An interesting set of immigration policy question arose last week regarding whether EB-5 investors who have been defrauded by American business interests should get their green cards anyway, despite the failure of the investments — failures only remotely linked to the actions of the aliens.
The questions arose when the court-appointed trustee for the EB-5 disaster in Vermont, Michael Goldberg, said that he was going to use some of the EB-5 funds under his control to hire a lobbyist to seek a change in the immigration law to protect the interests of the 700 or so investors in the ski lodge at Jay Peak and other problematic Vermont properties, as we have reported previously (see here and here).
The lobbying proposal came to light through another example of the fine EB-5 reporting of VTDigger, Vermont's alternative news site.
Goldberg's action raises two sets of policy questions:
- Should the 700 investors be granted legal residence in the United States despite the fraud that took much of the money out of allegedly job-creating projects and gave it to a crooked developer? This in a situation in which the aliens did not play a deliberate part.
- Should project funds be used to lobby for the interests of these 700 investors?
Before I explore the pros and cons of the issue, it should be stated that Goldberg, the judge who appointed him trustee, and the Securities and Exchange Commission, whose investigation blew open this whole scheme, are among the few good guys on the scene. On the other side is the hopelessly sleepy Department of Homeland Security, the Vermont state government (until it changed sides a couple of months ago), the all-too tolerant U.S. Congress, which keeps renewing the EB-5 program despite its manifold failures, and, of course, the developers, Ariel Quiros and William Stenger.
Question 1. The argument in favor of Goldberg's proposal is straightforward: The aliens who put up the money were not individually at fault, and they should each get the promised family-sized set of green cards.
The arguments against are many and may be hard for Congress to understand or accept:
- Unless the proposal is tightly drawn to cover only the Vermont 700, the thrust of the proposal would grant similar benefits (the set of green cards) to hundreds, probably thousands, of other EB-5 investors whose projects have gone bad for one reason or another. In some situations other than the Vermont one it might be difficult to sort out the innocent victims from the not-so-innocent ones.
- The proposal would set a horrible precedent going forward — that if an alien invests in a crooked EB-5 project in the future, the investor would get the set of green cards anyway. This would further lower the extent to which aliens use due diligence when they buy into the EB-5 program.
- Indirectly, the passage of such legislation would enhance the already (and appropriately) damaged reputation abroad of the EB-5 program, which should be allowed to die at the end of next month. (The main part of the program, that used in Vermont, is subject to a September 30 sunset, unless Congress acts. A little-used, $1-million-investment-in-non-pooled-funds segment of the program, would remain.)
Question 2. Should the trustee use project funds to lobby the Congress for relief of the 700?
I have great difficulty coming up with a positive argument for this position, except for the fact that the funds under Goldberg's control can all be traced back to the aliens' investments.
On the other hand, this would be another instance of the U.S. government charging off to defend the interests of the 1 percent — in this case an alien 1 percent.
We are not talking about providing health benefits to former coal miners with black lung disease, we are talking about a possible denial of a dubious U.S. government-created benefit for some of the world's richest people — those perfectly happy to risk half a million dollars in order to buy legal status in the United States for themselves and their family members.
Those hurt by the non-issuance of green cards are all grown-up, all rich, and all got themselves into this mess by trusting the Vermont developers. Goldberg should have simply sent a form letter to all 700 of them, giving them the addresses of the other 699, and suggesting that his efforts to get DHS to issue green cards had failed and that they may want to take action against the situation either in Congress or in the courts. If he could not obtain the addresses of the 700, he should have issued a press release to the same effect.
I do not know about the precedents for Goldberg's action. The notion that a court-appointed trustee could fund a lobbying program, of any kind, is worrisome.
One More Note. Vermont's state government has belatedly joined in the efforts to clean up the EB-5 mess in its own state; it has set up a small fund to protect the interests of the contractors and their workers hurt by the disaster, as we reported earlier. Goldberg is taking steps to help those who invested in the Vermont projects. Nothing like this has happened in South Dakota, where the EB-5 sums lost are much larger than those in Vermont.