Home Courts Hastings ‘investment-for-visa’ firm cleared of fraud

Hastings ‘investment-for-visa’ firm cleared of fraud

Fraud allegations against Hastings-on-Hudson E3 Investment Group and its owner, Matthew B. Gordon, have been dismissed by an arbitrator and federal judge.

Ateet Kosaraju, an Indian medical doctor, sued Gordon and his E3 three years ago, claiming that they had defrauded him of $550,000 in an investment-for-visa deal.

“The truth has come out and it was a complete vindication of my reputation, conduct and character,” Gordon said in an email message. “After years of litigation involving many thousands of pages of evidence, despite all of the salacious accusations leveled at me and my company, the truth was we did nothing wrong.”

Gordon’s firm puts together deals under the EB-5 visa program that enable immigrant entrepreneurs to qualify for permanent residency if they invest at least $500,000 and create 10 full-time jobs in the U.S.

visa hastingsKosaraju paid $500,000 plus $50,000 in fees to invest in an Indiana trucking company, under a limited partnership set up by Gordon’s Manhattan firm.

Kosaraju alleged that Gordon diverted the entire investment for his personal benefit.

He claimed he was granted ownership, given the right to manage a business with 10 trucks and 10 drivers, and promised $2,500 a month on his investment.

But he was not permitted to participate in management, he alleged in the lawsuit. The monthly payments stopped after a few months, Gordon had not actually bought trucks and he had commingled funds.

Kosaraju withdrew his visa petition and demanded that Gordon return his investment. Gordon refused to do so and converted the investment to debt, because Kosaraju had withdrawn his residency petition.

Gordon said he had followed the partnership agreement “to the T.” He accused Kosaraju of disclosing confidential information in the lawsuit, damaging his reputation and causing him to lose potential investors.

U.S. District Judge Nelson S. Roman in White Plains agreed with Gordon in a 2018 opinion that the dispute should be arbitrated.

Richard L. Mattiaccio, a Manhattan lawyer, heard the case for the International Centre for Dispute Resolution.

He ruled on Aug. 9 that Kosaraju had failed to establish fraud.

The business plan contained several warnings of risk factors, Mattiaccio found, and it gave Gordon broad discretion and flexibility to run the limited partnership. Kosaraju’s testimony, he stated in his ruling, acknowledged that the doctor understood that he was not guaranteed a return on his investment.

“The agreement may have been drafted aggressively, perhaps right up to the limit of what is permissible,” Mattiaccio said, “but not beyond those limits.”

He ruled that Gordon could not be judged according to a fiduciary duty standard or even by industry best practices, “but according to whether (he) dealt fairly and in good faith.”

He found Gordon’s testimony, that the enterprise failed because of a general decline in the trucking industry, credible.

“Whether or not Gordon and his team were the most astute managers or were as effective as they might have been in … reacting to changing market conditions,” the arbitrator said, they “did act in good faith, to the best of their abilities.”

Mattiaccio was unconvinced that Gordon had commingled funds, wrongfully converted Kosaraju’s equity into debt, acted improperly by leasing rather than buying trucks, charged excessive management fees, unfairly withheld monthly partnership payments or unjustly enriched himself.

“The credible evidence was that all … entities ended in failure and everyone involved lost money,” Mattiaccio stated. “Gordon testified that he personally lost about $400,000.”

But the arbitrator also was unconvinced that Kosaraju had caused Gordon to lose potential investors or had harmed his business reputation.

Mattiaccio denied all claims and counterclaims in their entirety and ordered both sides to bear their own costs and split the $97,278 in arbitration fees and expenses.

Gordon asked Roman to approve the arbitrator’s award. On Sept. 23, after Kosaraju had asked for more time to oppose the motion but failed to do so, Roman confirmed the award.

Gordon and is firm were represented by attorney Richard J. Lomuscio. Kosaraju was represented by John P. Gleason and Khaldoon Qubain.

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