The original plan was to attract foreign investment to blighted neighborhoods. But instead, the controversial EB-5 investor visa enabled affluent Chinese to park their cash in high-end real estate in Beverly Hills and Manhattan -- benefiting developers such as Donald Trump and his son-in-law, Jared Kushner.
Now the visas criticized as "green cards for cash" face a questionable future, with some members of Congress refusing to reauthorize the program, which expired Friday, unless there is significant reform.
Proponents of the program argue that the investor visas provide capital for economic development. Critics say it encourages a two-tier immigration system favoring the rich over those fleeing wars, persecution and poverty.
"These are wealthy investors whose main goal is to secure the visa as quickly as possible," said Gary Friedland, an investments and capital markets scholar in residence at New York University whose research focuses on EB-5 capital. "The way to do that is to invest in the safest projects that are most likely to be completed in the shortest period of time."
Some lawmakers, as well as the White House, say lax government oversight has resulted in a visa program that's rife with abuse.
Sen. Charles Grassley, R-Iowa, chairman of the Senate Judiciary Committee, and Sen. Patrick Leahy, Vt., a former ranking Democrat on the panel, have proposed reforms, along with their counterparts in the House. So, too, has the Department of Homeland Security.
Some members of Congress threatened to let the program expire in its current form on Friday if their colleagues do not agree to immediate changes.
Industry observers say the program is likely to be reauthorized under a short-term budget bill, separate from large-scale immigration reforms being hashed out with industry and the Trump administration.
The deadline presents a tricky political test for President Donald Trump. Both he and Kushner, a senior adviser to the president, have benefited directly from the visa program. Trump, who last week signed an executive order calling for an overhaul of high-skilled worker visas, has not spoken out much on EB-5 visas.
"It's a third-rail issue for the White House. They don't want to be seen as obstructionists to reform," said William Cook, former general counsel of the U.S. Immigration and Naturalization Services in the George H.W. Bush administration when the EB-5 program was created. His law practice, Global Migration Law Group, represents foreign investors.
The White House issued a statement to The Washington Post this week saying that the Trump administration is weighing reforms to the foreign investor visa program.
"There are serious concerns held by the administration regarding the EB-5 visa program, in part because it is not being used as it was primarily intended," said Michael Short, a White House spokesman. "The administration is continuing to evaluate reforms to the program, which we believe is in need of substantial repair."
EB-5 created in 1990
Congress created the EB-5 citizenship pathway in 1990 as a way to provide jobs during a recession. The guidelines require aspiring immigrants to invest $1 million in a new business anywhere in the country that would create at least 10 full-time jobs -- or put $500,000 into projects in needy areas, such as rural or urban communities with unemployment rates well above the national average. In exchange, the investor and immediate family members receive two-year conditional green cards.
The law does not define economically needy areas, and developers often draw the boundaries, resulting in "gerrymandered" areas in which their projects are located in affluent communities, researchers said.
This is how the Beverly Hills Waldorf Astoria ended up as an EB-5-funded project, with $150 million in foreign investment by 300 investors at $500,000 each, according to a report by Friedland for NYU Stern's Center for Real Estate Finance Research.
It's also how Trump Bay Street, a 50-story luxury apartment complex built by Kushner Cos. in Jersey City, was financed, according to a 2016 Bloomberg News report. A quarter of that project's funding -- $50 million -- came from EB-5 investors.
"The original intent was to establish an incentive for immigrants to invest in areas that can't otherwise attract conventional capital," Friedland said. "Instead, virtually all projects qualify. It's merely serving to enhance the returns for those developers."
About 99 percent of the visa holders invested only $500,000 -- and only a tiny fraction of projects, 3 percent, were in rural communities, according to Rebecca Gambler, director of homeland security and justice issues at the Government Accountability Office.
About 10,000 EB-5 visas are issued each year; 85 percent go to Chinese nationals, according to federal data compiled by Invest in the USA, an EB-5 trade association.
The foreign investment dollars are concentrated most heavily in California, New York and Florida, according to a Commerce Department report in January.
The bill from Grassley and Leahy proposes raising the minimum investment to $800,000. A portion of EB-5 visas would be reserved for rural areas. And the bill would impose stricter criteria for defining needy areas.
But some industry representatives say the changes would hurt projects already underway.
Washington has benefited from more than $250 million in EB-5 investments since 2011, said Angel Brunner, founder and president of EB5 Capital, which connects investors with development projects in 10 states plus the District.
More than half of that money has gone into the NoMa neighborhood north of Union Station, she said, where previously there was nothing but warehouses lining railroad tracks. An REI flagship store has sprung from the former Uline Arena.
"None of these projects would qualify under the proposed changes," Brunner said.