Feinstein calls for end to controversial EB-5 immigration program

SF Gate

By Kathleen Pender

November 4, 2015

Feinstein calls for end to controversial EB-5 immigration program

Sen. Dianne Feinstein has called for an end to the controversial EB-5 regional center program that lets foreign nationals get green cards for themselves and their families if they invest at least $500,000 or $1 million in a U.S. business that creates or preserves at least 10 jobs.

The regional center program expires Dec. 11 unless Congress renews it. Other legislators called for reforming the program, but Feinstein appears to be the first to say it should end.

“At its most basic, the EB-5 program allows a foreigner to invest $500,000 in a U.S. business, in return receive a visa that puts them and their direct family on a special path toward citizenship,” Feinstein, D-Calif, wrote in an opinion piece in Roll Call Wednesday. “At the same time, individuals unable to buy their way into the country remain trapped in seemingly endless visa backlogs that often last more than 20 years. I believe the program is deeply unfair, sends the wrong message about this country’s values and is prone to fraud and abuse.”

The EB-5 program itself is not set to expire, only the regional center program. But regional centers account for more than 90 percent of visa applications submitted under the program.

Congress created the EB-5 program in 1990 to stimulate the economy. To get a visa, foreigners had to invest at least $1 million — or $500,000 in high-unemployment areas — in a business that created or preserved at least 10 jobs. But it got off to a slow start, in part because it was hard to prove job creation.

In 1992, Congress created the regional center program. This let a private-sector entity set up regional centers that could pool foreign investors’ money to build larger-scale projects. The project still needed to create or preserve at least 10 jobs per investor, but unlike the original program, the jobs could be direct or indirect.

“Indirect jobs are those jobs shown to have been created collaterally or as a result of capital invested in a commercial enterprise affiliated with a regional center by an EB-5 investor,” according to U.S. Citizenship and Immigration Services, which runs the program.

For example, if a regional center builds a hotel, it counts hotel employees toward the requirement. If the hotel orders 100 loaves of bread per day from the bakery down the street, and the bakery hires another baker and delivery person, it could also count those two jobs. If the hotel employees spend money at Walmart and other local businesses, and they need to hire more people, it could also count them, said Stephen Yale-Loehr, an immigration attorney and professor at Cornell Law School.

The EB-5 program is small, granting a maximum of 10,000 visas a year. But it has been surging in popularity, especially among newly minted millionaires from China, South Korea and Russia hoping to send their children to U.S. colleges, the Chronicle’s Carolyn Lochhead wrote in a recent article. The 10,000 limit was reached for the first time last year. Demand from Chinese nationals is exceeding the annual limit for China.

In San Francisco, these investors have helped provide financing for redevelopment projects in Hunters Point, Treasure Island and Market Street.

But the program has attracted tremendous criticism for its size. Some investors say they have been fleeced. There have been cases of alleged gerrymandering, where developers lumped prosperous areas into high-unemployment areas so investors could put in just $500,000 each. A recent Government Accountability Office report said the immigration service has also had difficulty verifying job creation and determining whether money coming from investors was obtained lawfully in their home countries.

Because the regional center program is a pilot program, Congress must renew it periodically. If it doesn’t, it will expire Dec. 11. The original program, which does not require re-authorization, will continue. But it’s not likely to take the place of the regional center program because it requires more active participation by investors and the creation of direct jobs only.

“We have filed 900 EB-5 applications. We probably have 15 that were people directly starting their own business,” said Vaughan de Kirby, a San Francisco immigration attorney. The rest were through regional centers.

“I’m surprised Feinstein would take this position,” he said. “Framing this as an individual buying a green card is incorrect. They are making an investment in the American economy that will result in 10 jobs for an American citizen or permanent resident.”

Rep. Zoe Lofgren, D-San Jose, has co-authored a bill that would make the regional center program permanent, with some reforms. “As far as I know, Feinstein is the first to say let it expire,” Yale-Loehr said.

He’s doubtful she will get much support. The program “does create jobs for U.S. workers at no expense to taxpayers. If it’s done correctly, every Senator wants jobs in their district. It is one of the few immigration programs that has enjoyed bipartisan support.”

For more information, go to:  www.beverlyhillsimmigrationlaw.com