Two recent events have cast new light on old problems with the EB-5 program.
In one, a couple charged with swindling their EB-5 clients spoke the grim truth about the program – its investors are really buying visas, not seeking financial gain.
In the other, we saw the invention of a brand-new government program to protect victims – in this case those innocents suffering collateral damage from EB-5 fraud.
The locales were California and Vermont, respectively.
The California couple, Charles Liu and Xin Wang, had been charged by the Securities and Exchange Commission with bilking their clients out of $27 million; they said they were going to use a proton therapy to cure people of cancer, and to make a bundle for their investors, but they diverted the money and never started building the promised medical facility.
Now, as they seek to defend what they did, the couple has asked the judge to throw out the case because “their investors were seeking visas, not profits” according to a Law360 report that is behind a paywall. This is, of course, a true statement but it may not help their case.
Mr. Liu, as reported earlier, is a bit of an expert on the purchase of visas. He bought one from the ex-Brit colony of Grenada, as we have reported.
Meanwhile in Vermont, the state has invented another way for government to pay money to innocent victims, this time of the EB-5 program.
Stepping back in time, it was Chancellor Bismark who, in addition to invading Denmark, Austria, and France, took time off to inaugurate what was then called workmen’s compensation, for those workers losing wages because they had been injured on the job.
More than half a century later, FDR created unemployment compensation for workers losing their jobs because of a faltering economy.
Now we have the State of Vermont, dealing with an admittedly much smaller problem, inventing EB-5 compensation (not that they use the term) to help corporations (and their workers) hurt by scandals in that program.
In this case, it is a state-funded loan program for a contractor whose summer construction business has been threatened, if not worse, by the big collapse of the EB-5 program in that state.
As a New Hampshire website reported, a northern Vermont contractor – whose name was not revealed by the state government – has secured a $500,000 loan to keep operating while a judge-appointed trustee sorts out the financial mess left by the EB-5 scammers.
The website wonders, as I do, why Vermont has chosen not to reveal the name of the loan recipient, even though the loan is coming from the Vermont Economic Development Authority and the Northern Communities Investment Corporation, both state-related agencies. The contractor had worked on both the corruption-tainted EB-5 project at Jay Peak, and on the less controversial EB-5 operation at Mt. Snow, both ski resorts.
In any case, Vermont continues to move with admirable swiftness to limit the damage from its prior errors in managing the EB-5 program.