EB-5 Visa Program: Can It Be Fixed?: An Overview of the EB-5 Program, Its Policy Issues & Potential Repairs
Sherisse
Lewis*
Like the Founding Fathers, many
desire to immigrate to the United States in search of the proverbial American
dream, hoping for better opportunities and an improved way of life.[ii] The Declaration of Independence memorializes
this vision—holding as self-evident and true—man’s inalienable right to life,
liberty and the pursuit of happiness.[iii] Nevertheless, to those who dare tread across
oceans and seas for a taste of the proverbial pie, immigration to the United
States is not readily accessible and often comes at a hefty cost.[iv] Most new citizens pay this price in a public
ceremony—swearing the Oath of Renunciation and Allegiance forsaking loyalty to
former states and sovereignties.[v] For others, while the cost is monetary, it is
still dear.[vi]
Pursuant to Article I, Section 8,
Clause 4 of the United States Constitution, Congress is granted plenary power
to “establish a uniform [r]ule of [n]aturalization . . . throughout the United
States.”[vii] With this enumerated control, Congress was
afforded the autonomy to admit or deny access to the land of opportunity and consequently, enacted the Immigration Act
of 1882.[viii] The Immigration Act of 1882 is a product of
Congress utilizing its exclusive power and is widely recognized as the United
States’ first immigration law.[ix] Subsequently, a series of reforms followed,
most notably in 1990.[x] In 1933, the Immigration and Naturalization
Service (“INS”) was charged by Congress with the responsibility to commission
immigration and naturalization.[xi] Pursuant to a large scale restructuring of
the United States government in 2003, this duty was split when INS was divided
into three entities and placed under the guidance of the newly created
Department of Homeland Security (“DHS”).[xii]
During the term of the President
George H. W. Bush Administration, the Immigration Act of 1990 was passed on the
heels of a period of negative growth for the United States economy, dubbed the
Recession of 1990–1991.[xiii] It effectuated the “most sweeping overhaul of
the [United States] immigration system in [sixty-six] years” changing
naturalization from a judicial process to an administrative one.[xiv] Additionally, the Immigration Act of 1990 was
designed to aid in spurring economic growth and in fighting the recession
through the creation of American jobs, specifically through its
Employment-Based Immigration Program.[xv] Despite his administration’s attempts to
combat the declining economy, constituents abruptly lost confidence in
President George H. W. Bush when he reneged on his previous campaign
promise—“[r]ead my lips, no new taxes”—by raising taxes.[xvi] As a result, the effects of President Bush’s
broken promise were reflected at the election polls and attributed to his
defeat for re-election in the 1992 United States presidential election to
President Clinton.[xvii]
While George H. W. Bush's
presidency ended after one term in office, the Immigration Act carried on.[xviii] One pathway created through the Immigration
Act of 1990 is the EB-5 Immigrant Investor Program (“EB-5 Program” or “Program”).[xix] It was explicitly created to stimulate the
nation’s economy through capital investment by foreign nationals seeking a
legal track to United States residency.[xx] It was given the moniker EB-5 because by
filing a petition submitted under the Employment-Based Immigration Fifth
Preference program, “a non-citizen, who invests—or is actively in the process
of investing—lawfully obtained capital in a new or existing commercial
enterprise—in the United States—that creates or maintains full-time employment for
qualified workers, [may] apply for permanent residency in the United States.”[xxi]
Nevertheless, this Program has
been the subject of much controversy.[xxii] Because of registration exemption, the
Securities and Exchange Commission (“SEC”) has limited visibility into the
immigration investor market as compared to registered offerings in the public
market, which has led to much fraud.[xxiii] Although exempt from offer registration,
investments are still subject to the same statutes for the offers and sales of
securities as is used to govern registered offers.[xxiv] As a result, there have been several actions
brought by the SEC against entities and attorneys alike regarding EB-5 fraud
and the misappropriation of investor funds.[xxv] Enforcement actions have been brought against
a number of attorneys acting as investment brokers to raise EB-5 investor
capital.[xxvi] Additionally, there have been actions brought
against recipients misappropriating funds.[xxvii] In that fashion, there has been a recently
filed case in the United States District Court for the Southern District of
Florida, S.E.C. v. Quiros, et al.[xxviii]
Additionally, it has been reported
the United States Citizenship and Immigration Services (“USCIS”) cannot
effectively detect fraud or assess the Program’s economic benefits.[xxix] The USCIS’s oversight is staggered by
scattered data collection, as well as a lack of visibility into where the
foreign investor money originates.[xxx] For example, EB-5 investors must document
lawfully obtained sources of funds, not connected to drug trade, human
trafficking or other criminal activities.[xxxi] However, the Government Accountability Office
(“GAO”) has claimed the USCIS does not have a method to verify immigrants’
self-reported financial information with foreign banks; and in some cases,
immigrants have used counterfeit documents prepared overseas to show legally
derived funds.[xxxii] Consequently, this Program has drawn severe
criticism for fragmented regulation ultimately leading to its abuse.[xxxiii] The EB-5 Immigrant Investor Program’s
structure creates difficulty in monitoring, detecting, and preventing this kind
of alleged fraud.[xxxiv]
Nevertheless, there are proposed
legislation that would mitigate the risk to investors.[xxxv]
Although there have been bills
introduced proffering proposed changes to the Program, they were met with
opposition and were not passed.[xxxvi] In December 2015, President Barack Obama signed
a bill providing government funding until the next fiscal year.[xxxvii] Also included in this Congress-approved bill
is an extension, without changes, to the Program until September 30, 2016.[xxxviii] Subsequently, the Program has been extended
until December 9, 2016, and now faces renewal on April 28, 2017.[xxxix] The GAO report details four recommendations,
and the scope of these recommendations should be compared to the proposed
legislation to highlight the limits of addressing the Program through solely administrative
actions as opposed to legislative action.
Although the EB-5 Program has
been riddled with fraud and policy concerns, it is still in line with the
American dream. It attracts
entrepreneurs and gives an opportunity—albeit an expensive one—to foreigners
who are willing to make the sacrifice.
It strikes a balance and is beneficial for both prospective immigrants
and the economy. It spurs the economy by
injecting much needed capital into the country.
Unfortunately, it has fallen short of its potential.[xl] In the twenty-six years since its inception,
there has been no accurate data collection or assessment of the long-running
program’s impact on the nation’s economy.
This has made it difficult to substantiate the claim that the Program is
indeed a beneficial one.
Nevertheless, in light of its
discrepancies, the Program should be revamped on both an administrative and
legislative level. In light of the
recent presidential election, Congress should amend the Program on April 28,
2017 to better streamline its policies.
In streamlining its policies, the original mission of the Program will
be carried out by creating jobs and income in the underserved areas of the United
States. Moreover, it would give USCIS
more authority to terminate regional centers and better address fraud or
national security concerns.
Additionally, the USCIS should continue to improve its oversight of the
Program by hiring more specialists, developing interagency collaborations and a
more efficient way of detecting and preventing fraud.
In conclusion, the EB-5 Program
has immense potential, its mission is laudable and ultimately, it could greatly
benefit the still recovering United States economy.[xli]
*
Sherisse Lewis earned her
bachelor’s degree from Florida International University in Finance and in
International Business, her master’s
degree in Business Administration from Nova Southeastern University, H. Wayne Huizenga
School of Business and Entrepreneurship, and will receive her J.D. in May 2018
from Nova Southeastern University, Shepard Broad College of Law. Sherisse would first like to thank the
attorneys in the Miami Regional Office of the United States Securities and
Exchange Commission for inspiring her to write about the EB-5 Visa Program. Sherisse would also like to thank Kyla
Crowther, for impressing upon her the grammatical and writing skills necessary to
complete this Blog Post. Finally,
Sherisse would like to thank her family, friends, and specifically, her
parents, Michael and Carol Lewis, for allowing her to realize her own potential
and for being an unconditional support system.
[ii]. Kit Johnson, Buying the American Dream: Using Immigration Law to Bolster the Housing
Market, 81 Tenn. L. Rev. 829,
830–31 (2014). See generally K. M. Kostyal, Founding
Fathers: America’s Great Leaders and the Fight for Freedom, Nat’l Geographic, 2006, at 1. The American dream, often romanticized as a
national mythology, suggests anyone born in or migrated to the United States, the land of opportunity, may have a
slice of the dream through hard work and dedication. Elizabeth Keyes, Defining American: The DREAM
Act, Immigration Reform and Citizenship, 14 Nev.
L.J. 101, 109 (2013).
[iii]. The Declaration of Independence para. 2
(U.S. 1776).
[iv]. Trent
R. Hightower, Give Me Your Tired, Your
Poor, Your Huddled Masses Yearning to Breathe Free . . . As Long As They Have
the Proper Visas: An Analysis of the
Current State of United States Immigration Law, and Possible Changes on the
Horizon, 39 Tex. Tech L. Rev.
133, 136–37 (2006) (previously, immigration was open-minded and met migrants
with little resistance, but now immigration laws have tightened to control the
flow of immigrants with a quota system set in place).
[v]. 8 U.S.C. § 1448 (2012); see also Naturalization Oath of Allegiance
to the United States of America, U.S.
Citizenship & Immigration Servs., https://www.uscis.gov/us-citizenship/naturalization-test/naturalization-oath-allegiance-united-states-america
(last visited April 5, 2017).
[vi]. See EB-5 Immigrant Investor Program, U.S. Citizenship & Immigration Servs.,
https://www.uscis.gov/eb-5 (last visited April 5, 2017).
[vii]. U.S. Const. art. I, § 8, cl. 4.
[viii]. Keyes, supra note 2, at 109; see also Act of August 3, 1882, ch. 376, 22 Stat. 214 (thereby
taxing each immigrant fifty cents).
Before the enactment of the Immigration Act of 1882, the first United
States Naturalization Law was passed in 1790 and granted limited naturalization
to “free white persons . . . of good character” for two years. Naturalization Act of 1790, ch. 3, 1 Stat.
103. Subsequently, there were a series
of repeals and reforms. See Naturalization Act of 1795, ch.
19–20, 2 Stat. 414; Act of June 13, 1798, ch. 54, 5 Stat, 566; Act of April 14,
1802, ch. 26–28, 7 Stat. 153; Act of July 13, 1870, ch. 252–254, 41 Cong. 254.
[ix]. Pratheepan
Gulasekaram & S. Karthick Ramakrishnan, Immigration
Federalism: A Reappraisal, 88 N.Y.U. L. Rev. 2074, 2085 (2013); see also Act of August 3, 1882, 22 Stat.
214.
[x]. See Immigration Act of 1990, Pub. L. No.
101-649, 104 Stat. 4978 (increasing the annual level of immigration, providing
family-based and employment-based visas, and the visa lottery program). See
generally Immigration and Naturalization Act of 1965, Pub. L. No. 89-236,
79 Stat. 201; Immigration and Nationality Act of 1952, Pub. L. No. 414, 66
Stat. (prohibiting racial and gender discrimination); Naturalization Act of
1790, ch. 3, 1 Stat. 103.
[xi]. Organizational
Timeline, U.S. Citizenship & Immig.
Servs., https://www.uscis.gov/history-and-genealogy/our-history/organizational-timeline
(last visited April 5, 2017); U.S.
Citizenship & Immig. Servs., Overview
of INS History: USCIS History Office and Library, 7 (2012) [hereinafter
USCIS INS History].
[xii]. USCIS
INS History, supra note 11, at 11
(noting “INS was abolished and its functions placed under three agencies—[USCIS],
Immigration and Customs Enforcement, and Customs and Border Patrol—within the
newly created DHS. See USCIS INS History, supra
note 11, at 11 (highlighting that after the September 11th terrorist attacks,
there was a shift in the United States immigration policy to border security
and a resultant restructuring of the government).
[xiii]. 2
Olivier Blanchard, What Caused the Last
Recession?: Consumption and Regression of 1990–1991, 83 Am. Econ. Rev. 270, 270 (1993). Interestingly, one of the main causes cited
for the Recession of 1990–1991 was a consumption shock, the effects of which
were long lasting. Id. Consumption shock is
defined as a decrease in consumer consumption in relation to its common
determinants. Id.
[xiv]. Robert
C. Divine, 1990 Immigration Law: New Visas, Changed System, Tenn. B.J. 26, 26 (March/April 1991). See generally Immigration Act of 1990, Pub.
L. No. 101-649, 104 Stat.
[xv]. Immigration
and Nationality Act of 1990, 8 U.S.C. § 1153(b)(5) (2012); Howard Patrick
Barry, EB-5 As an Instrument of
Sustainable Capitalism, 16 Vt. J.
Envtl. L. 66, 70 (2014); see also
U.S. Citizenship & Immigr. Servs.,
U.S. Dep't Homeland Security, PM-602-0083, EB-5 Adjudications Policy 1 (May 30, 2013) [hereinafter
USCIS Policy Memo]; The Failures and
Future of the EB-5 Regional Center Program:
Can it be Fixed? Before the S.
Comm. on the Judiciary, 114th Cong. 1 (2006) (testimony of Stephen L. Cohen,
Associate Director, Division of Enforcement, U.S. Securities and Exchange
Commission). Historically, investment
was one seldom used pathway to legal permanent residency status. Leslie K. L. Thiele & Scott T. Decker, Residence in the United States Through
Investment: Reality or Chimera?, 3 Alb. Gov’t L. 103, 133 (2010).
[xvi]. John
W. Lee, III, Class Warfare 1988–2005 Over
Top Individual Income Tax Rates: Teeter-Totter from Soak-the-Rich to
Robin-Hood-in-Reverse, 2 Hastings
Bus. L.J. 47, 55 n.30 (2006).
[xvii]. Jeffery
Schmalz, The 1992 Capmaign: Voters; Words on Bush’s Lips in ’88 Now Stick
in Voters Craw, N.Y. Times
(June 14, 1992),
http://www.nytimes.com/1992/06/14/us/the-1992-capmaign-voters-words-on-bush-s-lips-in-88-now-stick-in-voters-craw.html;
see also U.C., Berkeley: Backcroft
Libr., 1990–92 Early 1990s Recession, http://vm136.lib.berkeley.edu/BANC/ROHO/projects/debt/1990srecession.html
(last updated March 7, 2011) (indicating that the Recession of 1990–91 also
contributed to his defeat at the polls).
[xviii]. Carla
Babb, US Presidents Gather for Bush
Library Dedication, Voice Am.
(Apr. 25, 2013), http://www.voanews.com/a/us-presidents-gather-for-bush-library-dedication/1648762.html.
[xix]. The Failures and Future of the EB-5 Regional
Center Program: Can it be Fixed? Before
the S. Comm. on the Judiciary, supra
note 15, at 1.
[xx]. The Failures and Future of the EB-5 Regional
Center Program: Can it be Fixed? Before
the S. Comm. on the Judiciary, supra
note 15, at 1; Kate Kalmykov & Steven T. Anapoell, Frequently Asked Questions Concerning the EB-5 Program, Greenberg Traurig 1, 1 (2012),
http://www.eb5insights.com/files/2012/03/Frequently-Asked-Questions-Concerning-the-EB-5-Program2.pdf.
[xxi]. Immigration
and Nationality Act of 1990, 8 U.S.C. § 1153(b)(5); Barry, supra note 15, at 70; Kalmykov & Anapoell, supra note 20, at 1. This
hot button issue permits entities, both public and private, to propose projects
for development into which foreigners invest.
Kalmykov & Anapoell, supra
note 20, at 2.
[xxii]. Jonathan
Chew, The Controversial Program That Lets
Wealthy Foreigners Buy Visas is Under Scrutiny, Fortune (Mar. 16, 2016, 10:19 AM),
http://fortune.com/2016/03/16/eb5-visa-citizenship/.
[xxiii]. The Failures and Future of the EB-5 Regional
Center Program: Can it be Fixed? Before
the S. Comm. on the Judiciary, supra
note 15, at 2; Investor Alert: Investment Scams Exploit Immigrant Investor
Program, U.S. Sec. & Exchange Commission, https://www.investor.gov/news-alerts/investor-alerts/investor-alert-investment-scams-exploit-immigrant-investor-program
(last visited April 5, 2017).
[xxiv]. The Failures and Future of the EB-5 Regional
Center Program: Can it be Fixed? Before the S. Comm. on the Judiciary, supra note 15, at 2.
[xxv]. Id. at 2; see e.g. Suzanne Barlyn, SEC
Charges Couple with Fraud in Chinese Investor Visa Scheme, Reuters (June 3, 2016, 3:59 AM),
http://www.reuters.com/article/us-sec-fraud-investors-idUSKCN0YO2QP; Press
Release, SEC.gov, SEC Lawyers Offered EB-5 Investments as Unregistered Brokers
(Dec. 7, 2015), https://www.sec.gov/news/pressrelease/2015-274.html. The SEC is a federal regulatory agency
charged with the mission to “protect investors, maintain fair, orderly, and efficient markets, and facilitate capital
formation.” What We Do, U.S. Sec. & Exchange Commission,
https://www.sec.gov/Article/whatwedo.html (last updated June 10, 2013).
[xxvi]. Press
Release, supra note 25.
[xxvii]. See Investor
Alert: Investment Scams Exploit
Immigrant Investor Program, supra
note 23 (listing several cases where recipients have misappropriated investor
funds).
[xxviii]. Amended
Complaint, SEC v. Jay Peak, No. 16-cv-21301 (S.D. Fla. May 17, 2016).
[xxix]. U.S. Gov’t Accountability Off.,
GAO-15-696, Immigrant Investor Program: Additional Actions Needed to Better Assess
Fraud Risks and Report Economic Benefits, at Cover (Aug. 2015),
http://www.gao.gov/assets/680/671940.pdf.
[xxx]. Id. at 18–19; Sanjay Bhatt, GAO Says Feds Lack Proper Oversight of EB-5
Investor Visa Program, Seattle Times
(Aug. 12, 2015, 11:40 AM), http://www.seattletimes.com/business/real-estate/gao-says-feds-lack-proper-oversight-of-eb-5-investor-visa-program/.
[xxxi]. U.S. Gov’t Accountability Off., supra note 29, at 18.
The Senate Judiciary Committee report, accompanying the
Immigration Act of 1990, states “the committee intends that processing of an
individual visa not continue under this section if it becomes known to the
Government that the money invested was obtained by the alien through other than
legal means—such as money received [from] the sale of illegal drugs.”
S.
Rep. No. 101-55, at 21. This committee
report was cited as a basis for “changing the definition of capital to exclude
assets directly or indirectly acquired by unlawful means.” Id.;
see also 8 C.F.R. § 204.6(e), (f),
(g)(1), (j) (2012); 8 C.F.R. § 216.6(c)(2) (2012); 56 Fed. Reg. 60,897, 60,904
(Nov. 29, 1991).
[xxxii]. U.S. Gov’t Accountability Off., supra note 29, at 19; see also Off.
Inspector Gen., United States
Citizenship and Immigration Services’ Employment-Based Fifth Preference (EB-5)
Regional Center Program, 7–8 (Dec. 2009), https://www.oig.dhs.gov/assets/Mgmt/2014/OIG_14-19_Dec13.pdf
(in its 2013 report, DHS drew similar conclusions).
[xxxiii]. U.S. Gov’t Accountability Off., supra note 29, at 12–34; Bhatt, supra note 30.
[xxxiv]. See generally U.S. Gov’t Accountability Off., supra note 29; Laura Foote Reiff et al.,
Immigrant Investor Program (EB-5 Regional
Center Program) Extended in Congressional Omnibus Appropriations, Greenberg Traurig (Jan. 2016),
http://www.gtlaw.com/News-Events/Publications/Alerts/190814/Immigrant-Investor-Program-EB-5-Regional-Ce%20nter-Program-Extended-in-Congressional-Omnibus-Appropriations.
[xxxv]. See generally U.S. Gov’t Accountability Off., supra note 29; Reiff et al., supra note 34.
[xxxvi]. Reiff et
al., supra note 34, at 1–2; see also American Entrepreneurship and
Investment Act of 2015, H. R. 616 (2015), American Entrepreneurship and
Investment Act of 2015; EB-JOBS Act of 2015, H.R. 3370 114th Cong.; American
Job Creation and Investment Promotion Reform Act of 2015, S. 1501 114th
Cong.; Targeted Employment Areas Improvement Act, S. 2115 (2015); Invest in Our
Communities Act, S. 2122 114th Cong. (2015); EB-5 Integrity Act of 2015, S.
2415 114th Cong.
[xxxvii]. Reiff et
al., supra note 34, at 1. See generally Consolidated Appropriations
Act, 2016, Pub. L. No. 114-113, 129 Stat.
[xxxviii]. Reiff et
al., supra note 34, at 1.
[xxxix]. Ellen
Sheng, New Proposal Seeks to Raise
Minimum Investment for EB-5 Visa, Forbes
(Jan. 28, 2017, 6:00 AM), https://www.forbes.com/sites/ellensheng/2017/01/26/new-proposal-seeks-to-raise-minimum-investment-for-eb-5-visa/#51f33322ee18.
[xl]. Is the Investor Visa Program an
Underperforming Asset?: Hearing Before the H. Comm. on the Judiciary, 114th Cong. 5 (2016).
[xli]. Michael
B. Sichter, Pumping Up America: Using the EB-5 Visa to Inject Entrepreneurial
Steroids Into a Struggling U.S. Economy, 79 UKMC
L. Rev. 1007, 1025–26 (2011).
