Extell’s former EB-5 regional center director says Gary Barnett defrauded her

Lela Goren, who launched the firm's EB-5 regional center, is seeking $65M
By David Jeans and Rich Bockmann | June 03, 2019 06:15PM

Lela Goren and Gary Barnett and One Manhattan Square

Lela Goren and Gary Barnett and One Manhattan Square

Once again, claims of fraud have surfaced in the world of EB-5 lending.

This time, the development giant Extell Development and its founder Gary Barnett have been accused of fraud by its former regional center executive, who is seeking $65 million in damages.

The EB-5 visa program, which gained significant traction after the 2008 financial crisis when developers were in need of cheap financing, offers green cards to international investors willing to invest $500,000 or more into qualifying real estate projects. Some developers have launched “regional centers” to pool these investments and commit them to large projects. But in recent years, scores of lawsuits have accused notable regional centers and developers of defrauding overseas investors.

A summons filed Monday in New York State Supreme Court by developer Lela Goren claims that Barnett and the Extell New York Regional Center breached their fiduciary duty and engaged in fraud. Until recently, Goren worked as the regional center’s director, and had a 20 percent stake in the entity, the lawsuit claims. Barnett held a 65 percent stake in the entity, and investor Eli Cohen had a 15 percent stake, which he sold to an unknown buyer in 2017, according to court filings.

Extell’s regional center has raised almost $500 million since it launched in 2010, and has been used to provide financing to fund One Manhattan Square, the $1.9 billion condominium project in the Lower East Side. It also helped fund the rental tower 555 10th Avenue and 50 West 47th Street, known as the International Gem Tower, according to court documents. Goren’s summons lists entities tied to the latter two projects as defendants. She declined to comment for this article.

“We believe this claim is without merit,” a spokesperson for Extell’s regional center wrote in an emailed statement. “This is a classic case of a former consultant and minority owner in the Extell Regional Center using a legal tactic to extort Extell.”

While details on the fraud allegations in the summons are scarce, it follows a separate filing by Goren in Delaware Chancery Court, brought against Extell’s regional center in October. In that suit, which is ongoing, Goren claims that Barnett repeatedly blocked her requests to view the regional center’s financials, and that Barnett redirected some of its funds to other investments without interest. She also claimed that she received late payment of $1.6 million earned from her stake in the center.

Goren, who recently worked on public affairs as a vice chair at WeWork, previously worked with Extell for a decade as a consultant on various project.