EB-5's Institutional Allies Give the Program a Hard Time

By David North on April 16, 2012

It's bad enough when the critics attack, but when your allies go after you, as they have on the immigrant investor (EB-5) program recently, look out!

The controversial, selling-batches-of-visas-for-half-million-a-pop program took it on the chin recently from such normally pro-migration forces as the op-ed page of the New York Times and a privately owned website for EB-5 news that routinely favors the program.

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The theme for both articles was that the alien investors were not getting, or might not be getting, a fair shake and that the 10-jobs-per-investment requirements were not being met.

As background, in return for making a $500,000 investment in an indirectly government-selected project, the alien investor and his or her entire immediate family get conditional entry documents allowing everyone involved to live and work in the United States and get green cards two years later if the conditions have been met. Typically, these people would otherwise be ineligible to immigrate to the United States. Their only qualifications are their bank accounts. The initials stand for the fifth class of Employment-Based immigrants.

The op-ed in today's Times includes this:

The most egregious problems with the EB-5 program can be found in its 218 regional centers, which work with private-sector brokers to identify local investments and direct foreign participants to them. Examples abound of centers and brokers playing down risky investments and misrepresenting how the program works, including a promise that EB-5 investments are guaranteed by the federal government — when the government in fact does nothing of the sort. Many investments have failed to create the required 10 jobs and [have] even gone bankrupt, leaving the investor without his money or his green card.

All perfectly true, and nice to see the Times say so. The author, Ann Lee, wants to reform the program, however, not kill it, and there we disagree.

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Ms. Lee's name was new to me, but a quick Google search found a photograph suggesting she is of Chinese descent and a resume that includes degrees from University of California (Berkeley), Princeton's Woodrow Wilson School, and Harvard's Business School, all of which suggests that she is not some kind of prairie-bred restrictionist and is the kind of person whose advice USCIS might be expected to take.

A majority of the EB-5 investors, incidentally, as I noted in a recent CIS Backgrounder, are Chinese nationals.

Meanwhile the poster child of EB-5 investment, at least according to Sen. Patrick Leahy (D-Vt.), chair of the Senate Judiciary Committee, is the Jay Peak ski lodge and associated enterprises, all located a few miles south of the Canada-Vermont border, and near his wife's home town. Sitting to my right a couple of months ago, as I was the only anti-EB-5 witness at a Judiciary Committee hearing, was Jay Peak executive Bill Stenger, who spoke of much construction at the ski area and of many overseas investments in it.

Sen. Leahy treated Stenger as an old friend and was grumpy with me because he knew that I had written that some EB-5 investments were used to refurbish "decaying Vermont ski resorts".

I did a little research after the hearing and found that none of the Jay Peak investments had yet matured to the point where they had to be repaid, and that the Jay Peak businesses (plural) were privately held and thus there were no corporate profit-and-loss statements to be reviewed. In other words, there is a dearth of publicly available financial information on the resort.

Last month EB5info.com, the industry's e-newsletter, ran a lead story saying that Rapid USA Visas, Inc., a broker of EB-5 investments, had "terminated relations with Jay Peak, Inc." on the grounds that it "no longer has confidence in the accuracy of representations made by Jay Peak Inc. or in [its] financial status and disclosures".

A local newspaper, the Orleans County Record in St. Johnsbury, reported that Rapid's pull-out was based in part on its perception of "a poor financial state of the resort from capital expenditures, low revenue because of a warm winter … [and] doubts that job creation projections will be realized."

The break-up, whatever the cause, must have been financially painful to Rapid USA Visas because it had been collecting at least a $25,000 fee on each of the investments and there have been hundreds of them. Rapid did not explain the rationale for its action to the St. Johnsbury paper.

A major Vermont media outlet is currently looking into the Jay Peak-Rapid USA Visas dust-up and related matters and we may know more about that EB-5 poster child soon.