Benefits, Drawbacks of EB-5 Immigrant Investor Program Debated Before House Judiciary Committee

Sens. Chuck Grassley (R-Iowa) and Patrick Leahy (D-Vt.) were the key witnesses in a congressional hearing that questioned the efficacy and management of the program

By Leo Versel

Senator Patrick Leahy - EB-5 Immigrant Investor Program Hearing
Senator Patrick Leahy (D-Vt., Center) testifies before a Congressional Hearing held by the House Judiciary Committee regarding reform of the EB-5 Investor Visa Program, on March 8, 2017.

At a hearing held by the House Judiciary Committee to discuss reforming of the EB-5 Immigrant Investor Visa Program, the significance and necessity of the government-funded program were debated and questioned by a group of mostly Republican congressmen.

Two panels of witnesses, who included veteran Sens. Charles E. Grassley (R-Iowa) and Patrick Leahy (D-Vt.), testified on the merits of the program and its shortcomings in creating employment for immigrants in rural and economically-distressed areas.

Per the United States Citizenship and Immigration Services (USCIS) web page on the Employment-Based Fifth Preference Immigrant Investor Program (EB-5 for short), the program was created in 1990 and aims to contribute to the growth of the US economy through “job creation and capital investment by foreign investors.”

Immigrants who are entrepreneurs and seek to start a business in the United States are eligible to apply for a green card if they make a requisite investment in a commercial enterprise and plan to create or preserve 10 permanent full-time for qualified US workers. Under this program, an entrepreneur’s spouses and children under age 21 are also eligible for a green card.

In addition, foreign investors may qualify for the EB-5 program if they invest in commercial enterprises associated with regional centers designated by the USCIS based on proposals for promoting economic growth, under a program initially enacted in 1992.

During testimony from the first panel of witnesses at the hearing, Sens. Grassley and Leahy expressed their concerns about the fraud and abuse of the EB-5 program. Senator Grassley discussed how investment funds for the program and background checks are not adequately vetted. He also said that jobs created by EB-5 are not created in areas identified by the government.

Senator Grassley urged the committee to work towards reforming the program. He cited that the investment level into the EB-5 program had not been raised in 25 years, and he was concerned that the program could potentially expire. Senator Grassley finished his testimony by stating that he wanted to work with members of both parties to reform the program.

Following Senator Grassley’s statement, Senator Leahy spoke about the significance of EB-5 to his home state of Vermont. However, Leahy also acknowledged some mismanagement of the program.

“The EB-5 program I once championed seems like a distant memory,” Senator Leahy said during his testimony. “It was designed to create jobs. For a while, it did just that.”

Senator Leahy described how economic gerrymandering has acted to undo EB-5’s progress. He described how entrepreneurs who are part of the program tend to invest funds in high-income areas, places that EB-5 was not intended to target.

“Only three percent of EB-5 investors now invest in rural areas,” Senator Leahy said in his testimony. “Less than 10 percent invest in true high-unemployment areas. Almost every other EB-5 project uses gerrymandering to qualify as distressed, despite many being located in the most affluent parts of the country.”

Senator Leahy expressed concern over economic gerrymandering in the EB-5 program and provided an example of this phenomenon in California.

“The fact that a luxury hotel in Beverly Hills can use gerrymandering to claim it is located in a distressed community is troubling,” Senator Leahy said. “But the fact that this type of abuse now represents almost 90 percent of the entire EB-5 program is appalling. And an untold number of these luxury developments would be pursued regardless of EB-5 financing, casting doubt on whether the program is creating any jobs at all.”

Despite his concerns about EB-5, Senator Leahy emphasized the importance of the program and the need for its reform by the Trump administration. He said that an increased investment in EB-5 is essential, and that funds should be allocated to rural and low-employment areas.

“The worst abuses of this program must not be given veto power over its reform,” Senator Leahy said.

After testimony from the first panel of senators, House Judiciary Committee Chairman Bob Goodlatte (R-Va.) delivered the hearing’s opening statement. Chairman Goodlatte denounced the EB-5 program, arguing that it has “strayed further and further from Congress’ intent and seen its reputation repeatedly tarnished by scandal.”

Chairman Goodlatte concluded his statement by urging the Trump administration to finalize and publish its governmental regulations pertaining to the EB-5 program to ensure the continuation of EB-5.

“These regulations deserve to be issued in final form, and I urge the Trump Administration to do so,” Chairman Goodlatte said. “They will enable the investor visa program to become a turbo-charged engine for economic growth. If, however, the regulations are not finalized and the program remains in disrepair, I am not sure that it deserves to continue.”

Following several responses to Goodlatte’s statement by other congressmen, a panel of five witnesses involved in immigration advocacy and policy each delivered a five-minute statement. Angelique Brunner, founder and president of investment capital company EB-5 Capital, delivered an especially passionate plea for Congress to consider reform of the EB-5 program.

“I pledge congress to support the EB-5 program that you have invested in over the past 25 years,” Brunner said during her testimony. “Success and reform can be aligned. I strongly advise the current administration to cancel the regulations proposed by the previous administration.”

David North, a Fellow at the Center for Immigration Studies, gave a more analytical testimony about the EB-5 program. North began his statement by expressing his opinion of the program.

“Frankly, we have no need for the EB-5 Investor Visa Program,” North said. “It brings capital in through a way that is convoluted.”

Despite his own reservations about EB-5, North described three concrete ways in which the program could be reformed. North said that investment in the program should be moved up to $1.35 million to ensure that capital is sufficient to contribute to economic growth.

Second, North stressed that there needs to be a different focus in the Trump administration. He said that there needs to be a more careful approach with regards to who runs the program. Third, North said that there must be revision as to the jobs of those who benefit from EB-5.

North concluded his testimony by stating that the EB-5 program has been advocated for by Republican leadership in both the House and Senate, and that two-thirds of the money for EB-5 goes into states that supported Hillary Clinton in the 2016 election.

Despite passionate testimony in favor of the program from several witnesses, most of the Republican congressmen on the committee appeared to not want to support the EB-5 program. Their questioning of the second panel of witnesses often challenged the benefits of the program. Rather than asking constructive questions about the merits of EB-5, the panel of majority Republican congressmen appeared to be unwavering in their disagreement with the program.

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leov92

Multimedia journalist. Aspiring professional reporter. Former intern (Summer 2016) with Agence France-Presse in Washington, D.C. American University Journalism graduate (May 2017).

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