Senators vow EB-5 reform

A row of vacuum packaging machines at the end of the packaging area at the Northern Beef Packers plant is shown in this February 2012 photo. 

A scandal plagued program that allows wealthy foreigners to buy their way into the country needs serious reform if it’s going to survive at all, several U.S. senators said Tuesday.

In a display of bipartisanship, both Democrats and Republicans called for more oversight into the country’s EB-5 Immigrant Investor Program, which allows foreigners to obtain visas to the United States for investing as little as $500,000 into qualified projects that promote economic development in poor or rural areas.

The program has come under fire following numerous examples of fraud and corruption. In South Dakota, the program was at the center of a public corruption inquiry after the state official who oversaw EB-5 left state government to work for the program. He later committed suicide before state officials could charge him for misdirecting state money.

“If this program is going to continue to exist, it’s got to improve,” Vermont Sen. Patrick Leahy said.

Leahy, who was in office when Congress created the program in 1990, said its intent was to help rural and impoverished areas. But he noted that numerous investigations have found that many projects, such as hotels, convention centers and other buildings, go in the wealthy parts of major cities. He added that the program has subsidized “mega developers.”

“Reform of this program has to be meaningful reform,” he said.

Iowa Sen. Chuck Grassley, who chaired Tuesday’s Senate Judiciary Committee hearing into EB-5, has been one of the program’s harshest critics. He began the hearing with a long list of program flaws. Jobs that are required to be created in exchange for a visa aren’t direct jobs, but instead can be estimated. The brokers who recruit investors sometimes charge exorbitant fees, invested funds are not always vetted, and the regional centers that put together EB-5 projects could be influenced by foreign governments, posing national security risks.

“It is widely acknowledged that the EB-5 program is riddled with flaws and corruption,” he said.

Unless it’s reauthorized, the program is set to expire at the end of September. California Sen. Dianne Feinstein said she wants to see it expire. Feinstein said the program unfairly lets wealthy foreigners jump ahead of those waiting to legally immigrate to the United States, some for as long as 24 years.

“I don’t believe America should sell visas and eventually citizenship,” she said.

But several other senators say the program could be saved if reformed. Texas Sen. John Cornyn lauded EB-5 for leading to billions of dollars in direct investment into the U.S. economy.

“I would suggest we should mend it and not end it,” he said.

Connecticut Sen. Richard Blumenthal agreed: “It has created jobs and opportunity unquestionably in some parts of the country.”

In South Dakota, EB-5 was used in about a dozen projects, leading to hundreds of millions of dollars since about 2004. Projects included dairies, a casino and energy. But the program blew up in spectacular fashion after the Northern Beef Packers Plant in Aberdeen went bankrupt in 2013. Dozens of mainly Chinese investors lost their money – some of whom are suing the state – and an investigation found that former cabinet Secretary Richard Benda directed $550,000 in state money to a business that oversaw the project, where Benda went to work after leaving state government.

Nicholas Colucci, the head of the Immigrant Investor Program under the U.S. Citizenship and Immigration Services, said in Tuesday's hearing that his office has instituted a series of reforms to better monitor the program – reforms that Grassley dismissed as “window dressing.” Colucci said the government has closed down several EB-5 regional centers because of problems.

In Septembers, USCIS notified the state that it was planning to cut ties with the South Dakota Regional Center over a host of issues with the state’s EB-5 program.

http://www.argusleader.com/story/blogs/jonathanellis/2016/02/02/senators-vow-eb-5-reform/79709014/

Mentions

• Northern Beef Packers III
• South Dakota Regional Center Inc.
• Patrick Leahy
• Chuck Grassley
• U.S. Citizenship and Immigration Services

Litigation Cases

• Darley International LLC vs South Dakota International Business Institute (SDIBI)

States

• South Dakota