A Plethora of Inside Information Is Available from China on EB-5 Scams

By David North on June 28, 2016

What are the primarily Chinese investors in the EB-5 program being told about the promoters' offers in Mandarin? EB-5 is the government's immigrant investor program that provides sets of green cards to families who make half-million-dollar investments in government-approved, but not guaranteed, business ventures.

To what extent are these investors misinformed, sometimes criminally, and to what extent is DHS paying attention to this aspect of the program? (We know that the EB-5 unit has one or more Mandarin speakers in it, but is that enough?)

Casting some light on the first part of the question is a large, interesting, but uneven flow of information, charges, and tips from a small group of program observers. They appear to be watching the Chinese websites, attending the EB-5 shows in China, and critiquing some of the promoters' written and spoken proposals — and sending their comments and relevant documents to my modest little computer in the DC suburbs. Some seem to have access to material that DHS will not release. All my contacts (usually nameless) seem to be bilingual and well informed about the program.

Some are seeking whistleblower rewards, a long shot at best; others have policy differences with the program; and some of them seem to be seeking revenge.

And if I see several dozen documents every week or so, the Department of Homeland Security, which runs the program, and the Securities and Exchange Commission, which pays attention to financial fraud, must see 10 times as many.

The quality of the material varies — it is like one of those massive dumps next to an abandoned gold mine, much dross, but every so often there is a real nugget. At least one of the informants seems to be able to gobble up and spew out masses of material. The obviously good tips I pass along to appropriate officials, but many are hard to evaluate.

Since I do not have the resources to check the charges, including a total lack of the language, the best I can do via this posting is to pass along — with no names attached of either informants or those informed upon — a sampling of information, some of which is potentially highly useful to the government, if it is paying attention.

My worry, of course, is that if DHS can be fooled for years in precincts where English is spoken — such as in South Dakota and Vermont, as it was to the tune of scores of millions in each state — how well will they cope when the data comes in another language?

Here are some samples drawn at random from the collection:

  • Chinese investors are being told by, among others, a mayor of a named American city, that an EB-5 project (a hotel) is under construction in his city, when it is not.

  • Potential investors are told flatly that the $500,000 price of admission in EB-5 will go up to $800,000 soon and they must invest now to get the lower price. (Congress may or may not make such a move.)

  • I was informed that, unknown to the Chinese, there is a specific director of a specific EB-5 regional center, who twice was suspended from the practice of law by state bar associations. For this and other reasons, I am told, this center should be avoided.

  • A regional center's booth at one of the numerous EB-5 conferences in China was said to be badly designed and largely empty of content.

  • There is a detailed description of an elaborate technique for getting around China's capital controls, including the name of the big international bank offering these dubious services. (That would be a clear violation of Chinese law.)

  • There is another detailed description of how one agent will convert an investment of $100,000 to appear like one of $500,000 so that the alien gets his set of green cards at a remarkable discount. (That would be a clear violation of U.S. law.)

  • Many named agents, often in China, who are supposed to be registered with the Securities and Exchange Commission are not so registered.

  • Many cited EB-5 pitches in Mandarin that make promises about the program that cannot be made, such as that the investments are guaranteed to be repaid. (All EB-5 investments are supposed to be in equity, and thus at risk.)

  • Sometimes I get a mass of attachments with a cover note saying that I should look into these matters, with all them in Mandarin.

  • In a previous blog post, I told the story of a recorded phone conversation that was sent to me — in English — that showed a strange combination of parental love and parental deviousness. The person asking the questions appeared to be a wealthy Chinese with a good job in a state corporation who wanted to buy an EB-5 visa for the family's nine-year-old kid, but did not want the parents' names on the application because that might endanger the plum job in China. (Sorry, parents, one needs to be at least 18 to file for EB-5, and one should have a believable account of the source of the money.)

This flow of EB-5 information tells me several things:

First, there is an enormous amount of misinformation and misbehavior in this program in China, much of it contrary to U.S. laws.

Second, the official channels for the receipt of this information apparently are not responding to it in an appropriate way, hence my receipt of it.

Third, the language variable — the vast majority of EB-5 investors do not speak English as their birth language — just makes an already complicated and vulnerable program that much more so.