State economic officials pilloried the EB-5 immigrant investor green card program when Terry McAuliffe planned to use it to fund an electric car plant in Virginia, but with him occupying the Executive Mansion, their resistance has softened.
Under the program signed into law more than 25 years ago, foreigners who invest $500,000 to $1 million in U.S. projects are eligible for green cards, or permission to emigrate to the United States. But the program hasn’t always paid off for investors, three-fourths of them Chinese, and has been vulnerable to fraud, prompting warnings from the Securities and Exchange Commission and debate in Congress over whether EB-5 should be fixed or shelved.
Virginia Economic Development Partnership officials, including the agency’s CEO at the time, raised concerns about EB-5 in 2009, when McAuliffe, fresh off a Democratic gubernatorial primary defeat, approached the state about locating a GreenTech Automotive plant in the Old Dominion. The project, which was to be funded through EB-5 investments, never got off the ground in Virginia.
GreenTech and a claim by a partnership official that EB-5 was a “visa-for-sale scheme” were hot topics during McAuliffe’s successful 2013 gubernatorial run. Halfway through McAuliffe’s term, the partnership has discussed EB-5 with a one-time ally of the governor’s.
Simone Williams, an immigration lawyer who worked on the GreenTech project, met with a partnership official last year about EB-5 just as investigators were finishing a federal inspector general’s report citing McAuliffe’s “unprecedented access” to the country’s top ranked immigration official in pursuit of investor green cards.
Williams has worked alongside Tony Rodham, the brother of Democratic presidential front-runner Hillary Clinton and a principal in the firm that solicited EB-5 investors for GreenTech.
Partnership officials said the agency has no written policy on EB-5. Asked to explain the agency’s position on the program, officials said they are not involved in its implementation and are not concerned about whether companies use EB-5. During the years of McAuliffe’s term that have passed, none has, as far as partnership officials know.
Nor has McAuliffe prescribed a policy on EB-5, said Maurice Jones, secretary of commerce and trade.
Citing McAuliffe’s schedule, a spokesman for the governor said last week that he would be unavailable for an interview about EB-5.
Critics say programhas serious flaws
Signed into law by President George H.W. Bush as part of the Immigration Act of 1990, EB-5 languished until the recession, falling well short of its limit of 10,000 green cards annually. The tide began to turn when lending tightened in the wake of the housing market collapse. Last fiscal year, EB-5 applications reached a record 14,373.
With heavier use of the program came tales of deals gone bad, including the collapse of a $900 million hotel and convention center project outside Chicago. The U.S. Securities and Exchange Commission ordered Anshoo Sethi, the principal in the deal, to repay investors $147 million held in escrow. He has pleaded guilty to wire fraud.
That case, EB-5 critics say, is just one example of the program’s flaws.
Investors sometimes are made promises that can’t be kept, including guarantees that they’ll receive a green card. In fact, green cards can be approved only by federal immigration officials, who review applicants for security concerns, among other things. In other cases, part of the program’s intent — to draw investment money into depressed or rural areas — has been subverted.
Projects in so-called target employment areas — rural areas or areas of high unemployment — require only $500,000 investments rather than $1 million. But promoters of EB-5 deals sometimes have engaged in gerrymandering to pull investment money into affluent areas. The hotel project in Chicago was an example.
U.S. Senate Judiciary Committee Chairman Chuck Grassley, R-Iowa, last month said EB-5 is “deeply flawed, without adequate oversight and has veered far away from congressional intent.”
His counterpart in the lower chamber agreed.
“This program is in desperate need of statutory and regulatory reform,” House Judiciary Committee Chairman Bob Goodlatte, R-Roanoke County, said in a prepared statement. “At the minimum, the investment amount should be increased, gerrymandering should be curtailed, and national security concerns should be addressed in order to reform this troubled program.”
Other critics say the program unfairly favors rich foreigners.
“The right to emigrate should not be for sale,” Sen. Dianne Feinstein, D-California, said last month.
That’s how Liz Povar, a high-ranking partnership official, appeared to view the program in 2009 when her agency began considering GreenTech Automotive’s plans to use EB-5 investments.
“I still can’t get my head around this being anything other than a visa-for-sale scheme,” she wrote in an email to a colleague.
Others at the agency raised questions about whether GreenTech could deliver on its proposals.
The future governor’s team “has no demonstrated ability to run an automotive company,” Mike Lehmkuhler, vice president of business attraction, wrote in an email.
GreenTech won incentives and went forward with a $60 million electric car project in Mississippi.
The partnership’s criticisms of EB-5 and GreenTech, meanwhile, remained largely private for roughly three years, until McAuliffe began making another run for governor. By December 2012, with a new CEO, Martin Briley, leading the partnership, the project had become a campaign issue, sparking open records requests from reporters.
Several days after seeking to arrange a meeting with McAuliffe, with the emails about to become public, Briley sent a written apology to GreenTech CEO Charles Wang for the agency’s remarks criticizing the carmaker and EB-5.
Some of those same critics, including Povar and Lehmkuhler, still are employed at the Virginia Economic Development Partnership, a state agency that operates independently of the governor but regularly works with him and his secretary of commerce and trade on the administration of such incentives as the Commonwealth’s Opportunity Fund.
McAuliffe, meanwhile, has confronted his own problems with EB-5, and the program came back to cast a shadow over his ultimately successful second run for governor.
Federal investigators examined a series of incidents in which McAuliffe rattled cages to break apart what he saw as bureaucratic EB-5 logjams to achieve faster and favorable processing decisions. In an episode made public in their final report, federal investigators said McAuliffe screamed and cursed at Alejandro Mayorkas, the chief administrator of the EB-5 program who headed U.S. Citizenship and Immigration Services. Mayorkas captured some of McAuliffe’s words on voice mail. He said the pressure began in 2011 and ran for two years.
In 2013, as the two men passed each other in a crowd, McAuliffe took a public shot at Mayorkas.
“Your agency is killing the project,” McAuliffe said, according to the investigative report.
In that document, made public in late March 2015, the Office of the Inspector General at the Department of Homeland Security upheld whistle-blower complaints from agency employees who said Mayorkas succumbed to outside influence and intervened improperly on behalf of politically powerful stakeholders, including McAuliffe, then board chairman of GreenTech. Mayorkas’ actions “created a perception within the EB-5 program that certain individuals had special access and would receive special consideration,” the report found.
Backer says programan ‘excellent tool’
Whether EB-5 investors are pouring cash into Virginia today isn’t clear.
A Shanghai law firm posted a Facebook ad last year soliciting EB-5 money for UniTao Pharmaceuticals a few months after the Chinese-based company said it was idling the Petersburg factory where it planned to open a plant. The company had not yet collected an expected $1 million state grant for the $22.5 million project. Efforts to reach UniTao were unsuccessful.
Partnership officials are mostly mum today on EB-5, although a recent open-government request for agency documents regarding the program resulted in hundreds of pages of records being withheld because they contained proprietary information about funding plans for projects. Two business plans dated in the past three months are in the mix.
“It is up to prospective clients and developers to determine if there is value in using EB-5, or other federal resources, to help advance financing for specific projects,” partnership spokeswoman Suzanne Clark said.
Asked to address the apparent shift in sentiment since the partnership’s criticism of EB-5 six years ago, Clark declined.
Jones said if a company planned to use EB-5 that wouldn’t factor into the agency’s decision-making on whether to approve incentives.
Jones said that if a company seeking state financial support presents a financial plan involving use of EB-5, officials would review it. None has so far, he said. “It really isn’t a factor that has, if you will, been relevant in any of the investment decisions that we’ve made,” Jones said.
“I don’t come to the table with a bias against EB-5 or for it,” Jones added.
Officials both at the Virginia Economic Development Partnership and in the governor’s office might be disinclined to air public criticisms of EB-5 in light of McAuliffe and the agency’s history with the program, said David North, a fellow at the Center for Immigration Studies.
Jones “is in sort of a spot,” North said. “It would be awkward for him to diss a program that his boss had used in another life.”
That applies to Virginia Economic Development Partnership staffers, who may find a neutral stance the only one that’s politically tenable, North said.
A cordial tone runs through February 2015 email exchanges between partnership Vice President of Research Robert McClintock and Williams, the immigration lawyer who worked on the GreenTech team that lobbied federal officials over EB-5 processing.
After an apparent meeting between Williams and McClintock, the latter wrote back, “I know that Secretary Jones will be most grateful for the guidance that you can impart as we strive to build the New Virginia Economy.”
“It is my pleasure to assist! I will be in touch again soon,” Williams replied.
Jones said he hasn’t read the inspector general’s report that mentions GreenTech, Williams and influence peddling. He recalled Williams reaching out. She’s one of several EB-5 consultants who have come to him with what he called “bullish” presentations about the program.
Williams, who continues EB-5 work, described the program as an “excellent tool” for project development. “I have clients everywhere,” she said. “D.C., Virginia, Philadelphia, New York, California. EB-5, as you know, is very popular.”
While some feed EB-5 information to the partnership, others seek guidance on the program.
Tom Rumora, Spotsylvania County’s director of economic development and tourism, said that if he were contacted by a business prospect interested in EB-5 capital, “I would call the VEDP office immediately and say, ‘How do you see this working?’ ”
He then cited a familiar EB-5 refrain.
“It is unusual and it will raise some eyebrows,” Rumora said. “Just the concept that a foreign investor can be doing this to accelerate their citizenship and that they are not directly involved in the company. They just buy their way into citizenship.”
Partnership email traffic about EB-5 also contains a note Rumora sent to Matt McLaren, a manager of international trade at the agency. Rumora had spoken to Michael Sears, an Alexandria-based broker of EB-5 deals. Sears tipped federal authorities to the doomed EB-5 hotel project in Chicago.
Florida attorney David Derrico, who represented some investors in that project, also represented Carolina States Regional Center in Charlotte, North Carolina, when it successfully applied to become an authorized EB-5 broker. Derrico said that application was one of more than 100 he’s filed.
Carolina States shares a business address with Development Advisors Inc., the site consultant for Lindenburg Industry, the company behind the failed deal in Appomattox that drew a $1.4 million grant from the Commonwealth’s Opportunity Fund after the partnership failed to vet the project.
Among other things, an investigation by The Roanoke Times found that partnership officials relied on false information posted on a company website that made it appear that plans to open a catalytic converter plant in Appomattox were an expansion of existing operations in North Carolina. No such operations existed. Virginia has yet to recover its $1.4 million investment from Lindenburg.
Both of Carolina States’ top representatives, Dandan Liu and Jane Wu, appeared in Appomattox on Nov. 5, 2014, when McAuliffe announced the project. A picture taken at the event shows both women with the governor as part of a group clutching cardboard checks.
Agency officials declined to comment on the photo and said they had no information indicating that the Lindenburg project relied on EB-5 money. Neither Carolina States nor Lindenburg has responded to requests for comment.