The Green Mountain State and its taxpayers are the latest casualty of the notoriously corrupt EB-5 program. (It’s called EB-5 because it is the fifth-preference category of Employment-Based visas.) Who would have thought an immigration program selling United States citizenship to the highest bidder would be prone to fraud? This $16.5 million dollar settlement will be paid to the Jay Peak receivership and comes on the heels of Vermont settling in a separate case, which had investors alleging negligence by the state during a trial that could have resulted in a former governor and other state officials testifying about their (mis)management of EB-5. Taxpayers in Vermont had to pay for the “privilege” of shielding their elected officials from being accountable under oath. Investors had been wooed by Vermont elected officials like former Governors Peter Shumlin and Jim Douglas who had traveled abroad to promote Vermont EB-5 projects along with Senator Patrick Leahy. In both settlements, Vermont officials were alleged to be negligent in their management of a Regional Center that led to the Jay Peak fraud which was the largest in Vermont’s history.
The EB-5 program allows foreign investors to purchase an express ticket to legal permanent resident (LPR) status with an investment amount that is supposed to create or preserve at least 10 jobs for American workers. Congress said this program would stimulate investment in the United States and create jobs for Americans, which sounds plausible if you ignore all human incentives in the economy. As a part of the program, Congress created “regional centers” where EB-5 investors could pool resources and invest in larger projects. The regional centers can be public or private, and states like Vermont are involved in the program. There are 640 approved regional centers active as of April of this year. For as little as $800,000, a foreign investor can buy-in for a golden ticket to LPR status in the United States.
This means the Department of Homeland Security (DHS) has largely outsourced management of a program selling citizenship to private companies and state governments that are desperate for outside investment. Keep in mind, some state governors are requesting that Congress give them similar authority over importing temporary, cheap, foreign workers as well. Predictably, this has turned EB-5 into what could be the most corrupt program in the entire immigration system, which is saying a lot.
In Vermont, the EB-5 fraud case with Jay Peak ski resort was the largest financial fraud case in the state’s history. In the wake of the fraud being uncovered, Newport, Vermont was left with a gaping pit downtown where a biotech facility was supposed to be built. South Dakota had an EB-5 scandal that led to a cabinet official committing suicide while facing criminal charges (note this linked article from 2014 praised Vermont’s EB-5 Regional Center as one of the best in the country). Just like Vermont, South Dakota settled to avoid fact-finding in a trial.
In Texas, three Houston developers settled fraud charges concerning 90 Chinese investors and $49.5 million. Thomas Henderson, in Oakland California, pleaded guilty to committing fraud in the EB-5 program. His EB-5 Regional Center raised $100 million from investors from 2011-2017, and he used it as a slush fund for his various business projects. Also in California, a fraudulent EB-5 scheme in San Francisco led to a 14-count indictment. This scheme affected over 100 foreign investors.
Keep in mind, this is not even close to an exhaustive accounting of the pervasive fraud within the EB-5 program. The promise of the program is job creation and business investment, but instead it has resulted in millions upon millions of dollars in fraud along with countless hours of investigation by law enforcement and years of prison sentences. It turns out that dangling citizenship to desperate foreign—mostly Chinese—investors with little effective oversight from DHS does not really lead to job creation and investment. The generous interpretation is that our immigration policies are created by naifs who assume only good things can ever happen when massive amounts of money are involved. The other possibility is that our policy makers are either reckless with immigration policy or intentionally creating environments ripe for fraud in our immigration system.
And it is not just the EB-5 program where we see this fraud and exploitation, of course. We are seeing forced and child labor across the nonimmigrant temporary worker categories. In addition, discrimination against American workers and wage theft of both foreign and domestic workers continues to expand. Meanwhile, Congress and the President keep speaking about the need to dramatically increase legal pathways for more immigration. They have done nothing to stop the mountains of fraud and abuse within the current system, yet continue to propose expanding the numbers exponentially. There certainly is no discussion about ending travesties like EB-5 and restricting the nonimmigrant categories rife with exploitation. At some point, our Congress has to view the immigration system as it actually exists, as opposed to naive notions that immigration only adds benefits and introduces no costs. Our immigration system is overwhelmed and full of fraud and exploitation of foreigners and Americans alike. The answer cannot be to double and triple down on fraud and exploitation.
JARED CULVER is a Legal Analyst for NumbersUSA
