[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]




 
         IS THE INVESTOR VISA PROGRAM AN UNDERPERFORMING ASSET?

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

                                HEARING

                               BEFORE THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 11, 2016

                               __________

                           Serial No. 114-58

                               __________

         Printed for the use of the Committee on the Judiciary
         
         
         
         
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                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        JERROLD NADLER, New York
LAMAR S. SMITH, Texas                ZOE LOFGREN, California
STEVE CHABOT, Ohio                   SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California          STEVE COHEN, Tennessee
J. RANDY FORBES, Virginia            HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa                       Georgia
TRENT FRANKS, Arizona                PEDRO R. PIERLUISI, Puerto Rico
LOUIE GOHMERT, Texas                 JUDY CHU, California
JIM JORDAN, Ohio                     TED DEUTCH, Florida
TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah                 KAREN BASS, California
TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
TREY GOWDY, South Carolina           SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho                 HAKEEM JEFFRIES, New York
BLAKE FARENTHOLD, Texas              DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia                SCOTT PETERS, California
RON DeSANTIS, Florida
MIMI WALTERS, California
KEN BUCK, Colorado
JOHN RATCLIFFE, Texas
DAVE TROTT, Michigan
MIKE BISHOP, Michigan

           Shelley Husband, Chief of Staff & General Counsel
        Perry Apelbaum, Minority Staff Director & Chief Counsel
        
        
        
        
                            C O N T E N T S

                              ----------                              

                           FEBRUARY 11, 2016

                                                                   Page

                           OPENING STATEMENTS

The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Chairman, Committee on the Judiciary     1

The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Ranking Member, Committee on 
  the Judiciary..................................................     3

The Honorable Zoe Lofgren, a Representative in Congress from the 
  State of California, and Member, Committee on the Judiciary....     5

                               WITNESSES

Nicholas Colucci, Chief, Office of Immigrant Investor Program, 
  U.S. Citizenship and Immigration Services
  Oral Testimony.................................................     8
  Prepared Statement.............................................    11

Rebecca Gambler, Director, Homeland Security and Justice Issues, 
  U.S. Government Accountability Office
  Oral Testimony.................................................    18
  Prepared Statement.............................................    20

Jeanne Calderon, Clinical Associate Professor, Stern School of 
  Business, New York University
  Oral Testimony.................................................    42
  Prepared Statement.............................................    44

Matt Gordon, Chief Executive Officer, E3 Investment Group
  Oral Testimony.................................................    57
  Prepared Statement.............................................    59

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable Jerrold Nadler, a 
  Representative in Congress from the State of New York, and 
  Member, Committee on the Judiciary.............................     6

                                APPENDIX
               Material Submitted for the Hearing Record

Material submitted by the Honorable Jerrold Nadler, a 
  Representative in Congress from the State of New York, and 
  Member, Committee on the Judiciary.............................    86

Supplement to the Oral Testimony of Jeanne Calderon, Clinical 
  Associate Professor, Stern School of Business, New York 
  University.....................................................    95
Response to Questions for the Record from Nicholas Colucci, 
  Chief, Office of Immigrant Investor Program, U.S. Citizenship 
  and Immigration Services.......................................    96
                        OFFICIAL HEARING RECORD
          Unprinted Material Submitted for the Hearing Record

Material submitted by the Honorable John Conyers, Jr., a Representative 
    in Congress from the State of Michigan, and Ranking Member, 
    Committee on the Judiciary. The material is available at the 
    Committee and can also be accessed at:

    http://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=104454.pdf

Material submitted by the Honorable Darrell E. Issa, a Representative 
    in Congress from the State of California, and Member, Committee on 
    the Judiciary. The material is available at the Committee and can 
    also be accessed at:

    http://www.gao.gov/assets/680/671940.pdf

Material submitted by the Honorable Darrell E. Issa, a Representative 
    in Congress from the State of California, and Member, Committee on 
    the Judiciary. The material is available at the Committee and can 
    also be accessed at:

    http://blogs.rollcall.com/beltway-insiders/u-s-citizenship-not-
sale-commentary

Material submitted by the Honorable Bob Goodlatte, a Representative in 
    Congress from the State of Virginia, and Chairmanr, Committee on 
    the Judiciary. The material is available at the Committee and can 
    also be accessed at:

    http://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=104454.pdf


         IS THE INVESTOR VISA PROGRAM AN UNDERPERFORMING ASSET?

                              ----------                              


                      THURSDAY, FEBRUARY 11, 2016

                        House of Representatives

                       Committee on the Judiciary

                            Washington, DC.

    The Committee met, pursuant to call, at 2:16 p.m., in room 
2141, Rayburn House Office Building, the Honorable Bob 
Goodlatte (Chairman of the Committee) presiding.
    Present: Representatives Goodlatte, Chabot, Issa, King, 
Gohmert, Jordan, Poe, Chaffetz, Marino, Gowdy, Labrador, 
Collins, DeSantis, Walters, Buck, Ratcliffe, Trott, Bishop, 
Conyers, Lofgren, Jackson Lee, Chu, DelBene, Jeffries, and 
Cicilline.
    Staff Present: (Majority) Shelley Husband, Chief of Staff & 
General Counsel; Branden Ritchie, Deputy Chief of Staff & 
Chief; Zachary Somers, Parliamentarian & General Counsel; 
Kelsey Williams, Clerk; George Fishman, Chief Counsel, 
Subcommittee on Immigration and Border Security; (Minority) 
Perry Apelbaum, Staff Director & Chief Counsel; Danielle Brown, 
Parliamentarian & Chief Legislative Counsel; Gary Merson, Chief 
Immigration Counsel; Micah Bump, Minority Counsel; Joe 
Ehrenkrantz, Legislative Aide; and Rosalind Jackson, 
Professional Staff Member.
    Mr. Goodlatte. Good afternoon. The Judiciary Committee will 
come to order. Without objection, the Chair is authorized to 
declare recesses of the Committee at any time. We welcome 
everyone to this afternoon's hearing on ``Is the Investor Visa 
Program an Underperforming Asset.'' I'll begin by recognizing 
myself for an opening statement.
    In 1990, Congress created the Investor Visa Program, EB-5 
for short. About 10,000 green cards each year go to aliens who 
invest in a business and will create 10 jobs. Congress' goal 
was to create new employment for U.S. workers and to infuse new 
capital into the country and to target investments to rural 
America and areas with particularly high unemployment, areas 
that can use the job creation the most. Finally, Congress was 
clear that the goal was not to provide immigrant visas to 
wealthy individuals.
    I am a supporter of the Investor Visa Program and believe 
that it has contributed in real ways to economic development. 
Unfortunately, over the years the program has strayed further 
and further away from what Congress envisioned. It is thus not 
performing at the high level that we deserve.
    The Immigration Act of 1990 provided that alien investors 
must invest $1 million. However, the Department of Homeland 
Security may in the case of investments made in a targeted 
employment area, rural or high unemployment, specify a lower 
amount. Since 1990, over 25 years, this has been $500,000.
    Finally, DHS has the authority to increase the minimum 
investment amounts. Over the last quarter century, the minimum 
investment amounts have never been adjusted for inflation. As a 
result, the real value of each investment has fallen by almost 
50 percent, depriving the U.S. economy of billions of dollars a 
year.
    The Department of Homeland Security now plans to take the 
long-overdue step of adjusting the levels to account for 
inflation. Congress wanted to incentivize investments through a 
lower investment amount in areas with a scarcity of jobs that 
find it hard to attract capital. As DHS has stated, Congress 
did this ``in order to spur immigrants to invest in firms that 
are principally doing business in and creating jobs in areas of 
greatest need.''
    Congress' expectation was that the vast majority of EB-5 
investors would invest $1 million. Yet, last year almost all 
investor visas went for $500,000. Why? Well, as one EB-5 
attorney has put it, most investors are interested in realizing 
permanent residency for a lower price tag, the logic being, why 
pay $1 million for a green card when I can get it for $500,000?
    Not surprisingly, this has led to rampant gerrymandering. 
As DHS Deputy Secretary Alejandro Mayorkas has stated, this 
involves the deliberate drawing of TEAs to include prosperous 
areas that should not be subject to the reduced capital 
requirements.
    Let me give one example. A proposed hotel and conference 
center in Laredo, Texas, was located in a census tract with 1.4 
percent unemployment, far less than the 12.5 percent required 
to be a TEA. So what did the project do? Here is a map of the 
project stretching 200 miles, all the way to the high 
unemployment area of Brownsville, Texas, in order to make the 
numbers work.
    And here is the vaulted conservatory with baby grand piano 
at the 926-foot Four Seasons Hotel and Private Residences at 30 
Park Place in Tribeca, which describes itself as ``perfectly 
pitched luxury,'' that will, ``introduce a new caliber of 
luxury living.'' Beverly Hills magazine says it is ``poised to 
be one of Manhattan's most prestigious addresses,'' and a ``new 
paradigm in sophisticated living.'' Prices vary from $2.6 
million to over $60 million for one condo in that building.
    30 Park Place wanted to market EB-5 visas for $500,000. 
However, since the unemployment rate there is only 3.8 percent, 
New York State developed a project map that went upstream along 
the East River in order to lasso enough high unemployment areas 
to qualify.
    Unfortunately, the Department of Homeland Security has 
facilitated such abusive gerrymandering. The USCIS accepts as 
binding maps approved by State agencies, even though, as The 
Wall Street Journal points out, they are eager for economic 
development and have little stake in Federal immigration 
policy.
    Projects in affluent areas will always get the lion's share 
of EB-5 investments. Even if immigrants have to invest more, 
they prefer the higher degree of safety and the prestige.
    However, we want to ensure a healthy percentage of projects 
locate in rural and depressed areas. Even if we could determine 
that a project's workers commute from high unemployment areas, 
which generally can't be done, that is not enough. We want to 
revitalize distressed areas, and to do that, projects actually 
have to be located in those areas.
    Let me mention two other issues. First, in instances where 
a project is financed by EB-5 and conventional capital, the 
Department of Homeland Security allows foreign investors to 
receive credit for all the jobs to be created, even those paid 
for by other people's money. DHS' inspector general has 
concluded that DHS regulations ``allow foreign investors to 
take credit for jobs created with U.S. funds''--in one case, 
even though EB-5 funds accounted for only 18 percent of the 
capital. This practice makes a mockery of the job-creation goal 
of the EB-5 program.
    Finally, as I stated, visas for the wealthy was not a goal 
of the EB-5 program. It was to attract investors with 
entrepreneurial talent. As Phil Gramm stated during Senate 
consideration: ``If people have been successful in business, 
they can bring that talent, and the fruits of that talent, a 
million dollars, to this country.''
    However, currently aliens can acquire investment funds 
through inheritance or a gift and there is no real regulatory 
requirement that they be entrepreneurs. They can simply be 
limited partners with no role in management. It is not 
surprising that the vast majority of EB-5 investors now are 
limited partners. If the EB-5 program is reformed, it can be 
become a turbo-charged engine for economic growth.
    I look forward to today's hearing. And I would add that if 
we're not successful in making reforms for this program, the 
program is going to either expire or become irrelevant because 
of the enormously long waiting list that has already developed 
for these green cards. Those who have profited from this are 
killing off a program that is intended to create jobs and real 
economic development in this country.
    I now recognize the Ranking Member of the Committee, the 
gentleman from Michigan, Mr. Conyers, for his opening 
statement.
    Mr. Conyers. Thank you, Mr. Chairman, for a very strong set 
of observations to begin this hearing.
    We're focusing today on the EB-5 Immigrant Investor 
Program. When Congress established the program in 1990, the 
intention was to create jobs for American citizens and to bring 
new investment capital to the United States.
    I believe the EB-5 program can have a positive effect on 
distressed urban and rural communities by providing a source of 
jobs and investment. However, there are fundamental questions 
about how the program is currently being used and whether 
adequate integrity safeguards exist.
    To begin with, the current practices used to draw targeted 
employment areas must be reformed. To help incentivize 
investment and job creation in rural or high unemployment 
areas, the EB-5 program offered a reduced investment level of 
$500,000 for projects in designated target employment areas.
    However, as reported by The Wall Street Journal, as well as 
many other news sources, the vast majority of EB-5 investment 
funds are going to projects in some of America's most affluent 
areas that qualify as targeted employment areas only because of 
gerrymandering. By stringing census tracts together from high 
unemployment neighborhoods to wealthy ones, project developers 
have been able to take advantage of the lower targeted 
employment area investment level while still investing in 
projects in more desirable and affluent areas.
    This practice has been strongly criticized by the 
Leadership Conference on Civil Rights. It notes that the EB-5 
Regional Center Program has dramatically deviated from its 
original purpose: to spur job creation and development in rural 
and high unemployment areas. Steering investments to projects 
in our cities' wealthiest neighborhoods at the expense of urban 
and rural communities that need it most is not what Congress 
intended when it established targeted employment areas and the 
lower investment level.
    The congressional district, for example, that I represent 
suffers from an unemployment rate of more than 300 percent the 
national average. I'm pleased to say today that we are starting 
to come back, but it's slow and tough. But for those Americans 
living in urban poverty, in my city of Detroit and in many 
other cities across the country, manipulation of targeted 
employment areas has diverted a potential source of jobs and 
neighborhood improvement away from those it was intended to 
help.
    As the Leadership Conference points out, it is not enough 
to have development in more affluent areas where low-income 
workers might commute to, because the projects will still leave 
these communities of concentrated poverty no better off in 
terms of development and infrastructure after their conclusion.
    Also, the EB-5 program suffers from the absence of good 
data on projects and jobs created. In order to receive a green 
card, a foreign investor must prove that the investment will 
create at least 10 jobs for U.S. workers. Under the Regional 
Center Program, investors can account for the 10 jobs by 
counting direct, indirect, and induced jobs. I wonder what an 
induced job is. These indirect and induced jobs are calculated 
by econometric models.
    While some data exists on the more than $13 billion of 
foreign direct investment since 2008, there's very little hard 
information on actual jobs created by EB-5 regional centers. We 
don't know whether these are jobs that are paying a living 
wage, whether they offer long-term employment, and whether they 
have benefited workers from distressed communities. The AFL-CIO 
shares these concerns and states that increased data will shed 
light on whether the program is meeting its mandate to spur 
growth and create jobs and in underserved areas.
    So in conclusion, I remain committed to working with 
Chairman Goodlatte and others on this Committee to improve the 
EB-5 program. The reforms that Chairman Goodlatte, Senate 
Judiciary Chairman Grassley, Senate Judiciary Ranking Member 
Leahy, and I negotiated last year demonstrate that meaningful, 
bicameral, bipartisan reform is possible.
    I thank the Chair, and I return any time remaining.
    Mr. Goodlatte. The Chair thanks the gentleman.
    It is now my pleasure to recognize the Ranking Member of 
the Subcommittee on Immigration and Border Security, the 
gentlewoman from California, Ms. Lofgren, for her opening 
statement.
    Ms. Lofgren. Thank you, Mr. Chairman.
    The EB-5 investor visa has proven to be an important job 
creation program. It provides financing to public-private 
projects, infrastructure, and other ventures, including nursing 
home facilities for senior citizens outside Dallas, Texas, a 
charter school in Buffalo, New York, and redevelopment of the 
Hunters Point Shipyard in the Bay area.
    Now, my State of California took steps to reform its policy 
to avoid gerrymandering, and in my own district it has allowed, 
the EB-5 program has allowed a new hotel to be constructed near 
the airport to help revitalize the San Jose airport corridor. 
This project was, in fact, the first hotel built in that 
airport area in 20 years.
    Yet, as important as the EB-5 financing has been since the 
banking and economic crisis of 2008, it pales in comparison to 
the potential of a visa program for startup entrepreneurs to 
create new American jobs and businesses.
    I support long-term reauthorization of the EB-5 program, so 
long as it includes much-needed reforms. The required 
investment levels are outdated, immigrant investors need 
security protections, and government agencies charged with 
oversight and enforcement need new authorities.
    I support reform of the targeted employment area 
requirements so that we ensure that EB-5 investments result in 
job creation in communities that need it most, whether they be 
urban or rural. In this respect, it is important that any EB-5 
reform be balanced so that communities across the country have 
the opportunity to compete for EB-5 investments.
    For these reasons, my good friend and colleague from 
Chicago, Mr. Gutierrez, and I introduced the EB-JOBS Act. Our 
EB-5 reform bill requires disclosures by regional centers and 
authorizes sanctions ranging from fines to debarment and 
termination of regional center designation for 
misrepresentations or other program violations. It provides for 
site visits, it prohibits regional center participation for 
persons who were found liable within the past 5 years of a 
criminal or civil violation relating to fraud.
    I'm pleased to say that these and other transparency and 
integrity measures are included not just in our bill, but in 
bipartisan reform efforts, and they are widely agreed upon 
among EB-5 financiers and developers. They should be enacted 
before the program is reauthorized at the end of this fiscal 
year. We should also raise the minimum investment levels, which 
have not been changed in over 25 years, since the program was 
first enacted. And here again we have agreement across party 
lines.
    Now, I know that reform of targeted employment area rules 
has been a major point of contention. But with balance and 
compromise we should be able to reach an agreement that works 
for urban and rural areas, for affluent and distressed 
communities, and that recognizes that workers do commute to job 
sites. There is no reason we shouldn't be able to reach an 
agreement that is consistent with the program's original intent 
and works in concert with other programs that direct 
investments to distressed areas, including enterprise zones, a 
Republican idea advocated by Speaker Ryan's mentor, the late 
Jack Kemp, the New Markets Tax Credits.
    However, as I said at the outset of my remarks, far more 
important than an investment visa is a new startup visa for 
entrepreneurs. Our bill, the EB-JOBS Act, includes provisions 
that incentivize economic growth and job creation by creating 
new green card categories for entrepreneurs who establish 
startup businesses and create jobs for American workers.
    Foreign-born entrepreneurs, many of them educated at U.S. 
universities, have contributed immensely to our economy. They 
have been a driving force for innovation in Silicon Valley and 
the continued prominence of America's technology sector. Nearly 
half, 24 out of 50 of the country's top venture-funded 
companies, have at least one immigrant founder.
    In fact, immigrants are twice as likely to start businesses 
as native-born Americans, and immigrant businesses, including 
small nontech businesses, have grown at 2.5 times the national 
average. Companies back home like Intel, Google, Yahoo, and 
eBay were all founded by immigrants and now employ tens of 
thousands of people.
    The startup visa would require significant venture capital 
or seed financing for innovative ideas and products or the 
creation of new businesses that can already demonstrate job 
creation in the U.S. Immigration has historically made our 
economy stronger. The inclusion of a startup visa expansion in 
our bill embraces that history and encourages the world's 
thinkers and doers to join us.
    While this hearing is focused on the EB-5 program, I remain 
committed and will work tirelessly to pass startup visa 
legislation.
    Today, more than ever, immigration is being used to divide 
us, and much needs to be done to fix our broken immigration 
system. But I am pleased that we can recognize programs that 
work. And I look forward to working with Chairman Goodlatte, 
Ranking Member Conyers, and others on a bipartisan, bicameral 
effort to make important reforms that will allow the EB-5 
program to be reauthorized.
    I thank you, Mr. Chairman, and yield back the balance of my 
time.
    Mr. Goodlatte. Thank you very much, Ms. Lofgren.
    Without objection, all other Members' opening statements 
will be made a part of the record.
    [The prepared statement of Mr. Nadler follows:]
Prepared Statement of the Honorable Jerrold Nadler, a Representative in 
   Congress from the State of New York, and Member, Committee on the 
                               Judiciary
    Mr. Chairman, the EB-5 program has been a tremendous job creator 
and economic development tool throughout the country. According to one 
estimate, EB-5 investments in New York State alone have created and 
supported more than 57,000 jobs in the last five years. Many of these 
are good, union jobs.
    EB-5 funding has been essential to financing important public-
private projects in my district, like the Pier A and Battery Maritime 
Redevelopment projects that are helping reclaim great public spaces for 
new and beneficial uses. It has also been a critical tool in financing 
major construction projects that provide thousands of jobs throughout 
New York City.
    Right now, the largest construction project in the United States is 
in my district. It's called Hudson Yards, and EB-5 funding is an 
important part of its funding. This project alone will generate 23,000 
construction jobs and help improve local infrastructure.
    Unfortunately, there is a misperception that the EB-5 program only 
benefits New York City and other urban areas. But EB-5 investment 
supports jobs up and down the East Coast, across the Midwest, and on 
the West Coast. Some critics of this program fail to recognize the 
ripple effect that major development projects can have throughout the 
country.
    When a developer in New York City breaks ground on a new project, 
they place orders for construction parts--glass, steel, concrete--that 
come from suppliers all across the country. For example, the 'upstream' 
and 'downstream' effects of Hudson Yards alone have even found their 
way to Lynchburg, Virginia, in the Chairman's district, where Hudson 
Yards has placed an order for 24,000 tons, or approximately $100 
million worth, of steel from the Banker Steel Company.
    Certain critics of the EB-5 program like to say that some regional 
centers are, in effect, gerrymandering census tracts to create Targeted 
Employment Areas and take advantage of the lower investment criteria. 
But this criticism fundamentally misunderstands the economy and scale 
of a major urban center like New York. Unlike some parts of the 
country, where a census tract may stretch for many miles, in New York, 
it might be only a couple of blocks. It would be a mistake to constrict 
TEAs in such a way that ignores this reality.
    Furthermore, in a major urban area, it is rare for workers to live 
in the same neighborhood as their job. But that doesn't mean that their 
home neighborhood is not directly relevant to the economic development 
an EB-5-financed project may generate. When the workers return home, 
often to a distressed community, they spend their income there, 
bringing further economic development to that neighborhood. That is 
exactly what this program was intended to do.
    It is unfortunate that much of the debate surrounding the EB-5 
program has been characterized as a battle between urban vs. rural, or 
New York against the rest of the country. I believe we can reform the 
program in such a way that everyone can compete on a level playing 
field, regardless of geography. I also support a range of integrity 
measures that would prevent fraud, and better data collection to ensure 
an accurate measure of the quality and economic impact of the jobs that 
are created. I hope Chairman Goodlatte and Ranking Member Conyers will 
continue to work with all of the relevant stakeholders to see that this 
is accomplished.
                               __________

    Mr. Goodlatte. We welcome our distinguished witnesses 
today. And if you'd all please rise, I'll begin by swearing you 
in.
    Do you and each of you swear that the testimony that you 
are about to give shall be the truth, the whole truth, and 
nothing but the truth, so help you God?
    Thank you.
    Let the record reflect that all of the witnesses have 
responded in the affirmative. And I'll now begin by introducing 
them.
    The first witness is Mr. Nicholas Colucci. Mr. Colucci is 
the Chief of Immigrant Investor Program at the U.S. Citizenship 
and Immigration Services, a position he assumed in December of 
2013. In this role, Mr. Colucci leads IPO's staff of 
adjudicators, economists, and program support specialists in 
administering the EB-5 program.
    Mr. Colucci joined USCIS with more than 21 years of 
experience with the Bureau of Alcohol, Tobacco, Firearms and 
Explosives and the Department of the Treasury. Mr. Colucci 
received his BA magna cum laude from Long Island University and 
his MBA from Loyola University.
    Today marks the second time that Mr. Colucci has testified 
before Congress, after last week's testimony before the Senate 
Judiciary Committee. I want to personally thank Mr. Colucci and 
his team and Legislative Affairs Liaison Mike Rodriguez for all 
the technical assistance they gave Mr. Issa, Mr. Conyers, Ms. 
Lofgren, and me last year in formulating legislative reforms to 
the EB-5 program.
    Our next witness is Ms. Rebecca Gambler, the Director of 
the U.S. Government Accountability Office's Homeland Security 
and Justice Team. Ms. Gambler leads GAO's work on border 
security, immigration, Department of Homeland Security 
management, and elections issues.
    Prior to joining GAO, Ms. Gambler worked at the National 
Endowment for Democracy's International Forum for Democratic 
Studies. Ms. Gambler is a graduate of the U.S. Naval War 
College and holds master's degrees from Syracuse University and 
the University of Toronto.
    Our next witness, Ms. Jeanne Calderon, is a clinical 
associate professor at the New York University Stern School of 
Business where she teaches courses in the areas of law, ethics, 
professional responsibility, and real estate. She's a graduate 
of Cornell University and the Georgetown University Law Center.
    Sitting behind her is her husband, Mr. Gary Friedland, who 
is a scholar in residence at the NYU Stern School of Business 
and affiliated with Stern Center for Real Estate Finance 
Research. Since 2014, Ms. Calderon and Mr. Friedland have been 
analyzing the EB-5 immigrant visa program and how it is 
utilized as a source of capital for commercial real estate 
projects.
    Our final witness is the CEO of E3 Investment Group, Mr. 
Matt Gordon. E3 is a private equity group that has established 
E3 Cargo, a trucking company, all of whose equity financing 
comes from the EB-5 program. Mr. Gordon has written extensively 
on legal topics related to EB-5 organizational structure and 
EB-5 policy.
    Mr. Gordon is a licensed attorney in New York and began his 
career practicing mergers and acquisitions law on Wall Street. 
Mr. Gordon received his BS in public policy analysis from 
Cornell University and his JD cum laude from the University of 
Pennsylvania School of Law
    Welcome to all of you. Your written testimony will be 
entered into the record in its entirety. I ask that you 
summarize your oral testimony in 5 minutes or less. To help you 
stay within that time, there's a timing light on your table. 
When the light switches from green to yellow, you have 1 minute 
to conclude your testimony. When the light turns red, that's 
it, your time is up, it signals that your 5 minutes have 
expired.
    Mr. Colucci you may begin. Welcome.

   TESTIMONY OF NICHOLAS COLUCCI, CHIEF, OFFICE OF IMMIGRANT 
  INVESTOR PROGRAM, U.S. CITIZENSHIP AND IMMIGRATION SERVICES

    Mr. Colucci. Chairman Goodlatte, Ranking Member Conyers, 
and distinguished Members of the Committee, I'm pleased to 
speak with you today about the EB-5 Immigrant Investor Program. 
My name is Nicholas Colucci, and since December 2013, I've been 
chief of USCIS' Immigrant Investor Program Office, or IPO, 
which administers the EB-5 program. I came to USCIS with more 
than 20 years of regulatory and law enforcement experience with 
the Bureau of Alcohol, Tobacco, Firearms and Explosives and the 
Financial Crimes Enforcement Network, where I managed diverse 
teams dedicated to combating money laundering, fraud, and 
terrorist financing.
    I share the Committee's dedication to ensuring the 
integrity of the EB-5 program. I will tell you today about the 
steps we've already taken and those we are planning to further 
strengthen our administration of the program. I thank the 
Committee for your continued support and interest in the EB-5 
program.
    USCIS has built a strong foundation that supports its 
administration of the program. Most significantly, in 2013 
USCIS realigned the EB-5 program into IPO, or the Immigrant 
Investor Program Office, and relocated it to Washington, D.C., 
where we hired staff with expertise in economics, law, 
business, finance, securities, and banking to manage the 
complex EB-5 caseload.
    USCIS also created a Fraud Detection and National Security 
Division and embedded its personnel to work alongside IPO's 
adjudications officers and economists. In addition to enhancing 
USCIS' ability to better detect fraud risks, which was noted by 
the Government Accountability Office in its August 2015 report, 
this structure has improved our ability to work closely with 
partners across the Federal Government to quickly identify and 
respond to fraud and national security concerns and to develop 
strategies to mitigate these risks.
    Additionally, consistent with GAO's recent review of the 
EB-5 program, USCIS is working to refine data systems to better 
collect program information and has entered into an interagency 
agreement with the Department of Commerce to conduct a 
valuation study of the EB-5 program.
    Since establishing IPO, USCIS has undertaken several 
initiatives to strengthen the program, including more than 
doubling the embedded Fraud Detection and National Security 
staff in fiscal year 2015 and more than tripling the number of 
overseas verification requests in support of EB-5 
adjudications, providing ongoing antifraud training to 
increased IPO staff's awareness of potential fraud schemes, 
undertaking a thorough review of existing regional centers and 
terminating those that failed to submit required information or 
promote economic growth, expanding security checks to cover 
regional center businesses and certain executives, and 
publishing an updated classified intelligence assessment of the 
EB-5 program in fiscal year 2015.
    We have accomplished much to strengthen the integrity of 
the EB-5 program, but as Secretary Johnson noted in his May 
2015 letter to the Committee, there remains more to be done. 
USCIS plans to propose potential regulatory action, including 
changes to make targeted employment area designations more 
consistent, increase minimum investment amounts that have 
remained unchanged for 25 years, and require business plan 
filings in advance of investor petitions.
    Additionally, USCIS has worked closely with congressional 
staff to identify key legislative enhancements to strengthen 
the program, including providing USCIS with specific statutory 
authority to ensure the Regional Center Program is free of bad 
actors, to impose graduated sanctions where appropriate, and to 
collect the information we need to better oversee the program.
    If implemented, these common sense reforms would create 
immeasurable benefits for the program. With the continued 
support of this Committee, I'm confident that the EB-5 program 
can fully realize its goal of stimulating the U.S. economy 
through job creation and capital investment, while safeguarding 
national security and program integrity.
    We look forward to continuing to work with this Committee 
to further then strengthen the EB-5 program and to provide 
technical assistance if requested to any EB-5-related 
legislation.
    Once again, I appreciate the opportunity to be here today. 
I'm happy to answer your questions. Thank you.
    [The prepared statement of Mr. Colucci follows:]
    
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                  __________
    Mr. Goodlatte. Thank you Mr. Colucci.
    Ms. Gambler, welcome.

 TESTIMONY OF REBECCA GAMBLER, DIRECTOR, HOMELAND SECURITY AND 
     JUSTICE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Gambler. Good afternoon, Chairman Goodlatte, Ranking 
Member Conyers, and Members of the Committee. I appreciate the 
opportunity to testify at today's hearing to discuss GAO's work 
reviewing the Immigrant Investor, or EB-5, Program.
    The EB-5 program was established to promote job creation 
and encourage capital investment in the U.S. by foreign 
investors in exchange for lawful permanent residency and a path 
to citizenship. Under the program, immigrant investors are to 
invest $1 million in a commercial enterprise or $500,000 if the 
business is in a targeted employment area. The investment is to 
result in the creation of at least 10 full-time jobs.
    Immigrant investors and their eligible dependents receive 
2-year conditional green cards. If they meet requirements, 
including their investments resulting in at least 10 full-time 
jobs, they can apply to remove the conditional basis of their 
green cards. About 10,000 EB-5 visas are made available to 
qualified applicants each fiscal year, and the number of EB-5 
visas issued each year has grown substantially over time.
    My remarks today will address two key aspect of USCIS' 
oversight and management of the EB-5 program. One, the extent 
to which USCIS has assessed and addressed fraud risks. And two, 
USCIS' methods for verifying job creation and reporting 
economic benefits.
    First, USCIS has taken some action to assess and address 
fraud risks to the program. For example, in recent years USCIS 
and partner agencies have conducted various assessments of 
fraud risks. USCIS has also increased its fraud unit staffing 
and has conducted fraud awareness training.
    While these and other actions have been positive steps, 
USCIS faces challenges in its efforts to identify and mitigate 
fraud risks. For example, USCIS officials have noted the 
constantly evolving nature of fraud risks and USCIS is working 
to implement our recommendation to plan and conduct regular 
fraud risk assessments.
    Further, USCIS' information systems and processes make it 
difficult for the agency to effectively collect and use data on 
the EB-5 program to identify potential fraud. USCIS has also 
not regularly interviewed immigrant investors when they submit 
applications to remove the conditions on their permanent 
residency.
    To strengthen USCIS' fraud detection and mitigation 
capabilities, we recommended that USCIS develop a strategy to 
expand information collected from applicants and petitioners. 
USCIS concurred with our recommendation and is taking steps to 
address it, such as planning to begin interviews later this 
year.
    Second, with regard to verifying job creation and reporting 
economic benefits, USCIS has increased its capacity in these 
areas. For example, USCIS has increased the size and expertise 
of its workforce and improved its training on the adjudication 
process. However, our work indicates that USCIS does not have a 
valid and reliable methodology for reporting on the program's 
economic benefits.
    Specifically, USCIS' methodology may understate or 
overstate program benefits in certain instances. This is 
because USCIS' methodology is based on the minimum program 
requirements of 10 jobs and a $500,000 investment per investor, 
rather than data collected by USCIS about the number of jobs 
created and amounts invested.
    We recommended that USCIS track and report such data. This 
is data that immigrant investors report and the agency verifies 
on program forms. DHS concurred and plans to revise its systems 
and processes to implement this recommendation.
    In addition, USCIS' methodology allows immigrant investors 
to claim all jobs created by projects with both EB-5 and non-
EB-5 investors. We and others have previously raised questions 
about this practice as it makes it difficult to determine 
whether the funds invested by EB-5 investors actually created 
U.S. jobs. In some cases, without the practice of allowing 
immigrant investors to claim jobs created by investments from 
other sources, a higher investment amount would be required for 
investors to meet the job-creation requirements.
    In closing, while the EB-5 program seeks to stimulate the 
economy by promoting job creation and encouraging capital 
investment by foreign investors, it also has unique fraud risks 
that must be identified and addressed. USCIS' ability to apply 
a valid and reliable methodology for reporting EB-5 program 
outcomes and economic benefits is also important for program 
accountability and to provide the public and Congress with more 
complete information to evaluate the program and make 
reauthorization decisions.
    Again, thank you for the opportunity to testify. And I'm 
happy to take any questions that Members may have.
    [The prepared statement of Ms. Gambler follows:]
    
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    Mr. Goodlatte. Thank you, Ms. Gambler.
    Welcome, Ms. Calderon and Mr. Friedman.

  TESTIMONY OF JEANNE CALDERON, CLINICAL ASSOCIATE PROFESSOR, 
         STERN SCHOOL OF BUSINESS, NEW YORK UNIVERSITY

    Ms. Calderon. Chairman Goodlatte, Ranking Member Conyers, 
and distinguished Members of the Committee. Thank you for 
inviting me to testify, I have been a professor at the NYU 
Stern School of Business for almost 30 years. My Stern 
colleague and husband, Gary Friedland, is sitting behind me. We 
have co-authored two major papers----
    Mr. Goodlatte. Really almost put that microphone, like, 
within an inch of your mouth. Then we will be able to hear you 
much better.
    Ms. Calderon. Oh, I didn't realize. Should I start again?
    Mr. Goodlatte. Pull it really close, yeah. Move it over 
real close to you.
    Ms. Calderon. This morning I will make four points. The 
original congressional intent in 1990 was to limit the TEA 
designation to rural and depressed inner-city areas. But 
Congress should consider taking a fresh look to incentivize 
project types and locations that it deems appropriate in 
today's world.
    Gerrymandering is census tract aggregation that sometimes 
permits projects located in luxury areas to qualify for the TEA 
discount. CIS contributed to the current gerrymandering system, 
but has the authority to remedy this as an alternative to 
legislative solution. And finally, creating appropriate visa 
reserves might be as important as redefining a TEA to simulate 
investment in certain locations or project types.
    Since 2010, the program has been primarily used for real 
estate projects. EB-5 serves as a government subsidy to 
developers because the visa motivates the investor to accept a 
negligible rate of return that results in a below-market 
interest rate loan, a major savings to the developer.
    This subsidy is available to all developers, whether or not 
the project is located in a TEA. In general, the minimum 
investment amount is $1 million project, except if the project 
is located in a TEA the amount is reduced to $500,000. A TEA is 
defined simply as any rural location or, if an urban area, it 
meets a defined high unemployment standard.
    The legislative history illuminates congressional intent. 
Senator Boschwitz cosponsored, with Senator Phil Gramm, the 
amendment that added the TEA framework to the Senate bill that 
became the 1990 Immigration Act. He emphasized that the reduced 
amount was primarily aimed to stimulate immigrant investment in 
rural areas, but also intended for depressed areas or inner 
cities. Senator Paul Simon, in a conference report, expected 
that most investors would invest at the $1 million level.
    Contrary to this original intent, under the current system 
virtually all projects qualify as being located in a TEA, 
including those in luxury areas. So all immigrants invest at 
the discounted amount. The reauthorization provides Congress 
with the opportunity to take a fresh approach as to which 
locations or project types should be incentivized without being 
constrained by the original intent.
    To test whether new TEA definitions meet Congress' 
objectives, perhaps it should map the locations in key cities 
to verify which areas would likely be incentivized. 
``Gerrymandering'' is a term applied to census tract 
aggregation to expand the boundaries of the areas to qualify as 
a TEA.
    Census tracts are added to the project's tract with the aim 
that the combined area's unemployment rate meets the high 
unemployment standard. If the project is located in a census 
tract that meets the standard, the area is a TEA. If not, then 
gerrymandering allows the addition of census tracts to the 
project's tract until the combined area meets the high 
unemployment standard. This could be as simple as adding one 
bordering tract or it could necessitate adding virtually a 
countless number until the standard is met, often relying on a 
remote tract's poor economic conditions to justify the TEA 
designation.
    The problem occurs because each State creates its own rules 
to define a TEA. How did this happen? CIS has been fostering 
gerrymandering since 1991. When the EB-5 law was passed, CIS' 
predecessor chose to delegate its authority to make all TEA 
designations to the individual States without any rules, 
oversight, or audits. The States motivated to promote economic 
development approve virtually every project.
    As Chief Colucci has acknowledged, CIS has the power to 
correct this. It could establish uniform, objective TEA rules 
for the States to apply or it could revoke the States' 
authority and transfer it to the CIS national office as 
contemplated by the Senate reform bill.
    Should I finish?
    Visa reserves. The reform bill that died in December 
proposed to reduce the spread to $200,000 for the minimum 
investment amount between TEA and non-TEA projects. Since the 
immigrant's sole reason to invest is to secure the visa, a visa 
reserve that moves the investor toward the front of the visa 
line for investments in certain project types or locations may 
become more important than investing $200,000 less on a very 
low interest loan. This becomes especially important as the 
visa waiting period approaches 8 years for Chinese investors.
    Visa reserves may be an effective tool to incentivize 
certain investments, but Congress should be mindful of which 
project types or locations gain the visa priority. Those 
investors who aren't granted the visa reserve may decide not to 
invest in this program.
    Thank you.
    [The prepared statement of Ms. Calderon follows:]
    
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    Mr. Goodlatte. Thank you.
    Mr. Gordon, welcome.

     TESTIMONY OF MATT GORDON, CHIEF EXECUTIVE OFFICER, E3 
                        INVESTMENT GROUP

    Mr. Gordon. Chairman Goodlatte, Ranking Member Conyers, and 
other Members of the Committee, thank you for allowing me to 
testify on this important topic. My name is Matt Gordon, and I 
am Chief Executive Officer of E3 Investment Group. We are a New 
York City-based private equity firm whose mission is the 
harmonious synthesis of economic and social value creation. We 
focus exclusively on the direct side of the EB-5 program, as 
all of our partner investors' capital creates more than 10 jobs 
each, so we do not need the econometric labor creation 
calculations afforded to the regional centers.
    E3 Investment Group's flagship, of which I am chairman, is 
E3 Cargo, an Indianapolis, Indiana-based trucking company. I am 
also one of the founding members of the More American Jobs 
Alliance, or MAJA. MAJA's constitutional principle is to 
maximize the social impact for America from the jobs created by 
the EB-5 program, in particular by focusing on the creation of 
the jobs in true economically distressed and rural areas.
    Since coming to the EB-5 program, I have done a significant 
amount of policy and academic work. I'm the editor of the EB-5 
legal treatise entitled ``The EB-5 Book'' and I have helped 
lead researchers of ICIC.org with their work related to EB-5 
capital in distressed urban communities that culminated in a 
policy forum at the Harvard Kennedy School.
    The apt title of this hearing questions whether the EB-5 
program is underperforming. Unfortunately, the answer is 
resounding yes. The EB-5 program consistently fails to maximize 
social value created for the green cards that our country 
invests in the process.
    The goal of the program is not to enrich real estate 
developers or others, like myself, who use the EB-5 program as 
a capital-formation vehicle for their businesses. The goal is 
to create jobs for America, and the sponsors are never worthy 
of protecting or perpetuating for their own sake.
    An important part of the program was the creation of the 
policy behind targeted employment areas. Target employment 
areas are supposed to turbocharge the social benefit resulting 
from the job creation by focusing it in economically distressed 
areas. Simply put, job creation in distressed areas is more 
valuable to our society. The mechanism to incentivize this 
behavior is the lowered investment threshold from $500,000 for 
investments that are made in a TEA.
    TEA policy has been a failure, because it is not only 
possible but relatively easy to get any location in America 
designated as a targeted employment area. Despite the policy 
goal of wanting to help distressed urban and rural communities 
who desperately need the additional investment capital, 
virtually all EB-5 capital goes into prosperous, wealthy areas.
    There are those who believe that TEAs are working just fine 
and want to perpetuate the status quo. Their argument is 
premised on a labor mobility model to support the idea that 
TEAs are fulfilling their policy objective if the project built 
in a low unemployment area draws workers who live in high 
unemployment areas. To frame this debate, it is either about 
helping the area or about helping the people who may or may not 
come from the area to work.
    I submit that a geographically anchored framework must 
prevail. Structural investment in an area has the premise to 
effect structural economic change to that area and its 
population. Labor is always mobile, areas are not. A TEA is a 
targeted area and so it should remain.
    Some frame the debate as urban versus rural. I submit that 
it is about helping the geographical areas that have versus the 
areas that have not. The idea is to give places like 
Indianapolis, Memphis, Southaven, Mississippi, or the Bronx not 
only a chance, but an advantage against projects located in Los 
Angeles, Manhattan's West Side, and Miami.
    The advocates for those who seek to have the status quo 
maintained, either currently or under new rules by another 
name, suggest that sticking to the policy premise would be the 
death knell of the program. Nothing could be further from the 
truth. The issue is about whether we can address these changes 
and for the betterment of the entire program.
    It is very much likened to the automakers when first 
seatbelts and then airbags were mandated. They cried, they said 
it would be impossible detriment on the industry, and then 
market simply adjusted. So too will the EB-5 market adjust to 
proper and reasonable changes to the TEA rules and regulations. 
It should not be about maximizing the number of projects that 
qualify for the benefit, but maximizing the benefit for the 
communities that are supposed to get it.
    If we get this right, then maybe some of the regional 
centers who support the current rules and invest in wealthy 
areas will instead focus their energies and effort in 
Indianapolis, Memphis, and the Bronx. That would be truly 
something.
    In the end the question is simple: if Congress wishes to 
maximize the social impact of the program, then it must provide 
an incentive for both investors and sponsors to create jobs in 
truly economically distressed areas. This incentive can take 
the form of either a materially reduced investment amount or 
segregating visas for investors in true TEAs.
    Thank you for the time. And I am happy to answer questions 
that the Committee might have.
    [The prepared statement of Mr. Gordon follows:]
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    Mr. Goodlatte. Thank you, Mr. Gordon.
    We will now begin the questioning of the witnesses under 
the 5-minute rule, and I'll begin by recognizing myself.
    Mr. Colucci, USCIS has reported that, from program 
inception through 2014, the EB-5 program has created a minimum 
73,730 jobs and more than $11.2 billion in investments. How 
many more jobs and investment funds could the program have 
created if the minimum investment amounts had been indexed for 
inflation?
    Mr. Colucci. Chairman, that is not a statistic that I have 
personally calculated, nor have my staff members calculated. 
However, as outlined in the Secretary's letter to this 
Committee, that is a legislative enhancement we currently seek, 
is to increase the minimum investment amount. And as also 
mentioned in that letter, if that is not something Congress is 
able to do, we are prepared and we are working to increase this 
amount through regulation.
    Mr. Goodlatte. Well, as far as back as 1987, the INS 
recommended that the minimum investment amount in an investor 
visa program be adjusted periodically based on some criteria, 
such as the Consumer Price Index. And I am pleased that 
Secretary Johnson has indicated that USCIS intends to exercise 
its authority. Do you intend to fully recapture the value lost 
to inflation over the past quarter century?
    Mr. Colucci. I think, sir, that we still need to study 
exactly where we set or propose to set those investment 
amounts. I do think that we would certainly look at what 
Congress did as part of a number of the bills that address this 
area.
    Mr. Goodlatte. In instances where a capital development 
project is financed by a combination of EB-5 and conventional 
capital, DHS currently allows foreign investors to claim credit 
for jobs created by other people's money. The DHS inspector 
general revealed one instance in which EB-5 investments 
accounted for 18 percent of the project's equity and yet the 
foreign investors took credit for all the jobs the project 
created. Doesn't this make a mockery of the Investor Visa 
Program's job-creation goal?
    Mr. Colucci. Sir, as you pointed out in your opening 
statement, this is something through our regulation that we do 
allow, EB-5 investors to take job-creation credit from non-EB-5 
sources. We recently did some analysis and found that, without 
that, there would be about 160 industries that would not 
qualify for EB-5 funding because they could not create those 
jobs on their own.
    I would also say the reverse is true. There are many 
projects that are solely EB-5 funded, in addition to projects 
that--a ``but for'' scenario, in which we see lending letters 
from commercial financial institutions which state: We will not 
loan this money unless you go out and get that EB-5 financing.
    Mr. Goodlatte. Mr. Colucci, I understand your argument, but 
doesn't that again simply reflect the fact that the DHS has 
never adjusted the minimum investment levels for inflation? If 
you had done so, wouldn't the number of jobs created by 
investments in all the industries you just referenced have 
increased commensurately?
    Mr. Colucci. Sir, that is correct. If we did----
    Mr. Goodlatte. I have a number of other questions, so let 
me keep moving.
    Seventeen thousand six hundred ans sixty-two aliens with 
approved investor visa petitions, including their spouses and 
minor children, are waiting for visas to become available right 
now as we sit here, and you have on hand 21,855 pending 
petitions. When you factor in accompanying family members, if 
any reforms to the EB-5 program only applied to prospectively 
filed petitions, such reforms would not actually take effect 
for over 7 years. Can such a delay be considered real reform?
    Mr. Colucci. Sir, those statistics you cite are accurate. 
We do indeed have approximately 21,000----
    Mr. Goodlatte. And an average of three green cards per 
petition, correct? So that's over 63,000 pending green cards. 
At 10,000 per year, we are getting over 6--closer to 7 years of 
backlog. And under those circumstances, if we only make reforms 
prospective in nature, those reforms won't take place for 7 
years. The program has generally not been authorized for as 
long as 7 years. So how are they meaningful reforms if they 
don't take effect for that long a period of time?
    Mr. Colucci. Sir, you're correct, any regulations that we 
would implement would likely be forward-facing or prospective 
increases.
    Mr. Goodlatte. But for them to be effective, they would 
have to have some retroactivity if they are going to take 
effect in any way, shape, or form before 7 years from now.
    Mr. Colucci. Sir, I know that in some of the bills that 
were introduced there were provisions to increase additional 
fees for the petitions, the actual--the 526, the immigrant 
investor petition, and the removal of condition petitions that 
would add to the costs that are taken in by the United States 
Government.
    Mr. Goodlatte. Let me turn to Ms. Calderon. Thank you, Mr. 
Colucci.
    You've written that gerrymandering has rendered the two-
level investment threshold meaningless, and immigrants flocked 
to invest in luxury projects by major developers, and we gave 
some examples up here. Is this consistent with the intent of 
Congress to incentivize investments in rural and depressed 
urban areas?
    Ms. Calderon. Thank you. And that's actually why I 
mentioned the legislative history in the 5-minute presentation, 
that no, it's not at all consistent with the two-tier system.
    The legislation that was first introduced had one tier, 1 
million, it was only later that the two-tier system was 
introduced by Senators Boschwitz and Gramm, and they made clear 
throughout the Congressional Record that we found that the 
discounted amount was aimed at rural as well as depressed or 
inner cities.
    Mr. Goodlatte. The intent was to get a higher amount for 
those investments in areas that didn't qualify for rural or 
depressed urban areas.
    Ms. Calderon. Yes. And apparently, I mean, the belief was 
that most investors would be investing at $1 million in 1990.
    Mr. Goodlatte. Right. You write that if Congress seeks to 
incentivize development in areas which encounter difficulty in 
attracting the investment capital needed for economic growth, 
the commuter pattern construct would not be an appropriate way 
to designate a TEA. Could you elaborate briefly on that?
    Ms. Calderon. It's a takeoff on the fact that regional 
centers, unlike Matt Gordon's company, uses econometric models, 
basically is basing the job count not on direct jobs, but on 
the indirect and induced jobs. So there's really no way of 
proving where the workers are coming from. He points out that 
the jobs may not be reflective of long-term jobs. We don't know 
the location of their residences as well.
    Mr. Goodlatte. Thank you.
    And lastly, Mr. Gordon, do you believe that the EB-5 
program reforms that I drafted last year, along with Mr. 
Conyers, Mr. Issa, Ms. Lofgren, and Senators Grassley and 
Leahy, would have corrected the abuses that have cropped up in 
the Investor Visa Program? And do you think these reforms would 
make the program unattractive to developers or foreign 
investors?
    Mr. Gordon. I think that the draft bills--and there are 
many versions of them, so I started losing track of which parts 
we were at which points--but I do think that they went a long 
way, and also as part of the compromise negotiations that were 
taking place in December, to correct the ills of the program.
    Mr. Goodlatte. With 63,000 people in the pipeline, 21,000-
plus petitions, would they have scared off investors?
    Mr. Gordon. To some degree it might have. And remember, 
that pipeline really is a problem when you're talking about 
investors from China, because due to the restrictions and the 
quotas for investors from each country, it wouldn't actually 
affect investors coming from outside of China at all.
    Mr. Goodlatte. Yeah, but 87 percent are from China. Is that 
not correct?
    Mr. Gordon. Yeah, that's correct.
    Mr. Goodlatte. Right.
    Mr. Gordon. So again, markets tend to normalize, and as 
people----
    Mr. Goodlatte. Normalize at a higher level of investment in 
areas that might be more targeted to rural and high 
unemployment areas.
    Mr. Gordon. Sponsors would react to the incentive 
structure. So if it was in their best interest to focus on 
nonprime real estate locations, if it was in their interest to 
do so, they would look for other opportunities.
    And likewise, they would also look for investors from 
locations where there might not be such a nonprice issue 
related to getting them to come on board. So maybe they'll 
focus on other areas of the world than simply China.
    Mr. Goodlatte. Thank you.
    The Chair recognizes the gentleman from Michigan, Mr. 
Conyers, for his questions.
    Mr. Conyers. Thank you, Chairman Goodlatte. And I 
appreciate the testimony, the varied testimony from our four 
witnesses.
    I'd like to begin by asking unanimous consent to include in 
the record the testimony of Nancy Zirkin, who is the vice 
president of the Leadership Conference on Civil Rights. May I?*
    Mr. Goodlatte. Without objection, it will be made a part of 
the record.
    Mr. Conyers. Right. And the second statement I'd like to 
have included in the record is one from the AFL-CIO concerning 
this Investor Visa Program. I'd also like that included in the 
record, please.*
---------------------------------------------------------------------------
    *Note: The material referred to is not printed in this hearing 
record but is on file with the Committee. Also, see Conyers Submissions 
at:

      http://docs.house.gov/Committee/Calendar/
      ByEvent.aspx?EventID=104454.
    Mr. Goodlatte. Without objection, that will also be made a 
part of the record.
    Mr. Conyers. I thank you very much.
    Now, we have a situation here where, Mr. Colucci, The Wall 
Street Journal estimates that 80 percent of all EB-5 projects 
need gerrymandering to qualify as high unemployment targeted 
employment areas. With respect to the reform of targeted 
employment areas, who has the authority to ensure that the 
gerrymandering is appropriate or should not be allowed, in your 
view?
    Mr. Colucci. Sir, through our regulation we allow the 
States--the States are the ones who put together targeted 
employment areas. And then through a policy memorandum, not 
only do we defer that to the States, but we indicate that we 
will look at their methodology. In other words, we will ensure 
that the area that they designated does indeed meet the 150 
percent unemployment rate.
    Mr. Conyers. And let me ask you this additional concern. 
What can the Department do to ensure meaningful incentives to 
invest in distressed areas, as we in the Congress wanted to by 
enacting this legislation in the first place?
    Mr. Colucci. Sir, as the Secretary indicated in his letter 
to the Committee, targeted employment areas are an area in 
which we were seeking a legislative enhancement. And short of 
that, as he also indicated, this is something that we can 
address through a regulatory solution that would go out for 
notice and comment to the public like any other regulatory 
solution. So we do have the power to define how targeted 
employment areas are put together.
    Mr. Conyers. Turning to Matt Gordon. Some EB-5 investors 
claim that they won't invest in projects outside traditional 
gateway cities because they believe those projects are safer 
and more likely to create jobs needed to support their visa 
applications.
    What do you think must be done to targeted employment areas 
to direct or drive investment to more economically distressed 
areas?
    Mr. Gordon. Thank you. That's an excellent question.
    It's supposed to be an economic incentive tool. For it to 
have any power or meaning, there needs to be a difference in 
the pricing. So targeted employment areas that are outside of 
the gateway cities need to have an investment amount that is 
materially lower than those in the gateway cities.
    There will always be those who want to live in prime areas 
and will be willing to pay the premium, and so too there will 
always be those who are only interested in investing in prime 
areas, and they too will be willing to pay the premium.
    Mr. Conyers. How do we know? Let's go to Ms. Calderon. How 
do we know if the jobs created are good jobs that pay a living 
wage?
    Ms. Calderon. We don't. We don't know that. Again, because 
most of the investors are investing indirectly through a 
regional center structure and because the regional center 
structure is used, the job count is not based on direct jobs 
but, instead, on indirect and induced jobs.
    And the way to measure those we use economic models. We 
don't count W-2s. We don't check where the people are coming 
from, and we don't check the length of the employment or the 
type of employment.
    Mr. Conyers. Who should do this checking, and how do we 
correct that?
    Ms. Calderon. USCIS could set out the standards for the 
States to apply if, again, the standards were objective and 
uniform, unambiguous. But I would think that it would be better 
for USCIS, in its D.C. national office, to take over that role.
    Mr. Conyers. As I conclude, does anyone else want to add 
anything to their views to this question that I've asked?
    Mr. Gordon. I would just supplement that it's a challenge 
under the current econometric models to actually gather this 
type of data. They're not really the right tool for the 
question that you ask. It's very different on the direct side 
of the program. I mean, we can tell you worker for worker by 
what they make, how long they work, and how their wages compare 
to national averages. That's very, very easy.
    But when you're using the type of input/output econometric 
models that's currently accepted for regional center job 
protection, it's going to be a difficult task. It might require 
a totally new type of accepted methodology.
    Mr. Conyers. Well, thank you, Mr. Gordon.
    And thank you, Mr. Colucci.
    Mr. Issa. Mr. Chairman, I have a unanimous consent.
    Mr. Goodlatte. Yes. The gentleman is recognized.
    Mr. Issa. Mr. Chairman, I ask unanimous consent--because 
it's going to be needed--that the GAO report the gentlelady put 
in be put in the record from August 2015 entitled, ``Additional 
Actions Needed to Better Assess Fraud Risk and Report Economic 
Benefits.''**
---------------------------------------------------------------------------
    **Note: The GAO Report referred to is not printed in this hearing 
record but is on file with the Committee. Also, see:

      http://www.gao.gov/assets/680/671940.pdf.
    Mr. Goodlatte. Without objection, it will be made a part of 
the record.
    Mr. Issa. Additionally, I have a unanimous consent that an 
editorial published in Roll Call by Senator Dianne Feinstein 
entitled ``U.S. Citizenship Should Not Be for Sale'' be placed 
in the record.***

    ***Note: The material referred to is not printed in this hearing 
record but is on file with the Committee. Also, see:

      http://blogs.rollcall.com/beltway-insiders/u-s-citizenship-
      not-sale-commentary.
    Mr. Goodlatte. Without objection, it will be made part of 
the record.
    Mr. Issa. Thank you, Mr. Chairman.
    Mr. Goodlatte. And I would ask unanimous consent that a 
letter to myself and Ranking Member Conyers from IIUSA, Invest 
In the USA, if you will, dated February 10, 2016, be made part 
of the record.****
---------------------------------------------------------------------------
    ****Note: The material referred to is not printed in this hearing 
record but is on file with the Committee. Also, see Goodlatte 
Submission at:

      http://docs.house.gov/Committee/Calendar/
      ByEvent.aspx?EventID=104454.
    Mr. Goodlatte. And, without objection, it will be made.
    And the Chair now recognizes the gentleman from California, 
Mr. Issa, for his questions for 5 minutes.
    Mr. Issa. Thank you, Mr. Chairman.
    And I want to thank all of you for being here.
    Ms. Gambler, I want to thank you for your report. I think 
it's insightful. I also appreciate the fact that all of you 
seem to have followed our attempts, albeit at least temporarily 
in vain, to reform EB-5.
    Mr. Colucci, I'm going to apologize in advance that you're 
the person in the hot seat, but let's go through a couple of 
things that I think need to be on the record.
    First of all, you're saying that you can do regulatory 
reform to fix many of the ills pointed out by the GAO's report 
last year, right? Is that correct?
    Mr. Colucci. Yes, sir, there are reforms----
    Mr. Issa. Okay. And, to date, you have not put any out for 
public comment. Is that correct?
    Mr. Colucci. We have not, sir. We were working on a 
regulatory reform in 2014, and when Congress signaled its 
intent to pass a comprehensive bill with respect to EB-5, we 
moderated our efforts in 2015. However, now that the bill did 
not pass, we are reengaged on our efforts.
    Mr. Issa. So let's go through this. 1990, there was 
regulatory authority to fix some of these things. Nothing 
happened. That was George Herbert Walker Bush. So then he left. 
President Clinton got 8 years. He didn't do anything. He left. 
George W. came in. He had 8 years. He didn't do anything. Now 
we are in the 8th year of President Obama, and you're saying 
that because we thought we were going to fix something you 
stalled.
    Well, let's go through some of these things. And, again, I 
apologize in advance, but you saw the Chairman's 200-mile long 
farce of a gerrymandering with no possibility that people were 
actually going to go 200 miles to a job. And you allowed it 
because, if I understand correctly, you feel you don't have the 
authority to fix that, to deny it. Is that correct?
    Mr. Colucci. I'd like to make two comments: We did actually 
pass a regulation with respect to the regional center program 
in the 1990's, and I believe it was 1993; with respect to that 
particular slide that was shown that indicated that 200-mile 
targeted----
    Mr. Issa. Well, whether it's that or the up the Hudson 
River one, they're both pretty egregious. Wouldn't you agree?
    Mr. Colucci. Well, the one in particular in Texas, we are 
not able to find that that was officially submitted by a 
petitioner for a targeted employment area. We are continuing to 
look, but we have not located that.
    With respect to the one that was shown for New York, you 
know, what I would point out is they are all contiguous census 
tracts. What I don't think was shown there is there actually 
are census tracts that border the river and some land----
    Mr. Issa. But that's not the question. The question is, 
isn't it obvious that the discount that was in the legislation 
before some voters were born, that will be voting in this 
election, the legislation intended to discount for the 
enhancement of employment. And if they include census tracts in 
which the employment is unlikely to come from there, then, in 
fact, they're just throwing it in when--you know, and let's 
just be honest. People do not come 100 miles to a job. Isn't 
that correct?
    So you had the ability to--and correct me if I'm wrong. Did 
you have the ability to deny them if you felt that they were 
including areas which would not have led to employment, but 
they were scoring the employment? Yes or no, please. Do you 
have the authority to deny?
    Mr. Colucci. If an area that has been designated by a State 
is a geographic area traditionally within a metropolitan 
statistical area, we do not have the authority to deny.
    Mr. Issa. Okay. So you don't have the authority, which 
means you do need congressional action to fix that?
    Mr. Colucci. Well, sir, what we can do is define targeted 
employment area within our regulations. But as the Secretary 
noted in his letter, we did recommend some sort of a 
legislative enhancement in this area.
    Mr. Issa. Okay. And for all those years I mentioned, there 
has been no increase in the amount necessary. I might note that 
Singapore is $2 million. It's about $1.5 million for Britain, 
and yet we're half a million dollars.
    Mr. Gordon, let me the just ask you a question. I'll try to 
get it very simple. If Congress determined that the original 
intent of this was job creation based on real investment in 
permanent jobs, wouldn't it be reasonable to stop loaning a 
minority amount of money to help real estate be built that 
creates temporary jobs, often simply rebuilding a hotel?
    Mr. Gordon. Generally, yes.
    Mr. Issa. Okay.
    And Mr. Colucci, my final question, I suspect, is going to 
be, you know, I hear you saying that you don't have the 
authority, but are you really telling the American people that 
if only 1 percent of the jobs came from money on an EB-5, that 
they still would be entitled to count 100 percent of the jobs?
    In other words, if $500,000 came in out of $500 million, 
the $500 million, all from other sources, should be able to 
count toward the job creation. You told me that you didn't see 
something wrong with that, and I believe you said you didn't 
see something wrong because many programs wouldn't qualify 
without using the non-EB-5 money. Is that what you're telling 
us, that we should put up with considering all the jobs 
created, including the ones that have nothing to do with the 
so-called investor?
    Mr. Colucci. Sir, what I did point out is that our 
regulations do indeed allow it, and there are about 160 
industries that would not be able to participate in the EB-5 
program----
    Mr. Issa. Because they don't create enough jobs with the 
investment money.
    Mr. Colucci [continuing]. Because they don't create enough 
jobs.
    Mr. Issa. And the Congress intended the investment money to 
create a certain amount of jobs, and they don't do it. So what 
you're saying is you believe the rules have to be stretched to 
allow for creation beyond what is actually created by the 
investment.
    Mr. Goodlatte. The time of the gentleman has expired, but 
the gentleman is welcome to answer the question briefly.
    Mr. Colucci. I would just say, sir, that is allowed through 
our regulation and that was after a significant notice and 
comment period in, again, as I mentioned, the 1990's.
    Mr. Issa. Mr. Chairman, I'll note that during that notice 
and comment, I wasn't a Member, but I am now. And I disagree 
with that ruling.
    Mr. Goodlatte. And the Chair shares your concern.
    The Chair recognizes the gentlewoman from California, Ms. 
Lofgren, for 5 minutes.
    Ms. Lofgren. Thank you, Mr. Chairman.
    Just a couple of comments. I listened carefully to my 
colleague from California, and, you know, I think it needs to 
be pointed out that Congress has reauthorized the EB-5 program 
numerous times, both with Republican and Democratic Presidents, 
with Republican and Democratic majorities in the House and 
Senate. So, you know, it isn't until this day that we've 
actually had the kind of substantive hearing that I think we 
clearly need.
    And part of the reason for that is that this was a program 
that was kind of quiescent. It never hit the 10,000 visa mark. 
It was not really a very active thing until the financial 
crisis hit, and now it's a live matter. And I think it's good 
that we're examining, how is this meeting the goals that we had 
for development, for job creation, economic development in our 
country?
    And unlike so many other elements of our immigration law, 
the focus isn't on the immigrant. It's on the investment. And 
that's why I'm so glad that we're here. You know, as we were 
working through how to structure this, you know, if your focus 
is on immigration, it doesn't mean that you know economic 
development and what is the right way to approach that.
    I would note that California has, I think, really led the 
way in trying to not abuse this program by adopting the twelve 
census tract rule. That may not be perfect, but I think it's a 
start. And I give them credit for trying to make sure that the 
investments went where they are needed, and that may be 
something that we may want to look at for this next 
reauthorization, understanding that we're going to, I think, 
continue to look at this.
    You know, I was very interested, Ms. Calderon, in your 
testimony. I really had never thought about the visa reserve 
issue. When you're oversubscribed, the issue--I mean, these are 
people who want to get permanent residency in the United 
States. And I was interested in your comment, Mr. Gordon. They 
don't have to live where they invest. I mean, you know, they 
get to live anywhere in the United States. It's just, do they 
get the visa? Is this really going to create jobs?
    And I'm wondering, since our two-tier investment didn't 
really produce the result we wanted in terms of investing in 
disadvantaged communities, maybe we just do visa--put the 
backlog people without regard to origin, maybe throw out the 
per-country limits, and say it's going to be $2 million apiece. 
But if you go into a rural disadvantaged area or an urban 
disadvantaged area, you go to the top of the backlog. Do you 
think that would work, Ms. Calderon or Mr. Gordon?
    Ms. Calderon. I think that it would certainly help, 
because, obviously, the immigrant is investing to obtain the 
visa----
    Ms. Lofgren. Right.
    Ms. Calderon [continuing]. And to obtain the visa in the 
fastest time possible and to hopefully receive back his 
investment in as short a time as possible.
    Ms. Lofgren. Right. But if you're the investor and you're 
looking at, I could be in this line for 10 or 15 years and have 
a guaranteed visa, or I can take a higher level of risk, but 
next year, my family and I can get to where we want to go, 
that's a balancing act, but maybe time does matter for these 
people.
    Ms. Calderon. I certainly agree--in our research, we're not 
out in the field. So I have no idea if, in fact--and there 
probably will be some immigrants who won't be able to afford, 
won't be able to obtain the funds necessary to----
    Ms. Lofgren. But that's really not our question.
    Ms. Calderon. Exactly.
    Ms. Lofgren. So provided there are an adequate number of 
investors, we don't care if everybody qualifies. What we care 
about is their investment being made, right?
    So I guess that goes to the next question, which is if we 
were to raise the dollar amount to where it would be through 
inflation or similar to Singapore or some other countries to $2 
million, say, or $1.5 million even, do you think that we would 
have sufficient investment interests for the great benefit of 
getting a permanent residence in the United States?
    Ms. Calderon. Being, again, that we are not out in the 
field----
    Ms. Lofgren. Right.
    Ms. Calderon. [continuing]. I don't have any practical 
experience. It sure seems that, at least based on the mainland 
Chinese immigrants' interest in the United States, that it 
would continue.
    Ms. Lofgren. Finally, and I don't know that you can answer 
this, but I would recommend to the Committee that we have some 
more exploration of this. We have treated all investments and 
all job creation as identical basically. And I don't know that 
that is the right approach. We have the capacity to identify a 
menu of investments that provide the most benefit for the 
United States.
    For example, in rural areas, it might be certain kinds of 
agriculture that provide persistence employment. In inner 
cities, it might not be a construction project; it might be a 
small manufacturing project that would provide.
    So I'm wondering if you or some of the other academics that 
you associate with have the capacity to provide bang-for-buck 
information to the Committee as we think about what kind of 
guidance we want to provide to investors in this program.
    Ms. Calderon. It certainly seems that the easiest type of 
project to receive incentivization regardless of its geographic 
location would be public infrastructure projects. If anything-
with the increase in real estate development, if EB-5 funds it 
or otherwise, that obviously puts more of a burden on the 
roads, the infrastructure.
    From our analysis of the drafts last December, it appears 
that that would not be controversial, that you're all on board 
for that.
    Ms. Lofgren. I see that my time is expiring, and I'll stop 
as a consequence.
    But, Mr. Chairman, I hope that we can engage either in a 
public hearing or in some small group settings open to the 
public some further discussion on the kind of investments we 
might want to incentivize that would provide lasting value to 
the country.
    And, with that, I yield back.
    Mr. Issa [presiding]. And I thank the gentlelady. I've had 
no better partner as we've tried to reform this than you, Ms. 
Lofgren.
    And, with that, we go to the gentleman from Texas, Mr. 
Gohmert, for 5 minutes.
    Mr. Gohmert. Thank you, Mr. Chairman.
    And I appreciate you guys being here today.
    You know, just this month, this Administration has seen to 
the release of $100 billion for Iran's use, the largest 
supporter of terrorism. They had given us fair warning that 
they were going to increase their spending on Hamas and 
Hezbollah with this huge amount of money we're going to get.
    Are there any assurances that if Iran decided to come into 
the U.S. and invest that money in the United States, that they 
would not get an EB-5 visa and be able to buy strategic land in 
the United States with the money that this Administration 
released to them?
    Anybody?
    Mr. Colucci. Sir, I can just say that as part of our 
adjudication, we look at each individual who is a prospective 
immigrant who is participating in the EB-5 program. We have 
access to a variety of law enforcement, financial, commercial 
databases, and we can also check intelligence community 
holdings right on site. And we also do screen the funds that 
each investor proposes to invest to ensure by a preponderance 
of the evidence that it does come from legitimate sources.
    And we have extensive training in this area. And, in some 
cases, we even engage our partners overseas to do a little bit 
more due diligence for us when it's a little bit up in the air.
    Mr. Gohmert. So if somebody is under arrest in a foreign 
country, has obtained their money from questionable sources, 
those are not people that you want to grant an EB-5 visa to. Is 
that correct?
    Mr. Colucci. Sir, that is correct. We deny a number of 
individuals who we do not look at--we do not trust their source 
of funds.
    Mr. Gohmert. Are you sure, though, that this desire to have 
foreign money come rushing into the United States doesn't 
sometimes override the desire to make sure that we really get 
good investors in this country?
    Mr. Colucci. Sir, I can tell you that the adjudicators that 
we have hired have the utmost professionalism, and they would 
never in any way put bringing in another $500,000 into this 
country above national security or criminal concerns.
    Mr. Gohmert. Okay. Well, that makes me feel so much better, 
except the first I ever heard of the EB-5 program--and, I mean, 
I'm on this Committee. I guess, I should've been aware, but I 
didn't until this story in February, exactly 4 years ago, from 
Jana Winter.
    It says: A former Mexican Government official wanted for 
embezzling millions was arrested in Texas this month, then 
promptly ordered released by the State Department in a case 
that has one lawmaker demanding answers.
    It says: A day after pulling rank on Smith County law 
enforcement officials, the State Department rescinded the 
order. But Hector Hernandez Javier Villarreal was gone. 
Villarreal, the former secretary executive of the Tax 
Administration Service of Coahuila, Mexico, was arrested in 
November on charges relating to an alleged scheme involving 
embezzling millions of dollars from the Mexican Government. He 
posted $1 million cash bond, got himself a U.S. visa and then 
skipped town.
    The sheriff in my home county at the time said: All we did 
was make a traffic stop; they didn't have a front license 
plate. Police were given permission to search the vehicle, 
found $67,000 in cash and a shotgun. We ran the check on the 
shotgun, and then all of a sudden everybody in the Federal 
Government got interested.
    But they go onto say that the State Department intervened. 
Sheriff said: According to Homeland Security officials called 
to tell him the Federal diplomatic agency had ordered 
Villarreal and his wife released. Neither State Department nor 
ICE officials responded to FOX News' request for comment.
    Villarreal was granted a visa days after posting a $1 
million bond following his arrest in Mexico. The visa 
Villarreal was granted was an EB-5, which is given to 
foreigners who invest at least $500,000 in a business venture. 
Turns out, it wasn't properly invested.
    And I appreciate your assurances a great deal that we would 
never do anything to compromise American safety. Unfortunately, 
you've already done it, and I have no assurance that you're 
going to protect us any better in the future, and I think we 
ought to be suspending this program until such time we can be 
assured that American citizens are safe.
    And from constituents, as a result of this, I've heard from 
people in Longview, Texas, that they've lost bids to foreign 
investors because the foreign investors were able to get 
sweetheart interest deals they couldn't get, so that local 
property was sold to foreign investors simply because they 
could get an EB-5 and they could get a better interest deal 
than American citizens could. That's just not right.
    I yield back.
    Mr. Issa. The gentleman yields back.
    We now continue on our Texas track, and we go to the 
gentlelady from Houston, Texas, Ms. Jackson Lee.
    Ms. Jackson Lee. Let me thank the Chairman and the Ranking 
Member.
    Having heard of this particular investor visa, what I've 
heard today from members, however, is very refreshing and very 
important, because I think you've heard a sense of 
strengthening and reforming and, if necessary, reinventing this 
investor visa, but that it does have merit.
    I'm very sorry to hear of the circumstances that my friend 
from Texas just enunciated. And, certainly, to find someone 
hiding from the law under an investor visa is, for me, 
horrific.
    But I do think Ms. Lofgren has it right that this is not an 
immigration visa per se; this is an investment visa, and it has 
some merit. But it does not have any merit for scoundrels who 
are avoiding the hand of the law in their own country or would 
be detrimental to any of our citizens. But if they can invest 
appropriately, then that would be important.
    I guess Texas is in the news, because I'm looking at a case 
that involved Webb County, a facility that was supposed to be 
in the hotel conference in Laredo, Texas, which had a 1.4 
percent unemployment rate. That's a problem. That was the 
gerrymandering. It happened to be in a case here, and they had 
to expand to other counties to get their unemployment rate 
where it needed to be, Mr. Colucci.
    I'm going to be--like one of the questioners, I hope that 
you see this hearing as being helpful, and so let me quickly 
ask a series of questions, because I would like for this visa 
to work and to work right.
    I quickly want to ask whether or not you have the capacity 
to raise the minimum--and I didn't hear if that was asked 
before; I heard $1 million--but raise the minimum investment 
from $500,000 to $1 million. Can you do that administratively?
    Mr. Colucci. Ma'am, we are able to do that via a regulatory 
fix. The only caveat there is we have to consult with Bureau of 
Labor statistics and the State Department to do so, but we do 
have that ability.
    Ms. Jackson Lee. And so is the minimum still at $500,000?
    Mr. Colucci. That is correct.
    Ms. Jackson Lee. In this day and time, even with the 
markets collapsing, that is chump change. And I don't say that 
for struggling families; I say that for rich investors. That is 
ancient numbers from a way, long time ago. So I am going to be 
on the record for saying it is too low an amount.
    The second is, what have you been doing to avoid Wall 
Street Journal reports that estimate 80 percent of all EB-5 
projects need gerrymandering? What have you been doing in terms 
of reforming that or reviewing projects and not gerrymandering 
and saying you're not just where the unemployment is?
    Mr. Colucci. Ma'am, this is something that the Secretary 
included in his letter to the Committee----
    Ms. Jackson Lee. I understand that.
    Mr. Colucci [continuing]. As a recommendation for a 
legislative enhancement. And it is something that we are taking 
a look at to do through a regulation in which we can further 
define and create greater consistency with respect to how 
targeted employment areas are put together.
    Ms. Jackson Lee. Well, I'm going to say two points, because 
I have census tracts. Right now, the African American 
unemployment rate, for example, nationally is at 8 percent. 
Last year, or a couple years back, it was 12. It has been 15 
percent. For unemployed youth, it's 15 percent. And so I would 
venture to say Latinos, youth, young people fall in some of the 
same categories, the elderly, et cetera.
    There is not a lack in rural areas for places for 
investment that are legitimate and true. And if it is a 
regulatory fix, I would encourage you immediately to do two 
things, which is the $1 million and the stopping of the 
gerrymandering.
    Let me go to Ms. Calderon very quickly, with your business 
mind. And I didn't hear your specific reforms but a $1 million 
minimum investment, Ms. Calderon, the gerrymandering I've 
answered, but can you give me some other frameworks that would 
be very helpful.
    Ms. Calderon. I think that, as a lawyer, might be where I 
feel most comfortable going, and that is in footnote 6 of our 
written testimony stated: Technically, the statute--and this is 
the 1990 statute--authorizes a third minimum investment level, 
an amount up to $3 million for areas of unemployment 
``significantly below'' the national average unemployment rate.
    Ms. Jackson Lee. Go ahead. Just expand. You're saying 
upwards of $3 million. What's your floor, though?
    Ms. Calderon. Well, I mean, I don't feel comfortable saying 
that. I just think that Congress, this Committee should be 
aware of the fact that in the actual statute, there is a 
provision that, in 1990, Congress believed that certain areas, 
there could be investment by immigrants through this program, 
but it should be at a higher rate.
    Ms. Jackson Lee. A higher rate of investment?
    Ms. Calderon. Right.
    Ms. Jackson Lee. Mr. Gordon, do you believe that as well? I 
know you had some reforms.
    Mr. Gordon. Sure. Categorically, there should be a tiered 
system in the market to reflect the amount of bang for the 
buck, as people are saying, or social value creation. In the 
communities in which we invest--Indianapolis; South Haven, 
Mississippi--in the office we just leased--we leased the 9th 
office of 19; there are still 10 vacant offices.
    Our money means something in this community. It's not a 
fancy, rich community. A large trucking company in the area 
just pulled out, and we're now hiring executives from that, 
people who would have otherwise lost their careers. The money 
matters. And having an advantage over getting investors' 
attention, it matters as well.
    I lose interest to the vast majority of investors I 
interact with on a daily basis because we are not the fancy, 
you know, gleaming, you know, tower in a large gateway city. So 
we need an advantage to help build an America where the value 
will be greatest for our society.
    Ms. Jackson Lee. I thank you.
    And that investment amount is what you're saying makes 
value and creates jobs in census tracts that actually need it?
    Mr. Gordon. Absolutely.
    Ms. Jackson Lee. Mr. Chairman----
    Mr. Issa. I thank the gentlelady.
    And I note that they've called the vote.
    If I can just, for the record, Mr. Colucci, if you change 
the amount under your rules, what will the effect be on those 
65,000 or more in line? And just as quick as possible. We're 
going to Mr. Marino.
    Ms. Jackson Lee. Thank you for that, Mr. Chairman.
    Mr. Issa. Yeah, I think it completes your thought.
    Mr. Colucci. I think my best answer would be that, in the 
past, when USCIS--and before us, INS--put forward new 
regulations with respect to immigration, it was always 
prospective looking as opposed to----
    Mr. Issa. Thank you.
    Mr. Marino.
    Mr. Marino. Thank you, Mr. Chairman.
    Mr. Colucci, first of all, you come from one of my favorite 
agencies, ATFE. I did a lot of work with them over the years, 
and a great bunch of people. But since you drew the short straw 
here today, I have some questions concerning my prosecutorial 
background.
    And let me start out by, I was paying closest attention to 
Ms. Gambler's statements about difficult to conduct fraud, 
difficult to conduct fraud interviews or investigations to talk 
to people.
    Let me ask you this, sir: Do you actually talk to the 
investors? Do you have face-to-face interviews with these 
people as to what their intentions are and where they're coming 
from? And not only the investors. I want to more specifically 
talk about the city officials or the county officials who keep 
expanding these lines out blocks, hundreds of yards, miles, to 
get this money?
    Mr. Colucci. Sir, I think my best response to that would 
be: any investor who comes in from overseas is interviewed by 
the Department of State prior to being allowed to enter into 
the United States. And often they have the investor's petition 
in front of them and can ask them questions based on the 
evidence that was submitted.
    Mr. Marino. Okay. Do you ever go back after a certain 
period of time to see who was employed and how many are 
employed and where they are working?
    Mr. Colucci. Sir, we do, after the immigrant investor comes 
into the United States. After 2 years, they file with us a 
petition to remove conditions; in other words, so they can be 
here without conditions. We do not, as part of that--we do get 
the information, but we do not, as part of that----
    Mr. Marino. So you don't go out and talk to--you don't get 
a list of employees and you don't call these people in or you 
don't go to the job site and talk to them about--to see if 
they're actually there?
    Mr. Colucci. Sir, we are about to actually launch something 
called a random site visit program and----
    Mr. Marino. Okay. I understand what you're launching. And, 
again, I'm not targeting you, per se; I'm targeting the system 
here.
    Let's switch gears a little bit, since we're not going out 
and talking to the people that are supposed to be employed. Is 
there any conversation with the officials that are expanding 
these boundaries and as to why they are expanding the 
boundaries?
    Mr. Colucci. Sir, I can tell you that we often--I shouldn't 
say ``often''--we sometimes field calls from individuals within 
the States who are putting these boundaries together, and we do 
point them to our regulation, which does allow them to put 
these boundaries----
    Mr. Marino. Okay. Let me go back a little bit here. Do you 
have the resources to do what I'm getting at? Do you have the 
investigators to go out and interview to see if these people 
are working? Do you have the investigators available to go out 
and say, I want a complete explanation as to why you're 
expanding these boundaries? Because as a prosecutor for 18 
years, I am automatically suspect of everything.
    So, given that fact, don't you think someone should be 
looking at the dealings, the dealings between the officials 
that are expanding these lines and the people that are from out 
of the country or even within the country that are investing 
into these areas? I'm a little bit suspect as to: follow the 
money.
    Mr. Colucci. Sir, what I can tell you is, prior to coming 
into this position, that's exactly what I did for 5 years.
    Mr. Marino. I know.
    Mr. Colucci. That was my background is following the money. 
And so I agree with that assertion. That is something that we 
do every day with respect to those individual petitions.
    Mr. Marino. I'm going to get right to the point. Is there 
any question--has anyone thought about the fact that given 
the--because the cities or the counties have the authority to 
expand the lines, has anybody ever thought about--is there any 
fraud taking place there? Is there any bribery taking place 
there? Is there any cash exchanging hands? This is something 
that I think is just ripe for oversight and investigation that 
probably could turn into a criminal investigation.
    Mr. Colucci. Sir, I've been with the program for about 2 
years, and what I can tell you is that we have not seen an 
instance of outright fraud with respect to how a particular 
State puts together----
    Mr. Marino. But you don't have the resources. I'm giving 
you a chance here to tell me. It sounds like you do not have 
the resources to look into these matters. Am I correct in 
making that assumption? And if you do, somebody better get off 
their can and fire somebody that should be doing these 
investigations.
    Mr. Colucci. Sir, I appreciate your comment and 
suggestions, and I would point to, we do have resources. We 
have a fraud detection and national security team, 20 strong, 
embedded within the program. And we also have fraud detection 
and national security specialists around the country.
    And if something did look like it merited a criminal 
investigation, I believe that would be--if it were something 
like graft, I believe that would be in the jurisdiction of the 
FBI. And we do have close relationships with the FBI in 
Washington, D.C., and we certainly would not hesitate to bring 
that to their attention.
    Mr. Marino. I see my time is expired.
    I yield back.
    Mr. Issa. Thank you.
    And we're going to do a lightning round.
    We now have the gentlelady from California, Ms. Chu.
    Ms. Chu. Yes. Mr. Colucci, I have seen firsthand how the 
EB-5 program can spur development in a community, but of 
course, improvements must be made, especially with regard to 
fraud.
    But just last month in California, I attended a 
groundbreaking ceremony for a development in my district that 
was financed in part through the EB-5 program. And I do believe 
that this particular project will revitalize this area.
    But I am really concerned about the backlog. I see that, as 
of November 2015, there were 17,662 individuals with approved 
petitions. And then for the first time, in 2014, the annual cap 
on permanent resident visas for Chinese nationals was reached. 
With this current backlog, it may take between 6 to 7 years for 
these visas to become available.
    So, considering that the number of the EB-5 visa petitions 
have skyrocketed, can you tell me why you think they've 
skyrocketed, but in particular, what are you doing about this 
backlog?
    Mr. Colucci. Thank you for the question.
    I can tell you that no one in the program is satisfied with 
respect to where our processing times stand today. In some 
ways, we were a victim of the success of the program. Just as 
we were transitioning the program to Washington, D.C., the 
program truly spiked in popularity.
    From fiscal year 2013 to 2014, we had an increase of 70 
percent of immigrant investors seeking to come into the country 
and then another 30 percent spike between 2014 and 2015. And I 
will say, leading up to the sunset dates, in September and 
December of this past year, we received an unprecedented surge 
in applications.
    We are working diligently to reduce this backlog. Last 
year, we actually approved close to 9,000 petitions, which is 
probably 2-plus years of visas. We do have 113--or 115, I 
should say, staff members on board right now, and we hope to 
hire up to 171 by the end of the fiscal year.
    And then just one final point. In a policy memorandum that 
we issued in May of 2013, it allowed developers and regional 
center principals the ability to use bridge financing, 
temporary financing and replacing that with financing through 
the EB-5 program. And that is because we didn't want to stand 
in the way. We didn't want our processing times to compromise 
economic development within the United States.
    Ms. Chu. You mentioned that there was a spike at the time 
of the deadline in each period. And is the fact that there is--
are these short-term extensions, that that is affecting the 
increase in these petitions?
    Mr. Colucci. Yes, ma'am. I believe prior to the two spikes, 
as we mentioned in September and December, I believe we had 
about 12,000 or so pending petitions. And now we're in the 
neighborhood, as you mentioned, of about 21,000 or 22,000. So 
that greatly affected the number of filings we received.
    Ms. Chu. So, therefore, if the program were on a more even 
basis, you know, with regard to time extensions, we might not 
have these spikes.
    I would also like to raise the issue about the fact that 
there are 10,000 visas, but in reality, the actual number of 
investors is far less, you know, because the family members are 
considered part of that, correct?
    Mr. Colucci. That is correct.
    Ms. Chu. Yes. And so has the Administration explored the 
possibility of considering foreign investors and their 
immediate family members as a single unit in terms of counting 
the visas? We certainly see a precedent with this in the H-1B 
program where you only count the actual recipient under the 
quota and family members are excluded from the cap.
    Mr. Colucci. Yes, ma'am, that is correct. As, I think, the 
Chairman indicated, we believe approximately for every 
immigrant investor, that means two and a half or three other 
visas because of spouse and derivatives or children.
    Ms. Chu. But have you considered the idea of having them 
count as one unit?
    Mr. Colucci. I'm sorry?
    Ms. Chu. There's 10,000, but in reality, if you looked at 
the actual number of visas----
    Mr. Colucci. Right. There's a cap of 10,000 visas that can 
be issued each year, so correct.
    Ms. Chu. But the actual number of actual investors is far, 
far less.
    Mr. Colucci. It's probably 3,500 to 4,000.
    Ms. Chu. Exactly, yeah. Well, anyway, that's my concern, 
and I'm saying consider the possibility of counting them as one 
unit.
    And, also, Ms. Calderon, you mentioned that the California 
model is a good starting place. And why is that?
    Ms. Calderon. Well, at least it sets a limit on the number 
of census tracts that can be aggregated, and it sets the number 
at 12. We're not sure what the significance of 12 is, but it's 
better than many other States where there is no limit. And 
there are no stated guidelines that one can objectively follow 
regarding the aggregation approach that is used.
    In terms of the comment that was made by----
    Mr. Issa. If you could be brief, because Ms. Chu is going 
to miss her vote.
    Ms. Calderon. Yes. I just wanted to say in terms of the 
States making the determination, in States, typically, there 
are economic development offices that are making these 
determinations, and they're seeking that the project, the 
capital investment, be made in their State.
    Ms. Chu. Thank you.
    Mr. Issa. Thank you.
    And I apologize, but this is going to conclude today's 
hearing. A number of things I need to ask you. Would all of you 
be willing to answer additional written questions placed by 
those individuals who could not be here to ask them because of 
the short time?
    Thank you.
    Additionally, without objection, all Members will have 5 
legislative days in which to submit additional written 
questions for the witnesses and additional materials for the 
record. That also includes 5 additional days if you have 
anything additional to put in, including Mr. Colucci.
    I thank you very much. We stand adjourned.
    [Whereupon, at 3:58 p.m., the Committee was adjourned.]

                            A P P E N D I X

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               Material Submitted for the Hearing Record

Material submitted by the Honorable Jerrold Nadler, a Representative in 
   Congress from the State of New York, and Member, Committee on the 
                               Judiciary
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Supplement to the Oral Testimony of Jeanne Calderon, Clinical Associate 
        Professor, Stern School of Business, New York University
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  Response to Questions for the Record from Nicholas Colucci, Chief, 
Office of Immigrant Investor Program, U.S. Citizenship and Immigration 
                                Services
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