Plenty of fraud, but interest up in EB-5 Green Card

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NEW YORK – Even as cases of manipulation and rampant fraud continue to increase in the controversial EB-5 visa program, which doles out an instant Green Card to foreign investor and his family in return for a sum ranging from $500,000 to a million dollars in investment projects approved by the Department of Homeland Security, with caveats – the interest in the program is on the up, including from India. The wait time for that Green Card is increasing too.

Recently, Forbes reported a case of EB-5 fraud in Texas, where 90 Chinese investors who were duped got lucky after the Securities and Exchange Commission went aggressively after the Houston-area developers who took money, and managed to settle the case.

The three developers – America Modern Green Senior (Houston) LLC, America Modern Green Community (Houston) LLC, and America Modern Green Residential (Houston) LLC repaid the $49.5 million that they raised from the Chinese investors, reported Forbes.

The initial investment was for a large mixed-use real estate development EB-5 project.  Instead, the developers allegedly improperly transferred $20.5 million of investor funds for various undisclosed and improper purposes, including funding purchases with respect to two unrelated real estate projects.

Now, there’s news of a massive EB-5 mismanagement case in South Dakota. The case is at present entangled in legal loopholes in a district court, according to the Center for Immigration Studies (CIS). Earlier, there were reports of as much as $350 million EB-5 investment gone awry in Vermont.

CIS reported that in South Dakota more than $120 million in EB-5 funds were stolen, misdirected, or otherwise wasted – and at least one life was lost – in a series of scandals over a decade.

“The Republican state government, which sponsored the EB-5 investments (most states avoid that role) did practically nothing to fix matters and the feds (under both Obama and Trump) did even less,” noted CIS.

In this case, a group of developers persuaded 65 Chinese investors to put up $32.5 million (plus an unknown amount of fees) for a project to convert an abandoned gold sliming plant into a country and western music event space, the report said. The property, which also contains a casino, is the Deadwood Mountain Grand in the Black Hills of western South Dakota.

CIS said the 65 investors lent $32.5 million to Tentexkota, a firm funded by eight wealthy Americans, and were supposed to get their money back in 2015, but they were not paid. The loan was defaulted in 2016, following an extension. So they sued.

The EB-5 program continues to get extensions by the federal government, despite numerous calls in the past to overhaul it and fix loopholes, or to do away with it altogether.

However, despite the risk associated with it and litigation nightmare, Asian investors continue to show tremendous enthusiasm for the EB-5 program. In course of time, a bottleneck has grown. The wait time for those who do get a Green Card through the program, especially for investors from China, Vietnam and India, has steadily gone up.

The blog Lucid, an excellent website for updates on the EB-5 visa, analyzed the Report of the Visa Office 2018 issued by the State Department, which gives a tally of Green Cards issued by country for the EB-5. It shows a marked increase in EB-5 visas issued to applicants born outside of mainland China.

Lucid noted that according to that report “India generated close to $500 million in EB-5 investments in 2018, and it is on track to generate $1 billion in 2019 and $2 billion in 2020. Indian EB-5 is a $3 billion opportunity in the coming two years.”

However, the constraint is that Indian nationals can only get around 700 Green Cards of the 10,000 issued by the US annually, due to a country cap, in the EB-5 program.

To a theoretical question of the possibility of an India-born investor with pending I-526 or pending visa application, to get a visa number in FY2019, through EB-5, Lucid said, “the worst case scenario is that in the next couple quarters, USCIS approves a lot of the I-526 pending for India-born people who filed I-526 in 2013-2017. If that happens (and the newly-approved petitioners quickly become documentarily qualified for a visa), the result could be that no one born in India who filed I-526 more recently will get a visa number in FY2019, no matter how quickly their I-526 was/will be processed or when they filed I-485 or the visa application.”

Lucid added: “The best case scenario is that in the next couple quarters, the pool of India-born people qualified for a visa doesn’t grow much, and additions to the pool mainly consist of people who filed I-526 recently. In that case, everyone already qualified for a visa as of Q1 FY2019 (500+ people) could actually get a visa in FY2019.”

Overall, legal immigration to the US is dwindling, noted Politico, this week.

State Department data show visa issuances have slumped under President Trump, according to government information reviewed and analyzed by Politico. The number of visas for temporary stays in the US fell 13 percent in fiscal year 2018 compared with two years earlier, the last full year under President Barack Obama. Immigrant visas, which allow a person to apply for a green card, dropped by 14 percent over the same period. And for people with visas, such as H-1B visas for skilled foreign workers, there is less certainty about whether they will be renewed because of changes in policy, the report said.

Student visas have fallen too. The State Department issued roughly 363,000 F-1 student visas in fiscal year 2018, according to Politico. That represents a 23 percent decline from fiscal year 2016.

Jessica Vaughan, a policy director with the Center for Immigration Studies, summed it up succinctly: “It’s really a lot of small changes that in the aggregate make a big difference.”

No doubt, India and China are the two countries worst affected by this scenario. It’s also the reason overseas investors are ready to take a gamble on the EB-5 visa program, to get that elusive Green Card in record time.

(Sujeet Rajan is Executive Editor, Parikh Worldwide Media. Email him: Follow him on Twitter @SujeetRajan1)




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