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Draft EB-5 Reform Leaks from DC: New Oversight and Fees for Regional Centers to Check Corruption

A source tells me that Senate Judiciary Committee staff have shared a draft of proposed EB-5 reforms with IIUSA, an industry front group of lawyers and private immigration specialists who are lobbying furiously to make sure their EB-5 gravy train keeps rolling.

Why should industry insiders be the only ones to get a peek at such legislation? Here’s the link so everyone can enjoy reviewing this important draft legislation:

https://drive.google.com/file/d/0B3agsA-vm8SMVFZXWmszMnZqcjg/view?usp=sharing

For reference, you can see the current EB-5 statutes here, under 8 USC 1153.

Here are the highlights that I’ve identified so far in the draft reforms:

  1. The draft legislation would extend EB-5 through September 30, 2019, keeping EB-5 on a relatively short leash to prove that it can work under the proposed reforms.
  2. The bill increases the minimum number of EB-5 visas allocated to “Targeted Employment Areas” from 3,000 to 4,000.
  3. TEA visas would have to be split 50-50 between rural areas and high-unemployment/high-poverty areas.
  4. The bill raises the EB-5 investment threshold to $1,200,000 for normal projects and $800,000 in TEAs. Additionally, the bill extends the lower investment allowance to infrastructure and manufacturing projects. Currently EB-5 visa applicants must invest $1,000,000 normally, $500,000 in TEAs.
  5. The Secretary of Homeland Security may increase the minimum investment amounts.
  6. Every five years, the investment thresholds would increase automatically to align with the five-year cumulative change in the Consumer Price Index. If the Secretary has already made such increases over the preceding five years or has raised thresholds beyond CPI increases, no additional increase takes place. If the Secretary’s increases haven’t equaled the CPI increase or if no increases have taken place, the automatic adjustment takes the thresholds to that five-year cumulative CPI level.
  7. Each EB-5 investment would still have to create ten direct or indirect jobs to qualify its investor for residency. This bill would allow indirect jobs to make up no more than 90% of the job count (which still is a pretty generous allotment to fuzzy math).
  8. EB-5 Regional Centers would have to notify and receive approval from the Secretary to make any significant change in the structure, ownership, or administration of the Regional Center. The Secretary must publicly post those proposed changes for at least 30 days before approval. Had this rule been in effect in 2008 when South Dakota’s EB-5 czar created SDRC Inc. to privatize his state job, we would have heard about it first, and the Secretary of Homeland Security would have had to approve it.
  9. The bill makes clear that Regional Centers must comply with federal and state securities laws and adds documentation requirements to prove compliance.
  10. Regional Centers would have to document any “conflicts of interest that currently exist or may arise among the regional center, new commercial enterprise, job-creating entity, or the principals or attorneys of the aforementioned entities.” So things like Joop Bollen running South Dakota’s Regional Center and managing the Northern Beef Packers slaughterhouse into which he poured EB-5 investments, or Jeff Sveen lawyering for Bollen’s SDRC Inc. and serving on the board of the Dakota Provisions turkey plant that got EB-5 dollars would at least be reported to USCIS, if not red-flagged and stopped.
  11. USCIS would conduct site visits of Regional Centers and the projects for which they solicit EB-5 dollars.
  12. Regional Centers would have include in their annual reports descriptions of any pending or resolved litigation or bankruptcies, progress of projects, and use of investor funds and fees.
  13. If Regional Centers break the rules, USCIS would be able to fine them up to 10% of the total amount of EB-5 investment in their portfolios, permanently ban culpable individuals from Regional Center activity, and suspend or terminate the Regional Center.
  14. The bill would ban crooks, convicts, persons busted for securities or banking issues, drug dealers, spies, money launderers, terrorists, human traffickers, and disbarred or reprimanded lawyers from being involved in Regional Centers and EB-5 investment projects.
  15. Individuals involved in EB-5 Regional Centers and projects (and by involved, the bill means “principal, representative, administrator, owner, officer, board member, manager, executive, general partner, fiduciary, or in a similar position of substantive authority for the operations, management, or promotion of the regional center, new commercial enterprise, or job-creating entity”) would have to provide fingerprints or other biometrics and submit to FBI background checks.
  16. The bill would create an EB-5 Integrity Fund by charging Regional Centers a $25,000 annual fee ($10,000 for Regional Centers with twenty or fewer investors). At least one third of the EB-5 Integrity Fund would be spent on site visits and audits; at least one third would be spent on overseas investigations, including monitoring overseas investor recruitment meetings; and the rest would be used for other investigation and compliance activities.
  17. A Regional Center that is 90 days late in paying its Integrity Fund fee would be terminated.
  18. EB-5 recruiters would have register publicly with the USCIS.
  19. EB-5 investors would have to document the sources of their funds so we know that they got the money through legitimate business and investment activity, not through crime or sneaky government transfers (so we don’t have the Chinese government buying EB-5 visas for spies, as Rep. Stace Nelson warned!).
  20. If USCIS terminates a Regional Center, or if an EB-5 project goes belly up, investors would not lose conditional permanent status right away. They would get a 180-day grace period to make an additional investment in a different EB-5 project or for their going project to associate with a new Regional Center.
  21. Anyone associated with fraud, misrepresentation, criminal misuse, or creation of a threat to the national interest in an EB-5 Regional Center or project would be permanently barred from EB-5 activities.

My source says IIUSA plans to send their feedback to the Senate by the end of this week. Whether South Dakota’s slow-witted Congressional delegation can plow through the draft that quickly to form their own opinions is an open question. But take a read, South Dakota neighbors, and decide whether you think this draft would help stem the corruption that marked South Dakota’s abuse of EB-5.

8 Comments

  1. leslie 2015-11-11

    wow. dems are being handed a winning election issue. watch thune, noem, rounds (no-he’ll likely remain quiet) spin this.

    i note rachel talked about two administration sicides in Missouri. She needs to tell SD’s story, and she needs cory to feed it to her. imo https://www.youtube.com/watch?v=Krr57jUnADE

  2. jerry 2015-11-11

    I only see one way in which the EB-5 could come back to South Dakota and that would be in rural areas, like reservations. 50% there and 50% economically depressed urban areas that have large Native populations.

  3. Roger Cornelius 2015-11-11

    Joop Bollen and his attorney’s are likely pouring through these recommendations with their eye on ways to manipulate the system, in other words, how we can keep EB-5 and make a shady profit.

    There is a lot of reading here, but I’ll get it done.

  4. 96Tears 2015-11-11

    Fixing the federal oversight of EB-5 is good. It’s long overdue, which makes me wonder about the gullibility of those who wrote the last set of rules. No doubt, Rounds and Daugaard will express their relief that the feds finally came to their senses about providing the protections (needed to stop crooks like themselves and their political appointees). I hope people don’t mistake federal reforms to stop crooks like Rounds and his pals as some kind of solution to the corrupt jerks who bilked millions from EB-5. This could be a very helpful program for resource poor states like South Dakota. I hope someday people will realize that cheap crooks like Rounds damn near killed a golden goose that has the potential to help so many communities.

  5. caheidelberger Post author | 2015-11-12

    Jerry, I’m all for a greater focus of EB-5 dollars on areas that really need help drawing investment.

    Roger, I wouldn’t be surprised if Joop and company have happily moved on to their next money-making schemes. They milked EB-5 when it was easily milkable, but now their names will raise red flags in that field. They’ll watch this bill closely to make sure it doesn’t impose any new demands or restrictions on their remaining EB-5 entanglements, but they won’t worry about trying to make this program their gravy train again.

    96, I offer a similar speculation about the state. They got lucky by jumping on EB-5 before it became really popular. They had their ride. They’ll gamely fight the USCIS termination notice, but they’ll be very cautious about throwing in with this program and the operators they’d have to hire for it again.

  6. Sid 2015-11-12

    Interesting link and article. However, S. 1501 was introduced in June of this year by Sens. Leahy and Grassley and says much the same. IIUSA wrote about it on June 12, 2015. Here is Congressional webpage link to actual bill introduced:

    https://www.congress.gov/114/bills/s1501/BILLS-114s1501is.pdf

    To IIUSA article:

    https://iiusa.org/blog/government-affairs/us-congress/key-senators-introduce-bill-extend-improve-eb5-program-stephen-yaleloehr/

    It is interesting that the “leaked” bill is not in the same format as ordinary legislation but appears closer to codes into which the legislation is inserted.

    Beware Greeks bearing gifts! (Or, does this remind one of the current conflict between 18% vs. 36% cap on Payday loan petitions?)

  7. caheidelberger Post author | 2015-11-12

    Indeed! Sid, do you see any substantive differences between the above draft and the already floated bills that would make it worth someone’s time to draw up a bogus version to “leak”?

  8. leslie 2015-11-12

    In 2004 I left private practice to serve as the first presidentially appointed Chief Counsel of U.S. Citizenship & Immigration Services (USCIS) here in Washington, and before I left USCIS in late 2006 I served a spell as Acting Director. I returned to Baker Donelson, and I have spent considerable time representing business people in developing offerings to EB-5 investors. For the last two years I have been elected Vice President of the Association to Invest In the USA (IIUSA, see http://www.iiusa.org), the industry association of “regional centers.” Robert Devine, Esq., testimony, judiciary cmmtte, 2011.

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