EB-5 Report by IG Short on Detail, Long on Program Criticism

By David North on December 28, 2013

The long-awaited report of the Department of Homeland Security's Inspector General turned out to lack any specific charges against the man who runs the program, Alejandro Mayorkas, now DHS Deputy Secretary, but carried many serious criticisms of the immigrant investor (EB-5) program itself.

It was released just before Christmas, though advance copies were seen on Capitol Hill the prior week, and it was dated December 12.

Republican Senators Chuck Grassley (IA) and Thomas Coburn (OK), as we previously reported, had called for the Senate to delay Mayorkas' confirmation until the IG's report was made public, but the Senate, along party lines, voted to do so before the report was formally issued. Prior to his promotion, Mayorkas has been the Director of U.S. Citizenship and Immigration Services, which runs EB-5 (with the initials standing for Employment-Based, as the program is supposed to produce jobs in America).

Written in the usual, muted, color-it-gray prose of the Inspectors General, the report did not mention Mayorkas by name (except as the USCIS official receiving the cover letter), and though it discussed several controversial EB-5 program decisions, there were no names of the companies or regional centers involved.

But the report was useful for some big-picture comments about the EB-5 program, which gives alien families sets of green cards for half a million dollar investments made through DHS-approved regional centers.

It did not touch, however, on the overall policy consideration: is it good public policy to sell a visa at all?

Nor did it deal with the massive financial losses of many alien investors in the programs, such as we have seen recently in South Dakota, Chicago, and elsewhere.

What it did do was to emphasis four other fundamental program failures:

  • The laws and regulations governing the program do not give the USCIS the authority to deny or terminate a regional center's participation in the Employment-Based Fifth Preference program based on fraud or national security concerns;
  • The program extends beyond current USCIS mission to secure America's promise as a nation of immigrants; and
  • USCIS is unable to demonstrate the benefits of foreign investment into the U.S. economy.

Additionally, USCIS has difficulty ensuring the integrity of ... the program.

To elaborate on each:

David North Explains

the EB-5 Visa Program:

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I find the IG's first point is either puzzling or misleading. A government official, generally, is supposed to protect the national security and to prevent fraud. If such an official rejects a an application for one of these reasons, he or she can, if the decision was wrong or questionable, count on the applicant to appeal it, perhaps to the courts. If there appears to be a fraud or a national security worry, reject the petition. What is the problem?

Maybe the problem is that the IG found that USCIS was not alert to problems of fraud and national security, and rather than denying petitions (because the administration generally wants marginal petitions to be approved) it rubber-stamped them. If so, it should have said so.

If the law and the regulations are lacking on these matters, the agency should have been trying to get them changed; there is no indication that this happened. Further, who writes the regulations? The agency does. If the regulations are not sufficiently sturdy, it should fix them.

There were no specifics in this section – not even allusions to unnamed cases – despite the fact that the agency's senatorial critics have talked about the use the program, or attempted use of the program, by Chinese and Iranian operatives. Frustrating.

The second point, about the extension of the program beyond the agency's mission, means, to put it more bluntly, that USCIS has no expertise, and thus no business to be in an investment-related program.

Looking at it another way, the Marines do wonderful things – but do you ask them to measure the weather at the South Pole, or explain the strange death of the honey bees? No, you use agencies with expertise in those sorts of things. Asking USCIS to run an investment program is like sending for the Marines to explain the factors that led to the death of those bees.

In this report the IG found that USCIS was trying to solve the lack of expertise by hiring some economists, but "according to the economists, they do not have access to data and systems needed to validate support for [the economic growth] predictions."

Similarly, there is the IG's third point about measuring the impact of the program; it is supposed to create employment in the U.S. economy at the rate of ten jobs for every $500,000 invested. (This is, of course, an enormously unrealistic goal – but that's something else the IG ignored.)

Given the program's goals, why, the IG asks, does not USCIS measure the impact of EB-5 in terms of jobs actually created? A good question, but the agency response (also included in the report) was feeble: "USCIS responded that its mandate is to adjudicate EB-5 cases according to the eligibility criteria ... [it] is not charged with a broader mandate of assessing the program's impact," according to the report.

To use one more metaphor, the USCIS position is like that of the batter who thinks that only contact with the ball is something to be recorded – that hits, foul balls, number of bases obtained, outs, errors, runs and the like are not worth reporting. The USCIS stand on this point is essentially an irresponsible one.

The final point, expressed in muted inspector-general speak, is not so much that the agency "has difficulty ensuring the integrity" of the program but that its history was replete with inappropriate actions in which visa petitions were approved by the agency leadership despite the advice of career people that they should have been denied.

This pattern is more or less suggested by the following frustrating segment of the report:

In another a Congressman [not named] asked a senior USCIS official [not named] to withdraw a request for evidence that USCIS sent to the regional center. In the same letter the Congressman thanked the senior USCIS official for discussing the request for evidence with him. In the draft letter the senior official responded to the Congressman saying that some items in the request for evidence were appropriate and some were not and promises to clarify some of the issues in forthcoming EB-5 policy guidance. The e-mails did not discuss the outcome of this case.

Here are some thoughts about the murky text above:

  • a USCIS request for evidence is a formal document sent to an applicant asking for an explanation of something in a petition; it is often a step taken just prior to denying that petition, unless the applicant has a very good answer;
  • there are 435 members of Congress but only one USCIS official that a congressman is likely to write to, namely Mayorkas;
  • an investigator, like the one who wrote this paragraph for the IG, is capable of looking beyond a set of e-mails in a file to ask, "what did happen in this case?"

I have been in Washington long enough, and in an assortment of positions, to know that in all administrations and in many, many agencies, political leaders do intervene in what might otherwise be career staff decisions on particular issues. It is often not admirable, but it certainly is a part of the system. How EB-5 is managed is part of a larger picture.

While many of my comments on the IG's document sound grumpy, it is, on balance, useful to have this report on the record.

Perhaps it will tend to clean up the program a bit. Perhaps it will discourage some political support for EB-5, one of the messier parts of our immigration system.