Sooner or later the whole crooked EB-5 business is going to come crashing down

[cali]

EB-5 is the federal program that provides green cards (read citizenship) for big $ investments. Here's how it supposedly works:

The EB-5 visa for Immigrant Investors is a United States visa created by the Immigration Act of 1990. This visa provides a method of obtaining a green card for foreign nationals who invest money in the United States.[1] To obtain the visa, individuals must invest $1,000,000 (or at least $500,000 in a "Targeted Employment Area" - high unemployment or rural area), creating or preserving at least 10 jobs for U.S. workers excluding the investor and their immediate family.[1] Initially, under the first EB-5 program, the foreign investor was required to create an entirely new commercial enterprise; however, under the Pilot Program investments can be made directly in a job-generating commercial enterprise (new, or existing - "Troubled Business"[2]), or into a "Regional Center" - a 3rd party-managed investment vehicle (private or public), which assumes the responsibility of creating the requisite jobs. Regional Centers may charge an administration fee for managing the investor's investment.

If the foreign national investor's petition is approved, the investor and their dependents will be granted conditional permanent residence valid for two years.[2] Within the 90 day period before the conditional permanent residence expires, the investor must submit evidence documenting that the full required investment has been made and that 10 jobs have been maintained, or 10 jobs have been created or will be created within a reasonable time period.[2]

http://en.wikipedia.org/wiki/EB-5_visa

So much opportunity for fraud and skullduggery.

I've been watching it close up because the biggest EB-5 project in the country is here in a remote corner of Vermont bordering on Canada.

<snip>

Mr. Stenger has already attracted 550 foreign investors from 60 countries to put up $275 million for the first phase: a hotel at the Jay Peak ski complex, an indoor water park the size of a football field, an ice hockey arena, condominiums, restaurants and stores.

The second and third phases, now under way, require 1,000 additional foreign investors to put up $500 million to overhaul Newport and to develop the nearby Burke Mountain ski area.

Mr. Stenger and Mr. Quiros are putting up $90 million themselves. But even at $785 million, this is one of the single biggest projects in the country financed under the investor program.

Congress created the visa program in 1990 to help stimulate the economy. Because of a cumbersome process and complaints of fraud and corruption, it was long underused.

<snip>

http://www.nytimes.com/2012/12/31/us/31vermont.html?_r=0

Within a year, this project will be exposed for the fraud that it is and when it does, the whole EB-5 system will come crashing down.

[MADem]

1. The Canadians have been doing this for a long while.

They demand a massive chunk of cash, too.

Their program is so popular they've put in on hold so they can process the scads of applications they have received thus far: http://www.cic.gc.ca/ENGLISH/immigrate/business/investors/index.asp

I didn't see anything in that NYT article that backs up your assertion that the program is a fraud and will come crashing down, though. Not a word.

You're going to have to back up that assertion with a few facts if you want your thesis to be regarded seriously.

[cali]

3. Just look up EB-5 problems on Google

There are scads of examples:

http://online.wsj.com/news/articles/SB10001424052702304500404579129690408822088

http://cis.org/north/uscis-warns-eb-5-immigrant-investor-fraud

http://www.jdsupra.com/legalnews/sec-charges-texas-couple-for-eb-5-fraud-17557/

http://www.yuimmigration.com/content/view/232/9/


It isn't rocket science to discern that such a program is ripe for the worst kind of abuse.

And Stenger's Jay Peak/Newport VT project is, I believe, the largest single EB-4 project in the country. It stinks.

[MADem]

5. The focus is on Americans committing fraud, not foreigners.

Your first link is locked-can't access it, but the headline just says they're engaging in "greater scrutiny" over the program--nothing about corruption.

The second link is more about investors--people benefitting from the program--having the potential to be ripped off:

Alien investors were given a detailed checklist of matters to examine before they put half a million dollars — the usual investment amount — into the schemes that can lead to a fistful of green cards for investors and their family members.

They were warned to make sure that everything was in writing, that the brokers were not promising guaranteed returns (EB-5 investments are supposed to be at risk, not loans), and to watch out for "layers of companies run by the same individuals".


Further, the warning was not simply an alert to the possibility of fraud, it was supported by reports of SEC actions against fraudsters in Chicago who had put together a massive scheme to steal money from Chinese investors, as we reported earlier, and of more recent SEC and FBI moves against a smaller EB-5 scandal, in this case a Ponzi scheme in South Texas, also the subject of an earlier blog.

All good advice, but the government did not go on to say that all EB-5 offerings are, by definition, second-class investments, ones in which offers of a set of visas are being made before money will change hands. The vast majority of investments in America — think of buying some stock on one of the exchanges — are made without such an inducement.

The USCIS document cries out for translation. It is not native English-speakers who are taken in by fraudulent offers in this program, it is primarily Mandarin speakers, as the vast majority of EB-5 investors are from China.

The next link is on the same lines--Americans defrauding clueless investors from abroad:

According to the SEC report, The Ramirez’s used the funds raised for their own personal expenses and businesses, and may even have funded payments to existing investors as part of a Ponzi scheme. The investors targeted by the couple were predominantly from Mexico, though there were others from Egypt and Nigeria. The U.S. Citizenship and Immigration Services helped the SEC with its investigation, as the Ramirez’s had applied to USCIS for regional center designation of one of their companies, USA Now, LLC. The SEC reports that investors were told their funds would be held in escrow until USCIS approved the regional center.

Caveat emptor, and all that. This program is very similar to the Canadian one.

You haven't explained how you think the program in Vermont stinks. The Vermont scheme isn't promising returns on investments, like the people in Texas and elsewhere were doing.

Separate from this issue is the question "Should we be selling visas and green cards?" It's like paying to jump the line, but it's not like they aren't bringing anything to the table. We've always had preferences in immigration--it's just that, for USA and Canada, lately, the preference has been not for youth, not for pale skin, not for strong backs, but for cold, hard cash.

[cali]

7. I can't explain why I'm convinced the Stenger project stinks

call it paranoia or not exposing people.

[MADem]

9. Time will tell, I suppose.

Anyone shelling out that kind of money for a green card had better check and double-check, unless that kind of money is pocket change to them....

[rucky]

2. What strikes you as being ripe for corruption?

I'm not saying it's not there. Just trying to figure out the angle.

[cali]

4. see links in my response to MA Dem

[rucky]

6. Ok. I see where this is going.

I would make a horrible fraudster for not seeing it. The jobs created for the visas will primarily be in virtually endless construction, but no viable payout for the investors. This guy gets money off the top, but in 2-5 years, the investors will fill the visa requirement, but nothing much more than that. The location is pretty remote, and I'm not seeing how this community could sustain this monstrosity.

[cali]

8. It can't and there are more opportunities for fraud than that

for instance, in a phase of capitol expenses they can use the EB-5 funds for operating expenses at Jay and Burke- and Burke Mountain is a huge sinkhole.

As for the community, 10,000 jobs in a town of 5,000 and its surrounded by towns of a few hundred. In any case schools, roads, etc wouldn't even begin to support that kind of growth.

[treestar]

10. What's wrong with that?

10 US jobs per investor?

[cali]

11. first of all, there's case after case where 10 jobs haven't been created

and in the Jay Peak/Newport VT deal, many of the jobs will be crappy paying service and seasonal

[treestar]

12. Still jobs

Higher end jobs come about because there are people to buy those services. I don't see the problem here. Americans might also invest and create similar crappy jobs, but no one would think that a bad thing.