Earlier this year, Brian Ross of ABC News wrote a series of stories attacking the U.S. EB5 investor immigrant program alleging it was rife with fraud and corruption. As an indication of how wide-spread the problems were, ABC News later revealed that a federal Government Accountability Office report found,
“…(F)or the first time … between January 2013 and 2015, the SEC received more than 100 ‘tips, complaints and referrals of possible securities fraud’ connected to the EB-5 program, and there are currently 59 open investigations by various agencies into alleged EB-5 scams.”
Under the U.S. regional center EB-5 green card program attacked by Ross, an investor who makes an investment of US$ 500,000 in: 1) a project sponsored by a regional center that 2) has been approved by the United States Citizenship and Immigration Service and 3) is located in a “targeted employment area” (TEA), initially receives a two-year conditional green card. At the two-year mark, assuming 1) the investment remained in the program for that period and 2) a minimum 10 jobs were created, the investor gets a regular U.S. Green card.
Senators Patrick Leahy (D-Vt.) and Chuck Grassley (R-Iowa) were among the first legislators to respond to the outcry of foul play related to the program by introducing a bipartisan bill in the Senate. Senator Grassley said the bill “strengthens oversight, ensures greater accountability and transparency, discourages fraud, and provides a higher priority for national security.” In addition, the bill seeks to limit credit for creating indirect employment by focusing on direct job creation in rural areas and areas with high unemployment. Finally, its provisions propose to raise the minimum investment required under the EB5 program from 500,000 to $ 800,000.
While the Leahy/Grassley bill is by no means the only bill dealing with the EB5 program that Congress will deal with, it is the first bipartisan initiative responding to the growing uproar initiated this year and a bellwether of what direction Congress may take. It may therefore be insightful to consider what some leaders in the EB5 community think of the bill.
According to Kurt Reuss, a Principal with EB5 Diligence and a Co-Chair of the Invest in the USA (IIUSA) Compliance Committee, In its current form, the Grassley/Leahy bill is laudable in that it requires USCIS to significantly reduce application processing times, requires regional center compliance with securities laws, both in the U.S. and by monitoring off-shore sales activities and creates a preference for financing new businesses created in rural and high-unemployment areas where traditional financing is harder to obtain.
Further, by requiring new businesses to have their offering approved by USCIS prior to soliciting investors, the bill addresses duplicative and occasionally conflicting adjudication decisions by USCIS.
He does not, however, support all aspects of the bill, he criticizes its significant reporting and compliance requirements for regional centers and points out that the bill’s language is at times unclear and unworkable.
Lincoln Stone, a leading EB5 immigration attorney, while greeting the bill’s provisions calling for increased oversight and enforcement, points out where the legislative problem lies,
Most of the controversy around Leahy-Grassley concerns limiting use of TEAs and … indirect job creation. There appears to be a consensus within Congress to limit both, but different camps have different approaches for getting there.
Tammy Fox-Isicoff, a well respected attorney with Rifkin & Fox-Isicoff P.A., predicts,
Although this legislation gives potential for the EB-5 program to establish a common goal of renewal of the regional center program, the Leahy/Grassley Senate bill will not be the lead bill on EB5.
Rather, a bill drafted in the House by Goodlatte, Issa and Polis to be introduced after Labor Day will take the lead. It is doubtful that this new bill will be passed by September 30th. Thus, I anticipate that either the EB-5 program will be extended with… other… programs that expire on September 30th in one clean sweep, or the EB-5 provisions will be extended for 90-180 days, pending passage of new provisions.”
As Fox-Isicoff points out the EB-5 regional center program is scheduled to end and needs to be extended by September 30, 2015. Bernard Wolfsdorf, a past president of the American Immigration Lawyers Association makes a good point in this regard,
It’s more likely Congress will enact a short extender bill with some integrity measures and possibly an increase in the minimum amount of the investment as they only have a few more days in this legislative session. Then they will study the options carefully before passing a comprehensive EB-5 bill such as Grassley/Leahy’s S1501.
His view is shared by Reuss who adds, “If Congress fails to pass a re-authorization bill by September 30, it is possible that it could simply extend the program for a short time while it finalizes substantive changes.”
With many lawmakers currently on vacation, it seems doubtful that anything more ambitious than a short term extension of the existing EB5 program will be passed before the September 30th expiration date. The only problem with a short-term extension is that it will place the fate of any renewal of the program right in the middle of the 2016 Congressional elections and the Presidential campaign. This could lead to an uncertain future for the EB5 program.
- U.S. Citizenship and Immigration Services
- UNITED STATES SECURITIES AND EXCHANGE COMMISSION
- Patrick Leahy
- Chuck Grassley
- Association to Invest In the USA (IIUSA)
- New York
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