WASHINGTON – Senators Dianne Feinstein (D-Calif.) and Chuck Grassley (R-Iowa), ranking member and chairman of the Senate Judiciary Committee, have introduced legislation to eliminate the EB-5 visa program.
The program, which has been replete with fraud and abuse, allows foreign investors to obtain a green card and eventually citizenship in exchange for a $500,000 or $1 million investment that creates at least 10 jobs. The lower investment level is intended to spur investments in rural and high-unemployment areas.
However, the program lacks a reliable or verifiable way to measure job creation. Furthermore, many of the wealthiest areas in America have been inaccurately designated as “high-unemployment” in order to allow investors to obtain a green card for the smaller $500,000 investment.
The Department of Homeland Security’s inspector general in September 2014 released a report detailing these problems, and the Government Accountability Office also discussed problems with the program in an August 2015 report.
“The EB-5 program is inherently flawed. It says that U.S. citizenship is for sale. It is wrong to have a special pathway to citizenship for the wealthy while millions wait in line for visas. I agree that the time has come to end EB-5,” said Senator Feinstein. “The Securities and Exchange Commission has filed charges in case after case of fraud connected to this troubled program. I look forward to working with Chairman Grassley to advance our legislation.”
“The EB-5 program has been rife with fraud and national security weaknesses. It has also strayed from Congress’ original intent to spur economic development in rural and depressed areas. For years, I’ve worked with bipartisan colleagues in good faith to reform it. Unfortunately, despite its many flaws, EB-5 proponents are apparently content with the status quo, and that’s unacceptable. I was hoping that it would not come to this point, but absent serious efforts to bring about reforms, we need to take the necessary steps to wind down the program and completely mitigate fraud, abuse and threats to our security,” Grassley said.
The legislation would eliminate the EB-5 program and redirect the nearly 10,000 annual EB-5 visas to other existing immigrant visa programs.
Following are some specific examples of fraud that resulted from the program:
The Justice Department in 2014 indicted Anshoo Sethi on criminal charges related to $160 million in fraud connected to a purported convention center project near O’Hare Airport in Chicago. The Securities and Exchange Commission previously filed civil charges, which were settled. Sethi pled guilty.
The SEC in 2015 filed civil fraud charges against Luca International, a Bay Area oil and gas company, and its CEO in connection with a $68 million Ponzi scheme that included millions of EB-5 funds. The complaint stated that the Chinese community was targeted and millions of dollars were diverted to personal expenses. A final judgment in the SEC’s favor was entered in July 2016 demanding that the defendants pay $68.3 million.
The SEC in 2015 filed civil fraud charges against Lobsang Dargey and several companies for $125 million in fraud in connection with two Seattle real estate projects. The complaint alleged that funds were diverted to personal expenses. It has been reported that there is a criminal investigation into this matter.
The SEC in 2015 filed civil fraud charges against Lin Zhong and her company. Zhong raised more than $8 million through EB-5, but diverted nearly $1 million for personal use, including the purchase of a boat and two luxury cards.