EB-5 FILES

It’s not uncommon for government programs to have a certain amount of fraud. Why should we treat EB-5 differently? 

 

Francis Cissna, Director of the U.S. Citizenship and Immigration Services (USCIS), which runs the EB-5 Program, openly admits that his agency doesn’t have the authority to curb endemic fraud in the EB-5 program and recommends the program be allowed to expire absent legislative reform. Director Cissna also explained the national security concerns raised by the Program: 

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In May 2017, USCIS conducted an internal fraud assessment and identified 19 cases of confirmed national security concerns. Specifically, the national security concerns identified related to terrorism, espionage, information and technology transfer, or a combination of these factors. 

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When was the last time the head of a federal agency advocated ending a program it runs? That alone should give you an idea of the problems with the EB-5 Program.

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Further, the Department of Homeland Security Inspector General (“DHS IG”) also uncovered how the Obama Administration improperly manipulated the program to benefit politically-connected companies associated with former Virginia Governor Terry McAulliffe and former Senator Harry Reid.  

 

Doesn’t the EB-5 Program create jobs? 

 

The DHS IG wrote in 2016 that the EB-5 Regional Center Program "does not provide USCIS the authority to verify that foreign funds were invested in companies creating U.S. jobs.”  In a separate report, the IG similarly concluded that USCIS regulations permit “foreign investors to take credit for jobs created with U.S. funds, making it impossible for USCIS to determine whether the foreign funds actually created U.S. jobs." 

 

What about the Department of Commerce study that found the EB-5 program generated thousands of jobs and billions in total investment? 

 

That same Department of Commerce study also states, “We did not evaluate the effectiveness or operational efficiency of the EB-5 program”.  The Commerce report further notes how it attempted to "address some of the social costs associated with the program. However, we determined that the data required for conducting a meaningful analysis of the social costs of immigrant investors and their families was unavailable and, therefore, do not include such an analysis in our study." 

 

Even if we can’t accurately measure the economic impact of the EB-5 Program, isn’t it likely to be positive? 

 

There’s no compelling evidence that projects funded through EB-5 wouldn’t have happened without the EB-5 investments. And if a project wouldn’t move forward without EB-5 investment, that may be a sign the project doesn’t make economic sense. As Manhattan Institute scholar Nicole Gelinas wrote in City Journal in 2017: 

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In fact, the government reported earlier this year that 75 percent of EB-5 investments go into the most passive sector of all: real estate…A foreign investor seeking the highest return for the lowest risk, for example, would put his money into an American real-estate project without the enticement of a visa. EB-5, thus, promotes and effectively subsidizes projects that don’t otherwise make economic sense...In encouraging massive investment in real estate, the EB-5 program perpetuates distortions of the American economy that are harming our long-term prospects for healthy growth. 

 

Doesn’t the EB-5 help areas with high-unemployment with investments in “Targeted Employment Areas?” 

 

The current use of Targeted Employment Areas (“TEAs”) openly flouts Congressional intent of the EB-5 Program. Most EB-5 projects are located in TEAs - areas that have unemployment of at least 150% of the national average rate. Although this would suggest that projects are developing in areas that could benefit from local job creation, a 2016 GAO report found that nearly 90% of EB-5 petitioners combined census tracts to meet the required unemployment rate. In other words, they gerrymandered maps to ensure the project qualified even if it wasn’t physically located in a high unemployment area. The GAO estimated that nearly 77% of the EB-5 projects in the study were physically located in areas that had unemployment levels between 0% and 6%. 

 

Couldn’t the program be reformed instead of ended? 

 

While pending modernization rules and proposed legislative reforms could potentially improve upon the current system, they will not fix the pervasive fraud and corruption endemic to the cash-for-visa program. Further, the EB-5 Industry and their allies have thus far opposed both the modernization rules and any legislative reforms. For these reasons, Congress should allow the EB-5 Regional Center Program to expire. 

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