Like an overfilled, uncovered garbage truck driving too fast on a bumpy road, the EB-5 program continues to spew trash all over the place.
Bear in mind that the EB-5 program produces about 1 percent of America's immigrants, no more than 10,000 out of more than a million arrivals a year.
Now look at the current immigration coverage at Law360.com (partially behind a paywall): 30 percent (three out of 10) of the immigration-related articles shown on August 23, 2018, deal with problems created by the immigrant investor (EB-5) program. One of these is mundane (a bankruptcy involving EB-5 and a Florida hotel), but the other two are rather more interesting.
The Exotic. One item involves the always interesting question of how to get your loot, perhaps ill-gotten, out of a country with tight capital controls (Iran in this case) in such a way as to prove to EB-5 authorities that it really is your money, and you came by it legitimately. Making that effort, but failing at the staff level, then again at the administrative judge level, and yet again in the federal district courts, was Batool Sadeghzadeh, an Iranian woman. The money came to the United States via that likely transit point for such deals, Dubai.
The money came, she said, from, among other sources, the sale of gold coins. Among the many problems with her documents, noted by the judge, were inconsistent dates for the sales of the coins, and an invoice
which reported at one point the coins were worth a total of 1.1 billion tomans, a form of Iranian currency, and another time that they equaled a total of 1.1 billion rials, a different unit of Iranian currency.
Why one would carry a government application through three levels of decision-makers with a glaring error like that puzzles me, but we have seen it before in the EB-5 business; the desire to buy a U.S. visa must be so strong that it blows away all connections to reality.
By the way, if you Google the question, you will find that one toman equals 10 rials; and that the Iranian currency has been and is now subject to serious inflation.
Perhaps someone should have said something like: "Oops, sorry Your Honor, I meant dollars not dimes, all those D's must have confused me."
Small-Town USA. While that story has elements of far away places, the other interesting article on EB-5 is a conflict between a small town in Vermont, and the court-appointed trustee seeking to untangle the massive Vermont EB-5 scandals; i.e., a dispute between two public-sector types.
The conflict reminds us of the many state and local governments that have suffered because of the EB-5 program, with much loss of tax revenues. It is also one of the sad side-effects of EB-5, a squabble between two good guys — the trustee and the tax collector — set in motion because of the fraud created by the Vermont EB-5 scandals.
One party in this case is the tiny town where one of the EB-5 ski resorts is located, Jay, whose population is 561. It is such a small town that its school board budget in a recent year was $726,521 and the annual report of the town published the names of all of the children in school.
The recent Law360 article said that interest on the back taxes owed by the EB-5 developer was $113,000 and the penalties due were $164,000. So those two numbers totaled equal $277,000, enough money to run the entire school system for several months. (Apparently the back taxes per se were paid earlier.)
The other party to the case is the court-appointed trustee, Michael Goldberg. He initially disagreed with the interest calculation, and objected to the penalties. Fortunately, the town and the trustee settled, without going to court, for all of the interest claimed and $60,00 in penalties. (There is a good reason for these penalties; it costs much more, proportionately, to collect back taxes than current taxes.)
Although the funds involved in this particular matter are modest, the settlement called attention to an element of this EB-5 disaster that I have not seen discussed elsewhere, the possibility that the hard-charging Goldberg may have collected more from the big firms indirectly involved in this case than needed to meet the real damages, and he may ultimately need to refund some of the money. I wish some reporter would look into that possibility.