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After Failure of Reforms by Illegally Appointed DHS Leaders, EB-5 Finally Close to Death

In 2017, the previous administration inattentively promised to end the EB-5 visa investment program. The legislation it endorsed to replace America’s green-cards-for-sale scheme, like most everything else in the previous administration’s legislative agenda, went nowhere.

In 2019, the previous administration tried to at tighten up EB-5 by issuing reasonable rules the Obama Administration had proposed to reduce the kind of fraud and abuse the EB-5 engendered in South Dakota, Vermont, Florida, and elsewhere. But San Francisco/Silicon Valley EB-5 peddler Behring Companies got a federal court to block those rules because the rulemakers were illegally appointed by the previous administration:

A federal district judge has struck down the 2019 EB-5 “modernization” regulation, finding the rule was invalid because it was enacted by DHS officials who were appointed to their posts in violation of the 1998 Federal Vacancies Reform Act (FVRA). Behring Co., the operator of Behring Regional Centers, brought suit against USCIS in 2019 in response to the modernization rule. Ultimately, Behring succeeded in showing the acting DHS secretaries succeeding Kirstjen Nielsen (including Kevin McAleenan) were not properly designated in the order of succession in accordance with the FVRA, and therefore they did not hold the authority to promulgate and ratify the 2019 modernization rule. At this moment, the minimum investment amount in a Targeted Employment Area is $500,000 [Jackson Lewis PC, “EB-5 Investor Visa Update,” JDSupra, 2021.06.28].

It wasn’t until Joe Biden became President that Congress evidently found the will do rein in the EB-5 program. That will is expressed in an odd way: they still lack the will to stand up to wealthy special interests and pass the EB-5 reforms Senators Chuck Grassley and Patrick Leahy have been proposing for years. But Congress’s weakness cuts both ways: the failure of the reform package in June left the EB-5 Regional Center program without an extension, meaning it expired on June 30, shutting down the primary avenue through which big wheels turned green-card-buyers’ cash into American investment schemes:

At the moment the EB-5 program is largely in disarray. The Regional Center part of the program has expired as a result of the automatic sunset provision that was part of its operation until June 30th, 2021. For some 20 years the program was renewed by Congress each year and in that way the program never sunset. But this time the Regional Center program was detached from regular Congressional budget renewals and was thus sidelined to await further developments. The result is that only the Direct Investment EB-5 Program is still in play. The significance of this is that well over 90 % of the investors who took part in the EB-5 program in the past chose the Regional Center option which was preferable because the investment amounted to a five year loan to a Regional Center project and was repayable at that time.

Now EB-5 investments can only take the form of equity with a purchase of shares in an EB-5 project with the requirement that the investment also create a minimum of 10 jobs. There are two sorts of Direct Investment EB-5 projects: ones in which the foreign investor maintains control and the other in which he or she is a minority shareholder. In the former, supervision of the employment component and compliance with business plan approved by the USCIS are the responsibility of the investor and can be complicated. In the latter, the investor surrenders control and trusts the project managers to ensure the project complies with all immigration requirements. In either case, the projects are smaller in size than Regional Center ones, involve fewer investors and may require more investor care to ensure compliance [Andy J. Semotiuk, “USCIS Appeal Sparks Speculation About the EB-5 Foreign Investor Program,” Forbes, 2021.08.30].

This is one situation where Republican obstruction and xenophobia could work in our favor. Anyone who wants to holler about vetting newcomers should be screaming about the opaque EB-5 process and the bad actors it has let sneak into America on “golden visas”:

Decades after its inception, “almost nothing is known about the backgrounds of applicants for the EB-5 program,” the analyst Belinda Li wrote. “The only information made available to [American authorities] is provided by applicants themselves on their application forms.” Thanks in large part to U.S. immigration authorities being stretched thin, Washington has disregarded the increasing ranks of kleptocrats looking for entry into the United States—and finding the EB-5 program open to whatever money they can provide, regardless of the source.

…As such, it’s no surprise that the United States’ golden visa program has already attracted the kinds of fraudsters and transnational money launderers saturating similar programs elsewhere. One Chinese kleptocrat, Jianjun Qiao, gained American residency courtesy of the EB-5 program—despite laundering funds via foreign banks and parking that laundered loot in American real estate. Other members of China’s “100 Most Wanted List” have been connected to EB-5 schemes. One of the key figures linked to the sanctioned Ukrainian oligarch Ihor Kolomoisky’s efforts to launder hundreds of millions of dollars across the American Midwest also oversaw EB-5-related investments—and ended up jailed for large-scale fraud.

A recent study from Transparency International Russia uncovered just how easy it is for foreign nationals drenched in dirty money to access one of these American golden visas. Disguised as potential investors, members of the transparency organization uncovered American lawyers and Russian intermediaries more than willing to help along the application process—despite clear signs that the wealth of the poseurs was of “illegitimate origin.” A range of U.S. lawyers—who have proved time and again to be the best friends a kleptocrat could ask for—detailed ways to disguise the wealth’s origin, including creating contracts with relatives and providing work documents from friends.

The strategies have clearly proved successful; as the group uncovered, some 150 Russian nationals have successfully obtained EB-5 visas in just the past few years. But because the U.S. government “does not publish the names of these investors, the Russian public can only guess who they are.” And since all of the financial information is provided by the supposed investors themselves, the rest of us can only guess at the source of the funds as well [Casey Michel and Paul Massaro, “Oligarchs’ Favorite U.S. Visa Might Not Last,” Foreign Policy, 2021.07.16].

10 Comments

  1. ArloBlundt 2021-09-12

    Well..I doubt whether anything will be done with the EB-5 program other than tinker with some of the language in the regulations. It is a money making son of a gun for all involved.

  2. Donald Pay 2021-09-12

    I love it when politicians hang themselves by the testes. Trump emasculated himself and his policies repeatedly through his staff changes and illegal regulatory moves. His China policies were complete failures. Trump was a one-man wrecking crew for his own agenda. He couldn’t do anything right because his big fat ego got in the way. He did everything for the public relations splash, and it all kind of splashed back on him when his efforts crashed and burned.

    In case you didn’t know, the Trump organized crime network had set up in China just prior to the 2016 election in order to push EB-5 funding for its proposed hotel in Austin, Texas. They weren’t expecting to win, so they had all their ducks lined up to push their business interests. When they won, they had to wind it all down. See, he really didn’t want to be President. It was all a marketing move. But he done won, and that began the beginning of the end of the Trump business empire.

  3. kurtz 2021-09-12

    It’s not difficult to link the EB-5 program to the sex industry where rich investors buy green cards for professionals who convert pillow talk into industrial espionage. Recall Bob Mercer’s request to see Richard Benda’s autopsy report and investigation files was shot in the abdomen by another Republican-owned court in South Dakota. My home state has routinely operated in an ethics vacuum often aborting efforts to reduce opacity.

  4. Guy 2021-09-12

    Cory, so, in other words, after COVID and a shortage of affordable housing, this continues a labor market giving the employees the upper hand. Well, I like that and what employee does not like this situation? Employers bend over backwards to keep employees these days. Like you said Cory, this is welcome news to employees. We holler about a shortage in the workforce, but, deep down those employed benefit in certain ways because our labor is more valued. So, I’m not complaining. Obama, Trump and Biden have actually helped increase the value of the employee and their power.

  5. Guy 2021-09-12

    Cory, I appreciate your posts and analysis on a variety of subjects. However, let us not forget we have a major infrastructure bill that needs to successfully pass Congress before the end of this year. Rebuilding our infrastructure is vital to the interests of all American Citizens. I do not want to see this bill die. We, as American Citizens have patiently waited for decades to see the Congress seriously fund investments in our roads, bridges, sewers, water pipes, electric grid, railroads, broadband, and affordable housing. Too much money was sidelined into funding endless wars in Afghanistan and Iraq. So much money went to fund wars that could have been used to rebuild infrastructure for our own citizens. Are we going to get back to focusing on one of the most important subjects that affects all of us: our basic infrastructure?

  6. John Dale 2021-09-13

    “everything in the previous admin’s agenda” – very absolute statement that does not reflect reality.

    But I suppose it’s worth stating that perhaps good moves like this would have made more progress without three impeachment attempts (actually 4, but only 3 legitimate attempts).

    It was ruthless politics .. mom and dad were fighting, and the kids (American Citizens) really suffered.

    Mom started every darned fight as near as I can figure.

  7. O 2021-09-13

    Guy, “Employers bend over backwards to keep employees these days.”
    I have to disagree. Employers have been taking some steps out of their comfort zones lately, but as to SERIOUS steps toward addressing the decades of deterioration of labor compensation, it certainly is not “bending over backward.” I know that small business has felt the sting, but Jeff Bezos still funded his own launch into space. Even this employment crunch is not changing the fundamental entrenchment of inequity of wealth distribution in the US.

  8. Cory Allen Heidelberger Post author | 2021-09-13

    I generally don’t support obstructionism. Problems don’t get solved by doing nothing, not in a complex, changing world where wealthy private actors can too easily rig the economy in their favor. We need robust government to check all the forces that would exploit the planet and its people to concentrate power and wealth.

    However, I can recognize that, occasionally, obstructionism will break our way, especially if, as has happened with the EB-5 Regional Centers, we include sunset clauses that require the Legislative Branch to revisit and reauthorize policies.

  9. Cory Allen Heidelberger Post author | 2021-09-13

    John Dale, I said “like most everything else”—not an absolute, because I recognize that the previous administration did manage to achieve certain elements of its agenda, like handing tax breaks to the rich and stacking the Supreme Court with underqualified theocrats. But a review of the previous administration’s own promises and its record shows that the previous administration failed to do much of what it promised to do. That failure did not result from impeachment—don’t forget, Republicans controlled the White House 2017–2018. The previous administration failed to carry out numerous major policy promises. Its inattentive, half-hearted attempt to reform EB-5 failed because the previous White House couldn’t even follow simple law designating the order of succession for an important Cabinet position.

    The previous administration was largely incompetent and ineffective, as demonstrated by the court’s overturning of its execution of EB-5 reform.

  10. Mark Anderson 2021-09-13

    Visas are always interesting. My good friend, an excellent painter was hired by Ringling to chair our first year program. He’s from Great Britain. Its kind of funny because his first semester here at the first departmental meeting he said in an effort to give his “artists” more studio time they would meet mid semester and at the end. He learned very quickly that he had to have a weekly meeting for the venters.. After three years he had helped merge the first year program more into the majors rather than an across the board first year, his visa was running down. The school just thought they would say sorry and he’d go back to England. He however had met with a lawyer in secret and got the card he needed. Sooo when the time came he told the Vice President that he could stay. I wish I had been there for that meeting to see her mouth drop. I’m sure that this kind of manipulation happens everywhere. You have to watch out for yourself.

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