GAO Report Confirms that EB-5 Visa Program Susceptible to Fraud and Economic Benefits are Questionable
WASHINGTON – Chuck Grassley of Iowa, Chairman of the Senate Judiciary Committee, and Bob Corker of Tennessee, Chairman of the Senate Foreign Relations Committee, said that a Government Accountability Office (GAO) report highlights the lack of rigorous oversight of the EB-5 regional center program, specifically how the agency fails to analyze risks, continuously assess fraud and accurately measure economic benefits.
The report, entitled, “Immigrant Investor Program, Additional Actions Needed to Better Assess Fraud Risks and Report Economic Benefits,” examined efforts by U.S. Citizenship and Immigration Services to detect and mitigate fraud and other related risks, including in conjunction with other agencies. The report also validates that the program is inherently susceptible to fraud schemes, and that the agency lacks the ability to determine if investor funds are lawfully obtained.
The Immigrant Investor Program, or EB-5, provides visas for foreign nationals who invest a certain amount of capital in the U.S. economy and create jobs. The EB-5 Regional Center program allows for a certain number of those visas for foreign investors who pool their capital in centers that fund U.S. projects and commercial enterprises.
“The GAO report confirms that Citizenship and Immigration Services has a lot of work to do to ensure that the EB-5 regional center program is used for legitimate job creation and economic benefit. The country can’t afford to put national security at risk and let job creation take a back seat. The status quo is unacceptable, and we need to pass legislation to reform the program,” Grassley said. “Without adequate systems in place we can’t verify the source of funds from petitioners or ensure that investors aren’t being defrauded. One of the simplest ways to keep fraud at bay is to conduct site visits and use the in-person interview to a greater extent with people in the country on the EB-5 visa who are trying to gain lawful permanent residency. These straightforward tools are being used at a minimum or not at all. That needs to change.”
"It is critical that Congress work to strengthen oversight of this program to ensure it actually creates American jobs that otherwise would not be created and does not jeopardize our national security,” said Corker. “It is also important that the Department of Homeland Security develop more effective ways to detect and eliminate cases of fraud and to make sure the source of funds being used for these applications is not coming from criminal activity."
The GAO found that:
• Unique fraud risks in the EB-5 program include uncertain source of EB-5 investor funds, uncertain legitimacy of EB-5 investment entities, and susceptibility to influence by outside groups.
• Fraud-mitigating activities in the EB-5 program are hindered by U.S. Citizenship and Immigration Services’ heavy reliance on paper-based documentation and the agency’s failure to collect information that could be useful to detect fraud by EB-5 investors, regional centers, the businesses supported by regional centers, and other entities receiving fees from EB-5 investors.
• U.S. Citizenship and Immigration Services’ EB-5 program office has never conducted interviews with EB-5 investors before removing the conditions on their permanent residency.
• U.S. Citizenship and Immigration Services’ methodology for job creation and investments through the EB-5 program may overstate the economic benefits derived from the EB-5 program.
• U.S. Citizenship and Immigration Services does not adequately track or analyze economic outcome information from the EB-5 program.
• Confirms that an upcoming Department of Commerce study of the economic impact of the program, which has been commissioned by U.S. Citizenship and Immigration Services, will consider only the benefits of economic activity and fail to discuss the program costs.
The Judiciary Committee has conducted extensive oversight of the program over the last several years and was instrumental in bringing to light allegations brought forward by whistleblowers. The whistleblowers alleged that other federal agencies, including the FBI, had raised concerns with the approval of several EB-5 regional centers and visas for foreign investors, and that requests from politically influential people were being expedited.
The EB-5 Regional Center Program is due for reauthorization this year. Grassley, as chairman of the committee of jurisdiction, along with Judiciary Committee Ranking Member Patrick Leahy, have sponsored legislation to reauthorize and reform the program.