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SoCal city’s hunt for Chinese investment leads to lawsuit

SoCal cityÆs hunt for Chinese investment leads to lawsuit

A plan seeking foreign investment to speed up redevelopment of a former military base into a major Southern California logistics center has ended up in the middle of a $33 million lawsuit filed against the city of Victorville last week.

   CMB Investments, which had partnered with the city earlier this year in seeking the investments, alleged in the Los Angeles County Court filing that the city used an 'ongoing and continuing fraudulent scheme' to obtain internal business information from CMB and used it 'to improperly and unfairly compete against CMB.'

   The firm is asking the court to block the city from using contacts and business plans allegedly gained from the earlier partnership with CMB.

   The city, while not yet filing an official response with the court, has denied all the allegations.

   Earlier this year, the city and CMB teamed up to seek Chinese and South Korean investment for four keystone projects at the Southern California Logistics Airport, a former airbase in Victorville that has been envisioned as a major regional logistics center. The partnership sought to secure $500,000 in investment from each of up to 200 foreign investors to pay for projects at SCLA including construction of a BNSF rail spur, street and utility upgrades, a wastewater treatment facility, and a power plant to provide power to the complex.

   At the time, noted Inland Empire economist John Husing wrote in an impact study on the Chinese investments: 'The city needs this funding to jump-start projects that will later provide the cash flow to repay the loan.” Without the investments, Husing said, several of the infrastructure programs may be delayed, possibly resulting in the loss of potential tenants.

   The CMB and city partnership used a carrot-and-stick approach to lure potential foreign investors, with the United States federal EB-5 program playing the main role. Under the federal plan, foreigners investing in American business can receive priority green cards allowing them to migrate to America.

   The CMB lawsuit follows the city's decision, after a 10-day investor-recruitment trip to Asia, to forego an exclusive contract with CMB. City officials instead approached the federal government for approval to seek out foreign investment on its own.

   CMB alleges in the lawsuit that the city violated terms of a previously signed memorandum of understanding with CMB that forbid city officials from using any information gained from CMB for a period of two years, or from hiring CMB consultants to essentially do the same work.

   Victorville's mayor at the time of the CMB partnership, Terry Caldwell, told the Victorville Daily Press that he had read the CMB filing and 'in my opinion the claim is a bunch of nonsense.'

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