In Immigration Debate, Millionaire’s Visa Under the Radar
By Kelly Chung Dawson, New America Media
Working with privately run regional EB-5 centers, investors must be able to prove that their money has gone toward creation of at least 10 jobs for US citizens, through a venture that promotes “economic growth, including increased export sales, improved regional productivity, job creation or increased domestic capital investment,” according to US Citizenship and Immigration Services.
Projects with EB-5 financing include the $172 million Marriott hotel now under construction in downtown Los Angeles. The venture is expected to create 800 temporary construction jobs and 200 permanent jobs.
The program, which sets a minimum investment of $500,000 for projects in high-unemployment or rural areas and a $1 million threshold for other projects, has drawn criticism for creating a system that links the prospect of citizenship to an applicant’s ability to pay. Whether it actually creates jobs or stimulates local economies has also been questioned.
A project involving an EB-5 applicant must demonstrate only that it has “indirectly” created jobs, a loophole that has proven easy to slip through. A recent rash of scams targeting would-be investors has caused new problems for applicants, the private operators of regional EB-5 processing centers that match applicants with suitable business opportunities and federal immigration authorities.
The program’s supporters point to the benefits such investment can bring to local economies, especially at a time when deal financing by US banks remains slow. Reports of fraud and deals falling apart, the proponents argue, are the exception for a program projected to have almost 10,000 participants this year.
The popularity of the EB-5 contrasts with the picture in 2007, when fewer than 800 people applied. That low number was due to “an onerous application process and lengthy adjudication periods”, according to the Government Accountability Office.
But application procedures have since been streamlined, with a heavy push for applicants from China, where growing middle and upper classes have fueled increased immigration to the US.
US Citizenship and Immigration Services reports that of 7,641 EB-5 visas issued in fiscal year 2012, about 80 percent went to Chinese applicant-investors. Hundreds of consulting firms that specialize in EB-5 cases have cropped up in recent years, with advertising on television, radio and the Internet. Some consultants are said to charge as much as $175,000 for handling an application and matching it with a US business seeking investors.
Chinese applicants now have a wide selection of options to choose from, as American companies in various industries compete for EB-5 interest.
The China International Immigration Report found earlier this year that among the country’s wealthiest (citizens with assets of over 100 million yuan, or about $16 million), 47 percent were considering moving abroad and 27 percent had already done so. For Chinese with assets of more than 10 million yuan, 60 percent had applied for an EB-5 or already received one.
The real estate website Soufun.com said that of 5,000 people surveyed, 41.5 percent cited better living conditions as a reason for emigrating, and 35.43 percent emphasized educational opportunities for their children.
Immediate family members of EB-5 investors are also eligible for conditional US residency, which is generally approved nine months after the investment has been initiated. Two years later, residency status becomes permanent; eventually the applicant and close relatives are eligible for US citizenship.
The program’s higher visibility has been accompanied by scandal. The Securities and Exchange Commission in February sued an EB-5 regional center in Chicago and accused its operator, Anshoo Sethi, of defrauding more than 250 investors of about $156 million for a convention center and hotel project. Most of the investors were Chinese, the SEC said. Its lawsuit claims Sethi mismanaged the investors’ money, including $11 million in administrative fees, and falsely marketed the project as a joint project with established hotel companies.
CIS, the nation’s immigration enforcement agency, has responded with closer monitoring of regional centers and adding staff economists to assess the economic-impact claims of the centers and the investment-seeking companies with which they do business.
The program will expire in September 2015 unless Congress reauthorizes it, but its long-term future is uncertain. President Barack Obama said earlier this year that he hopes to make the EB-5 visa permanent.
This article was first published in New America Media.
[Photo by caltiva]