Mixing a Sub-Par Deal with a Ticket to the USA

By David North on May 29, 2011

If the job does not pay much, or if the investment is shaky, the way for big business to close the deal is to add a ticket to America to the formula – and the migrant quickly falls in line with a body for the job, or a sum of money for the investment.

For example, many of the exploited guestworkers recruited to work in the Marianas Island sweatshops a dozen years ago were naive young women from rural China; they were sometimes told that "Los Angeles is just a bus ride away from the factory site".

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Unfortunately the Congress and this administration continue to tolerate (admittedly less outrageous) versions of those lures in both its investor and its foreign worker programs, as an enterprising reporter from the Houston Chronicle discovered earlier this month in connection with the EB-5 immigrant investor program.

The very initials for the program are misleading. EB-5 is one of a group of "Employment-Based" immigration programs, but the relationship of EB-5 to employment is pretty feeble. The basic deal is that if an alien invests half a million dollars, for two years, in a scheme promoted by an USCIS-authorized "regional center" he and his entire family get green cards for the rest of their lives, as I described in an earlier blog.

Ten new jobs are supposed to be created by each investment, but the definition of these jobs can be a convoluted intellectual exercise, as this quotation from an interested middleman indicates:

"The requirement of creating at least 10 new full-time jobs may be satisfied by showing that, as a result of the investment and the activities of the new enterprise, at least 10 jobs will be created indirectly through an employment creation multiplier effect. To show that 10 or more jobs are actually created indirectly by the business, reasonable methodologies may be used, such as multiplier tables, feasibility studies, analyses of foreign and domestic markets for the goods or services to be exported, and other economically or statistically valid forecasting tools which support the likelihood that the business will result in increased employment."

Somehow the kitchen sink was left off the list.

Other nations (e.g., Australia, Canada, and New Zealand) only offer visas to entrepreneurs who will, personally, actually run a company with real employees, while the U.S. settles for passive investments and "calculated" jobs.

In addition to the problems outlined above, some of these EB-5 investments are pretty unstable, which is the point of Susan Carroll's expose in the Chronicle, which was headlined: "Federal Program offers investors visas, a lot of risk."

She offers these examples:

In one extreme case, a Dallas company – the North Texas EB-5 Regional Center – is actively advertising multi-million dollar development projects on land in Farmers Branch [Texas] tied up in a civil lawsuit and bankruptcy filing. A company executive and two of its officers are named in a pending $72 million civil lawsuit filed by a major bank in U.S. District Court in Missouri, alleging the businessmen created a separate "straw company" in order to transfer debts and file for bankruptcy.

A Houston company is in danger of violating the EB-5 program's rules by offering foreign investors deeds to waterfront property to help secure their investments. The EB-5 program requires that immigrant investor money be "at risk" – meaning it's not a loan and could result in a loss. Experts on the EB-5 program say that the type of "assurance" offered by the Houston company could end up costing would-be immigrants a visa or green card down the line.

She also makes the basic point that "the program lacks transparency. While the government estimates that EB-5 investments have generated $1.5 billion for the U.S. economy since 1990, USCIS does not publicly disclose how well individual regional centers perform."

Ms. Carroll might have added that $1.5 billion over 21 years works out to investments of about $75 million a year, peanuts in a multi-trillion dollar economy. Further, licensing investment vehicles, like the regional centers, is probably a task better handled by a finance-oriented agency, such as the Securities and Exchange Commission, than a migration agency, not that the SEC has covered itself with glory in recent years.

While the Chronicle is outlining basic problems with the EB-5 program, USCIS has recently announced another of it streamlining programs, designed to make the program even easier to manipulate by would-be green card holders. For more on this see the agency's announcement.

Within a related document is a section encouraging critics and supporters of EB-5 to voice their opinions on the streamlining (and, by extension the whole program), provided they do so before June 17.

Readers of this blog are encouraged to let the USCIS know what they think of that program.