Fraud Acknowledged in Part of EB-5 (Immigrant Investor) Program

By David North, December 5, 2012

Substantial applicant fraud in part of the immigrant investor (EB-5) program was officially recognized by an unexpected source at a USCIS "stakeholders" meeting Monday in Washington.

It was one of those regular gatherings of immigration lawyers, real estate developers, and the leadership of the agency to discuss how to make the EB-5 program work more smoothly for both alien investors and the middle-sized entrepreneurs who use capital from the program.

I say "middle-sized" because no venture or private equity operator with any degree of success would bother to seek to raise capital in the half-million-dollar increments offered by this program, as noted in an earlier CIS Backgrounder on the subject.

The EB-5 program is attractive to aliens with half a million dollars to spare who are otherwise inadmissible to the United States. During the Obama administration USCIS leadership has been trying to expand the program and make it work more smoothly despite a complex structure and a civil service staff that is not always ready to say "yes", all the time, to the various applications required in the program.

If the EB-5 investment actually is made, the otherwise inadmissible alien and all the members of his or her immediate family are given a batch of green cards after the passage of two years. It is particularly popular with rich Chinese nationals uncomfortable with life in China. It is generally recognized that aliens are lucky if they get their money back with no losses. The attraction is the set of visas, not the prospect of a capital gain.

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Monday's session included a substantial period of questions and answers, with the lawyers and lobbyists securing replies from USCIS Director Alejandro Mayorkas. One of the attorneys asked about the expedited request portion of the program, in which applicants willing to part with an additional $1,225 fee are given faster (if not more favorable) treatment for their applications.

Mayorkas replied, approximately, that his efforts to speed up decision-making in this part of the program had not met with success because of an unexpectedly high rate of (agency-recognized) fraud. He did not elaborate, and the lawyer who raised the issue did not seek any details.

My theory is that the aliens and middlemen willing to pay the extra $1,225 (per application) may have had, to put it gently, applications that were of lower quality than the EB-5 average.

Earlier in the session I had asked Mayorkas to tell the assembled lawyers and others about a so-far secret court settlement between a group of would-be EB-5 investors (Courtney Carlsson et al, v. USCIS et al. in the U.S. District Court in California) and USCIS, and asked what the justification could be for keeping such an agreement secret. He replied that he would not comment on specific cases and promised that if there were any public policy implications from the case (which I think likely) , he would publish them.

See my recent blog for more on the court case, in which USCIS turned down a group of investor applications.