMENT 102, LP;
CAFFE PRIMO MANAGEMENT 103, LP;
CAFFE PRIMO MANAGEMENT 104, LP;
CAFFE PRIMO MANAGEMENT 105, LP;
CAFFE PRIMO MANAGEMENT 106, LP;
CAFFE PRIMO MANAGEMENT 107, LP; and
CAFFE PRIMO MANAGEMENT 108, LP,

Defendants.
Case No.

COMPLAINT

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Plaintiff Securities and Exchange Commission (“SEC”) alleges:
JURISDICTION AND VENUE
1. The Court has jurisdiction over this action pursuant to Sections 20(b),
20(d)(1) and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§
77t(b), 77t(d)(1) & 77v(a), and Sections 21(d)(1), 21(d)(3)(A), 21(e) and 27(a) of the
Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d)(1),
78u(d)(3)(A), 78u(e) & 78aa(a). Defendants have, directly or indirectly, made use of
the means or instrumentalities of interstate commerce, of the mails, or of the
facilities of a national securities exchange in connection with the transactions, acts,
practices and courses of business alleged in this Complaint.
2. Venue is proper in this district pursuant to Section 22(a) of the Securities
Act, 15 U.S.C. § 77v(a), and Section 27(a) of the Exchange Act, 15 U.S.C. §
78aa(a), because certain of the transactions, acts, practices and courses of conduct
constituting violations of the federal securities laws occurred within this district.
Defendant Emilio Francisco resides in this district and defendant PDC Capital
Group, LLC is headquartered in this district.
SUMMARY
3. Defendant Emilio Francisco and his company Defendant PDC Capital
Group, LLC, have engaged in an ongoing fraudulent scheme to defraud at least 131
investors in 19 different offerings out of at least $9.5 million, beginning in January
2013 and continuing at least through September 2016. Francisco and PDC Capital
made offerings in assisted living facilities, Caffe Primo restaurants, and a packaging
facility, primarily to investors in China, that purportedly qualify under the “EB-5
Immigrant Investor Program” administered by the U.S. Citizenship and Immigration
Service (“USCIS”). Defendants raised approximately $72.05 million from the 131
investors, consisting of approximately $65.5 million in capital contributions to
purchase units in limited partnerships, and $6.55 million in “administration fees” to
pay expenses of the limited partnerships until the projects were built. In several of

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the offerings, Defendants expressly represented that an investor’s entire $500,000
capital contribution would be used to develop a specific project, and that only
administration fees would be available to pay expenses of the limited partnership
until the project was completed.
4. Approximately $19.2 million of investors’ funds was sent directly to
PDC Capital’s accounts, which exceeded by about $12.65 million the total
administration fees paid by investors. Of that $12.65 million of diverted investor
funds, Defendants PDC Capital and Francisco misappropriated at least $9.5 million
of investors’ capital contributions to support his luxury lifestyle including the
purchase and maintenance of a yacht, and to support his businesses. Francisco and
PDC Capital misrepresented to investors that their capital contributions would be
used for the designated purposes stated in the offering materials. In addition,
Francisco and PDC Capital commingled funds among different projects, contrary to
representations in the offering materials that investors’ funds would be used for the
specific project in which they were investing. Further, at least $1.5 million of
investors’ funds deposited into escrow for two offerings were not disbursed to the
bank accounts of the limited partnerships that were to receive the funds.
5. Defendants Francisco, PDC Capital Group, and Caffe Primo
International, Inc. – another company Francisco controlled as CEO and part-owner –
committed their fraud through the offerings for the Defendant limited partnerships.
At all relevant times, Defendant Francisco controlled the bank accounts, directly or
indirectly, for all of the Defendants; controlled and approved the terms of the various
offerings; and benefitted personally from the misuse and misappropriation of funds.
Defendants’ conduct appears to be ongoing and they raised funds from investors as
recently as September 2016.
6. By engaging in this conduct, the Defendants have violated, and continue
to violate, the antifraud provisions of Section 17(a) of the Securities Act, 15 U.S.C. §
77q(a), and Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rules 10b-5

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thereunder, 17 C.F.R. 240.10b-5. Alternatively, Francisco and PDC Capital Group
aided and abetted the violations by the limited partnership Defendants. Finally,
Francisco is liable as a control person for the violations of each of the corporate
Defendants under Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a).
THE DEFENDANTS
7. Emilio Francisco (“Francisco”) resides in Newport Beach, California.
He graduated from the University of California at Irvine, was awarded a J.D. by
Western State University in 1976, and is an active member of the California Bar.
Francisco is the CEO and Chairman of defendants PDC Capital Group, LLC (“PDC
Capital”) and Caffe Primo International, Inc. (“CPI”). Francisco also controls and/or
serves as the CEO of other entities involved the fraudulent scheme, such as PDC
Partners Management, Inc. (“PMI”) which managed assisted living projects; FDC
Partners Management, Inc. (“FDC”) which also managed assisted living projects;
and Summerplace Management, LLC (“SML”), which is the general partner of
several of the assisted living projects. Francisco was admitted to the California Bar
in 1976, was placed on suspension in 1992, and in 2012 his license was suspended
for nine months for a variety of types of misconduct. Francisco also currently works
as a marketing consultant for The Law Offices of Marilyn Thomassen & Associates
(“MTA”), a California law firm owned by Marilyn Thomassen. MTA and/or
Marilyn Thomassen serve as the escrow agent for PDC Capital’s EB-5 offerings, and
serves as immigration counsel for a number of investors in PDC Capital’s EB-5
offerings.
8. PDC Capital Group, LLC (“PDC Capital”) is a Delaware limited
liability company, headquartered in Costa Mesa, California. PDC Capital was
formed by Emilio Francisco in 2012 and is controlled by him as CEO. PDC Capital
was formed as a vehicle for managing EB-5 program investments.
9. Caffe Primo International, Inc. (“CPI”) is a Delaware corporation,
which is owned by PDC Capital and Global Restaurant Partners, Inc. Francisco is

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the CEO of CPI. CPI is a general partner of the defendant Caffe Primo Management
limited partnerships.
10. SAL Assisted Living, LP (“SAL Assisted Living”) is a Nevada limited
partnership headquartered in Costa Mesa, California, which was formed to invest in
the construction and operation of an assisted living facility in Lincoln, California,
and invests through the entity Summerplace at Lincoln, LLC. SML is the general
partner of SAL Assisted Living.
11. SAL Carmichael, LP (“SAL Carmichael”) is a Delaware limited
partnership headquartered in Costa Mesa, California, which was formed to invest in
the construction and operation of an assisted living facility in Carmichael, California,
through the entity SAL Carmichael LLC. SML is the general partner of SAL
Carmichael.
12. SAL Citrus Heights, LP (“SAL Citrus Heights”) is a Delaware
limited partnership headquartered in Costa Mesa, California, which was formed to
invest in the construction and operation of an assisted living facility in Citrus
Heights, California, through the entity SAL Citrus Heights, LLC. SML is the
general partner of SAL Citrus Heights.
13. SAL Kern Canyon, LP (“SAL Kern Canyon”) is a California limited
partnership headquartered in Costa Mesa, California, which was formed to invest in
the construction and operation of an assisted living facility in Stockton, California,
through the entity SAL Kern Canyon, LLC. SML is the general partner of SAL
Kern Canyon.
14. SAL Phoenix, LP (“SAL Phoenix”) is a Delaware limited partnership
headquartered in Salem, Oregon, which was formed to invest in the construction and
operation of an assisted living facility in Glendale, Arizona. Sante GP Zanjero LLC
and SML are the general partners of SAL Phoenix.
15. SAL Westgate, LP (“SAL Westgate”) is a Delaware limited
partnership headquartered in Costa Mesa, California, which was formed to invest in

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the construction and operation of an assisted living facility in West Sacramento,
California, through the entity SAL Westgate, LLC. SML is the general partner of
SAL Westgate.
16. Summerplace at Sarasota, LP (“Sarasota”) is a Delaware limited
partnership formed to invest in the construction and operation of an assisted living
facility in Sarasota, Florida, through the entity Summerplace at Sarasota, LLC. FDC
is the general partner of Sarasota, and Francisco controlled its bank accounts at least
through the end of 2015.
17. Summerplace at Clearwater, LP (“Clearwater”) is a Delaware
limited partnership formed to invest in the construction and operation of an assisted
living facility in Clearwater, Florida, through the entity Summerplace at Clearwater,
LLC. FDC is the general partner of Clearwater.
18. Summerplace at Correll Palms, LP (“Correll Palms”) is a Delaware
limited partnership formed to invest in the construction and operation of an assisted
living facility in Titusville, Florida, through the entity Summerplace at Correll
Palms, LLC. FDC is the general partner of Correll Palms.
19. TRC Tucson, LP (“TRC Tucson”) is a Delaware limited partnership
formed to invest in the construction and operation of an assisted living facility in
Tucson, Arizona, which is owned by SET Real CO, LLC. SML and Sante GP
Tucson are the general partners of TRC Tucson.
20. Clear Currents West, LP (“Clear Currents LP”) is a Delaware
limited partnership headquartered in Costa Mesa, California. It was formed for the
purpose of investing in Clear Currents West, LLC, which will renovate a production
facility for Clear Currents environmentally friendly agriculture and cleaning
products. The general partner is Clear Currents West Management, LLC.
21. Defendants engaged in eight offerings under the EB-5 program for the
construction and operation of individual “Caffe Primo” restaurants. Each offering
had the same structure: the limited partnership (“LP”) is the issuer of securities, CPI

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is the general partner, Francisco is an original limited partner, and Primo Hospitality
Group Management, Inc. is a non-voting general partner. Each LP invested in a
corresponding limited liability company (“LLC”) which built and operated the Caffe
Primo restaurants.
a. Caffe Primo Management, LP (“Caffe Primo Management”)
is a California limited partnership formed for the purpose of
investing in Caffe Primo Management 101, LLC.
b. Caffe Primo Management 102, LP is a Delaware limited
partnership formed for the purpose of investing in Caffe Primo
Management 102, LLC.
c. Caffe Primo Management 103, LP is a California limited
partnership formed for the purpose of investing in Caffe Primo
Management 102, LLC.
d. Caffe Primo Management 104, LP is a Delaware limited
partnership formed for the purpose of investing in Caffe Primo
Management 104, LLC.
e. Caffe Primo Management 105, LP is a Delaware limited
partnership formed for the purpose of investing in Caffe Primo
Management 105, LLC.
f. Caffe Primo Management 106, LP is a Delaware limited
partnership formed for the purpose of investing in Caffe Primo
Management 106, LLC.
g. Caffe Primo Management 107, LP is a Delaware limited
partnership formed for the purpose of investing in Caffe Primo
Management 107, LLC.
h. Caffe Primo Management 108, LP is a Delaware limited
partnership formed for the purpose of investing in Caffe Primo
Management 108, LLC.

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THE FRAUDULENT SCHEME
A. The EB-5 Program
22. The EB-5 Immigrant Investor Program sets aside EB-5 visas for
participants who invest in commercial enterprises in the United States which create
jobs and meet certain other conditions.
23. Under the EB-5 Immigrant Investor Program, foreign investors who
invest capital in a “commercial enterprise” in the United States may petition the
USCIS (called an “I-526 Petition”) and receive conditional permanent residency
status for a two-year period. USCIS defines a “commercial enterprise” as any for-
profit activity formed for the ongoing conduct of lawful business.
24. The EB-5 Immigrant Investor Program requires a showing that the
foreign investor has placed the required amount of capital at risk for “the purpose of
generating a return” on the capital placed at risk. The foreign investor must invest at
least $500,000 in a “Targeted Employment Area” and thereby create at least ten full-
time jobs for United States workers. If the foreign investor satisfies these and other
conditions within the two-year period, the foreign investor may apply to have the
conditions removed from his or her visa and live and work in the United States
permanently.
B. The Fraudulent Offerings
25. PDC Capital was formed in 2012 to put together real estate transactions
and develop properties. PDC Capital is described as a marketing company and
solicits investors primarily in China to invest in EB-5 projects.
26. From about January 2013 to at least September 2016, Defendants have
raised approximately $72.05 million from at least 131 investors through offerings in
the Defendant EB-5 project limited partnerships.
27. Defendants solicited investors in the offering through PDC Capital’s
website.
28. Defendants also solicited investors in China through PDC Capital’s

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marketing staff in China, who work with Chinese marketing agencies to solicit EB-5
investors. PDC Capital representatives train the sales agents about how to describe
the investments, and the marketing agents receive commissions of varying amounts.
29. At times, PDC Capital representatives meet directly with investors at
seminars in China.
30. Defendant Francisco approves all marketing and offering materials that
are provided to investors.
1. Offerings in Assisted Living Facilities and Clear Currents LP
31. During the relevant period, Defendants Francisco and PDC Capital
offered and sold securities in the ten limited partnerships that were to finance, build,
and operate assisted living facilities in California, Florida, and Arizona, specifically
Defendants (1) SAL Assisted Living, (2) SAL Carmichael, (3) SAL Citrus Heights,
(4) SAL Kern Canyon, (5) SAL Phoenix, (6) SAL Westgate, (7) Sarasota, (8)
Clearwater, (9) Correll Palms, and (10) TRC Tucson (the “Assisted Living LPs”).
32. In addition, Defendants Francisco and PDC Capital also offered
securities in Defendant Clear Currents LP, which was to renovate a production
facility for Clear Currents’ environmentally friendly agriculture and cleaning
products. In all material respects, the offering for the Clear Currents LP followed
the structure and operation of the offerings for the Assisted Living LPs, as alleged
below.
33. The Assisted Living LPs used similar mechanisms for the offer and sale
of securities. In exchange for a $500,000 capital contribution and a $45,000-$50,000
administration fee, or a total investment ranging from $545,000 to $550,000, an
investor receives an interest in one of the Assisted Living LPs. Investors are
required to deposit their entire investment consisting of both the capital contribution
and the administration fee into special escrow accounts managed by a law firm that
has an ongoing relationship with Defendant Francisco. The Assisted Living LPs
then lent the offering proceeds to a limited liability company created specifically for

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that EB-5 offering (the “Project LLC”).
34. The PPMs state that units in the limited partnerships being offered for
sale are “securities” and reference provisions of the federal securities laws. The
offerings solicit minimum investments of $500,000 as a capital contribution for one
limited partnership unit. The PPMs state that investors’ capital contributions are
pooled for the purposes of the particular project. The PPMs also provide that the
limited partnership would be run “exclusively” by the General Partners who have
“broad powers” over the day-to-day management of the partnerships’ affairs, and
that the investors (the limited partners) generally have no power to participate in the
management of the limited partnership. The PPMs also represent that success of the
limited partnership is substantially dependent on the performance of the General
Partners and management.
35. Defendant PDC Capital, through its sales agents, provides investors with
offering materials which include a private placement memorandum (“PPM”), an
investor questionnaire, a limited partnership agreement (“LP Agreement”), a spousal
consent form, a subscription agreement, an escrow agreement, a term sheet, and in
some cases, a sample promissory note (between the Assisted Living Offering LP and
the Project LLC).
36. Each of PDC Capital’s investors signed an escrow agreement, which
governs how the investor’s funds will be released. Typically, the escrow agreement
allows for the release of all investor funds to the limited partnership once an investor
was accepted and approved by the partnership. One exception is the SAL
Carmichael offering, which states that 80% of an investor’s subscription proceeds
would be released upon approval of the first investors I-526 petition, with the
remaining 20% released when the last investor’s I-526 petition was approved.
37. The Assisted Living LPs vary somewhat from offering to offering in
terms of the scope of the project. The PPMs state that the Project LLC will either
“develop, construct, lease and operate (and eventually sell),” or “build out and

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renovate,” a memory care or assisted living facility. The PPMs or accompanying
term sheets also describe the number of jobs that each project is expected to generate
based on the number of partnership units offered. For example the SAL Kern
Canyon offering was for 10 partnership units, and the term sheet represents that the
project will create 130 direct jobs.
38. The PPMs represent how the investors’ funds were to be used.
Typically, the offering documents state that the proceeds from the offering “except
for all administration fees, will be loaned to the Project LLC to fund the purchase of
the land as well as some of the components of the Development.” Each PPM also
states that the EB-5 investor funds would constitute a portion of the project’s
funding, with owner contributions and/or construction loans providing the rest of the
funding.
39. The Assisted Living LP PPMs also contain disclosures concerning
compensation to the General Partners. In general, any remuneration paid by the
limited partnership to the General Partners is to be paid out of administration fees,
loan interest proceeds, or through dividends paid from the project company to the
limited partnership as its parents, so as to comply with USCIS requirements.
40. The PPMs state that investors would receive an accrued distribution on
their investment with a rate of return of 1.5% to 2%, and after five years, repayment
of their $500,000 investment with any accrued interest.
41. Defendant Francisco and one of his associates provided the information
that was included in the PPMs and other offering documents for each of the Assisted
Living LPs, and Clear Currents LP. Defendant Francisco was responsible for
determining what information from the PPMs would be highlighted in PowerPoint
presentations to investors.
42. Defendant Francisco controlled the bank accounts of the Assisted Living
LPs and Clear Currents LP, directly or indirectly through PDC Capital.

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2. Caffe Primo Offerings
43. During the relevant period, Defendants Francisco and PDC Capital
offered and sold securities in eight limited partnerships that were to finance, build,
and operate Caffe Primo restaurants, specifically Defendants (1) Caffe Primo
Management, LP; (2) Caffe Primo Management 102, LP; (3) Caffe Primo
Management 103, LP; (4) Caffe Primo Management 104, LP; (5) Caffe Primo
Management 105, LP; (6) Caffe Primo Management 106, LP; (7) Caffe Primo
Management 107, LP; and (8) Caffe Primo Management 108, LP (the “Caffe Primo
LPs”).
44. As with the offerings of the Assisted Living LPs, the Caffe Primo LPs
offered securities in the form of limited partnership units in exchange for a $500,000
capital contribution and a $45,000-$50,000 administration fee, or a total investment
ranging from $545,000 to $550,000. The Caffe Primo LPs were then to lend funds
to an associated limited liability company (“Caffe Primo LLCs”) for that particular
offering and restaurant. For example, Caffe Primo Management 108, LP was to lend
money to Caffe Primo 108, LLC, for the construction and operation of the
restaurants associated with that offering.
45. Defendants PDC Capital and Francisco, directly or indirectly, provided
the following offering documents to investors in the offerings of the Caffe Primo
LPs: a private placement memorandum (“PPM”), an investor questionnaire, a
limited partnership agreement, a spousal consent form, a subscription agreement, an
escrow agreement, a joinder agreement, and a promissory note.
46. The PPMs for the Caffe Primo LPs offer investors the opportunity to
purchase limited partnership units in a particular Caffe Primo LP. The PPMs refer to
the limited partnership units as “securities” and refer to provisions of the federal
securities laws. Each unit requires the investment of at least $500,000 for a capital
contribution. The investors’ funds are pooled, and used to develop the particular
Caffe Primo in which they were investing. The PPMs state that the General Partners

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will conduct the day-to-day management of the limited partnership, as fiduciaries.
47. The offering materials state that investors would receive a preferred rate
of return of 1.5% per year, with any remaining distributions to the General Partner.
After 5 years, investors will receive distributions until their capital contribution is
returned. In addition, once the capital contribution is returned, investors may
continue to share in a percentage of any remaining distributions.
48. The PPMs for the Caffe Primo LPs typically state that the investors’
funds will be used to build and operate a Caffe Primo restaurant in California. The
offering documents state that the funds will be used to “build out and launch,” and
for “legal and fees,” “corporation operations and administrations,” and for “ongoing
support and professional services,” which includes, among other items, travel,
marketing, and supplies for the particular limited partnership. The PPMs also
disclose that investors’ proceeds can be used for finder’s fees and commissions, and
that PDC Capital will contribute $300,000 to the project.
49. Defendant Francisco is the signatory on the subscription agreements for
the Caffe Primo LPs, and the bank accounts for the Caffe Primo LPs are controlled
by PDC Capital.
3. Defendants’ Misrepresentation and Misuse of Investor Funds
50. Investors sent their capital contributions of $500,000 and administration
fees of $45,000-$50,000 to the lawyers’ escrow account. An investor’s entire capital
contribution of $500,000 was to be provided to the limited partnership making the
offering to be used to develop the specific EB-5 project described in the particular
offering’s PPM. The capital contribution could not be used to support PDC
Capital’s operations.
51. Only the administration fee could be used for other expenses, including
those of PDC Capital. Defendant Francisco admitted that PDC Capital was not
entitled to use any of the capital contributions to support PDC Capital’s operations
and was limited to using administration fees.

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52. Defendant Francisco has sole responsibility for how PDC Capital, the
Assisted Living LPs, the Project LLCs, Clear Currents LP, and the Caffe Primo LPs
spent money. Defendant Francisco was aware of all of the movement of money, no
disbursements or transfers took places without his knowledge, and he had approval
authority along with one other PDC Capital employee for all the accounts of PDC
Capital, the Assisted Living LPs, the Project LLCs, Clear Currents LP, and the Caffe
Primo LPs.
53. Once a project is built and operating, PDC Capital and the investors,
depending on the offering, may earn continuing income associated with the project
under the terms of the offering documents. To date, none of the facilities associated
with the Assisted Living LPs are completed and operating. As of November 2016,
construction may have started on one of the facilities. Some of the Caffe Primo
restaurants are in operation, however, Defendant CPI’s 2015 tax return showed it
had total income of $1,583 for that year.
54. Approximately 131 investors paid into escrow about $6.55 million in
administration fees for the Assisted Living LPs offerings, Clear Currents LP, and the
Caffe Primo LPs offerings.
55. Approximately $19.2 million of investors’ funds was sent directly to
PDC Capital’s accounts from the lawyers’ escrow accounts. Thus, at least $12.65
million of investors’ capital contributions were improperly diverted to PDC Capital.
56. Of that $12.65 million, Defendants PDC Capital and Francisco
misappropriated at least $9.5 million to finance Francisco’s luxury lifestyle,
including the purchase and maintenance of a yacht, and to support his businesses.
57. In addition, Defendants Francisco and PDC Capital diverted investors’
funds from one project to another on multiple occasions. Defendant Francisco
admitted that he was not permitted to move investors’ funds from one project to
another because doing so would run afoul of the USCIS requirements for the EB-5
program. The PPMs also represented that investors’ funds would be pooled and

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used for the particular project that was the subject of the offering. Nonetheless,
Francisco and PDC Capital frequently moved investors’ funds among various
projects.
58. For example, an investor in TRC Tucson wired a $500,000 capital
contribution to the lawyer’s escrow account on November 3, 2015. The funds were
transferred among two other accounts controlled by the lawyer, before the entire
capital contribution was disbursed on November 12, 2015 and November 13, 2015,
to seven other recipients including PDC Capital. None of the funds from the TRC
Tucson investor were disbursed to bank accounts of TRC Tucson.
59. In addition, for at least two Caffe Primo offerings, the total amount of
the investors’ capital contributions were not transferred to the associated limited
partnership bank account. Caffe Primo Management 107, LP raised a total of $1.65
million from three investors, but only $1 million was transferred from the lawyer’s
escrow accounts to the Caffe Primo 107 bank account. Caffe Primo Management
108, LP raised a total of $1.65 million from three investors, but only $500,000 was
transferred from the lawyer’s escrow accounts to the Caffe Primo 108 bank account.
At least $1.5 million of the investors’ funds were diverted from the Caffe Primo
offerings.
60. By misappropriating a substantial portion of the investors’ capital
contributions, Defendants materially misled investors that the entire capital
contribution would be used to fund the specific projects, provide the promised
returns, and create the requisite ten jobs.
61. By diverting funds to different offerings or projects, Defendants
materially misled investors that their entire capital contributions would be used to
fund the specific projects, provide the promised returns, and create the requisite jobs.
4. Defendants’ Ongoing Conduct and Explanation
62. Defendant Francisco admitted that as of May 16, 2016, no construction
had started on any of the projects associated with the Assisted Living LPs.

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63. In May 2016, Defendant Francisco explained that any loans between
Project LLCs consisted of his own funds, and that he had up to $1 million of his
personal funds invested with PDC Capital. Francisco claimed that any funds that
moved between projects were his own money, and not the investors’ capital
contributions. In fact, bank records show that Francisco had contributed at most
about $115,000 to PDC Capital.
64. In May 2016, after Defendant Francisco provided testimony to the SEC,
PDC Capital closed all of its existing bank accounts, and opened new bank accounts
at a different bank.
65. As of at least September 2016, Defendants continued to raise money
from investors.
66. Defendants’ offerings and sales of limited partnership interests were
made using means and instrumentalities of interstate commerce. Investor funds were
wired to the escrow accounts, and wired from the escrow accounts to PDC Capital’s
accounts, as well as accounts of the projects. In addition, projects were located in
Arizona and Florida, and several of the Defendants are Delaware limited
partnerships. Defendants also used means and instrumentalities of interstate
commerce to transmit offering documents and other materials to sales agents and
prospective investors in China, and used instrumentalities such as email to
communicate with investors.
67. At all relevant times, Defendant Francisco acted with scienter.
Francisco’s state of mind is imputed to the companies he controls, including
Defendants PDC Capital, CPI, the Assisted Living LPs, Clear Currents LP, and the
Caffe Primo LPs.
68. Alternatively, at all relevant times, Defendant Francisco was negligent.
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FIRST CLAIM FOR RELIEF
Fraud in the Offer or Sale of Securities
Violations of Section 17(a) of the Securities Act
(against all Defendants)
69. The SEC realleges and incorporates by reference paragraphs 1 through
68 above.
70. As alleged above, Defendants engaged in a scheme to defraud investors
by making false statements concerning the limitation on use of proceeds, as well as
the manner in which proceeds would be used, including engaging in transactions
designed to obscure the diversion of funds, to enrich themselves at the expense of
investors.
71. As alleged above, Defendants obtained money by means of untrue
statements of material fact concerning the use of proceeds of the Assisted Living LPs,
Clear Currents LP and Caffe Primo LPs offering.
72. As alleged above, Defendants engaged in transactions and a course of
business obtained money from investors by means of false statements in the PPMs
about the use of investor proceeds and limitations on the use of investors’ capital
contributions.
73. At all relevant times, Defendant Francisco acted with scienter to enrich
himself at the expense of the defrauded investors. In the alternative, Defendant
Francisco was negligent. Defendant Francisco’s state of mind is imputed to the
entities he controlled, including PDC Capital, CPI, and the Assisted Living LPs,
Clear Currents LP and Caffe Primo LPs.
74. By engaging in the conduct described above, Defendants Francisco and
PDC Capital, with regard to the Assisted Living LPs and Clear Currents LP, directly
or indirectly, in the offer or sale of securities, and by the use of means or instruments
of transportation or communication in interstate commerce or by use of the mails
directly or indirectly: (a) employed devices, schemes, or artifices to defraud; (b)

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obtained money or property by means of untrue statements of a material fact or by
omitting to state a material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading; and (c)
engaged in transactions, practices, or courses of business which operated or would
operate as a fraud or deceit upon the purchaser.
75. By engaging in the conduct described above, Defendants Francisco and
PDC Capital, and CPI, with regard to the Caffe Primo LPs, directly or indirectly, in
the offer or sale of securities, and by the use of means or instruments of transportation
or communication in interstate commerce or by use of the mails directly or indirectly:
(a) employed devices, schemes, or artifices to defraud; (b) obtained money or
property by means of untrue statements of a material fact or by omitting to state a
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading; and (c) engaged in
transactions, practices, or courses of business which operated or would operate as a
fraud or deceit upon the purchaser.
76. Each of the Defendants knew, or was reckless in not knowing, that he or
it employed devices, schemes and artifices to defraud. Each of the Defendants knew,
or was reckless or negligent in not knowing, that he or it obtained money or property
by means of untrue statements of a material fact or by omitting to state a material fact
necessary in order to make the statements made, in light of the circumstances under
which they were made, not misleading; and engaged in transactions, practices, or
courses of business which operated or would operate as a fraud or deceit upon the
purchaser.
77. By engaging in the conduct described above, each of the Defendants
violated, and unless restrained and enjoined will continue to violate, Sections
17(a)(1), 17(a)(2), and 17(a)(3) of the Securities Act, 15 U.S.C. §§ 77q(a)(1),
77q(a)(2), & 77q(a)(3).
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SECOND CLAIM FOR RELIEF
Fraud in Connection with the Purchase or Sale of Securities
Violations of Section 10(b) of the Exchange Act
and Rules 10b-5(a) and 10b-5(c) Thereunder
(against all Defendants as primary violators, and,
alternatively, against Francisco as a control person
under Section 20(a) of the Exchange Act)
78. The SEC realleges and incorporates by reference paragraphs 1 through
68 above.
79. As alleged above, Defendants engaged in a scheme to defraud investors
by making false statements concerning the limitation on use of proceeds, as well as
the manner in which proceeds would be used, including engaging in transactions
designed to obscure the diversion of funds, to enrich themselves at the expense of
investors.
80. As alleged above, Defendants engaged in transactions and a course of
business obtained money from investors by means of false statements in the PPMs
about the use of investor proceeds and limitations on the use of investors’ capital
contributions.
81. At all relevant times, Defendant Francisco acted with scienter to enrich
himself at the expense of the defrauded investors. Defendant Francisco’s state of
mind is imputed to the entities he controlled, including PDC Capital, CPI, and the
Assisted Living LPs, Clear Currents LP and Caffe Primo LPs.
82. By engaging in the conduct described above, Defendants Francisco and
PDC Capital, with regard to the Assisted Living LPs and Clear Currents LP, directly
or indirectly, in the offer or sale of securities, and by the use of means or instruments
of transportation or communication in interstate commerce or by use of the mails
directly or indirectly: (a) employed devices, schemes, or artifices to defraud; and (b)
engaged in transactions, practices, or courses of business which operated or would

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operate as a fraud or deceit upon the purchaser.
83. By engaging in the conduct described above, Defendants Francisco and
PDC Capital, and CPI, with regard to the Caffe Primo LPs, directly or indirectly, in
the offer or sale of securities, and by the use of means or instruments of transportation
or communication in interstate commerce or by use of the mails directly or indirectly:
(a) employed devices, schemes, or artifices to defraud; and (b) engaged in
transactions, practices, or courses of business which operated or would operate as a
fraud or deceit upon the purchaser.
84. Each of the defendants knew, or was reckless in not knowing, that he or
it employed devices, schemes and artifices to defraud; and engaged in acts, practices
or courses of conduct that operated as a fraud on the investing public by the conduct
described in detail above.
85. By engaging in the conduct described above, each of the defendants
violated, and unless restrained and enjoined will continue to violate, Section 10(b) of
the Exchange Act, 15 U.S.C. § 78j(b), and Rules 10b-5 thereunder, 17 C.F.R. §§
240.10b-5(a) & 240.10b-5(c).
86. Defendant Francisco was a control person of Defendants PDC Capital
and CPI because he possessed, directly or indirectly, the power to direct or cause the
direction of the management and policies of each of these entities. Accordingly,
pursuant to Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), defendant
Francisco is liable to same extent as each of these Defendants for those Defendants’
violations of Section 10(b) and Rules 10b-5(a) and (c) thereunder.
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THIRD CLAIM FOR RELIEF
Fraud in Connection with the Purchase or Sale of Securities
Violations of Section 10(b) of the Exchange Act
and Rule 10b-5(b) Thereunder
(against Defendants Francisco, PDC Capital, the Assisted Living LPs (SAL
Assisted Living, SAL Carmichael, SAL Citrus Heights, SAL Kern Canyon, SAL
Phoenix, SAL Westgate, Sarasota, Clearwater, Correll Palms, TRC Tucson).
Clear Currents LP, and the Caffe Primo LPs (Caffe Primo Management, and
Caffe Primo Management 102-108) as primary violators, and, alternatively,
against Francisco as a control person under Section 20(a) of the Exchange Act)
87. The SEC realleges and incorporates by reference paragraphs 1 through
68 above.
88. As alleged above, Defendants obtained money by means of untrue
statements of material fact concerning the use of proceeds of the Assisted Living LPs
and Caffe Primo LPs offering.
89. At all relevant times, Defendant Francisco acted with scienter to enrich
himself at the expense of the defrauded investors. Defendant Francisco’s state of
mind is imputed to the entities he controlled, including PDC Capital, and the Assisted
Living LPs, Clear Currents LP, and Caffe Primo LPs.
90. Defendants Francisco, PDC Capital, SAL Assisted Living, SAL
Carmichael, SAL Citrus Heights, SAL Kern Canyon, SAL Phoenix, SAL Westgate,
Sarasota, Clearwater, Correll Palms, TRC Tucson, Clear Currents LP, Caffe Primo
Management, Caffe Primo Management 102, Caffe Primo Management 103, Caffe
Primo Management 104, Caffe Primo Management 105, Caffe Primo Management
106, Caffe Primo Management 107, and Caffe Primo Management 108, and each of
them, directly or indirectly, in connection with the purchase or sale of a security, by
the use of means or instrumentalities of interstate commerce, of the mails, or of the
facilities of a national securities exchange, made untrue statements of a material fact

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or omitted to state a material fact necessary in order to make the statements made, in
the light of the circumstances under which they were made, not misleading.
91. Defendants Francisco, PDC Capital, SAL Assisted Living, SAL
Carmichael, SAL Citrus Heights, SAL Kern Canyon, SAL Phoenix, SAL Westgate,
Sarasota, Clearwater, Correll Palms, TRC Tucson, Clear Currents LP, Caffe Primo
Management, Caffe Primo Management 102, Caffe Primo Management 103, Caffe
Primo Management 104, Caffe Primo Management 105, Caffe Primo Management
106, Caffe Primo Management 107, and Caffe Primo Management 108, and each of
them, knew, or was reckless in not knowing, that he or it made untrue statements of a
material fact or omitted to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made, not
misleading.
92. By engaging in the conduct described above, defendants Francisco, PDC
Capital, SAL Assisted Living, SAL Carmichael, SAL Citrus Heights, SAL Kern
Canyon, SAL Phoenix, SAL Westgate, Sarasota, Clearwater, Correll Palms, TRC
Tucson, Clear Currents LP, Caffe Primo Management, Caffe Primo Management
102, Caffe Primo Management 103, Caffe Primo Management 104, Caffe Primo
Management 105, Caffe Primo Management 106, Caffe Primo Management 107, and
Caffe Primo Management 108 violated, and unless restrained and enjoined will
continue to violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rules
10b-5(b) thereunder, 17 C.F.R. § 240.10b-5(b).
93. Defendant Francisco was a control person of defendants, PDC Capital,
SAL Assisted Living, SAL Carmichael, SAL Citrus Heights, SAL Kern Canyon,
SAL Phoenix, SAL Westgate, Sarasota, Clearwater, Correll Palms, TRC Tucson,
Clear Currents LP, Caffe Primo Management, Caffe Primo Management 102, Caffe
Primo Management 103, Caffe Primo Management 104, Caffe Primo Management
105, Caffe Primo Management 106, Caffe Primo Management 107, and Caffe Primo
Management 108 because he possessed, directly or indirectly, the power to direct or

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cause the direction of the management and policies of each of these entities.
Accordingly, pursuant to Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a),
defendant Francisco is liable to same extent as each of the entity Defendants for those
Defendants’ violations of Section 10(b) and Rule 10b-5(b) thereunder.
FOURTH CLAIM FOR RELIEF
Aiding and Abetting Violations of Section 10(b) of the
Exchange Act and Rule 10b-5(b)
(Defendants Francisco and PDC Capital)
94. The SEC realleges and incorporates by reference paragraphs 1 through
68 above.
95. Defendants Francisco and PDC Capital provided substantial assistance
to the Assisted Living LPs, the Caffe Primo LPs, and Clear Current in their violations
of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder in connection
with the securities offerings of the Assisted Living LPs, the Caffe Primo LPs, and
Clear Currents LP.
96. Be engaging in the conduct described above, Defendants Francisco and
PDC Capital aided and abetted, and unless enjoined will continue to aid and abet
violations of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5
thereunder, 17 C.F.R. § 240.10b-5(b), pursuant to Section 20(e) of the Exchange Act,
15 U.S.C. § 78t(e).
PRAYER FOR RELIEF
WHEREFORE, the SEC respectfully requests that the Court:
I.
Issue findings of fact and conclusions of law that Defendants committed the
alleged violations.
II.
Issue orders, in forms consistent with Rule 65(d) of the Federal Rules of Civil
Procedure, temporarily, preliminarily and permanently enjoining Defendants

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Francisco, PDC Capital, CPI, SAL Assisted Living, SAL Carmichael, SAL Citrus
Heights, SAL Kern Canyon, SAL Phoenix, SAL Westgate, Sarasota, Clearwater,
Correll Palms, TRC Tucson, Clear Currents, Caffe Primo Management, Caffe Primo
Management 102, Caffe Primo Management 103, Caffe Primo Management 104,
Caffe Primo Management 105, Caffe Primo Management 106, Caffe Primo
Management 107, and Caffe Primo Management 108, and their officers, agents,
servants, employees, and attorneys, and those persons in active concert or
participation with any of them, who receive actual notice of the orders by personal
service or otherwise, and each of them, from violating Section 17(a) of the Securities
Act, 15 U.S.C. §77q(a), and Section 10(b) of the Exchange Act, 15 U.S.C. §§ 78j(b),
and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
III.
Issue orders, in forms consistent with Rule 65(d) of the Federal Rules of Civil
Procedure, temporarily, preliminarily and permanently enjoining Defendants
Francisco, PDC Capital, CPI, SAL Carmichael, SAL Citrus Heights, SAL Kern
Canyon, SAL Assisted Living, SAL Westgate, SAL Phoenix, TRC Tucson, Sarasota,
Clearwater, Correll Palms, Clear Currents LP, Caffe Primo Management, LP, Caffe
Primo Management 102, LP, Caffe Primo Management 103, LP, Caffe Primo
Management 104, LP, Caffe Primo Management 105, LP, Caffe Primo Management
106, LP, Caffe Primo Management 107, LP, Caffe Primo Management 108, LP, and
their officers, agents, servants, employees, attorneys, subsidiaries and affiliates, and
those persons in active concert or participation with any of them, from, directly or
indirectly, participating in the offer or sale of any security which constitutes an
investment in a “commercial enterprise” under the United States Government EB-5
visa program administered by the United States Citizenship and Immigration Service
(“USCIS”).
IV.
Issue in a form consistent with Fed. R. Civ. P. 65, a temporary restraining order

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and a preliminary injunction freezing the funds and assets of Defendants; ordering
repatriation of any funds or assets transferred overseas; prohibiting each of the
Defendants from destroying documents; permitting expedited discovery, ordering
accountings by each of the Defendants, and appointing a receiver over the Defendant
entities.
V.
Order Defendants to disgorge all funds received from their illegal conduct,
together with prejudgment interest thereon, and to repatriate any funds or assets they
caused to be sent overseas.
VI.
Order Defendants to pay civil penalties under Section 20(d) of the Securities
Act, 15 U.S.C. § 77t(d), and Section 21(d)(3) of the Exchange Act, 15 U.S.C. §
78u(d)(3).
VII.
Retain jurisdiction of this action in accordance with the principles of equity and
the Federal Rules of Civil Procedure in order to implement and carry out the terms of
all orders and decrees that may be entered, or to entertain any suitable application or
motion for additional relief within the jurisdiction of this Court.
VIII.
Grant such other and further relief as this Court may determine to be just and
necessary.

Dated: December 27, 2016

/s/ John B. Bulgozdy
John B. Bulgozdy
Adrienne D. Gurley
Attorneys for Plaintiff
Securities and Exchange Commission

OCR text (52,878c · tika · 95% conf)

JOHN B. BULGOZDY (Cal. Bar No. 219897)
Email: [email protected]
ADRIENNE D. GURLEY
Email: [email protected]

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

SECURITIES AND EXCHANGE
COMMISSION,

Plaintiff,

vs.

EMILIO FRANCISCO; PDC CAPITAL
GROUP, LLC; CAFFE PRIMO
INTERNATIONAL, INC.; SAL ASSISTED
LIVING, LP; , SAL CARMICHAEL, LP; SAL
CITRUS HEIGHTS, LP; SAL KERN
CANYON, LP; SAL PHOENIX, LP; SAL
WESTGATE, LP; SUMMERPLACE AT
SARASOTA, LP; SUMMERPLACE AT
CLEARWATER, LP; SUMMERPLACE AT
CORRELL PALMS, LP;TRC TUCSON, LP;
CLEAR CURRENTS WEST, LP; CAFFE
PRIMO MANAGEMENT, LP;
CAFFE PRIMO MANAGEMENT 102, LP;
CAFFE PRIMO MANAGEMENT 103, LP;
CAFFE PRIMO MANAGEMENT 104, LP;
CAFFE PRIMO MANAGEMENT 105, LP;
CAFFE PRIMO MANAGEMENT 106, LP;
CAFFE PRIMO MANAGEMENT 107, LP; and
CAFFE PRIMO MANAGEMENT 108, LP,

Defendants.

Case No.

COMPLAINT

Case 8:16-cv-02257 Document 1 Filed 12/27/16 Page 1 of 25 Page ID #:1

Plaintiff Securities and Exchange Commission (“SEC”) alleges:

JURISDICTION AND VENUE

1. The Court has jurisdiction over this action pursuant to Sections 20(b),

20(d)(1) and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§

77t(b), 77t(d)(1) & 77v(a), and Sections 21(d)(1), 21(d)(3)(A), 21(e) and 27(a) of the

Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d)(1),

78u(d)(3)(A), 78u(e) & 78aa(a). Defendants have, directly or indirectly, made use of

the means or instrumentalities of interstate commerce, of the mails, or of the

facilities of a national securities exchange in connection with the transactions, acts,

practices and courses of business alleged in this Complaint.

2. Venue is proper in this district pursuant to Section 22(a) of the Securities

Act, 15 U.S.C. § 77v(a), and Section 27(a) of the Exchange Act, 15 U.S.C. §

78aa(a), because certain of the transactions, acts, practices and courses of conduct

constituting violations of the federal securities laws occurred within this district.

Defendant Emilio Francisco resides in this district and defendant PDC Capital

Group, LLC is headquartered in this district.

SUMMARY

3. Defendant Emilio Francisco and his company Defendant PDC Capital

Group, LLC, have engaged in an ongoing fraudulent scheme to defraud at least 131

investors in 19 different offerings out of at least $9.5 million, beginning in January

2013 and continuing at least through September 2016. Francisco and PDC Capital

made offerings in assisted living facilities, Caffe Primo restaurants, and a packaging

facility, primarily to investors in China, that purportedly qualify under the “EB-5

Immigrant Investor Program” administered by the U.S. Citizenship and Immigration

Service (“USCIS”). Defendants raised approximately $72.05 million from the 131

investors, consisting of approximately $65.5 million in capital contributions to

purchase units in limited partnerships, and $6.55 million in “administration fees” to

pay expenses of the limited partnerships until the projects were built. In several of

Case 8:16-cv-02257 Document 1 Filed 12/27/16 Page 2 of 25 Page ID #:2

the offerings, Defendants expressly represented that an investor’s entire $500,000

capital contribution would be used to develop a specific project, and that only

administration fees would be available to pay expenses of the limited partnership

until the project was completed.

4. Approximately $19.2 million of investors’ funds was sent directly to

PDC Capital’s accounts, which exceeded by about $12.65 million the total

administration fees paid by investors. Of that $12.65 million of diverted investor

funds, Defendants PDC Capital and Francisco misappropriated at least $9.5 million

of investors’ capital contributions to support his luxury lifestyle including the

purchase and maintenance of a yacht, and to support his businesses. Francisco and

PDC Capital misrepresented to investors that their capital contributions would be

used for the designated purposes stated in the offering materials. In addition,

Francisco and PDC Capital commingled funds among different projects, contrary to

representations in the offering materials that investors’ funds would be used for the

specific project in which they were investing. Further, at least $1.5 million of

investors’ funds deposited into escrow for two offerings were not disbursed to the

bank accounts of the limited partnerships that were to receive the funds.

5. Defendants Francisco, PDC Capital Group, and Caffe Primo

International, Inc. – another company Francisco controlled as CEO and part-owner –

committed their fraud through the offerings for the Defendant limited partnerships.

At all relevant times, Defendant Francisco controlled the bank accounts, directly or

indirectly, for all of the Defendants; controlled and approved the terms of the various

offerings; and benefitted personally from the misuse and misappropriation of funds.

Defendants’ conduct appears to be ongoing and they raised funds from investors as

recently as September 2016.

6. By engaging in this conduct, the Defendants have violated, and continue

to violate, the antifraud provisions of Section 17(a) of the Securities Act, 15 U.S.C. §

77q(a), and Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rules 10b-5

Case 8:16-cv-02257 Document 1 Filed 12/27/16 Page 3 of 25 Page ID #:3

thereunder, 17 C.F.R. 240.10b-5. Alternatively, Francisco and PDC Capital Group

aided and abetted the violations by the limited partnership Defendants. Finally,

Francisco is liable as a control person for the violations of each of the corporate

Defendants under Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a).

THE DEFENDANTS

7. Emilio Francisco (“Francisco”) resides in Newport Beach, California.

He graduated from the University of California at Irvine, was awarded a J.D. by

Western State University in 1976, and is an active member of the California Bar.

Francisco is the CEO and Chairman of defendants PDC Capital Group, LLC (“PDC

Capital”) and Caffe Primo International, Inc. (“CPI”). Francisco also controls and/or

serves as the CEO of other entities involved the fraudulent scheme, such as PDC

Partners Management, Inc. (“PMI”) which managed assisted living projects; FDC

Partners Management, Inc. (“FDC”) which also managed assisted living projects;

and Summerplace Management, LLC (“SML”), which is the general partner of

several of the assisted living projects. Francisco was admitted to the California Bar

in 1976, was placed on suspension in 1992, and in 2012 his license was suspended

for nine months for a variety of types of misconduct. Francisco also currently works

as a marketing consultant for The Law Offices of Marilyn Thomassen & Associates

(“MTA”), a California law firm owned by Marilyn Thomassen. MTA and/or

Marilyn Thomassen serve as the escrow agent for PDC Capital’s EB-5 offerings, and

serves as immigration counsel for a number of investors in PDC Capital’s EB-5

offerings.

8. PDC Capital Group, LLC (“PDC Capital”) is a Delaware limited

liability company, headquartered in Costa Mesa, California. PDC Capital was

formed by Emilio Francisco in 2012 and is controlled by him as CEO. PDC Capital

was formed as a vehicle for managing EB-5 program investments.

9. Caffe Primo International, Inc. (“CPI”) is a Delaware corporation,

which is owned by PDC Capital and Global Restaurant Partners, Inc. Francisco is

Case 8:16-cv-02257 Document 1 Filed 12/27/16 Page 4 of 25 Page ID #:4

the CEO of CPI. CPI is a general partner of the defendant Caffe Primo Management

limited partnerships.

10. SAL Assisted Living, LP (“SAL Assisted Living”) is a Nevada limited

partnership headquartered in Costa Mesa, California, which was formed to invest in

the construction and operation of an assisted living facility in Lincoln, California,

and invests through the entity Summerplace at Lincoln, LLC. SML is the general

partner of SAL Assisted Living.

11. SAL Carmichael, LP (“SAL Carmichael”) is a Delaware limited

partnership headquartered in Costa Mesa, California, which was formed to invest in

the construction and operation of an assisted living facility in Carmichael, California,

through the entity SAL Carmichael LLC. SML is the general partner of SAL

Carmichael.

12. SAL Citrus Heights, LP (“SAL Citrus Heights”) is a Delaware

limited partnership headquartered in Costa Mesa, California, which was formed to

invest in the construction and operation of an assisted living facility in Citrus

Heights, California, through the entity SAL Citrus Heights, LLC. SML is the

general partner of SAL Citrus Heights.

13. SAL Kern Canyon, LP (“SAL Kern Canyon”) is a California limited

partnership headquartered in Costa Mesa, California, which was formed to invest in

the construction and operation of an assisted living facility in Stockton, California,

through the entity SAL Kern Canyon, LLC. SML is the general partner of SAL

Kern Canyon.

14. SAL Phoenix, LP (“SAL Phoenix”) is a Delaware limited partnership

headquartered in Salem, Oregon, which was formed to invest in the construction and

operation of an assisted living facility in Glendale, Arizona. Sante GP Zanjero LLC

and SML are the general partners of SAL Phoenix.

15. SAL Westgate, LP (“SAL Westgate”) is a Delaware limited

partnership headquartered in Costa Mesa, California, which was formed to invest in

Case 8:16-cv-02257 Document 1 Filed 12/27/16 Page 5 of 25 Page ID #:5

the construction and operation of an assisted living facility in West Sacramento,

California, through the entity SAL Westgate, LLC. SML is the general partner of

SAL Westgate.

16. Summerplace at Sarasota, LP (“Sarasota”) is a Delaware limited

partnership formed to invest in the construction and operation of an assisted living

facility in Sarasota, Florida, through the entity Summerplace at Sarasota, LLC. FDC

is the general partner of Sarasota, and Francisco controlled its bank accounts at least

through the end of 2015.

17. Summerplace at Clearwater, LP (“Clearwater”) is a Delaware

limited partnership formed to invest in the construction and operation of an assisted

living facility in Clearwater, Florida, through the entity Summerplace at Clearwater,

LLC. FDC is the general partner of Clearwater.

18. Summerplace at Correll Palms, LP (“Correll Palms”) is a Delaware

limited partnership formed to invest in the construction and operation of an assisted

living facility in Titusville, Florida, through the entity Summerplace at Correll

Palms, LLC. FDC is the general partner of Correll Palms.

19. TRC Tucson, LP (“TRC Tucson”) is a Delaware limited partnership

formed to invest in the construction and operation of an assisted living facility in

Tucson, Arizona, which is owned by SET Real CO, LLC. SML and Sante GP

Tucson are the general partners of TRC Tucson.

20. Clear Currents West, LP (“Clear Currents LP”) is a Delaware

limited partnership headquartered in Costa Mesa, California. It was formed for the

purpose of investing in Clear Currents West, LLC, which will renovate a production

facility for Clear Currents environmentally friendly agriculture and cleaning

products. The general partner is Clear Currents West Management, LLC.

21. Defendants engaged in eight offerings under the EB-5 program for the

construction and operation of individual “Caffe Primo” restaurants. Each offering

had the same structure: the limited partnership (“LP”) is the issuer of securities, CPI

Case 8:16-cv-02257 Document 1 Filed 12/27/16 Page 6 of 25 Page ID #:6

is the general partner, Francisco is an original limited partner, and Primo Hospitality

Group Management, Inc. is a non-voting general partner. Each LP invested in a

corresponding limited liability company (“LLC”) which built and operated the Caffe

Primo restaurants.

a. Caffe Primo Management, LP (“Caffe Primo Management”)

is a California limited partnership formed for the purpose of

investing in Caffe Primo Management 101, LLC.

b. Caffe Primo Management 102, LP is a Delaware limited