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8/2/2016

GrassleyDiscussesFailures,FutureofEB5ForeignInvestorVisaProgramatJudiciaryCommitteeHearing|ChuckGrassley

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GrassleyDiscussesFailures,FutureofEB5ForeignInvestorVisaProgram
atJudiciaryCommitteeHearing
Feb02,2016
PreparedStatementbySenatorChuckGrassleyofIowa
Chairman,SenateJudiciaryCommittee
HearingontheFailuresandFutureoftheEB5
RegionalCenterProgram:CanitbeFixed?
February2,2016
In1990,CongresscreatedanemploymentpreferencecategoryknownasEB5whichwasintendedtocreatenew
employmentforU.S.workersandtoinfusenewcapitalintothecountry,nottoprovideimmigrantvisastowealthy
individuals.Twoyearslater,CongressrevisedtheEB5categorybyestablishingapilotprogramallowinginvestorstouse
regionalcenterstopooltheirinvestments.Thispilotprogramstillexists,nearly25yearslater,butitsdeeplyflawed,lacks
adequateoversight,andhasveeredfarawayfromcongressionalintent.Theprogramisinneedofamajoroverhaulifitis
goingtobereauthorizedattheendofthisfiscalyear.
Yetdespitetheneedforreform,thefiscalyear2016omnibusappropriationsbillincludedastraightandcleanextensionof
theprogram.Thiswasadisappointmentgiventhealarmbellsandwhistleblowerallegations.Itwasamissed
opportunity.So,wewillhavetomakeadecisionshouldtheprogrambefixedorshoulditbenixed?
ItiswidelyacknowledgedthattheEB5programisriddledwithflawsandcorruption.MaybeitisonlyhereonCapitolHill
onthisislandsurroundedbyrealitythatwecanchoosetoplugourearsandrefusetolistentocommonlyacceptedfacts.
TheGovernmentAccountabilityOffice,themedia,industryexperts,membersofcongress,andfederalagencyofficials,
haveconcurredthattheprogramisaseriousproblemwithseriousvulnerabilities.Allowmetomentionafewoftheflaws.
Investmentscanbespentbeforebusinessplansareapproved.
RegionalCenteroperatorscanchargeexorbitantfeesofforeignnationalsinadditiontotheirrequiredinvestments.
Jobscreatedarenotdirectorverifiablejobsbutratherareindirectandbasedonestimatesandeconomicmodeling.
JobscreatedbyU.S.investorsarecountedbytheforeignnationalwhenobtainingagreencard,evenifEB5moneyis
onlyafractionofthetotalinvested.
Investmentfundsarenotadequatelyvetted.
Giftsandloansareacceptablesourcesoffundsfromforeignnationals.
Theinvestmentlevelhasbeenstagnantfornearly25years.
Theresnoprohibitionagainstforeigngovernmentsowningoroperatingregionalcentersorprojects.
Regionalcenterscanberentedorsoldwithoutgovernmentoversightorapproval.
Regionalcentersdonthavetocertifythattheycomplywithsecuritieslaws.
Theresnooversightofpromoterswhoworkoverseasfortheregionalcenters.
Theresnosetofsanctionsforviolations,norecourseforbadactors.
Therearenorequiredbackgroundchecksonanyoneassociatedwitharegionalcenter.
RegionalcentersdrawTargetedEmploymentAreaboundariesaroundpoorareasinordertocomeinatalower
investmentlevel,yetthejobscreatedarenotactuallycreatedinthoseareas.
http://www.grassley.senate.gov/news/newsreleases/grassleydiscussesfailuresfutureeb5foreigninvestorvisaprogramjudiciary

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8/2/2016

GrassleyDiscussesFailures,FutureofEB5ForeignInvestorVisaProgramatJudiciaryCommitteeHearing|ChuckGrassley

EveryTargetedEmploymentAreadesignationisrubberstampedbytheagency.
Adjudicatorsarepressuredtogettoayes,especiallyforthosepoliticallyconnected.
Visasarenotproperlyscrutinized.
Visasarepushedthroughdespitesecuritywarnings.
Filesandapplicationslackbasicandnecessaryinformationtomonitorcompliance.
Theagencydoesnotdositevisitsforeachandeveryproject.
Theresnotransparencyonhowfundsarespent,whoispaid,andwhatinvestorsaretoldabouttheprojectstheyinvest
in.
Therearealsoclassifiedreportsthatdetailthenationalsecurity,fraudandabuse.Ourcommitteehasreceivednumerous
briefingsandclassifieddocumentstoshowthissideofthestory.
TheenforcementarmoftheDepartmentofHomelandSecuritywroteaninternalmemothatraisessignificantconcerns
abouttheprogram.OnesectionofthememooutlinesconcernsthatitcouldbeusedbyIranianoperativestoinfiltratethe
UnitedStates.Thememoidentifiessevenmainareasofprogramvulnerability,includingtheexportofsensitivetechnology,
economicespionage,usebyforeigngovernmentagentsandterrorists,investmentfraud,illicitfinanceandmoney
laundering.
AninteragencyworkinggroupwasorganizedbytheNationalSecurityStaffbecauseoftheseriousconcerns.Thisgroups
draftmemosaid,Thecapitalraisingactivitiesinherentintheregionalcentermodelraiseconcernsaboutinvestorfraudand
otherconductthatmayviolateUSsecuritieslaws.
TheSecuritiesandExchangeCommissionhasbroughtatleast10suitsagainstregionalcentersandoperators.U.S.
investorsandforeignnationalsarebeingdupedandlefthighanddry.WellhearfromtheheadoftheCommissions
enforcementbranchaboutwhattheyareseeinginthemarket.
ThentheresthefactthatmostofthevisasaregoingtourbanandaffluentareasatadiscountedratewhenCongress
specificallyintendedtosteersomevisastoruralandhighunemploymentareas.Censustractsarestitchedtogetherto
incorporateremotepublichousingdevelopmentssothathighrises,hotels,casinosandresortscanattractinvestorsforless
thanthestatutory$1millionrequirement.
Howmanymoreintelligencereportsareneededtounderstandtheproblems?Howmanymorewhistleblowersaregoingto
bedemotedforspeakingthetruth?HowmanymoreprojectsinmidtownManhattanattheexpenseofruralAmericaneed
tobehighlighted?Howmanymoreheadlinesareneededbeforetheprogramisfixed?
Somesayweshoulddoawaywiththeprogram.Somesayitneedstobereformed.Somelikethestatusquo.But,its
timeforthingstochange.
Today,wellhearfromtheDepartmentofHomelandSecurityabouttheenhancementstheyhavemadeandthe
improvementsthatarebeingconsidered.Nearlyfouryearsago,IsentalettertoDirectorofU.S.Citizenshipand
ImmigrationServicesMayorkasabouttheproblemsintheprogram.Mayorkas,whoisnownumber2attheDepartment,
saidhewasconsideringregulatorychangestoaddressconcerns.Yet,thedepartmenthasnotdoneanythingtoresolvethe
problems.Iamhopefulthattheagencywilltakeimmediateandappropriatestepswithintheirauthoritytoturnthisprogram
around.

GrassleyandRankingMemberPatrickLeahyauthoredabipartisanreformmindedEB5reauthorizationin2015,which
wouldhaveimprovedaccountability,addressedfraudandnationalsecurityvulnerabilities,andreturnedtheprogramtoits
originalintent.Unfortunately,Congressoptedtoignorethewelldocumentedconcernsandreauthorizethecurrent
programwithoutanyreforms.
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