[Update 4/29/2022: As anticipated, Ariel Quiros, the key player in the long-running Vermont EB-5 scandals, was sentenced to five years in federal prison on April 29.]
The EB-5 (immigrant investor) industry, despite Congress’ decision to re-authorize the main part of the program last month, continues to receive bad news:
- Another player in the decade-long Vermont EB-5 scandals was jailed;
- The government has decided that all existing regional centers (the middlemen in the program) must re-apply to stay in business; and
- EB-5 visas issued for March were less than 2 percent of the potential.
Vermont. William Kelly, one of the lesser players in the long-running EB-5 scandals in Vermont, was sentenced to 18 months in jail by a federal court last month, and was told to cough up $8.3 million in restitution for moneys taken illicitly from alien investors. His colleague in crime Bill Stenger, once president of the Jay Peak ski resort, previously also got 18 months. The third and largest player, Ariel Quiros, is expected to be sentenced soon, and will probably get a stiffer sentence.
These complex and long-running scandals (likened to Ponzi schemes) turned the state’s senior senator, Pat Leahy (D), from an ardent supporter of the program to a staunch reformer.
Regional Centers Must Re-Apply. Most of the EB-5 program has revolved around the pooling of alien investments, usually at the minimum $500,000 level, by DHS-licensed regional centers, private, for profit entities routinely run by citizens. For this investment the aliens received, if all worked well, a family-sized set of green cards for the investor and his or her dependents. The regional centers then invested the money, usually in big city real estate ventures.
USCIS has ruled recently that the Congress-imposed nine-month hiatus in the regional center program, which was ended last month in an appropriations bill, cancelled the licenses for the regional centers and they have to apply all over again to meet the program’s new and appropriately tougher requirements. For more on the process of getting the reform through Congress, see the detailed account by my colleague George Fishman.
The industry does not like the new ruling at all. It means:
- Re-applying for a license that seemed to be perfectly good nine months ago, when Congress allowed the regional center program to expire;
- Having to wait for USCIS to act upon the applications before being able to operate; and
- Paying a minimal fee of $3,035.
This led California regional center, Behring Regional Center LLC to sue USCIS, claiming it had no authority to demand the re-applications. The government, on the other hand, was dealing with a new congressional authorization that had an “integrity package” seeking to avoid the numerous scandals that had bedeviled the program for years if not decades, and the package set new ground rules for the centers.
The suit was brought by an adversary that had previously successfully sued against stricter regulations formulated by the Obama administration and adopted by the Trump administration. In that case, a civil servant, a magistrate judge sitting in for a federal judge, ruled for the industry; the Biden administration at first appealed the decision and then later caved in, accepting the magistrate’s ruling. Most of the reforms that were included in the contested regulations have since been adopted by Congress.
My sense is that Behring has a weaker case this time around because the new rules on program reform are based on detailed congressional legislation, not on a decision by an acting secretary of DHS whose appointment was regarded as extralegal by the magistrate.
Whatever happens to the court case in California, the (totally appropriate) decision of USCIS will presumably lead to a further decline in the number of EB-5 regional centers. Some will not bother to re-apply.
Visas. The EB-5 program is allocated about 10,000 visas for alien investors and their dependents; this works out, on average, to 833 a month. Fifteen visas were issued in March, all to direct investors, one in Brazil, six in China, six in India, and two in the United Kingdom. Thus, less than 2 percent of the available visas were used.
The direct investment part of the program, which did not involve the regional centers, was the only part of it that could be used when the regional center part of the program was not authorized by Congress, a period of about nine months. Historically it had been the smaller segment of the program.