It’s been more than three months since Congress revived the once-lapsed authorization for the main part of the controversial EB-5 (immigrant investor) program and its progress since then can be best described as a slow crawl — by one significant measure it is operating at less than 5 percent of its capacity.
This is the program that rich aliens can use to buy their way into the U.S. despite their lack of other qualifications. The main part of the program, for pooled investments, was closed for almost nine months by congressional inaction, but a lesser part of it — calling for direct investments by aliens — stayed alive.
Several recent developments include moves that will reduce the number of middlemen in the program (usually citizens), a tiny usage of the direct investment program by aliens in April, a lawsuit by an alien tired of waiting for an EB-5 visa, and the continued rumble from a major EB-5 fraud case in Chicago.
Fewer Citizen Middlemen. One of the long-term problems with the EB-5 program — never mentioned by the industry — is that there were far too many middlemen agencies, DHS-licensed regional centers, for most of them to thrive. These are the entities that handle the aliens’ pooled investments, usually placed in big-city real estate ventures.
According to the most recent numbers posted by USCIS, there were 632 such centers as of October 25, 2021. Since the visa limits confine the program to be about 4,000 investments a year, that meant that each regional center averaged a little over six investments a year. It’s like putting 20 cows in a one-acre pasture, soon all but the healthiest will starve to death and the remaining one or two will be noticeably gaunt.
The revival of the main part of the EB-5 program established a new set of legal requirements and so USCIS decided that all the existing centers had to re-apply to meet the new (and stronger) congressional standards. Middlemen wanting to stay in the business were told that they have to file four new sets of applications, and pay multiple fees.
Instead of the strong regional centers silently applauding the expected disappearance of many of their weaker rivals, two court cases were filed against the new rules, one by single firm and the other, in a different court, by a bunch of them, as reported here and here.
I am a non-lawyer, but suspect that the regional centers will lose both cases. After all, Congress changed the law, and DHS is only doing what is implicitly required in the new legal language.
Little Interest from Aliens. State Department statistics for April, largely for those involved in the direct investment program, showed only 37 visas issued. Vietnam led the list with 12 visas, followed by Egypt with six, China and Iran with five each, Tunisia with three, and one or two each from Angola, Congo, India, and Turkey.
Having a ceiling of just under 10,000 visas a year produces a monthly total of about 833; 37 visas is just under 4.5 percent of the monthly capacity. Further, many visas are issued to family members, so the 37 does not equal 37 investments; in fact, over the years the score is about 2.5 visas issued per investment. So the entire industry, nationwide, huffing and puffing, managed to secure about 15 new investments during April.
That would produce about $12 million in new investments, hardly an impressive number. The minimum investment, thanks to the new legislation, is $800,000
An Alien Sues. A Nigerian citizen, resident in Oregon, one Oladapo Olatunji Olofin, his spouse, and their two children have sued USCIS for not acting upon their application for green card status, despite their filing the appropriate forms and investing the then-appropriate $500,000 in an EB-5 venture. Their immigration status, no surprise, is not stated in their filing; are they, in 2022, living on a tourist visa or are they in illegal status? (This is a variable that may not matter to the courts.)
The case is Olofin et al. v. U.S. Citizenship and Immigration Services et al., case number 1:22-cv-1684, in United States District Court for the District of Columbia. There are other, similar suits pending in other federal courts.
We noted in a recent posting that USCIS is taking 41 months on average to process these applications.
Chicago Controversy Swells. One of the larger ongoing EB-5 fraud court cases, that of the proposed $50 million Carillon Tower project in Chicago, continued to draw negative headlines, such as that one by Law360 headed: “Settlement Investigator Sees Red Flags in EB-5 Fraud Deal”.
The question is whether a purported multi-million-dollar loan from the Middle East that was supposed to have been made to the EB-5 developers not only may have never existed, but may have been knowingly misrepresented in court. A special master looking into the case for a federal judge said that the judge “needs to dig deeper” into the matter.
Last year we reported that data on the loan in question could not be obtained in time to meet a deadline because of what was described as a five-day-long religious holiday in the Middle East.