[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]





                        INVESTOR VISA PROGRAM: 
                     KEY TO CREATING AMERICAN JOBS

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   IMMIGRATION POLICY AND ENFORCEMENT

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 14, 2011

                               __________

                           Serial No. 112-54

                               __________

         Printed for the use of the Committee on the Judiciary









      Available via the World Wide Web: http://judiciary.house.gov


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                       COMMITTEE ON THE JUDICIARY

                      LAMAR SMITH, Texas, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina         JERROLD NADLER, New York
ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT, 
BOB GOODLATTE, Virginia                  Virginia
DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
MIKE PENCE, Indiana                  MAXINE WATERS, California
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona                  Georgia
LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
TED POE, Texas                       JUDY CHU, California
JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
TIM GRIFFIN, Arkansas                LINDA T. SANCHEZ, California
TOM MARINO, Pennsylvania             DEBBIE WASSERMAN SCHULTZ, Florida
TREY GOWDY, South Carolina
DENNIS ROSS, Florida
SANDY ADAMS, Florida
BEN QUAYLE, Arizona
[Vacant]

      Sean McLaughlin, Majority Chief of Staff and General Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel
                                 ------                                

           Subcommittee on Immigration Policy and Enforcement

                  ELTON GALLEGLY, California, Chairman

                    STEVE KING, Iowa, Vice-Chairman

DANIEL E. LUNGREN, California        ZOE LOFGREN, California
LOUIE GOHMERT, Texas                 SHEILA JACKSON LEE, Texas
TED POE, Texas                       MAXINE WATERS, California
TREY GOWDY, South Carolina           PEDRO R. PIERLUISI, Puerto Rico
DENNIS ROSS, Florida

                     George Fishman, Chief Counsel

                   David Shahoulian, Minority Counsel












                            C O N T E N T S

                              ----------                              

                           SEPTEMBER 14, 2011

                                                                   Page

                           OPENING STATEMENTS

The Honorable Elton Gallegly, a Representative in Congress from 
  the State of California, and Chairman, Subcommittee on 
  Immigration Policy and Enforcement.............................     1
The Honorable Zoe Lofgren, a Representative in Congress from the 
  State of California, and Ranking Member, Subcommittee on 
  Immigration Policy and Enforcement.............................     2
The Honorable Lamar Smith, a Representative in Congress from the 
  State of Texas, and Chairman, Committee on the Judiciary.......     4

                               WITNESSES

William J. Stenger, President & Chief Executive Officer, Jay Peak 
  Resort, Jay, VT
  Oral Testimony.................................................     6
  Prepared Statement.............................................     9
Daniel J. Healy, Chief Executive Officer, Civitas Capital Group, 
  Dallas, TX
  Oral Testimony.................................................    15
  Prepared Statement.............................................    18
Jason Mendelson, Managing Director, Foundry Group, Boulder, CO
  Oral Testimony.................................................    25
  Prepared Statement.............................................    27
Shervin Pishevar, Managing Director, Menlo Ventures, Menlo Park, 
  CA
  Oral Testimony.................................................    36
  Prepared Statement.............................................    40

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, and 
  Ranking Member, Committee on the Judiciary.....................     5

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of Patrick F. Hogan, President CMB Export, 
  LLC, and CMB Summit, LLC.......................................    57
Letter from K. David Anderson, President, Invest In the USA 
  (IIUSA)........................................................    69
Letter from Randel K. Johnson, Senior Vice President, Labor, 
  Immigration, & Employee Benefits, U.S. Chamber of Commerce.....    75

 
                        INVESTOR VISA PROGRAM: 
                     KEY TO CREATING AMERICAN JOBS

                              ----------                              


                     WEDNESDAY, SEPTEMBER 14, 2011

              House of Representatives,    
                    Subcommittee on Immigration    
                            Policy and Enforcement,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 1:35 p.m., in 
room 2141, Rayburn Office Building, the Honorable Elton 
Gallegly (Chairman of the Subcommittee) presiding.
    Present: Representatives Gallegly, Smith, Gohmert, Lofgren, 
and Conyers.
    Staff present: (Majority) George Fishman, Subcommittee 
Chief Counsel; Marian White, Clerk; and (Minority) Hunter 
Hammill, USCIS Detailee.
    Mr. Gallegly. I call to order the Subcommittee on 
Immigration Policy and Enforcement.
    Good afternoon, everyone. Almost 10,000 green cards a year 
are available through the Investor Visa Program for foreign 
businessmen who invest in American businesses and create jobs 
for American workers.
    If investors and their families utilize all these visas, 
and each investor created the 10 jobs called for in the 
program, tens of thousands of jobs a year would be created. 
That is something I am sure all of us could rally around.
    And yet the Investor Visa Program is presently 
underutilized. DHS issued only 749 investor visas in 2006, 
rising to 2,480 in 2010. The program has the potential to be a 
far larger job creator.
    The recent growth we have seen in the Investor Visa Program 
has come from the Regional Center Pilot Program. A regional 
center pools investments in defined economic zones. The 
establishment of a regional center may be based on general 
predictions concerning the kinds of commercial enterprises that 
will receive capital, the jobs that will be created directly or 
indirectly as a result of such capital investments, and the 
other positive economic effects such investments will have.
    Numerous regional centers exist in my State of California. 
The Regional Center Program expires in a year. We will examine 
today its level of success in generating jobs, the merits of 
the reauthorization, and the appropriate length of 
reauthorization.
    We will also examine another proposal that has been made to 
utilize unused investor visas. What if we were to make green 
cards available, not just to foreign investors willing to 
invest in American businesses, but to foreign entrepreneurs 
with visions of new ways of doing business and whole new 
industries.
    For those businesses that pay off, we could be talking not 
about 10 jobs, but thousands of jobs. This idea, called the 
Start Up Visa, has gained a lot of support in recent years in 
venture capital circles. A number of Members have introduced 
legislation proposing such a visa program, including my good 
friend, the Ranking Member, Ms. Lofgren. While I'm not prepared 
at this time to declare my full support, this innovative 
proposal deserves a lot of support and consideration from 
Congress. We will be giving that consideration today.
    And with that, I would yield to the gentlelady from 
California, Ranking Member Ms. Lofgren?
    Ms. Lofgren. Thank you, Mr. Chairman. We often disagree in 
this Committee on the role that immigration plays in America, 
but every once in a while we seem to find something we can 
agree on. And today's hearing on the EB-5 Regional Center 
Program and the Start Up Visa concept, I think will highlight 
some of the ways that immigrants create jobs and will show 
immigration can be used as a powerful tool for innovation and 
job creation.
    First, the existing EB-5 Regional Center Program provides 
conditional green cards to immigrant investors who pool their 
monies in projects that will create jobs in America. If a 
sufficient number of jobs are created, the conditions are 
removed and the investors earn permanent residency. The program 
smartly incentivizes investing in areas of high unemployment, 
focusing job creation in the areas where it is needed most.
    This program seems like a no-brainer, but it is severely 
underutilized, largely, I think, because of two problems that 
make the program risky for potential investors.
    First, the Regional Center Pilot Program is supposed to, as 
the Chairman has said, to expire at the end of the next fiscal 
year, which creates a pretty big uncertainty for investors. 
Second, there has been a lack of consistency by the government 
in adjudicating EB-5 petitions, and this, I think, in some 
cases led to a lack of confidence among investors who question 
whether they'll actually receive a green card when they put 
their money at risk through the programs.
    Now, I understand that USCIS is trying to address the 
adjudication issues and will begin implementing new procedures 
this very month to streamline the process, including premium 
processing for the program and letting applicants directly 
contact the agency giving them an opportunity to appear before 
a panel to resolve issues. And those are positive steps. I 
think they will fix most of the problems in the application 
process. But until we get the Regional Center reauthorized for 
hopefully a long period of time, if not permanently, that 
uncertainty about the investment will remain and really 
undercut our goals in the program.
    There's another similar job creating immigration proposal 
that we have enacted that the Chairman mentioned, and that is 
the startup visa. You know, I thought a couple of years ago how 
are companies really formed. And I thought about Google as an 
example. Larry and Sergey did not come in with a million bucks; 
they came in with a tremendous idea, and they got venture 
capital funding. And now, they employ thousands of my 
constituents in Silicon Valley, and they are hiring. That is 
how companies get formed usually, not just with your own money 
that you are investing.
    And so, the startup visa really relies on that. If a 
talented individual has an idea that attracts U.S. venture 
capital financing, an idea that might lead to the next Google 
or Intel or Facebook or whatever, the startup visa will allow 
that entrepreneur to start the company here in the United 
States rather than abroad. And alternatively, if an individual 
starts a new commercial enterprise in the U.S. using his or her 
own sweat equity, that new company creates jobs for U.S. 
workers, and the promise of creating more of that would allow 
also for a green card for job creation.
    Now, the tremendous success of immigrants in the tech world 
is something I know pretty well because my district is in 
Silicon Valley. The National Venture Capital Association, NVCA, 
found that 40 percent of U.S. publicly traded venture backed 
companies operating in the high tech field were started by 
immigrants. And if you take a look at those companies, they 
employ 220,000 people in the U.S., 400,000 people globally. 
That is a huge success.
    But our immigration system today really does not allow that 
virtuous activity to continue. And that is why we are here 
today. As the Chairman said, I introduced the Immigration 
Driving Entrepreneurship in America Act, the IDEA Act of 2011, 
which includes a startup visa of the two types that I just 
mentioned. It provides conditional residency to immigrant 
entrepreneurs who secure at least $500,000 in venture capital 
financing, and I am interested to hear if that is the right 
number from all of you today at the hearing. And if we get that 
funding from angel investors or the venture world and we create 
jobs, then the visa would vest.
    We also have self-sponsored entrepreneurs. And I think 
about Marvell in my district, that was founded by a wonderful 
engineer who was born in Shanghai, her husband a brilliant 
engineer born in Singapore. They met while getting their Ph.D.s 
at the University of California at Berkeley. They did not get 
big VC funding; they struggled. I mean, they borrowed money 
from their family, and they maxed out their credit cards. They 
now have 3,500 engineers employed in my district, and they just 
got the contract for the new cell phone design for the country 
of China. They are a massive success. This sweat equity self-
sponsored plan would be perfect for them.
    I do not want to go on. I want to hear this, but I did 
mention we have someone sitting at the dais who is an important 
person in developing this concept and that is our colleague, 
Jared Polis, who is not a Member of the Committee, but had he 
been able to participate, he would have introduced Jason 
Mendelson, who is his constituent from Colorado. And I wanted 
to mention how grateful we are to Jared's leadership in this 
whole area, and how glad I am that he can sit in at this 
hearing today.
    I will just say that in these perilous economic times, our 
singular focus should be on creating jobs and more jobs. The 
startup visa program has the potential to create that, and I am 
looking forward to hearing from our witnesses today. And I 
thank you, Mr. Chairman, for allowing me to go over my time 
just by a bit.
    Mr. Gallegly. I thank the gentlelady. And at this time I 
would yield to our good friend from Texas, the Chairman of the 
full Committee, Mr. Smith?
    Mr. Smith. Thank you, Mr. Chairman.
    The number one job of Congress is to create jobs. We must 
ensure that our policies help private enterprise, strengthen 
our economy, create jobs for American workers and maintain our 
global competitiveness.
    The Investor Visa Program plays a part in achieving this 
goal. Under the program, almost 10,000 immigrants can receive 
permanent residence each year if they engage in a new 
commercial enterprise, invest between $500,000 and $1 million 
in the business, and see that it creates 10 full time jobs for 
American workers.
    The Regional Center Pilot Project, which is almost two 
decades old, has become the most used part of the Investor Visa 
Program. Investment through a regional center is attractive to 
potential investors because they are relieved of the 
responsibility of running a new business, and they can count 
indirect job creation toward the job creation requirement.
    Investors may feel more confident about a regional center 
that is operated through a State or city government. In these 
difficult economic times, many State and local governments have 
turned to regional centers as a method of generating economic 
growth.
    The Association to Invest in the USA has estimated that the 
Regional Center Program has created or saved over 65,000 jobs 
in the U.S., and had led to the investment to over $3 billion 
in the U.S. economy.
    The program is set to expire at the end of Fiscal Year 
2012.
    Just as in any visa program, there is the potential for 
fraud in the Investor Visa Program. We have to ensure, both for 
the sake of the American people and potential foreign 
investors, that regional centers operate at the highest levels 
of professionalism and integrity. The business plans and 
promotional materials that regional centers produce should meet 
the same standards as if they were to be submitted to the 
Securities and Exchange Commission.
    Another proposal is the ``start-up'' visa. Foreign 
entrepreneurs would be granted conditional permanent residence 
to come to America to launch their businesses. If the 
businesses succeed and create a certain number of American 
jobs, the immigrants would become unconditional permanent 
residents.
    While we can benefit by bringing entrepreneurs to America 
with their bold ideas, and we need to do so, such a program 
could be susceptible to fraud and abuse. How is the government 
to determine which economic vision is feasible and which is pie 
in the sky? And how will it root out schemes proposed simply to 
procure a visa?
    I look forward to today's hearing to help us answer some of 
these questions.
    Thank you, Mr. Chairman. Yield back.
    Mr. Gallegly. I thank the gentleman. And at this time, I 
will recognize my good friend from Michigan, the Ranking Member 
of the Committee, Mr. Conyers?
    Mr. Conyers. Thank you, Chairman Gallegly. I have asked 
that my statement be submitted. And I would like to join in 
with the Chairman of the Committee and, you, Mr. Chairman, in 
working out the concerns of fraud that you have so that we can 
move forward with a very important part of the jobs initiative 
that we are all committed to.
    I thank and I yield back.
    [The prepared statement of Mr. Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative 
 in Congress from the State of Michigan, and Ranking Member, Committee 
                            on the Judiciary
    The single biggest issue facing the American economy is the current 
lack of jobs available for U.S. workers. The majority has talked a 
great deal about job creation, so I'm glad we're finally having a 
hearing on how immigration can create jobs for Americans. The hearing 
today is about two investor visa ideas that can create American jobs--
one that is current law, one that is not.
    The first of these job creating programs is the EB-5 program. It 
gives green cards to immigrant investors who invest at least half a 
million dollars towards projects that create jobs for Americans. And 
the program wisely focuses on creating jobs where they are needed 
most--areas of high unemployment.
    The EB-5 regional center program is working for my home of Detroit. 
For example, the Green Detroit Regional Center is working to advance 
sustainable energy solutions by using immigrant investor funds in the 
company ``Alt-E,'' which was founded by former employees of Tesla 
Motors to retrofit fleet-based trucks with electric-hybrid powertrains 
that greatly increase their fuel efficiency. An article in Crain's 
Detroit Business noted that the EB-5 investment will let the company 
``speed up hiring and create more than 300 jobs by the end of 2011.''
    The program as a whole is working to attract significant capital to 
the United States. In 2005, the GAO found that the EB-5 program had 
attracted $1 billion to the country since it began.
    Yet, while successful, the program remains underused because of two 
issues that we'll hear about today. First, the regional center pilot 
program that targets areas of highest unemployment is not permanent and 
is set to expire at the end of FY 2012. This creates uncertainty for 
immigrant investors. Second, the program has been administered in an 
inconsistent manner by USCIS, and INS before them. This creates even 
more uncertainty for investors.
    I understand that USCIS is working to streamline the EB-5 process 
and make it easier for immigrant investors to use. This is a welcome 
change. But we should work towards making the regional center pilot 
program permanent so that we can continue to attract money and jobs to 
areas that sorely need both.
    I'm also interested in hearing today about another immigrant 
investor visa concept that does not yet exist. I'm talking about the 
so-called start-up visa concept that my friend Zoe Lofgren has worked 
on. This concept would help immigrants stay in the United and start 
companies here if they have intellectual capital and backing from 
American venture capitalists.
    As you know, companies like Google and Intel were started by 
immigrants. We need to do everything we can to ensure that the next 
innovative company begins right here in the U.S. and the jobs created 
by it stay in the United States. So, I'm looking forward to hearing 
about how we can advance the start-up visa concept.
    I thank the witnesses for their participation today.
                               __________

    Mr. Gallegly. I thank the gentleman.
    At this time, I would like to introduce our witnesses. We 
are very fortunate today to have the very distinguished panel 
of witnesses we have. And I would just like to make note that 
all the statements will be entered into the record in its 
entirety.
    And I would ask the witnesses if you would be kind enough 
to try to keep your comments summarized within the 5-minute 
period so we can get into the question and answer session. And 
we have provided the lights down there as kind of a convenient 
way to remind you, but to make sure that you do understand that 
your testimony will be made a part of the permanent record of 
the hearing in its entirety.
    With that, I would introduce our first witness, Mr. William 
Stenger. Mr. Stenger serves as president and chief executive 
officer of Jay Peak Resort in Jay, Vermont. He is the general 
partner of the largest regional center project in Vermont, and 
one of the most substantial EB-5 projects in America.
    He has been appointed by the governor of the State of 
Vermont to serve on the Governor's Council of Economic 
Advisors, and serves as a member of the Agency of Commerce and 
Community Development Advisory Council.
    Mr. Stenger earned his associate in science degree from the 
Corning Community College, and a bachelor of science degree 
from Syracuse University.
    Our second witness is Mr. Daniel Healy. He is co-founder of 
the Civitas Capital Management, LLC. He is responsible for the 
general management of the firm. Mr. Healy leads a team that is 
responsible for identifying and evaluating investments that 
meet EB-5 Program criteria. Prior to forming Civitas, Mr. Healy 
served as executive vice president and partner of Royalty Real 
Estate Capital.
    Mr. Healy earned his B.A. from the University of Texas at 
Dallas and his M.B.A. from Cox School of Business at Southern 
Methodist University.
    Our third witness, Mr. Jason Mendelson, is the co-founder 
and managing director of Foundry Group, a bolder based venture 
capital firm that invests in early stage formation of 
technology companies. He also serves as a board member at the 
National Venture Capital Association.
    Prior to this, Mr. Mendelson was attorney for Cooly LLP and 
a software engineer for Accenture.
    Mr. Mendelson earned his bachelor's degree and J.D. from 
the University of Michigan.
    Mr. Shervin Pishevar--is that close enough?
    Mr. Pishevar. Pishevar.
    Mr. Gallegly. Pishevar. Is the managing director of Menlo 
Ventures at Venture Capital Firm in Silicon Valley. Before 
joining Menlo, Mr. Pishevar was chief application officer and 
general manager at Mazelli Corporation after spending most of 
his career as a serial entrepreneur and angel investor.
    He serves on the advisory board of comScore. Mr. Pishevar 
is one of the 10 members of the UN Foundation Global 
Entrepreneurs Council.
    He earned his B.A. from the University of California at 
Berkeley.
    So, with that, we will start with Mr. Stenger. Welcome, and 
we look forward to your testimony.

         TESTIMONY OF WILLIAM J. STENGER, PRESIDENT & 
       CHIEF EXECUTIVE OFFICER, JAY PEAK RESORT, JAY, VT

    Mr. Stenger. Mr. Chairman, thanks very much. Distinguished 
Members of the Committee, I appreciate the opportunity----
    Mr. Gallegly. Why do you not pull the mic up a little bit, 
maybe turn on the button. I am not sure.
    Mr. Stenger. Is that better?
    Mr. Gallegly. I am not sure.
    Mr. Stenger. Is that better?
    Mr. Gallegly. Yes, sir.
    Mr. Stenger. Okay. Can we start my clock again? [Laughter.]
    Mr. Chairman, thank you very much for the opportunity to be 
here. Distinguished Members of the Committee. We appreciate you 
having the hearing on this EB-5 Regional Center extension. It 
is very important to our economy. It is very important to the 
job creating initiatives we are all eager to promote. And I and 
all of my colleagues appreciate your valuable time in 
conducting this hearing today.
    I am president of Jay Peak Resort located in northern 
Vermont. We are a beautiful, marvelous, physical facility in 
rural Vermont. We have marvelous assets and characteristics, 
but we also have some of the highest unemployment and most 
challenging socioeconomic issues that anyone faces in Vermont.
    Jay is one of the most significant employers in Orleans 
County, a place of great rural agricultural character. However, 
despite all these issues that I mentioned that are challenging, 
the most profound economic challenge that we have seen in 
generations in Vermont and the Nation, the difficulties we are 
seeing these days. I am very optimistic about the future of our 
community and its citizens.
    We are seeing in our facility the significant creation of 
the biggest positive life changer a person needs, a job, a job 
that will sustain them and their families with benefits and a 
future that inspires and rewards their economic and human 
spirit.
    We are seeing this employment creation at Jay Peak and our 
surrounding communities in this terribly troubled economic 
times solely because the EB-5 Foreign Investor Program exists 
and is helping us.
    Over a decade ago in 1997, I had the opportunity to work 
with Senator Patrick Leahy and our governor at the time, Howard 
Dean, to make the Vermont Regional Center happen.
    In today's economy, what is strangling the small business 
community in Vermont and nationally is the lack of access to 
capital. Affordable capital is almost non-existent in this 
marketplace; however, through the EB-5 Regional Center Pilot 
Program, Jay Peak has raised over $200 million of equity 
capital, and we have welcomed over 400 investors from 56 
countries.
    This capital has helped us build a wide range of facilities 
that we desperately need to be competitive, but it also helps 
us create full time job opportunities for so many citizens 
throughout Northern Vermont's highest unemployment community.
    I have met personally almost every investor participating 
in Jay Peak. They are a group of wonderful people, so 
appreciative of the opportunity to live in the United States. I 
can tell you that their equity investment is changing our 
region in a profound and positive way. Once in the United 
States, they have continued to contribute as every one of them 
are well educated, successful people who have brought their 
family values and capital with them.
    Although Jay Peak is employing many hundreds of direct and 
indirect year-round employees, Jay is a small business in 
comparison with our national economy. As a matter of fact, with 
very few exceptions all of Vermont is made up of small 
businesses. The EB-5 Regional Center Program is ideal for the 
small business community throughout America.
    Two years ago on an EB-5 trade mission to South Korea, 
Governor Jim Douglas, my partner Ariel Quiros, and myself 
visited with AnC Bio/Korea, a cutting edge biotech research and 
development company, that was looking for a place in the United 
States to create a U.S. affiliate. In the past 2 years, AnC 
Bio/Vermont was created, and tomorrow a 90,000 square foot AnC 
Bio/Vermont USA facility will be acquired where over 200 
quality research and manufacturing jobs will result.
    Alex Choi, the chairman of AnC Bio/Korea, could have placed 
this facility anywhere, but he chose Vermont because of the 
quality workforce, the quality universities, and our ability to 
bring equity capital to the table, and create this wonderful 
facility.
    I would like to take a few moments in closing to let you 
know that extending this program permanently is vitally 
important to this program. If a project cannot plan, if an 
investor cannot plan, they cannot expect a good outcome. I urge 
the Committee, and I would urge the Congress, to extend this 
program and make it permanent. It is so vital to the projects 
as well as the investors.
    I also think it is very important to work closely with 
Commissioner Mayorkas to make sure that USCIS is as efficient 
as possible in processing the applicants. Our applicants need 
to be processed in a reasonably short period of time so they 
have predictability, the programs have predictability, and we 
will have the job outcomes that are so vital to our country 
right now.
    Mr. Chairman, I appreciate very much this time. I thank you 
again for holding this hearing, and at some point happy to 
answer questions that you might have. Thank you very much.
    [The prepared statement of Mr. Stenger follows:]
    
    
    
                               __________

    Mr. Gallegly. Thank you, Mr. Stenger, and thank you for 
being sensitive to the lights with your testimony. We 
appreciate it.
    And with that, we will move to Mr. Healy. Welcome, and we 
look forward to hearing your testimony.

TESTIMONY OF DANIEL J. HEALY, CHIEF EXECUTIVE OFFICER, CIVITAS 
                   CAPITAL GROUP, DALLAS, TX

    Mr. Healy. Thank you. Mr. Chairman and distinguished 
Members of the Committee, thank you again for the opportunity 
to testify this morning or this afternoon about the EB-5 
Regional Center Program.
    My name is Daniel Healy. I am the chief executive of 
Civitas Capital Group in Dallas, Texas. We are a boutique asset 
management firm, and we manage the City of Dallas Regional 
Center in a public/private partnership with the City of Dallas, 
Texas.
    Jobs are at the top of the agenda here in Washington and at 
kitchen tables across this Nation. With that in mind, my 
message here today is that the EB-5 Regional Center Program is 
an extremely effective catalyst for job creation. Congress 
should act now to permanently reauthorize it.
    The City of Dallas Regional Center, or CDRC, is a unique 
public/private partnership. The city envisioned creating a 
regional center to facilitate economic development, but they 
recognize that investment management is best left to the 
private sector. Civitas collaborated with the city to design a 
regional center that reflects the pro-business, pro-growth 
culture that has made Dallas a magnet for employers and 
families alike.
    USCIS approved the CDRC in late 2009, and we identified our 
first project in February 2010. In the short time since then, 
just 17 months, the CDRC has committed to six high quality 
investments totaling $91 million.
    The CDRC is providing low cost, flexible capital for 
projects across a range of industries, including $15 million 
for a call center, $5.5 for a boutique hotel, and $8.5 million 
to help the oldest chain of Tex Mex restaurants in the country 
open four new locations.
    At its core, the EB-5 Program is about jobs, and I am very 
pleased to report that the first CDRC investments are 
forecasted to create a total of 1,499 jobs in Dallas. That 
figure exceeds the minimum job creation requirement under EB-5 
rules by more than 50 percent.
    Civitas is expanding its activities to new markets, 
including Houston, San Antonio, and Austin. We are working 
closely with the City of Amarillo on their ambitious downtown 
redevelopment plan, which will include a 300-room hotel and a 
minor league baseball stadium at a cost $120 million. But 
without $40 million in flexible, low cost EB-5 capital, that 
project would be impossible in today's credit markets, and 
Amarillo would lose a rare opportunity to create more than 
1,000 jobs and revitalize their downtown.
    Members concerned that the Regional Center Program has been 
underutilized in the past should rest easy because those days 
are over. Civitas is hardly alone in grasping the huge 
potential of the EB-5 Program to facilitate economic activity 
and create jobs.
    When I began evaluating the EB-5 Program in 2008, there 
were perhaps 35 regional centers. Today there are 180 in 36 
States, almost a six-fold increase in just 3 years. According 
to USCIS, just 332 investors applied to participate in the 
program in Fiscal 2005; by contrast, petitions are on track to 
total more than 3,200 in Fiscal 2011, nearly a tenfold 
increase.
    The pace of new applications has accelerated dramatically 
since 2009, with year over year growth averaging 77 percent. 
With 180 regional centers competing for investors and more 
coming online every day, it is clear that the annual allocation 
of 10,000 EB-5 visas will soon become a constraint on the 
program's ability to create more jobs for U.S. workers and 
bolster local economic development, all at no cost to the U.S. 
taxpayer.
    These statistics and my own experience with the CDRC 
demonstrate the EB-5 Program's vast job creation potential. 
With unemployment above 9 percent, Congress should see the 
value this program delivers across the Nation. That is why I 
strongly urge Congress to act on permanent reauthorization now. 
Even with a full year until the expiration date, I can testify 
to many personal experiences with respect to investors who are 
already hesitant to apply because the program may sunset before 
their petition is approved.
    I would like to conclude by acknowledging the good work of 
the men and women at USCIS. Director Mayorkas is hosting a 
stakeholder meeting shortly after this hearing, which I am 
looking forward to attending. I applaud his plans for improving 
the program's administration, and I am particularly encouraged 
by the announcement yesterday that premium processing of 
investor petitions and the ability to communicate directly with 
adjudicators by e-mail will soon be available.
    While I realize premium processing will take time to 
implement, allowing e-mail contact with adjudicators is a step 
that can be taken immediately and will lead to a more 
collaborative, productive, and cost effective adjudication 
process. In my written testimony, I have included additional 
suggestions for improvements to this critical program.
    Mr. Chairman, thank you again--excuse me--for the 
opportunity to appear before you and your colleagues today. 
Thank you also for your support of the Regional Center Program 
and for pushing its reauthorization forward during these 
challenging times when it is most needed.
    I hope you found my testimony useful and informative, and I 
am pleased to answer your questions.
    [The prepared statement of Mr. Healy follows:]
    
    
    
                               __________

    Mr. Gallegly. Thank you very much, Mr. Healy.
    And now, we will hear from Mr. Mendelson. Mr. Mendelson?

TESTIMONY OF JASON MENDELSON, MANAGING DIRECTOR, FOUNDRY GROUP, 
                          BOULDER, CO

    Mr. Mendelson. Thank you. As a co-founder and managing 
director of Foundry Group, an early stage venture capital firm 
based on Boulder, Colorado, and as a board member of the 
National Venture Capital Association, it is my privilege to be 
here today to share with you my perspective on the critical 
role that immigration entrepreneurs play in job creation, 
innovation, and economic growth in the United States.
    I would like to thank the Chairman for recognizing that 
this issue is critical to our country's future. I would also 
like to thank Ranking Member Lofgren and my own congressman, 
Jared Polis, for their leadership and support of the startup 
visa legislation.
    At a time when we are in desperate need of both fiscal 
responsibility and economic stimulus, the Startup Visa Act will 
create American jobs at no cost to the Federal Government. Each 
day that passes without this legislation, another company 
builder is turned away, and jobs are created elsewhere. On 
behalf of the venture capital and startup communities, I urge 
Congress to send a message that our company is open for 
business and eagerly welcome job creating entrepreneurs to our 
shores.
    The startup visa legislation recognizes two elements that 
have been critical in driving U.S. economic growth and job 
creation, which are venture backed companies and immigration. 
Separately, these elements have helped to differentiate our 
country from all others. When harnessed together, they will be 
instrumental in maintaining our global leadership.
    According to a 2011 IHS Global Insight report, companies, 
such as Apple, Genentech, and Starbucks, that were founded as 
small startups of venture capital now account for 12 million 
jobs and $3.1 trillion in revenues in the U.S. in 20101. That 
equates to 11 percent of private U.S. employment and 21 percent 
of our country's GDP.
    While America's startup economy would not be what it is 
today without venture capital, the same can also be said for 
immigrant entrepreneurs. A 2006 NVCA report entitled ``American 
Made,'' found that approximately 25 percent of U.S. public 
companies that were venture financed, including Intel, Google, 
Sun Microsystems, and Watson Pharmaceuticals, were founded by 
immigrant entrepreneurs. The same study revealed that nearly 
half of current startups have immigrant founders. These are 
companies that are hiring American workers. They are paying 
taxes and they are creating value for American shareholders.
    Anecdotally, I would estimate today that a third or more of 
the business plans that my firm receives have an immigrant as 
part of their founding team.
    In my written testimony, I discuss my experience with 
Stratify, just one of our portfolio companies founded by 
immigration entrepreneurs. The company created more than 400 
U.S. jobs before it was sold in 2007, garnering over $150 
million to shareholders and employees. More than half a dozen 
of Stratify's alumni have gone on to become founders or early 
employees of other startups. Yet despite the strength of this 
success story, it is my belief that it would be much more 
difficult to replicate it today given our current immigration 
policies.
    The current path to a green card is fraught with complex 
requirements, limitations, and delays, sending a message to 
these talented people that we do not want them here. Foreign-
born graduates who earn their degrees here and want to stay and 
build businesses are often forced to return to their native 
country because of our restrictive policies, despite these 
entrepreneurs attending federally and State-subsidized 
universities. In effect, we are subsidizing the world's 
entrepreneurship and not realizing any return.
    At TechStars, a seed stage investment program my partners 
and Jared Polis helped found, we see opportunities lost each 
year, most recently in the Boston program where four of the 12 
companies had immigrant founders from Israel, the United 
Kingdom, India, and Estonia. In three cases, the founders had 
to return to their home countries after the program. We 
estimate that in the immediate term, 20 high paying jobs were 
lost to these countries, yet the ultimate loss to the U.S. over 
time will be much, much greater.
    And it is the same story in other TechStars programs in New 
York, Seattle, and Boulder. Immigrant founders want to stay and 
create fast-growing companies with high paying jobs, but are 
forced back to their native countries, such as Canada, Israel, 
and England. We should give them every reason to stay in the 
U.S. Ironically, our policies are showing them the door.
    This negative dynamic is made worse by the fact that the 
U.S. is no longer the only destination for high tech startup 
companies. In the last decade, countries such as India and 
China have adopted the American venture capital model and 
accelerated their growth by offering government incentives to 
move there. And the world's venture capital dollars are 
following these entrepreneurs abroad. Once a company is started 
in a specific location, its economic benefits remain 
geographically tied to that region.
    Despite all of these government incentives, the United 
States is still the preferred location to start these types of 
businesses. But this will not be the case if we keep sending 
founders out of country.
    Reforming high skilled legal immigration policy should be a 
congressional priority. When we turn away immigration 
entrepreneurs, not only do we lose bright people, but then we 
end up competing against them in the global marketplace. The 
startup visa legislation will help support job creation and 
innovation right here.
    We appreciate the bipartisan support this Committee has 
given to this initiative, and we stand ready to work with you 
to get the startup visa legislation signed into law. Thank you.
    [The prepared statement of Mr. Mendelson follows:]
    
    
    
                               __________

    Mr. Gallegly. Thank you, Mr. Mendelson.
    Now, we will hear from Mr. Pishevar?

    TESTIMONY OF SHERVIN PISHEVAR, MANAGING DIRECTOR, MENLO 
                    VENTURES, MENLO PARK, CA

    Mr. Pishevar. Thank you, Mr. Chairman.
    My name is Shervin Pishevar. I am a managing director at 
Menlo Ventures. We have $4 billion under management and a new 
$400 million fund that we are investing out of.
    Yesterday we announced the Menlo Talent Fund, which is 
specifically for early stage seed stage companies where we will 
decide within 24 to 72 hours to invest up to $250,000 to a 
million dollars in new companies.
    I am testifying before you today as a venture capitalist, 
an entrepreneur, and an angel investor who has founded five 
U.S. companies, and invested in 40 other startups that have 
gone on to innovate and create jobs in America. From my vantage 
point and home in Silicon Valley, I witness each day the value 
that startups can bring to a region and to our country. I am 
also an immigration entrepreneur.
    I would like to read a quote that inspires me and many 
other people in Silicon Valley every day, ``Never doubt that a 
small group of thoughtful, committed people can change the 
world. Indeed, it is the only thing that ever has.'' It is a 
quote by Margaret Mead, and I believe that it captures the 
ethos of Silicon Valley.
    People from around the world are inspired to come to 
Silicon Valley, to come to America and pursue their dreams. I 
am privileged to testify today on behalf of countless foreign 
entrepreneurs who would like nothing more than to do what I 
have done--build companies and pursue their dreams here in the 
United States.
    I was born in Iran in 1974. My family was poor. We survived 
persecution, the Iran-Iraq War, and fled to the United States 
in 1975 when I was 5 years old. There, my father took a job as 
a taxi driver in Washington, D.C. driving some of you 
congressmen. And my mother cleaned hotel rooms.
    When I got accepted to the University of California at 
Berkeley, I remember how proud my parents were. I received the 
Presidential Fellowship to continue to continue my high school 
science project, which led to finding a new way to selectively 
lice malaria-infected red blood cells. Berkeley filed a patent 
on that discovery, and I was the sole inventor, and that 
inspired me to actually become an entrepreneur.
    In 1994, at the computer lab at Berkeley, I came across a 
program called NCSA Mosaic, created by Mark Andreessen. I 
quickly imagined all that I could do, and with my friends, we 
developed an idea called the web operating system, webOS. A 
mentor encouraged me to start my own company, and in my senior 
year I began to pursue my American Dream.
    I took a job as a security guard at night to make enough 
money so I could work day and night on my business. After a 
number of fortunate breaks and cold calling Jamie Diamond in 
his office, the company found investors and we launched. And I 
was on my way with the first of many startups.
    History shows us that the location of innovation drives 
where the economic value is created. Nowhere is that more true 
than in Silicon Valley, where the economy thrives on 
technological breakthroughs and innovations that occur each 
day. If you look at the top startup regions around this 
country, you will see a familiar combination of successful 
research universities, a cadre of highly motivated 
entrepreneurs, and a system of capital and mentorship that 
supports the growing of businesses. It is a benevolent circle 
that begins with that innovation. Where the innovation goes, 
the value flows.
    Immigrant entrepreneurs are an integral part of the Silicon 
Valley ecosystem. Studies have shown that Silicon Valley has a 
higher concentration of foreign-born entrepreneurs, 
technologists, scientists than any other region in the U.S. 
According to the 2006 ``American Made'' study, 40 percent of 
U.S. publicly-traded venture capital companies operating high 
tech manufacturing were started by immigrants. The story of 
privately-held venture backed companies is even more 
compelling, where almost half of the companies across the U.S. 
had foreign-born founders.
    The U.S. innovation pipeline is well fueled by immigrants, 
and it is our responsibility to ensure that we do not 
unintentionally divert this energy to other nations overseas.
    The startup visa legislation applies two very important 
filters so that when the United States accepts an immigrant 
entrepreneur who has received venture investment, we can have 
the confidence that we are getting the best and the brightest 
talent from around the world.
    First, there is the selection filter, which applies to any 
individual enterprising enough to leave one's home and pursue 
their dreams in an attempt to innovate and grow a business in a 
new country. The second filter is the venture capital vetting 
process, which only funds those companies that have the highest 
chance to succeed. The result will be creating a network of 
highly motivated, well supported entrepreneurs who will 
generate value and perpetuity here in America.
    To wit, the ``American Made'' survey has reported that 
nearly two-thirds of immigrant founders of privately-held 
companies, venture backed companies, have started or intend to 
start more companies in the United States. Like me, they have 
become serial entrepreneurs and angel investors, and will 
continue to serve our economy well by building innovative 
companies, one after the other.
    Reforming the legal immigration process so that our highly 
motivated immigrant entrepreneurs can grow their businesses in 
America must be a congressional priority. I am encouraged by 
the growing bipartisan support for the startup visa proposal, 
but for this bill to become law, we will need more than 
bipartisan support. We will need bipartisan compromise. The 
stalemate has gone on too long.
    The ``American Made'' survey reported that nearly all the 
immigrant founders and private companies would still start 
their companies in the United States if they had the choice. 
But nearly two-thirds believe that it was currently more 
difficult to enter the United States and start a company than 
when they started their companies. When I think about that 
fact, that others like myself, the same commitment and talent 
and passion for technology and innovation are not being 
permitted into this country, which I now call home, I can only 
shake my head and ask why.
    I urge this Committee to ask themselves the same question 
and then act quickly and compromise to reverse an unfortunate 
path down which we have traveled for too long. I urge Members 
of Congress to come together, work together as a team, and 
create a package that is in the spirit of bipartisan compromise 
before year end. The American people are counting on you to do 
this for the good of the American economy.
    Thank you.
    [The prepared statement of Mr. Pishevar follows:]
    
    
    

                               __________
    Mr. Gallegly. Thank you, Mr. Pishevar.
    I would like to start by asking a couple of questions of 
Mr. Stenger.
    Where would Jay Peak Resort be today had it not been for 
the Regional Center Pilot Program?
    Mr. Stenger. Well, we would be a resort that would be 
confined largely to winter operation only. An incredibly 
capital intensive business like we are, that would be fraught 
with challenge.
    We currently have approaching 2,000 direct employees and 
indirect employees around our community. We have 450 
construction workers working today, all Vermonters that would 
not would be working otherwise.
    So, I can tell you, Mr. Chairman, that were it not for the 
equity capital of this program, all the things that we have 
been able to do in the last few years would not have been 
possible, and especially since the banking challenges of 2008. 
Equity capital is just not available. And a resort like ours, 
we are vibrant, we are healthy. We are excited about the 
future.
    The EB-5 capital has made that possible in a rural, high 
unemployment area where now we are no longer the highest 
unemployment community in Vermont. We are up and coming, and it 
is because of this capital access that has made that possible.
    Mr. Gallegly. How many jobs specifically were created at 
Jay Peak as a direct result of the program?
    Mr. Stenger. I would say right now, as we enter into this 
current year where we open one of our newest facilities, we 
will approaching 800 to 900 direct new jobs.
    Mr. Gallegly. That are a direct result of the program?
    Mr. Stenger. Yes, and many, many hundreds more that are 
indirect--all of the contractors, all of the people who support 
those businesses. Vermont is a rural State in general, and in 
our part of the State, even more so. So, the indirect impact is 
profound throughout the region.
    Mr. Gallegly. How do you respond to those that claim that 
the Investor Visa Program simply allows aliens to buy green 
cards?
    Mr. Stenger. Well----
    Mr. Gallegly. Some have made that accusation.
    Mr. Stenger. I appreciate that. What I see in our 
investors, and I think in all of the quality programs in the 
country, you see people who are interested in being in this 
country. They have the capacity to invest in a project that is 
job creating.
    Yes, they are getting a preference, but they are bringing 
something that we desperately need. We need equity capital. 
These things, and you asked the question earlier, what would we 
be if we did not have access to this? The banking community is 
just not available to us in the manner that we would like it to 
be. And that is not just true at Jay Peak; that is true for 
small business throughout this country.
    So, when our investors come, they bring their capital. They 
bring their good educations. Many of them invest in other 
communities that they live in. And it is truly a win-win-win 
situation in that they bring capital, they bring their 
education, they bring their family, they bring their love of 
this country and their desire to be here. And it is a great 
economic benefit to us, and it creates jobs everywhere along 
the way.
    Mr. Gallegly. Mr. Healy, from your perspective, do you see 
any fraud or dubious investment vehicles in the Regional Center 
Program?
    Mr. Healy. From my perspective, no, I do not regularly see 
fraud or dubious investments. I think what is important to keep 
in mind is that like any market, there is a range of 
investments. Our program at Civitas with the City of Dallas has 
a particular approach that we take that is different from Mr. 
Stenger's, that is different from many other regional centers. 
Some of my competitors I would invest in; some I would not. But 
in terms of fraud or abuse, I really do not see that.
    I mean, we see a great number of investment opportunities. 
We, you know, try hard to monitor our competition and 
understand where the market is going. But where I have seen 
problems is not really in people entering the market or 
attempting to game the system. It is much more on the 
regulatory adjudication side.
    Mr. Gallegly. What competition do you see from the Canadian 
and Australian programs?
    Mr. Healy. The competition from other countries' programs, 
including those two that you mentioned, is sometimes quite 
stiff. Very recently, the Canadian program doubled the required 
investment because they had substantial demand and were looking 
to tamp it down.
    There is no question that when investors in other countries 
are considering emigrating, they look at other options. And one 
of the challenges that we face as regional centers is that 
while the United States remains the gold standard for many of 
the reasons that my colleagues have mentioned, the process for 
going through an EB-5 investment is arduous, time consuming, 
expensive.
    Mr. Gallegly. I thank the gentlemen. My time has expired, 
so I would yield to the gentlelady from California, Ranking 
Member Ms. Lofgren.
    Ms. Lofgren. Well, thank you very much. And to all the 
witnesses, it has been great to hear from all of you.
    I want to specifically say, Mr. Pishevar, what a thrill it 
is to see the person responsible for webOS. I mean, it is very 
cool that you are.
    You know, coming from the Valley, there are some things 
that are obvious to me, but may not necessarily seem as obvious 
in other parts of the country. One of the things, and I am 
interested in how you would see this fact factored into how 
this program needs to be fine-tuned.
    I mean, in the Valley, failure is a learning experience, 
and not every venture is going to hit on all cylinders. I mean, 
we see people, you know, be successful in later things.
    How in your judgment--we have got like in the bill, we have 
a 2-year window to see whether this is going to take off or 
not. Twenty-five, maybe half of the ventures you fund, Mr. 
Mendelson, you in your testimony, are not going to make it. And 
yet, their founders may go on to found another business. How 
would you suggest we deal with that phenomenon?
    Mr. Pishevar. Well, I think, first of all, 2 years is 
plenty enough time to realize if a venture is going to take 
hold or not, especially in the dollar amount we are talking. I 
have heard anywhere from $250,000 to $500,000 as a threshold to 
enact the startup visa.
    That is going to be plenty to get somebody nine to 12 to 18 
months. And we are going to know.
    Ms. Lofgren. Okay.
    Mr. Pishevar. Either more money is going come and they are 
going to ramp up or not. So, whether they can turn around and 
create a second company, too, within 24 months, I do not think 
that happens. But it is certainly plenty for the first.
    Ms. Lofgren. And we have got built into the visa the plan 
that either you create the jobs or you attract the additional 
capital.
    Mr. Pishevar, in your testimony, you were talking about the 
screens, I think, because, you know, I really think in this 
venture, the VC world is going to be better at sorting this out 
really than some government bureaucracy.
    Talk to us about how you evaluate ventures as an angel 
investor or in your VC capacity, and what that would mean for 
people who participate in this program?
    Mr. Pishevar. Absolutely. So, our philosophy at Menlo is 
that we invest in people, that people are the greatest asset 
class. And so, we look for the greatest talent that we can find 
regardless of where they are in the world. In fact, you know, 
we look at entrepreneurs from all over the world that we would 
like to attract and invest in.
    So, the filter really is around talent, and we invest in 
those people and those teams that we think have the greatest 
opportunity to build companies of consequence.
    So, I think that is really, you know, in terms of our 
philosophy, that we want to stick to that, that works. It is a 
great philosophy that, you know, this is all about people, that 
investment and entrepreneurship is about finding that band of 
gold that exists out there in terms of the greatest talent that 
we can find and back them.
    And to the other point that Mr. Mendelson was talking 
about, many of these companies within 24 months very quickly, 
you know, figure out that their initial idea was not working, 
and they can pivot to a new idea, even within the same 
structure of that company.
    Ms. Lofgren. And space, yeah.
    Mr. Pishevar. And I completely agree that 2 years is more 
than enough time to realize that and realign the company as 
quickly as possible to the right opportunity.
    Ms. Lofgren. Well, I think then the advice I am hearing you 
give, and it is one I believe in and we put in the bill, is 
that if the venture world is willing to put their capital on 
this, that is likelier to be a sound screen than the 
bureaucracy trying to second guess that decision. Is that 
basically what you are saying to us?
    Mr. Pishevar. Absolutely. I mean, venture capital firms 
have a huge responsibility to invest their limited partners' 
money well. And they would not be in business if they did not 
have a high filter for quality and did an immense amount of due 
diligence on those teams and those companies that they are 
potentially investing. And so, it is a pretty rigorous process 
that, you know, I would not consider outsourcing to some other 
process.
    Ms. Lofgren. Right. The final thing I would ask, you know, 
we have got a quantified number of jobs that need to be 
produced in order to turn the visa from conditional to 
permanent. But, again, coming from the Valley, that is not just 
the jobs that are going to be grown, because if you have got an 
ecosystem, was we do in the Valley, it is not just the jobs 
that one company creates with that one. It is things spin off, 
other inventors, so that it really is creating--well, we are 
not creating. The ecosystem is there. It is preventing that 
ecosystem from degrading.
    Mr. Mendelson. You know, I would add that the people are 
spinning off through the rest of the country.
    Ms. Lofgren. Yes.
    Mr. Mendelson. I was in the Valley for 10 years before I 
moved to Boulder, and there are a lot of people from the Valley 
in Boulder and everywhere else.
    Ms. Lofgren. I know that.
    Mr. Mendelson. So, this is ecosystem is a nationwide thing, 
not just a particular geography.
    Mr. Gallegly. Thank the gentlelady. I want to remind 
Members, I have just been told, we are going to be called to a 
vote on the floor shortly. So, what I am going to try to do, if 
we can, wrap up so we do not have to ask you folks to stay 
while we go and vote and come back. If we cannot, we will go 
from there.
    So, with that, I would yield to Mr. Smith?
    Mr. Smith. Thank you, Mr. Chairman. Mr. Stenger, let me ask 
you a question that we discussed earlier today because I think 
your answer will be of interest to other Members of this 
Subcommittee.
    In the case of your companies and projects and investment 
opportunities, I think you have 100 percent foreign investors. 
Why is it we cannot find more American investors to participate 
in these kinds of programs?
    Mr. Stenger. Well, I think our particular program is very 
attractive to EB-5 candidates around the world. And we have 
reached out to various parts of the world.
    And earlier the comment was made about Canada. We became 
very involved in this program in Jay Peak because of our close 
relationship with or our proximity to Canada.
    So, there is an investment market. There is interest in 
coming to this country. There is a tremendous amount of capital 
that is looking to become part of programs in the United 
States. So, we have reached out to various parts of the world 
to welcome investors to the United States.
    The return on investment is competitive to reach out to 
U.S. investors. We have other investments that U.S. investors 
can participate in. This particular EB-5 program is focused on 
foreign investors who have capital, who have a good background, 
and are capable of investing and making job creation occur in 
rural areas, such as ours.
    Mr. Smith. Okay.
    Mr. Stenger. So, the program is specifically for the 
foreign investor, bringing capital, creating jobs in rural, 
high unemployment areas such as ours. And that is where we have 
focused, and we have seen substantive results and success.
    Mr. Smith. Thank you, Mr. Stenger.
    Mr. Healy, we've discussed this before as well, but how 
would you suggest we improve the program. A few minutes ago, 
you testified in response to another question that there were 
some individuals, some enterprises who gamed the system. How 
can we prevent individuals from gaming the system? How can we 
better protect investors?
    Mr. Healy. Thank you for the question, Mr. Chairman. I 
think that the way that I would suggest that most of the 
regional centers that are operating now are very high quality 
and are not, you know, attempting to do anything that would be 
gaming the system. But I think that in order to ensure that 
that does not occur, all of the best practices suggested by 
IIUSA, which include complying with and being subject to the 
regulation of the SEC with respect to unregistered securities 
just to the extent that these regional center projects are 
structured as limited partnerships or other forms of 
unregistered securities, would be appropriate.
    I mean, my background is in institutional investments. I 
was the chief compliance officer at a broker dealer. We are 
approaching the threshold for being required to register as an 
investment advisor with the SEC anyway.
    This is not new to us, and I think for people that are 
operating at a high quality level, it is not going to be a 
problem.
    Mr. Smith. Thank you, Mr. Healy. Mr. Mendelson, I do not 
know where my time went, but let me squeeze in a last question 
to you.
    And you said in your written testimony that in regard to 
these companies, 25 to 50 percent will not return our invested 
capital. What happens to those foreign investors in businesses 
that do not work out?
    Mr. Mendelson. So, the investors? Well, I am a venture firm 
that takes money from other folks and invests it in. And in 
those 25 to 50 percent, I get back less money than I put in, 
and I take a loss. While the VC, venture capital, diligence 
process is extremely rigorous, you know, these are high, high 
risk situations. And, you know, we fund less than .01 percent 
of all the business plans we get. And despite that, just on 
pure luck and who knows what, you can have some problems. So, 
it is a very tough screen.
    Mr. Smith. Okay. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Gallegly. Thank you, Mr. Smith.
    Mr. Conyers?
    Okay. I appreciate that, and we will then yield to Mr. 
Lungren for his 5 minutes?
    Mr. Lungren. Thank you, Mr. Chairman.
    Mr. Pishevar, it is good to see somebody that I can relate 
to. I also had expectations from my mom and dad I was going to 
be a doctor. And my dad did talk to me, but my mom cried for 2 
weeks. But they would probably be happier with me sitting in 
your shoes, sitting in your seat than here as a Member of 
Congress, I might say. Actually, my dad was disappointed 
because I became a lawyer.
    The question I have got, Mr. Healy, is this. I am in 
support of this program and refining the program. But in answer 
to critics, I have noticed that a representative of your State 
has talked about how many jobs you create in your State and 
what a great job you do. And he has done a very good job of 
taking jobs out of my State and putting them into your State. 
In fact, he has talked about how he loves to go on hunting 
expeditions to California where he bags an employer or two.
    With a State that presumably is the best job creating State 
in the Union and has a lot of investment, why do you need to 
have a regional center to attract foreign investors when 
presumably you would be the place for people to want to invest 
that are already here?
    Mr. Healy. Thank you for the question. There is always room 
for improvement, Congressman.
    In the City of Dallas, there are areas of Dallas that have 
been underserved for years that have very high unemployment 
rates. To give you an example that I will briefly summarize 
that I have written about in my written testimony, we just 
recently committed to an investment with an affordable assisted 
living developer to provide seniors' housing for Dallas 
residents that are underserved in this market completely, 
because while the investment climate in Texas is indeed strong, 
there are always areas that are underserved and that, in 
particular, EB-5 capital can facilitate transactions occurring.
    Because the capital can be much lower cost, much more 
flexible than traditional institutional investment capital or 
bank financing, there are opportunities to create a great many 
jobs that would be missed without this program.
    Mr. Lungren. Okay. Mr. Pishevar, again, I am trying to 
respond to critics of the program. When I support the program, 
they would say--someone like you, you and your parents did not 
come here under a program like this, correct?
    Mr. Pishevar. Right.
    Mr. Lungren. And many of the entrepreneurs that you have 
talked about that have started companies did not come under a 
program like this. They came as refugees. They came under the 
regular immigration policy. But there was something about 
America and the opportunities here that attracted them to be 
able to succeed as you have.
    And so, they would say to me, well, why do we need a 
special program which, some people say, looks like you are 
buying a precious commodity, that is, the ability to become an 
American citizen, when folks such as you--that is not what 
attracted you here, and yet you succeeded. Can you give me a 
response to----
    Mr. Pishevar. Absolutely.
    Mr. Lungren [continuing]. That kind of a criticism of this 
kind of a program.
    Mr. Pishevar. Thank you, Congressman. That is a great 
question.
    So, I believe deeply that we need to move away from passive 
immigration policy in terms of waiting and hoping that we will 
attract the types of immigrants that can actually build these 
types of, you know, companies and that kind of success, and 
begin to go into recruiting mode, to actually, you know, 
specifically attract these types of talented entrepreneurs who 
want to come to America, and be a magnet for them to come here.
    We have just seen it over and over again, both inside of Y 
Combinator and TechStars, in companies that I have invested in 
so many. That those incredibly talented entrepreneurs that we 
want to fund many times have funded, run into immigration 
issues in terms of getting their visas to move here, move their 
companies here, and create jobs.
    It just happens, you know, in every single class of the 
companies that we see. In these incubators, we have a number of 
those. And I am spending a lot of time, you know, trying to 
help those entrepreneurs with----
    Mr. Lungren. Mr. Healy, just one quick thing. I have been 
contacted by one of the regional centers in California, and 
they have complained about the lack of activity or action by 
the government agency that is supposed to approve this. Have 
you seen a similar thing?
    I mean, we have the commitment from the head of the 
government agency to do a better job. But have you seen that as 
well, that if we are going to have this program? I mean, I have 
got a situation where they suggest that the USCIS preapproved 
the project in September 2010. They still do not have final 
approval, and they have got investors hanging out there that--
well, you know, whether they get here or they do not get here, 
hangs in the balance.
    Mr. Healy. Yes, sir. Thank you. We have indeed seen similar 
situations. I have personally faced similar situations. I am 
very encouraged by the director's recent announcements for 
plans to streamline the program, but there is no question that 
there is considerable work to do with USCIS to make sure that 
they have the internal capacity to process these applications 
in a timely manner, and the expertise that that will require.
    We are, as I mentioned, meeting with the director later 
this afternoon, and I expect to discuss that specifically.
    Mr. Lungren. Give him my regards, will you please?
    Mr. Healy. I will.
    Mr. Lungren. Tell him I have a concern.
    Mr. Healy. I will do that. Thank you, sir.
    Mr. Gallegly. Thank the gentleman. And before we adjourn, I 
would like to give special thanks for Mr. Polis for joining us 
today. Glad to have you here.
    And I would also like to especially thank all of our 
witnesses for your testimony today.
    Without objection, all Members will have 5 legislative days 
to submit to the Chair additional written questions for the 
witnesses, which we will forward and ask the witnesses to 
please respond as promptly as possible so that we can make the 
answers a part of the formal record of the hearing.
    Without objection, all Members will have 5 legislative days 
to submit any additional materials for inclusion in the record.
    And with that, I thank you again.
    And with that, the Subcommittee stands adjourned.
    [Whereupon, at 2:35 p.m., the Subcommittee was adjourned.]


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               Material Submitted for the Hearing Record




                                 
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