Congress Ignores Growing Investor Visa Abuse; Champions More EB-5 Investors

By Joe Guzzardi
March 4, 2014

In the complex world of immigration legislation, regulations that govern dozens of visas often bewilder all but the experts. As a result, visa fraud and abuse are common. But when one of the nation’s most powerful politicians, Senate Majority Leader Harry Reid, uses his influence to force the Department of Homeland Security to break the EB-5 investor visa’s rules, it’s time to pay closer attention.

Late last year,  the U.S. Citizenship and Immigration Services initially denied the applications of two dozen prospective Asian investors associated with the old Sahara Hotel, now renamed SLS Las Vegas.  USCIS cited “suspicious financial activity.” Once officially handed down, the decisions are irrevocable. But Reid interceded and, after what the media described as a shouting match between his staff and USCIS, the supposedly irreversible decision was overturned.

Critics have been skeptical about the EB-5 visa since 1990 when Congress created it. Conceptually, the visa is designed to attract investors who are willing to put down at least $500,000 in a new venture that will generate jobs for Americans and stimulate the economy.

Almost all foreign EB-5 investments are channeled through special companies called regional centers. Once immigration officials approve their business plans, investors can apply for the EB-5 visa and, if approved, get conditional green cards. Assuming the new businesses create jobs or seem likely to, the conditions are removed from the green card. Investors’ spouses and unmarried minor children will also eventually get green cards.

Here are the concerns. Essentially, the EB-5 represents permanent residency for an entire family in exchange for $500,000; in other words, resident status for sale. But in the world of high finance and venture capital, $500,000 is an inconsequential sum. No major project goes wanting for lack of half a million dollars. More important, the EB-5 visas are issued to foreign-born investors who, according to insiders, would otherwise be inadmissible. 

Predictably, Congress’ only interest is in expanding the EB-5 program instead of eliminating the conspicuous abuse.  A DHS whistleblower who reviewed 30 applications from U.S. companies seeking overseas investors told the Washington Times that USCIS doesn’t ask even the most basic questions about the business plans the agency reviews: “Is there a semblance of an idea? Do they know their operating margins? Do they have a plan for revenue growth? What about a marketing plan?” EB-5 cases that should take USCIS weeks if not months to evaluate average a mere 4.3 days. The mandatory one-investor-to-ten new jobs ratio is rarely met.

As always, once the word spreads about loophole-laden immigration opportunities like the EB-5, applications soar. An Internet search found that EB-5 seminars that focus on how to raise overseas capital are offered nationwide. Regional processing centers are also on the rise.

The EB-5’s track record is bad. A South Dakota meatpacking plant funded by 160 predominantly Chinese aliens declared bankruptcy. In Texas, the FBI uncovered an EB-5 Ponzi scheme involving Mexican investors. And in Chicago, fraudsters used lies and misrepresentation to raise $150 million from 261 would-be EB-5 immigrants to build a non-existent O’Hare Airport hotel. Besides the financial perils that the EB-5 presents, the visa’s lax regulations and minimal oversight create money laundering potential that could lead to national security threats.  

The U.S. should follow Canada’s example and end the investor visa program. Calling it an express lane for wealthy Chinese, Canada slammed the door on nearly 60,000 pending applications that would have generated $42 million for the government. In a statement which Reid and most others in Congress are unlikely to repeat, Ottawa said that the easily obtained visa, “significantly undervalued” permanent Canadian residency.

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Joe Guzzardi is a Californians for Population Stabilization Senior Writing Fellow whose columns have been syndicated since 1987. Contact him at [email protected]