The EB-5 program has been extended through Sept. 30, 2017, in the latest spending bill, with no changes. This is a foreign investment scheme that is tied to immigration, which I wrote about last year. The EB-5 visa is a golden pathway to a United States citizenship for those with investments of at least as much as $1 million to invest in a regional center business venture or $500,000 on projects that can employ at least 10 full-time American workers in a targeted employment area — areas designated as high unemployment localities. A regional center is an organization approved by the U.S. Citizenship and Immigration Services to sponsor capital investment projects for investment by EB-5 investors.
With the revelation that Jared Kushner’s companies have benefited from the EB-5 program, there has been renewed interest in examining how the visa works and what the loopholes are. Michael Short, a White House spokesperson, issued a statement to The Washington Post recently saying that the White House is evaluating reforms to the 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,” Short said.
There are 211 regional centers in California. Golden Gate Global is a San Francisco-based regional center working on developing the controversial Hunters Point Naval Shipyard along southeastern San Francisco. According to its website, the 75-acre Phase 1 construction is underway, which will consist of 1,400 homes and 10,000 square feet of retail with an additional 25 acres of parks and open spaces.
Benjamin Jarmon, CEO of Joorney Business Plans, with 77 clients in San Francisco and 490 throughout California, shed some light on EB-5s in the course of the work he does developing business plans for investor visa applicants.
The difference between EB-5 regional center investment and other entrepreneur visas — like E1, E2 and L1 visas — is that EB-5 is a passive investment, Jarmon explained.
“[Investors] actually just give the money to a regional center and basically get a green card,” he said. “Every other visa is an active investment. They invest in a startup or business, or they create something.”
When asked about loopholes in the EB-5 system, Jarmon agreed that it was lack of control and oversight. If each regional center claiming to be in construction was verified and checked by immigration, you wouldn’t see any issues with the program, Jarmon said. “It’s a very young program,” he added, and “as in any industry, it needs to be refined to make it more optimized.”
There have been several cases of fraud tied to the EB-5 program. When large sums of money are changing hands, greed sometimes takes primacy. In mid-May, four Chinese investors filed a lawsuit against California Investment Immigrant Fund, a business located in San Gabriel. The firm allegedly collected EB-5 investments amounting to $50 million from investors in mainland China and Hong Kong for construction projects in the San Gabriel valley, but, in fact, the money allegedly padded the bank accounts of Victoria Chan, Tat Chan and Fang Zeng, the people running the fund, with no sign of any development having been undertaken. It was a $50 million scam perpetrated against foreign nationals eager to get a foothold in American society, the immigration system and the judicial system. Included among the investors were a few who were on a Chinese government watchlist of most-wanted fugitives.
Jarmon calls EB-5 “the sexiest,” because it leads directly to the green card. “I mean It’s very sexy, the EB5,” he reiterated, “but obviously it’s not attainable for a lot of people,” referring to the high dollar amount for entry.
That is not the typical viewpoint inside the Beltway.
In a letter, dated April 11, to Ms. Samantha Deshommes of the U.S. Citizenship and Immigration Services, signed by Representatives Bob Goodlatte and John Conyers, Jr. of the House Judiciary Committee and senators Charles Grassley and Patrick Leahy of the Senate Judiciary Committee, the case was made that due to lack of inflation adjustment of EB-5 investment amounts, “the real value of each investment has fallen by 50 percent — depriving the U.S. economy of billions of dollars each year in potential investment funds and requiring investors to attract more foreign investors than they would otherwise need to in order to raise the desired amount of capital.”
The letter advocated an increase to the minimum investment amount in regional centers from $1million to $1.8 million (80 percent increase) and from $500,000 to $1.35 million (170 percent increase) in targeted employment areas.
While, no doubt, some kind of calibration is required, this kind of steep increase has the potential to backfire with fewer people being able to afford investing significantly larger sums of money. After all, as NPR’s Rob Schmitz reported in an interview with EB-5 applicants in Shanghai, most are average folks who want to give their kids better opportunities.
“Actually, everyone I know has applied for EB-5s. We’re just ordinary people. We’re not wealthy,” an applicant named Ms. Wang declared in the interview.
“The investment must be at risk for an investor, that’s one of the rules,” Jarmon says, but it’s a question of how much skin should there be in the EB-5 game. For certain, fraud should not be the risk we’re talking about. With more stringent oversight, fraud risks should be reduced and with a reasonable increase in investment the EB-5 visa can strongly impact the economy and serve its original intent — to attract entrepreneurs and increase jobs.
Jaya Padmanabhan can be reached at email@example.com. Twitter: @jayapadmanabhan. In Brown Type covers immigrant issues in San Francisco.