Senator Charles Grassley of Iowa has raised security concerns (concerns affirmed by the Department of Homeland Security) about the EB-5 visa investment program and the mostly private “regional centers” that sell EB-5 visas. Now he and Vermont Senator Patrick Leahy have proposed the “American Job Creation and Investment Reform Act to reform the controversial green-cards-for-sale program:
The American Job Creation and Investment Promotion Reform Act will strengthen oversight of the EB-5 Regional Center Program.
- Provide increased authority to DHS to deny or terminate applications where there is fraud, criminal misuse, or a threat to public safety or national security;
- Establish an “EB-5 Integrity Fund” in which regional centers would pay an annual fee to be used by DHS to conduct audits and site visits to detect and investigate fraud in the United States and abroad;
- Require background checks of regional center and project developer principals;
- Require DHS to vet EB-5 projects earlier in the process, before investors submit applications and hand over money to developers;
- Require increased disclosures to investors regarding business risks and conflicts of interest;
- Require more oversight of projects and closer monitoring for securities compliance;
- Strengthen the definition of “Targeted Employment Area” (TEA) so more investment goes to areas with high unemployment and rural areas, as Congress originally intended;
- Raise the investment threshold to $800,000 for TEAs and $1.2 million for non-TEAs;
- Decrease petition processing times, which have been plagued by extraordinary delays in recent years, by providing for expedited business plan approval and requiring fees be adjusted to the rate necessary to achieve efficient processing [Senator Patrick Leahy, press release, 2015.06.04].
That point about strengthening the definition of “Targeted Employment Areas” responds to the fact that Regional Centers frequently draw their project area boundaries to include neighborhoods and/or large rural areas with high unemployment to qualify for the lower $500K EB-5 visa-purchase threshold, then plunk their projects into ritzier neighborhoods whose lower unemployment rates would have required immigrants to invest a full million to qualify for EB-5 visas. This gerrymandering is taking place in Grassley’s home state, where developers have included some poorer neighborhoods in a project area to justify recruiting $500K EB-5 investors for a $101-million convention center planned for economically healthy downtown Des Moines. CMB Regional Center boss Pat Hogan isn’t worried:
Grassley’s bill would eliminate that option and require Des Moines to find foreign investors willing to contribute $1 million. Most investors aren’t willing to do that, Hogan said.
“Under Senator Grassley’s bill, Des Moines’ hotel is dead,” he said. “But that’s OK, because it’s only a draft” [Joel Aschbrenner, “Invest in Des Moines Hotel, Get a Green Card,” Des Moines Register, 2015.06.12].
The EB-5 lobby (there are 676 EB-5 regional centers, and they love their big easy money) will work to ease the restrictions of the Grassley-Leahy bill. The Integrity Fund, audits, and background checks of regional center personnel run counter to the unchecked authority then-Governor, now-Senator Mike Rounds gave South Dakota’s EB-5 operators. Rounds, who has a keen interest in protecting the EB-5 program he boosted in South Dakota, has yet to sign on as a co-sponsor to S.1501.