[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
THE DEPARTMENT OF HOMELAND SECURITY'S PROPOSED REGULATIONS REFORMING
THE
INVESTOR VISA PROGRAM
=======================================================================
HEARING
before the
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
MARCH 8, 2017
__________
Serial No. 115-4
__________
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 SMITH, Texas ZOE LOFGREN, California
STEVE CHABOT, Ohio SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California STEVE COHEN, Tennessee
STEVE KING, Iowa HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona Georgia
LOUIE GOHMERT, Texas THEODORE E. DEUTCH, Florida
JIM JORDAN, Ohio LUIS V. GUTIERREZ, Illinois
TED POE, Texas KAREN BASS, California
JASON CHAFFETZ, Utah CEDRIC L. RICHMOND, Louisiana
TOM MARINO, Pennsylvania HAKEEM S. JEFFRIES, New York
TREY GOWDY, South Carolina DAVID CICILLINE, Rhode Island
RAUL LABRADOR, Idaho ERIC SWALWELL, California
BLAKE FARENTHOLD, Texas TED LIEU, California
DOUG COLLINS, Georgia JAMIE RASKIN, Maryland
RON DeSANTIS, Florida PRAMILA JAYAPAL, Washington
KEN BUCK, Colorado BRAD SCHNEIDER, Illinois
JOHN RATCLIFFE, Texas
MARTHA ROBY, Alabama
MATT GAETZ, Florida
MIKE JOHNSON, Louisiana
ANDY BIGGS, Arizona
Shelley Husband, Chief of Staff and General Counsel
Perry Apelbaum, Minority Staff Director and Chief Counsel
C O N T E N T S
----------
MARCH 8, 2017
OPENING STATEMENTS
Page
The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the
Judiciary...................................................... 5
The Honorable John Conyers, Jr., Michigan, Ranking Member,
Committee on the Judiciary..................................... 7
The Honorable F. James Sensenbrenner, Wisconsin, Chairman,
Subcommittee on Immigration and Border Security, Committee on
the Judiciary.................................................. 8
The Honorable Zoe Lofgren, California, Ranking Member,
Subcommittee on Immigration and Border Security, Committee on
the Judiciary.................................................. 9
WITNESSES
The Honorable Chuck Grassley, Iowa, United States Senate
Oral Statement................................................. 2
The Honorable Patrick J. Leahy, Vermont, United States Senate
Oral Statement................................................. 3
Rebecca Gambler, Director, Homeland Security and Justice Team,
U.S. Government Accountability Office
Oral Statement................................................. 13
Sam Walls III, Managing Director, Pine State Regional Center
Oral Statement................................................. 14
Angelique Brunner, Founder and President, EB5 Capital
Oral Statement................................................. 16
Dekonti Mends-Cole, Director of Policy, Center for Community
Progress
Oral Statement................................................. 18
David North, Fellow, Center for Immigration Studies
Oral Statement................................................. 20
OFFICIAL HEARING RECORD
Material Submitted for the Record
Statement submitted by the Honorable Sheila Jackson Lee, Texas,
Committee on the Judiciary. This material is available at the
Committee and can be accessed on the committee repository at:
http://docs.house.gov/meetings/JU/JU00/20170308/105660/HHRG-115-
JU00-20170308-SD002.pdf.
THE DEPARTMENT OF HOMELAND SECURI-
TY'S PROPOSED REGULATIONS REFORMING
THE INVESTOR VISA PROGRAM
----------
WEDNESDAY, MARCH 8, 2017
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The committee met, pursuant to call, at 10:10 a.m., in Room
2141, Rayburn House Office Building, Hon. Bob Goodlatte
(chairman of the committee) presiding.
Present: Representatives Goodlatte, Sensenbrenner, Chabot,
Issa, King, Gohmert, Jordan, Poe, Marino, Gowdy, Labrador,
Buck, Gaetz, Johnson of Louisiana, Biggs, Conyers, Nadler,
Lofgren, Jackson Lee, Deutch, Cicilline, Lieu, Jayapal, and
Schneider.
Staff Present: Shelley Husband, Staff Director; Branden
Ritchie, Deputy Staff Director; Zach Somers, Parliamentarian
and General Counsel; George Fishman, Counsel, Subcommittee on
Immigration and Border Security; Danielle Brown, Minority
Parliamentarian and Chief Legislative Counsel; David
Shahoulian, Minority Chief Counsel, Subcommittee on Immigration
and Border Security; Veronica Eligan, Minority Professional
Staff Member; and Joseph Ehrenkrantz, Minority Legislative
Aide.
Chairman Goodlatte. We welcome everyone to this morning's
hearing on ``The Department of Homeland Security's Proposed
Regulations Reforming the Investor Visa Program.''
We will begin today by recognizing our first panel of
witnesses for their statements. After they have concluded, I
will recognize myself and the ranking member for our opening
statements.
The Honorable Chuck Grassley is a United States Senator
from Iowa, where he has been a leader in shaping legislation to
expand the economic opportunities for individuals, families,
and communities. Senator Grassley serves as chairman of the
Senate Committee on the Judiciary. He also serves as a senior
member of the Senate Committee on the Budget and on the Senate
Committee on Agriculture. Senator Grassley was previously
chairman of the Committee on Finance.
The Honorable Patrick Leahy is ranked first in seniority in
the United States Senate. Senator Leahy is the vice chair of
the Senate Appropriations Committee. He is the senior-most
member of the Senate Judiciary Committee and of the Senate
Agriculture Committee. Senator Leahy is the ranking member of
the Appropriations Subcommittee on State Department, Foreign
Operations, and Related Programs.
I would ask each witness to summarize his or her testimony
in 5 minutes or less. To help you stay within that time, there
is timing light on your table. When the light switches from
green to yellow--well, you guys know how this works, even
though you are in the Senate.
We welcome both of you. We welcome both of you, and we will
begin by recognizing Chairman Grassley. Welcome.
STATEMENT OF THE HON. CHUCK GRASSLEY, A UNITED STATES SENATOR
FROM THE STATE OF IOWA
Senator Grassley. Chairman Goodlatte, Ranking Member
Conyers, and all the members of this very good committee, thank
you very much for inviting me to testify about the EB-5
investor visa program. Senator Leahy and I have longstanding
concerns with the regional center program. We have worked
together for years to address this program's rampant waste,
fraud, and abuse.
In 1990, Congress created the EB-5 program. The goal was to
create new employment opportunities for American workers. A
mere 2 years later, Congress established a pilot program which
allowed investors to pool their investments in regional
centers. The theory was simple: by allocating investors to pool
their funds, greater investment would occur, and jobs for
American workers would flourish.
Twenty-five years later, this pilot program still exists,
but it is deeply flawed and has strayed very much from its
original intent. There are many problems with the regional
center program, but let me mention just a few of the worst.
Jobs created are not direct and verifiable jobs. They,
instead, are indirect and based on vague estimates and economic
modeling. A foreign national is allowed to count all jobs
created by a project when obtaining their green card. This is
even if EB-5 money is only a mere fraction of total investment.
Investment funds are not adequately vetted, and there are no
prohibitions against foreign governments owning or operating
regional centers. Even more concerning, background checks
aren't required for anyone associated with regional centers.
This raises serious questions about whether foreign governments
are selling U.S. green cards to their citizens. Regional
centers gerrymander targeted employment areas and the
boundaries therein to encompass economically distressed areas
in order to come in at a lower investment level.
This is an issue because the jobs created aren't actually
created in those areas, and the projects aren't actually in
those areas. The problem is made worse by the fact that every
targeted employment area designation is just simply rubber
stamped.
Finally, and perhaps the most frustrating, the minimum
investment level hasn't been raised in 25 years. I could keep
going on about many abuses. With this in mind, I believe that
either the regional center program should be completely
overhauled and reformed, or it should expire. The American
people deserve better than what we are getting out of this
program.
Senator Leahy and I have tried to work in a bicameral and
bipartisan way to enact real EB reforms. Last year, the Senate
Judiciary Committee held two hearings alone on this subject,
and this committee we are before now held another. We heard
from local leaders and associations representing workers in
regional centers. We listened to the academics and government
officials. We received feedback from many industries as well as
immigration and security attorneys. After painstaking
negotiations and concessions by almost every stakeholder, some
of us more than others, we reached consensus and would
reauthorize that program for 6 years. Unfortunately, this
wasn't acceptable to all parties. Instead of addressing the
program's waste, fraud, and abuse, Congress merely
reauthorized, as you know.
Nothing better supports the need for serious reform than
the work that Chairman Chaffetz and I have done to draw
attention to the program's very real national concerns. We have
sent several letters and conducted transcribed interviews with
key players of an interagency working group to assess just how
rampant fraud and abuse are in the program.
This working group made several recommendations, the most
compelling of which was to sunset the regional center model due
to crippling fraud, national security vulnerabilities.
I also want to take a moment to address the reforms
proposed by the Obama administration. Earlier this year, former
Homeland Security Secretary Johnson published proposed rule
changes to the regional center, the program, that would stop
gerrymandering and increase investment levels. I strongly
support these changes. They are a vital first step--but just a
first step--to returning the program to its original intent,
creating new employment for American workers and infusing
capital into the distressed rural areas.
When I met Secretary Kelly before his confirmation, I
emphasized the importance of those rules, and he seemed
favorable to them. I want to continue working with my
colleagues of both Chambers and both parties to reform the
program. I look forward especially to working with you,
Chairman Goodlatte and Ranking Member Conyers, and hopefully
the Trump administration in the coming months on legislation
that is serious and substantial.
Thank you for receiving my testimony.
[Senator Grassley's written statement is available at the
Committee or on the committee repository at: http://
docs.house.gov/meetings/JU/JU00/20170308/105660/HHRG-115-JU00-
Wstate-GrassleyC-20170308.pdf]
Chairman Goodlatte. Thank you, Senator Grassley. Senator
Leahy, welcome.
STATEMENT OF THE HON. PATRICK J. LEAHY, A UNITED STATES SENATOR
FROM THE STATE OF VERMONT
Senator Leahy. Thank you, Mr. Chairman and Ranking Member
Conyers. I appreciate being here with my good friend Chairman
Grassley.
You know, the last several years, as Senator Grassley said,
we worked together across the aisle. We got to work across the
Capitol, as you know, to try to bring overdue reforms to the
EB-5 regional center program. The EB-5 program that I once
championed seems like a distant memory. That program was
designed to bring jobs to underserved rural and urban
communities. And for some time, it did just that, but the
program has strayed from these goals, and it is a magnet for
fraud. Security violations are common, and the incentives that
Congress created to promote investment in distressed areas have
become obsolete due to economic gerrymandering. Only 3 percent
of EB-5 investors now invest in rural areas, 3 percent. I am
representing a State that has a lot of rural areas. I note that
number.
Less than 10 percent invest in true high-unemployment
areas. Almost every EB-5 project uses gerrymandering to qualify
as distressed. I will give you an example: a luxury hotel in
Beverly Hills uses gerrymandering to claim it is located in a
distressed community, one of the wealthiest communities in
America. But the fact that this type of abuse represents almost
90 percent of the entire EB-5 program is appalling. I am told a
number of these luxury developments would be pursued whether
they had EB-5 financing or not. So it casts real doubt on
whether this is creating any jobs at all.
In my home State of Vermont, EB-5 has been used in areas it
would not otherwise have been able to attract significant
investment. But even in Vermont, experience has clearly shown
the need for the reforms and the transparency--transparency,
which is so important--that we are trying to achieve.
In our State, the news organization Vermont Digger has dug
deeply, if you will excuse the pun, to reveal the need for
broad reforms. Yet, for some developers, any change to the
status quo is a threat to their bottom line. And,
unfortunately, some in our leadership have allowed a couple of
powerful developers who exploit this program's flaws to derail
critical reform. That is unacceptable. The worst abusers of a
government program should not be given veto power over its
reform.
Now, the Department of Homeland Security's proposed rules
represent a significant step forward. I agree with Senator
Grassley. When we asked then Secretary Jeh Johnson over a year
ago to do all he could do to improve the EB-5 program, he
worked at that, and I commend him for that. By increasing
investment amounts, reining in abusive gerrymandering
practices, these changes will end some of the most egregious
abuses. Investors will be afforded greater flexibility when
circumstances changed through no fault of their own, which is
going to bring additional fairness to the program. But the
Trump administration is going to have to make sure these are
implemented and improved.
And, Chairman Goodlatte and my friend Chairman Grassley, I
thank you for shining a spotlight on this issue. You can't let
these proposed rules be diluted or discarded, because this
thing will just spin out of control. I still believe, as did
Secretary Johnson, the EB-5's many problems ultimately demand a
legislative solution. I think we need that. I remain committed
to doing more to protect investors to root out fraud within the
program, increasing fraud investigations, requiring additional
oversight.
Chairman Grassley and I will soon reintroduce our
legislation that would do just that. It is my hope that serious
reforms proposed in new rules would lead to these broader
improvements. But I look forward to working with all of you on
this committee as well as on ours to make sure the EB-5
program, again, serves the rural and poor urban communities
that Congress intended.
Thank you very much.
[Senator Leahy's written statement is available at the
Committee or on the committee repository at: http://
docs.house.gov/meetings/JU/JU00/20170308/105660/HHRG-115-JU00-
Wstate-LeahyP-20170308.pdf]
Chairman Goodlatte. Thank you, Senator Leahy.
I want to thank both of you for your insights into this
program and these important regulatory reforms. And as is our
custom, we will not have a round of questioning for you. And I
know you have other matters to attend to. So thank you very
much, and we will at this time excuse both of you.
Senator Leahy. Thank you. Good to see you.
Chairman Goodlatte. I will now recognize myself for an
opening statement.
In 1990, Congress created the investment visa program in
order to bring entrepreneurial talent to the United States,
create new jobs, and infuse new capital into our economy,
especially in hard-hit rural and depressed areas.
Unfortunately, over the years, the program has strayed further
and further from Congress' intent and has seen its reputation
repeatedly tarnished by scandal.
For the past year and a half, I have worked collaboratively
with Ranking Member Conyers, Representative Issa, and Senators
Grassley and Leahy to reform the program and set it on a solid
foundation.
Currently, aliens must invest $1 million unless they invest
in projects in rural or high-unemployment areas, in which case
they can invest half of this amount. These levels have remained
untouched since 1990, a quarter century ago, never adjusted for
inflation or any other factor. As a result, the real value of
each investment has fallen by half. Almost all visas now go to
aliens investing at the lower level, meant for rural and poor
areas, even when the resulting projects are built in prosperous
areas. Regional centers have discovered that they can duct tape
together ritzy, high-rent districts with distant depressed
zones in order that the combined area magically meets the high-
unemployment test. The Government Accountability Office found
that 12 percent of projects qualifying as high-unemployment
TEAs, in fact, taped together over 100 disparate census tracts.
The GAO also found that more than three-quarters of projects in
supposedly high-unemployment areas are actually physically
located in places with unemployment rates from zero to 6
percent.
This gerrymandering takes place to access cheap capital.
Aliens don't care about their rate of return as much as they do
procuring green cards. Real estate experts at New York
University have concluded that, quote: ``Projects in even the
most affluent areas are able to routinely qualify for the
discounted investment. This gerrymandering renders the two-
level investment threshold meaningless, and foreign investors
flock to invest in luxury projects,'' end quote.
For example, here is Hudson Yards, a Manhattan mega
development that purchased a 4-page spread in the 800-page
September issue of Vogue. Based on Vogue's rack rate, the ad
cost Hudson Yards about $800,000. It boasts that Hudson Yards
will include some of the tallest and grandest towers in the
city. Inside, soaring ceilings, walls of glass, and ingenious
details reflect the highest standards in the residential
market. Boasting a collection of restaurants curated by world-
renowned chef Thomas Keller, Hudson Yards is poised to become
the city's most unique and exciting dining destination. A
unique combination of luxury retailers and independent
boutiques is being curated. You can rejuvenate in the
innovative luxury spa, and on and on.
At the Yard's first condominium project, condos will start
at around $1.9 million for 843 square feet and rise to $32
million for the two penthouses. Perhaps in recognition of the
huge success of HGTV's show, Tiny Houses, the real deal, a New
York real estate journal states that 200 of the total 285
market-rate condos are priced at 7 million--at below $7
million. The move is reflective of a general drift in the
market toward smaller homes at less ostentatious prices. Things
must be tough all over.
Of course, Hudson Yards is marketing investor visas for
$500,000.
Projects in affluent areas will always be able to compete
for foreign investors. Even if aliens have to invest more, they
prefer the lower risk of the investments and their prestigious
ZIP Codes. However, if Congress is going to be granting a path
to citizenship, we have every right to ensure that a healthy
percentage of investments be in rural and depressed areas, as
Congress originally intended.
I have been one of the most vocal opponents of the Obama
administration's executive overreach. However, for the past
quarter century, both Democratic and Republican administrations
have engaged in executive underreach when it comes to the
investor visa program. Congress gave the administration
explicit statutory authority to raise the minimum investment
amounts. Congress gave the administration the power to
determine for itself which areas qualify as depressed rather
than simply delegating away this authority. And, yet, no
administration acted until January.
In one of his last acts, Secretary of Homeland Security Jeh
Johnson commendably issued proposed regulations that deliver
long overdue reform. The regulations proposed to raise the
minimum investment amount to $1.8 million. While this is higher
than what I was willing to accept last year, in the spirit of
compromise, it is eminently justifiable, merely accounting for
inflation over the past quarter century and far lower than the
investment amount required by our international competitors.
The regulations would also raise the minimum investment amount
for rural and high-unemployment areas to $1.35 million and
effectively end gerrymandering by defining a high-unemployment
area as the census tract or tracts in which a project is
principally doing business and, at the discretion of the
regional center, any or all census tracts directly adjacent to
the project tract, a concept I proposed 2 years ago. These
regulations deserve to be issued in final form, and I urge the
Trump administration to do so. They will enable the investor
visa program to become a turbo-charged engine for economic
growth. If, however, the regulations are not finalized and the
program remains in disrepair, I am not sure that it deserves to
continue.
I look forward to hearing from today's further witnesses.
And I am now pleased to recognize the ranking member, the
gentleman from Michigan, Mr. Conyers, for his opening
statement.
Mr. Conyers. Thank you, Chairman Goodlatte, for what I
agree is a very comprehensive statement.
Members of the committee, last Congress, I had the honor of
working with Chairman Grassley and Senator Leahy in an effort
to reform the EB-5 investor visa program. While the proposed
Department of Homeland Security regulations would go a long way
toward addressing many of our longstanding and serious concerns
with the program, there is no substitute to a meaningful
legislative solution.
I remain confident that we can accomplish these important
legislative reforms this Congress, and I look forward to
working with you on this, Chairman Goodlatte.
I have taken a particular interest in the EB-5 investor
visa program because I believe it has drifted far from the
program initially envisioned by Congress. As a result, the
communities that need investment the most, specifically rural
and distressed urban areas, struggle to benefit from the
program and are unfairly placed in direct competition with the
developed, affluent areas. We have already heard some examples
of that.
When Congress established the EB-5 investor visa program in
1990, the intention was to create jobs for American citizens
and to bring new investment capital to the United States. To
help encourage investment in 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 GAO, academics, Wall Street
Journal, and other news sources, the vast majority of the EB-5
investment funds are going to projects in some of America's
wealthiest corridors. They qualify as TEAs, or economically
distressed, only by aggregating census tracts across many
miles, sometimes across State lines, and often across natural
boundaries, such as rivers.
I call it economic gerrymandering. This practice has been
criticized by the Leadership Conference on Civil Rights, noting
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' well-to-do
neighborhoods comes at the expense of EB-5 funds for urban and
rural communities. According to the Center for American
Progress, the congressional district that I represent, for
instance, I am sorry to say, is the second most impoverished
district in the United States. I am pleased to say that, under
the Obama administration, our economic environment began to
improve. It is slow, and we have a long way to go, but for
those Americans living 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 that it was originally intended to
help.
The Department of Homeland Security's proposed rules make a
number of important reforms. First, the rules would raise the
higher investment level to adjust for inflation from $1 million
to $1.8 million and would raise the lower investment amount
from $500,000 to $1.35 million.
Secondly, the rules would reduce the difference between the
statutory and targeted employment area investment levels and
would allow for conforming adjustments based on inflation
beginning 5 years from the effective date.
And, lastly, the rules would significantly rein in
manipulation of targeted employment areas. I am encouraged by
this development from the Department of Homeland Security and
consider the proposed rulemakings as movement in the right
direction. But I must reiterate: to achieve the necessary
reforms to the EB-5 program, there is no substitute to a
meaningful legislative solution. And absent significant reform,
either regulatory or legislative, I will not be able to support
continued authorization of this program.
And so, in closing, I want to thank the witnesses for their
willingness to appear before our committee. I look forward to
an open debate about the proposed regulations and the future of
this valuable program, the EB-5 program.
Thank you, Mr. Chairman. I yield back.
Chairman Goodlatte. Thank you, Mr. Conyers.
It is now my pleasure to recognize the chairman of the
Immigration and Border Security Subcommittee, the gentleman
from Wisconsin, Mr. Sensenbrenner, for his opening statement.
Mr. Sensenbrenner. Thank you very much, Mr. Chairman.
For anyone looking for CliffsNotes on today's hearings, I
can summarize it at the onset into two major points that you
will hear over and over again.
First, the EB-5 investor visa program brings sustained
foreign investment and quality jobs to the U.S. And, second,
the program is out of date and has been subject to waste, fraud
and abuse. Any time you have a valuable government program that
isn't working as well as it should, it is time for reform.
The days of last-minute extensions and continuing
resolutions are over. Let me repeat that: no more extensions
and CRs. It is time for all parties to come together to the
table so that Congress can do the often dirty job of
legislating.
The immigrant investor program has made great contributions
to our economy. We should not look at its problems today and
dismiss it as a failure. Its value was recognized as far back
as 1981 by the Select Commission on Immigration and Refugee
Policy. The committee concluded that admitting investors into
the United States is in the national interest and recommended
the creation of a small numerically limited visa program for
immigrants who would contribute a substantial amount of
investment.
Congress listened and created the EB-5 investor program.
Customs and immigration service has reported that since--from
its inception in 1990 through 2014, the EB-5 program has
created at least 73,730 jobs and generated more than $11.2
billion in investment. We want that capital, and we need those
jobs.
But even if I don't like to admit it, the world has changed
since we created the program in 1990. The price of a stamp has
doubled; so has the price of milk. The number of millionaires
in the United States has more than tripled. And the minimum
investment in the EB-5 program has not increased by even a
nickel.
Other nations with investor visa programs require much
larger investments. Australia's investor program requires up to
11 million U.S. dollars. Canada's program requires at least 1.5
million U.S. dollars, in addition to a required personal net
worth of over 7 million or more U.S. dollars. And the United
Kingdom's investor program requires at least 2.5 million U.S.
dollars and millions more for expedited citizenship. There are,
of course, some countries that offer cut-rate prices for
investment visas, but I for one believe that the value of U.S.
citizenship is that higher than any other country in the world,
and I think the cost of becoming a U.S. citizen should be
fairly valued at way over $500,000.
Demand supports my patriotism because we currently have a
7- to 8-year backlog for the roughly 10,000 investor green
cards available each year. I am not an economist, but when
demand is that high, it means that the price is too low. An
increase in investment amounts would cause considerably more
capital to flow into the United States.
Making matters worse, not only are the required investment
levels 25 years out of date, but the system has been abused to
require even less capital than Congress intended. Congress
intended the minimum investment for an EB-5 visa to be $1
million. We then specifically sought to incentivize investments
in rural and depressed areas by carving out an exception. In
so-called targeted employment areas, Congress lowered the
minimum investment amount to $500,000.
These incentives completely failed, however. The targeted
boundaries were gerrymandered, and the million-dollar
investment level was almost completely ignored. The exception
swallowed the rule, and all EB-5 visas are now set at the
$500,000 level, even though the majority of capital flows to
affluent areas.
Last year, the Department of Homeland Security attempted to
address these and other concerns through its rulemaking
process. I agree with the intent of DHS' proposed regulations,
but Congress, not the administration, is suited to weigh the
policy considerations necessary to properly reform the investor
visa program.
I thank the chairman for holding this hearing, and I thank
Senators Grassley and Leahy for crossing over to the wrong side
of the tracks to testify here today.
The four of us, along with Ranking Member Conyers and many
other members of this committee, have worked to solve a lot of
intractable problems over the years, and I look forward to
working with you all to reform the EB-5 program. Thank you.
Chairman Goodlatte. Thank you, Mr. Sensenbrenner.
The chair is now pleased to recognize the ranking member of
the Immigration and Border Security Subcommittee, the
gentlewoman from California, Ms. Lofgren, for her opening
statement.
Ms. Lofgren. Thank you, Mr. Chairman.
Created 27 years ago, this EB-5 program is an important
investment and job-creation program. It got a slow start, but
after the Great Recession in 2008, the program really picked
up. When traditional bank lending dried up during the economic
crisis, developers turned to the EB-5 program to keep funding
projects, and the use of the program has really skyrocketed
since then.
Now, I saw a 2017 report from the U.S. Department of
Commerce that says in fiscal years 2012 and 2013 alone, the EB-
5 program brought in $5.8 billion in capital financing to the
United States and was expected to create more than 174,000
jobs. The benefits of this program are on display in the bay
area, where I am from. The program has funded a new hotel in
the revitalizing San Jose Airport corridor in the 19th
Congressional District I represent as well as development in
revitalizing Treasure Island. According to investors, these
projects would not have happened without EB-5 financing. For
example, the hotel in my district was the first one built near
the airport in 20 years. And the Treasure Island project
includes the island's World's Fair site, which is a California
historical landmark and a former military base, which has
required significant remediation and redevelopment.
At the same time, there is growing recognition that the
program is in need of modernization and reform. As has been
mentioned by others, the minimum investment level of 1 million
or 500,000 hasn't been updated since the program was created in
1990. And considering the high demand for the program
demonstrated by the long and growing backlog of EB-5 petitions,
it shows that the U.S. is leaving investment capital on the
table by not increasing the investment level.
The program has also come under consideration--criticism
with respect to the provisions designed to ensure that EB-5
investments are shared among rural areas and distressed areas.
As has been mentioned, my colleagues, the gerrymandering issue
is of concern to many. Others worry, however, that excessive
tightening of the current conditions would prevent funding of
many projects that, although situated in relatively prosperous
areas, nonetheless create jobs for workers in nearby distressed
areas.
And in the midst of the program's exploding popularity,
there is increasing concern about fraud within the program. We
have seen reports concerning alleged investment scams, SEC
civil violations, and even criminal indictments related to EB-5
projects.
And I will say this, although there has been not yet full
consensus on the investment amount and the so-called
gerrymandering issue, I do think there is broad consensus on
the antifraud provisions no matter what the opinion is on the
investment amount.
We do need to reform this program. And as we know, the
Department of Homeland Security proposed some changes to reform
the program, increasing the threshold amounts and reforming the
targeted areas. Whether these proposed changes should be
adopted in the final rule--of course, is what we are here to
discuss today--or whether the rule should be replaced by
legislation, I support increasing the investment threshold to
ensure that we are maximizing foreign investments and creating
the maximum number of U.S. jobs for workers. But we must also
be careful to avoid changes that would reduce the overall
investment and, thus, the number of jobs created by the
program.
I think we need to look at how we can incent additional
development in depressed and rural areas. I do think that we
have fallen short there although our intent was clear. But we
need to be careful, as we move in that direction, not to impose
restrictions that would effectively close off the EB-5 program
in large swaths of the country.
These are difficult issues that require careful balancing,
and I look forward to hearing from the witnesses today on the
right balance.
I would note that, along with this hearing, EB-5
stakeholders are currently submitting comments on the proposed
rule for consideration by DHS, which is exactly the way this
system should work. By airing proposals and gathering feedback
and other data, both the Congress and the Department can weigh
competing priorities and hopefully reach the right balance for
the good of the country.
I would be remiss if I did not mention that, while this EB-
5 hearing is important and a subject deserving of review, I
would hope that the committee might also find time to work on
the topic of comprehensive immigration reform, something that
our country desperately needs.
And, with that, Mr. Chairman, I would yield back the
balance of my time.
Chairman Goodlatte. The chair thanks the gentlewoman.
And I would now invite our second panel members to come
forward and take their seats at the witness table.
Thank you. You might want to remain standing since the
first thing I am going to do is swear you in.
Welcome to all of you. If you would, please raise your
right hand.
Do you each of you solemnly 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 five witnesses answered in
the affirmative.
And you may be seated. Thank you.
Ms. Rebecca Gambler is a Director in the U.S. Government
Accountability Office's Homeland Security and Justice Team,
where she leads GAO's work on border security, immigration, and
elections issues. Ms. Gambler joined GAO in 2002 and has worked
on a wide range of issues related to Homeland Security and
Justice. Prior to joining the GAO, Ms. Gambler worked at the
National Endowment for Democracy's International Forum for
Democratic Studies. Ms. Gambler has an M.A. in national
security and strategic studies from the United States Naval War
College, an M.A. in international relations from Syracuse
University, and an M.A. in political science from the
University of Toronto. She is a Fulbright fellow to Canada. Ms.
Gambler has a B.A. in political science from Messiah College.
Mr. Sam Walls is the president and chief operating officer
of Arkansas Capital Corporation, having joined the company in
2003. ACC is a private, nonprofit, economic development company
that provides capital to businesses starting or expanding in
Arkansas.
In 2012, State leaders approached ACC and asked ACC to
consider creating an EB-5 regional center that would serve
Arkansas. Consequently, Pine State Regional Center was born.
PSRC was approved in 2014, and Mr. Walls serves as its managing
director. He has a B.A. from Southern Methodist University in
Dallas, Texas, and a J.D. from the William H. Bowen School of
Law in Little Rock, Arkansas.
Ms. Angelique Brunner established EB5 Capital in 2007. She
splits her time between the company's Washington, D.C., and San
Francisco offices providing strategic direction and oversight
to EB5 Capital's real estate, marketing, and legal team.
Ms. Brunner serves on the board of directors for Invest In
The USA, the national EB-5 industry trade association, and was
the inaugural chair of the II USA Policy Committee, which
guides the industry's communications with the USCIS and other
governmental agencies. Ms. Brunner received her bachelor's
degree in public policy from Brown University. She also holds a
master's degree in public affairs and a certificate in urban
planning from Princeton University's Woodrow Wilson School.
Ms. Dekonti Mends-Cole serves as a director of policy for
the Center for Community Progress, which is a nonprofit solely
dedicated to transforming blighted and vacant properties into
asset-supporting neighborhood vitality. Prior to joining Center
for Community Progress in September 2015, Ms. Mends-Cole worked
as the deputy director of dispositions for the Detroit Land
Bank Authority overseeing disposition, property management, and
compliance program.
In addition, she served as a fellow with the White House
Strong Cities, Strong Communities initiative embedded in the
city of Detroit's law department. Ms. Mends-Cole holds an M.S.
from the London School of Economics in urban regeneration and
affordable housing, a juris doctor from Georgetown Law Center,
and a B.A. from the University of Miami in international
studies and economics.
Mr. David North, a fellow of the Center for Immigration
Studies, is an authority on immigration policy, specializing on
the interaction between immigration and domestic systems, such
as education and labor markets. He served in the United States
Labor Department as the Assistant for Farm Labor to the U.S.
Secretary of Labor and as the Executive Director of President
Lyndon Johnson's Cabinet Committee on Mexican-American Affairs.
Mr. North received a Fulbright scholarship to attend Victoria
University in Wellington, New Zealand, where he earned an M.A.
He is also a magna cum laude graduate from Princeton
University.
Welcome to all of you. Your timing device is right there in
front of you. You have 5 minutes. When it reaches 1 minute
remaining, it will turn to yellow. We ask that you summarize
and conclude before the red light comes on. Your entire
statement will be made a part of the record.
And we will begin with Ms. Gambler.
TESTIMONY OF REBECCA GAMBLER, DIRECTOR, HOMELAND SECURITY AND
JUSTICE TEAM, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; SAM WALLS
III, MANAGING DIRECTOR, PINE STATE REGIONAL CENTER; ANGELIQUE
BRUNNER, FOUNDER AND PRESIDENT, EB5 CAPITAL; DEKONTI MENDS-
COLE, DIRECTOR OF POLICY, CENTER FOR COMMUNITY PROGRESS; AND
DAVID NORTH, FELLOW, CENTER FOR IMMIGRATION STUDIES
TESTIMONY OF REBECCA GAMBLER
Ms. Gambler. Good morning, 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 United States by
foreign investors in exchange for a lawful permanent residency
and a path to citizenship.
Currently, 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, or TEA. A TEA is
defined as an area that at the time of investment is either
rural or has experienced unemployment of at least 150 percent
of the national average rate.
Investments are 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
program 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.
My remarks today summarize a report GAO issued last fall to
this committee providing information on proposed EB-5
investments in TEAs. For that report, we selected and reviewed
a random sample of 200 of the approximately 6,600 investor
petitions submitted during the fourth quarter of fiscal year
2015.
Based on our review of those petitions, we provided
information on the proportion of petitioners that did or did
not elect to invest in TEA, the proportion of petitioners
basing a high-employment TEA on various types of geographic
areas, and EB-5 investment as a proportion of the total
investment in projects.
With regard to the first area, we estimated that 99 percent
of the EB-5 petitioners who filed a petition in the fourth
quarter of fiscal year 2015 elected to invest in a project
located in a TEA, most within a high-unemployment TEA that is
qualifying for a reduced investment threshold of $500,000.
In particular, just under 97 percent elected to invest in a
high-unemployment TEA and just under 3 percent in a rural TEA.
The remaining petitioners elected to invest at least $1 million
in a project that was not located in a TEA.
Second, we estimated that 90 percent of petitioners
electing to invest in a high-unemployment TEA based that on the
average unemployment rate for a combination of census areas
while the remaining 10 percent based the TEA on the employment
rate of a single census tract, block group, or a county. Most
of these petitioners combined from 2 to 10 census areas, but
others combined more than 100 census areas, as allowed under
the program as currently structured.
With regard to the third area, we estimated that EB-5
investment by one or more immigrant investors who invested in
projects located in a TEA was generally less than the nonEB-5
investment by other U.S. or foreign investors relative to the
total estimated project cost. We also estimated that nearly
three-fourths of petitioners who elected to invest in a TEA
invested or plan to invest in various types of real estate
projects, such as hotels and resorts, commercial and
residential developments.
In closing, in addition to our September 2016 report
regarding proposed investments in TEAs, we have also issued
reports related to USCIS' efforts to assess and address fraud
within the EB-5 program and to report the economic benefits of
the program. We have made recommendations in these areas, which
USCIS is working to address, and we will continue to monitor
USCIS' efforts and progress.
This concludes my oral statement, and I would be pleased to
answer questions members may have.
[Ms. Gambler's written statement is available at the
Committee or on the committee repository at: http://
docs.house.gov/meetings/JU/JU00/20170308/105660/HHRG-11-JU00-
Wstate-GambLerR-20170308.pdf]
Chairman Goodlatte. Thank you, Ms. Gambler.
Mr. Walls, welcome.
TESTIMONY OF SAM WALLS III
Mr. Walls. Thank you, Chairman.
Chairman Goodlatte, Ranking Member Conyers, and members of
the committee, thank you for the opportunity today to appear
today to discuss the EB-5 foreign investor program.
My name is Sam Walls, and I am the president and chief
operating officer of Arkansas Capital Corporation. Arkansas
Capital Corporation is a private, nonprofit, economic
development company that was formed in 1957 by State business
leaders that included the late Governor Winthrop Rockefeller.
We partner with banks and other sources to provide capital to
businesses starting or expanding in our State.
In 2012, State leadership requested Arkansas Capital to
create an EB-5 regional center that would serve Arkansas. This
request was made of Arkansas Capital because of our impeccable
reputation and history of partnering with the State to promote
economic development. Pine State Regional Center was approved
in 2014.
In September of 2015, Pine State filed its first EB-5
exemplar petition to raise up to $200 million for a $1.67
billion steel manufacturer in Osceola, Arkansas, a rural
community with high unemployment, persistent high poverty
levels, and a low level of college degrees. State and local
leaders have described this steel production facility as a game
changer and a godsend. This facility is the largest industrial
project in the history of the State of Arkansas. The project
creates 9,600 construction direct and indirect jobs. The
employees of this facility will earn wages with benefits that
far exceed the average salary in that community and what most
would ever have dreamt possible.
But to be clear, although we are proud of our involvement
in this project, our support for the reforms in the USCIS
proposed regulations and in past legislative efforts are not
merely because they may provide some benefit to our current
project. As a now 60-year-old economic development entity
serving Arkansas, we see these reforms as an opportunity for
rural and distressed urban communities to realistically use
this program to assist in economic development. Our current
project is an example of how rural communities will utilize
this program if given the opportunity.
Before I make some remarks about the USCIS proposed EB-5
regulations, I wanted to express my thanks to you, Mr.
Chairman, Ranking Member Conyers, Senator Grassley, and Senator
Leahy, for your efforts to enact EB-5 reform legislation. We
strongly support your legislation introduced in the last
Congress and encourage you to continue to push your EB-5
reforms that will help rural and underserved communities.
I applaud USCIS for its proposed regulations on EB-5.
Today, the adjective ``controversial'' almost invariably seems
to be used when this program is discussed in public forums. The
USCIS is clearly attempting to take whatever steps it can
within its authority to reform the program and address these
concerns. While we share the view of many in the industry about
the rates of increase to the current investment levels, we
still welcome the proposed rules for several reasons.
The rules' reform of the targeted employment area
destination would return the use of this designation to the
original intent of Congress. Currently, some of the most
affluent areas of the country have been able to attain the TEA
designation by creatively streaming together dozens of
disparate census tracts. The TEA designation was intended for
rural and highly distressed urban areas and was anticipated to
be exception, not the rule. According to the Government
Accountability Office, we know that, today, more than 90
percent of investors have gone into projects that are in urban
TEAs comprised of many, sometimes dozens, of census tracts, and
only 3 percent of EB-5 investments have gone into rural areas.
We agree with the chairman in his observation that this
practice has made a mockery of what Congress intended.
The proposed regulations essentially maintain the current
statutory differential between the TEA and non-TEA investment
levels of 500,000. From our perspective, this is a key
component to the TEA reform because a more restrictive process
to qualify for TEA status is only half of the equation. There
must be a meaningful difference in the investment amounts. Past
suggestions of a $50,000 difference, for example, will amount
to a continuation of the status quo. The program's legislative
history is clear on this point: the discounted investment rate
was intended to drive investment to areas of the country that
are traditionally undercapitalized. A meaningful investment
differential is essential to achieve that goal.
The proposed rule is important for another reason. Over the
past 2 years, we have seen a small segment of the EB-5 industry
essentially veto proposed reforms. Most recently, this past
December, these stakeholders rejected a very fair reform
compromise. Like any compromise, they were asked to accept
things that we didn't like, but taken as a whole, it was fair,
and we support it with an eye toward the long-term health and
viability of the program.
If finalized, these proposed regulations will finally make
this ongoing strategy of delay untenable for these parties and
force them to participate in good faith in the legislative
process.
All of you have heard arguments against making changes to
the EB-5 program. Some have claimed that proposed legislative
reforms are picking winners and losers. We believe that efforts
to restore congressional intent to the EB-5 TEA incentive is
not picking winners and losers. It is an effort to fix a broken
program.
Some claim that the EB-5 program is just a job creation
program, and so it should not matter where investments are
going as long as jobs are being created somewhere. Some argue
that the TEA policy is being honored if people commute from
poor areas to prospering areas where an EB-5 project is. This
argument completely ignores the fact that Congress enacted the
TEA incentive for a very specific purpose: to boost economic
activity in communities that are traditionally
undercapitalized. Congress would not have debated and enacted
the TEA provision on the assumption it would apply everywhere.
Congress has every right to insist that public policy work as
it was intended.
If the recent Presidential election showed us anything, it
demonstrated that there are numerous rural and distressed urban
communities that feel the government has forgotten about them.
The clear intent of the TEA designation was an effort by
Congress to help induce more job-creating economic investment
in those areas, a result that has not been realized yet.
The reforms contained in the USCIS proposed regulations and
recent legislative efforts is a reaffirmation to the people in
those areas of the country that Congress has not forgotten
about them and is working to help those communities restore
vital sources of employment.
Thank you, and I look forward to your questions.
[Mr. Walls' written statement is available at the Committee
or on the committee repository at: http://docs.house.gov/
meetings/JU/JU00/20170308/105660/HHRG-115-JU00-Wstate-WallsS-
20170308.pdf]
Chairman Goodlatte. Thank you, Mr. Walls.
Ms. Brunner, welcome.
TESTIMONY OF ANGELIQUE BRUNNER
Ms. Brunner. Chairman Goodlatte, Ranking Member Conyers,
and distinguished members of the committee, thank you for the
opportunity to testify today.
My name is Angelique Brunner, and I am founder and
president of EB5 Capital, a regional center operator based in
Maryland. I founded the company in 2007 in the District of
Columbia to utilize foreign capital in disadvantaged
communities and support living-wage job creation. Founding the
company during the economic downturn gave me a unique
perspective on capital markets, their lack of resilience, and
the importance of a flexible, independent source of capital.
Today, EB5 Capital is a leading regional center operator.
We manage more than $400 million of investment capital that
represents more than 20 projects in five States and the
District of Columbia on behalf of clients from 50 countries.
Our investments have anchored more than $2.4 billion of
total development that has created thousands of jobs. The
company's initial focus was Washington, D.C., where we have
committed over $250 million of investment in transitioning
communities in the Convention Center corridor, the ballpark and
Capitol Riverfront area, and most recently in NOMA, where Uline
Arena is reshaping the entire neighborhood with REI's flagship
store and the District's first creative class A offices.
Our expansion outside of the District includes projects
throughout California and the entire State of Michigan, where
we believe that we can bring $100 million a year for qualified
EB-5 projects under the current TEA definitions.
I am here today to comment on proposed regulations that, if
enacted, will jeopardize the ability of the program to continue
to draw foreign direct investment to the United States. I urge
Congress to complete the legislative reform of the EB-5 program
that your committee has been working on with stakeholders for
the past 2 years. Regulatory changes in support of new
legislation could then be revisited after congressional action.
The most problematic proposed changes that I will focus on
are the changes to the targeted employment area definition and
the increases in investment amounts. On their face, both may
seem grounded in principled arguments, but with further
examination, the economic basis of both are subjective and far
from a best-practices approach to the reform each is meant to
foster.
My first area of concern is that the proposed TEA
definition does not incorporate preexisting government
criteria. DHS is proposing to continue the single variable
criteria of a targeted employment area. I was hopeful that DHS
would propose new criteria practiced elsewhere in Federal
Government, like those used to define the new market tax credit
qualifying geography, or eliminate the TEA entirely.
Additionally, proposed limitations based on number of
census tracts are biased against densely populated urban areas
that have significantly more census tracts per square mile than
suburban and rural areas. The suggested doughnut approach that
measures economic development as a circle of adjacent census
tracts rather than commuting distance does not reflect the
reality of economic development in cities which follow a block-
by-block path and/or occur along public transit lines. To
illustrate this bias, I offer an anecdote from my commute to
the hearing from my office this morning, an 8.3-mile drive. If
I take a suburban route, I travel only 10 census tracts. But if
I travel through the District of Columbia, I cover 21 census
tracts.
My second area of concern is that the market will not
support the proposed increase in investment levels. At this
time, the EB-5 program is effectively operated as a one-tier
level of investment, with 95 percent of investments occurring
at the $500,000 level, which DHS proposes raising to $1.35
million. Such an increase will shock the marketplace and, in my
opinion, decimate the EB-5 program.
U.S. competes for investors with about 40 countries. Our
ability to attract investors is already compromised because of
our complex immigration requirements, visa capacity issues, and
processing backlogs. An increase in investment amount at the
magnitude proposed.
While the investment tiers of $501 million date back to the
beginning of the program, the higher investment amount has
never been competitive.
Success and reform can be aligned. Incentives for rural and
distressed urban areas through visa set-asides will achieve the
investments expressed by many stakeholders. Reform efforts
should shift away from the arbitrary single variable TEA to a
single investment amount. Given the program's backlog,
investors want their visas quicker. A single investment amount,
eliminating the TEA, coupled with set-asides will incent
increased investment in needed areas.
In conclusion, Mr. Chairman, Ranking Member Conyers, and
distinguished members of the committee, I strongly urge you to
advise the current administration to cancel the regulations
proposed by the previous administration. I ask that you instead
support Congress to complete its work on legislative reform of
the EB-5 program. Regulatory changes in support of new
legislation could then be revisited after congressional action.
Thank you. This concludes my statement, and I would be
pleased to answer questions.
[Ms. Brunner's written statement is available at the
Committee or on the committee repository at: http://
docs.house.gov/meetings/JU/JU00/20170308/105660/HHRG-115-JU00-
Wstate-BrunnerA-20170308.pdf]
Chairman Goodlatte. Thank you, Ms. Brunner.
Ms. Mends-Cole, welcome.
TESTIMONY OF DEKONTI MENDS-COLE
Ms. Mends-Cole. Thank you, Chairman Goodlatte, Ranking
Member Conyers, and distinguished members of the committee.
Thank you for inviting me to testify today. As stated, my name
is Dekonti Mends-Cole and I serve as the director of policy for
Center for Community Progress based in Washington, D.C.
The Center for Community Progress is a national nonprofit
focused on addressing vacancy and abandonment to revitalize
distressed communities in urban, suburban, and rural areas.
Headquartered in Flint, Michigan, with staff in Detroit,
upstate New York, New Orleans, Chicago, and Atlanta, our
organization supports the revitalization of America's older
industrial regions and places, as well as communities that for
decades have experienced an exodus of population and industry.
We believe that a reformed EB-5 program that presents an
opportunity to revitalize places experiencing economic distress
and in the greatest need of at-risk capital to spur growth,
such as Detroit, Michigan; Cincinnati, Ohio; and Scranton,
Pennsylvania, would provide the greatest benefit.
The EB-5 program introduced in 1990 was intended to be an
innovative financing tool that encouraged job growth,
incentivized investment, and recruited at-risk capital to
disinvested communities. The program was largely dormant until
the 2010s when increased immigrant interests, largely from
China, coupled with increased demand for low cost mezzanine
finance drove take-up.
At the same time EB-5's use began to increase
exponentially, a widening disparity began to emerge between
recovering markets and those that are currently on a downward
trajectory. From 2010 to 2013, the most prosperous 10 percent
of ZIP Codes saw unemployment climb by 22 percent, and the
number of businesses rise by 11 percent, while the most
distressed 10 percent of ZIP Codes lost 13 percent of their
jobs and saw a business closure rate of 1 in 10. Fifty million
Americans live in the country's most distressed communities,
characterized by low job growth, high vacancy, and out of work
adults as high as 55 percent.
The program has become disconnected from its original
purpose. Immigrant investor capital, rather than serving as a
catalyst for growth in communities serving job and industry
loss, has sought the safe havens of high-return and low-risk
projects in the country's most prosperous census tracts. This
has been made possible by the gerrymandering of EB-5 investment
areas. It is not a coincidence that EB-5 capital is heavily
concentrated in the States and ZIP Codes with the highest
populations living in prosperous census tracts: California, New
York, Texas, New Jersey, and Illinois. I hope to shift the EB-5
conversation beyond high density, high growth, largely coastal
cities, and support the Department of Homeland Security's
efforts to better target EB-5 capital and stimulate economic
growth in America's distressed communities.
I would like to specifically talk about the narrowing
definition of TEAs that was focused on in the proposed
regulations. A February 2017 article by EB-5 experts and
scholars, Professor Friedland and Calderon at Stern's business
school, applied the following proposed regulation TEA
definitions to a sample of 52 projects that were largely from
what is known as gateway cities. Based on this application, 52
of the sample qualified projects, only two would apply under a
single census tract and only four would qualify under the
contiguous census tract definition. This demonstrates that a
narrower TEA definition would prohibit projects from continuing
to include high unemployment areas that are in close proximity
but are not receiving any direct investment from the project.
It also would better align with similarly targeted programs
such as new market tax credits.
The proposed regulations would more effectively target
credits to hard to recruit capital areas than also two other
models that have been proposed: The California 12-tract model
or the commuting pattern model. Both of these models will
continue to permit investors to enter at a lowered investment
level and high growth census tracts. It's applied nationally
and are less likely to recruit capital for distressed
communities than what is outlined in the proposed regulation.
Lastly, I'd like to briefly comment on the deferential
between TEAs and non-TEAs. The current legislation has proven
to be a valuable incentive for both investors and regional
centers. EB-5 investment is completely at risk and investors
seeking to minimize their risk have favored lower cost of entry
projects in TEA designated areas. A sizable differential is
necessary to attract capital to the most economically
distressed areas. Ensuring that the spread is continued and
adequately incentivizes immigrant investors to support
difficult-to-finance projects is necessary.
Thank you for the opportunity to present, and I would be
happy to take any questions.
[Ms. Mends-Cole's written statement is available at the
Committee or on the committee repository at: http://
docs.house.gov/meetings/JU/JU00/20170308/105660/HHRG-115-JU00-
Wstate-Mends-ColeD-20170308.pdf]
Chairman Goodlatte. Thank you, Ms. Mends-Cole.
Mr. North, welcome.
TESTIMONY OF DAVID NORTH
Mr. North. Good morning, Mr. Chairman, Mr. Ranking Member,
members. I'm grateful for a chance to discuss the proposed
changes in the regs of the EB-5 program. I speak for the Center
for Immigration Studies. It is a downtown agency, nonpartisan
research organization here in Washington, D.C.
Frankly, we have no need for an immigrant investor program.
EB-5 brings in only 1 or 2 percent of the flood of new foreign
money that is invested in the United States every year, and it
brings it in through a convoluted way that almost invites
corruption and theft. It is lodged in an agency that does not
deal in high finance, involves the sale of visas to aliens who
could not become U.S. immigrants in any other way. The Center
has moral objections to selling green cards.
That said, realistically, the chances are that the big
urban monied interests that profit from the EB-5 program,
heavily in Manhattan I might add, it never places--the program
never places investments in the Appalachias--will prevail. The
big money people will as they usually do. But if the
termination battle is lost, perhaps we can make some modest and
sensible changes in the program. I have four specific
suggestions, two echoing what the Department suggests, and two
that don't appear to be in the Department's proposals.
As far as the basic investment is concerned, moving it up
to $1.35 million makes a lot of sense to me. Bring in more
money without spending more visas in the process. I also
disagree with one of my colleagues here at this table about the
prospective market. There is a whole lot of fear among a whole
lot of very rich people, primarily in China, and I think that
the market for visas at $1.35 million will be quite brisk.
Besides, we have a backlog to take care of anyway.
The question of the location of the investments is
interesting. This is a TEA. Currently, the half million dollar
investments must be used in what the agency calls targeted
employment areas. I would like to illustrate how this
definition can be manipulated in terms of this place. We are in
Rayburn House Office Building and the Rayburn House Office
Building, as you can see on the screen, is in that kind of
upside down U shape form, the red form there. That is a TEA
that could be created--I am not saying it has been--it could be
created under the current rules, and includes the White House,
which is one of the more expensive residences in the country,
and this wonderful building. And it is a depressed area as far
as DHS is concerned. If you can put the White House in a TEA,
you can put a TEA anywhere in the country.
I want to stress something that I am not sure is in the
regulation package, and that is the question of integrity.
There are numerous, multimillion dollar scandals in this
program, in South Dakota, in Vermont, in Chicago, in Florida,
in the State of Washington, and lots and lots of them in
California. There needs to be a different focus in the
administration on these things. And let me give you one example
of a particular fraud.
I decided to see--this is regarding one of the California
frauds--what I could find out about the proposers of what turns
out to be fraudulent activity by using the internet. I am not
skilled with the internet. I had no particular law enforcement
connections. I just went on the internet and I looked. And what
did I find? Well, the first thing I found, that the main broker
was a lawyer who had been to a for-profit law school, which is
worrisome to me. He had a debt counseling firm attached to his
law firm. That sounds worrying. He had been twice sanctioned by
the California bar, and when once was suspended from the
practice of law for 7 months.
Now, do you want to invest in a program that is led by
somebody like that? I would think not. But none of the 100 or
so investors did what I had just done in a few minutes, nor had
the managers of the EB-5 program. There needs to be a rather
more careful approach to who gets to run these programs and who
the middlemen are.
There is one other thing that I didn't see in the regs,
which I think should be there, and that should be a provision
that there be jobs for residents only. There was a failed
project in South Dakota where Korean workers were brought in, I
think H-2Bs, to build a beef slaughterhouse, and there were
Germans working on tourist visas on a German-connected EB-5
lumber mill in Florida. Now, these matters are deplorable, and
I think that if any jobs were to be created by this program,
they should go to full-time legal residents of this country,
including green card holders.
In closing, I would like to point out an irony. This is a
program which has been defended stoutly by the leadership, the
Republican leadership of the House and the Senate through the
continuing resolution that Mr. Sensenbrenner talked about. They
have done so despite the fact that two-thirds of the money in
this program goes into States that supported Ms. Clinton in the
last election. So it may be an act of generosity on the part of
the Republican Party to continue a program that is so nice to
the blue States.
And on that note, I end.
[Mr. North's written statement is available at the
Committee or on the committee repository at: http://
docs.house.gov/meetings/JU/JU00/20170308/105660/HHRG-115-JU00-
Wstate-NorthD-20170308.pdf]
Chairman Goodlatte. Thank you, Mr. North.
We will now begin questioning by the members of the
committee. And I will recognize myself for 5 minutes.
Ms. Gambler, let me start with you. I find it interesting
that the General Accounting Office found that three-quarters of
all alien investors in TEAs invest in real estate projects, and
yet real estate construction accounts for about 6 percent of
the U.S. economy. So why does 75 percent of these investments
go into what is only 6 percent of the economy?
Ms. Gambler. Congressman, that is not something we looked
at specifically as part of our review. It may be due to the
universe of projects that are available for investors to seek
to invest in. So it could be a product of just the types of
projects that are available to investors and that that is more
predominantly in certain industries than others.
Chairman Goodlatte. Is it possible that under the current
law and regulation, where gerrymandering can allow you to
figure development in highly attractive areas like the Hudson
Yards example that we used earlier, that the money would
gravitate toward what would be considered to be easier
investments than it would be to invest the money in a rural
area or in a high unemployment area?
Ms. Gambler. I think it is reasonable that the types of
projects that are available for investors to invest in are
probably driven by a number of factors, including what is
currently allowed under law and regulation in terms of how
projects and regional centers can designate TEAs or can have--
use TEAs that have been designated.
Chairman Goodlatte. Thank you.
Mr. Walls, I read your testimony. It is easy to imagine
that projects such as the Big River Steel in Osceola, Arkansas,
are the exact type of projects that Congress wanted to
facilitate in creating the investor visa program and the
regional center program. Isn't it disappointing that so few
such projects get funded through this program?
Mr. Walls. It is. I think, you know, when we were asked to
do this and you got into the program without any previous
experience, you look at the regs and you say, well, there is
TEAs and there is non-TEAs. Clearly, a project like that would
fall onto a TEA. And intuitively you would say, well, this
clearly looks like a good job creator. And so when you get more
immersed into it and you discover that you are competing with
very impressive projects in very affluent areas of the country,
it is--it is disappointing, it is frustrating, it has been.
Chairman Goodlatte. And it is highlighted by the fact that,
well, this would be considered a less attractive area for the
most part for investments, Big River Steel is going to pay its
mostly noncollege educated workers in rural Arkansas $75,000 a
year or more. How do you think this compares with the wages
that noncollege educated workers will make at the high end
hotels and condos that are being built with EB-5 funds?
Mr. Walls. I would hesitate to speculate to an exact
number, but I would assume that it would be much higher.
Chairman Goodlatte. Ms. Brunner, you state in your
testimony that the administration should cancel the proposed
regulations and allow Congress to complete the legislative
reform of the EB-5 program that your committee has been working
on with stakeholders for the past 2 years. Now you mention your
involvement with a number of industry groups who, in my
experience, have been incredibly resistant to any real reforms
and who have, in fact, stymied reform over the past 2 years.
These groups like the investor visa program the way it is. They
want the investment level to remain low and they want to be
able to qualify luxury condo projects as being in depressed
areas. If the regulations are canceled, why would they have any
more incentive to engage in substantive negotiations than they
have over the last 2 years?
Ms. Brunner. Mr. Chair, one thing that has happened in the
past year is I have become the membership chair and
spokesperson for the EB-5 Investment Coalition. Since that
time, the statements in my testimony actually reflect the
alignment of those groups and that we are prepared to eliminate
the TEA, go to a single investment model. And my understanding
is that we are very excited to cooperate with your committee
and the Senate committee and achieve reform this calendar year.
Chairman Goodlatte. Well, good. I am definitely glad to
hear that.
One of your statements caught my ear, and did Mr. North as
well, and that is that current markets will not support the
investment amounts that are provided for in these regulations.
And yet for a program that for most of its existence never hit
the 10,000 green card cap until just 3 years ago when it
suddenly mushroomed into not just hitting the cap, but now
having a 7- or 8-year waiting list, meaning that there is a
backlog of 70,000 to 80,000 green cards that are committed for
and in demand right now, this disturbs me for a couple of
reasons.
First of all, I think, like Mr. Sensenbrenner, it makes it
very clear that this program can justify much higher payments
for green cards than investments for green cards, if you will,
than is currently provided for. But secondly, it bothers me
that this program has been sold like that to people primarily
in China, who I don't think have a clue that this program isn't
even authorized beyond April of this year. There is no
authorization whatsoever for any green card beyond the
expiration of the current continuing resolution in April. And
yet this industry, if you will, is busy selling green cards in
China to people who, you know, I don't think even have any idea
that if the program were allowed to expire in April, would have
nothing except for a 70,000 to 80,000 green card backlog.
What would happen if that were to occur? And how--what can
you tell me about how the people who promote this program in
places like China make full disclosure to these people who are
making these investments?
Ms. Brunner. I can tell you how my company makes full
disclosure. We make sure that all of our investors are aware of
the pending expiration or the pending reform of the program, is
what we are hopeful for.
Chairman Goodlatte. But you still think it is appropriate
to have them go ahead and make investments without the
knowledge that the program is even going to continue?
Ms. Brunner. No, they do not make investments without that
knowledge. That is not a true statement for our investors. They
are all aware of the April 28 deadline for Congress and for the
industry. And the market has slowed significantly. It slowed
because of the expiration and it slowed because of the
significant backlog.
I would like to address one of your earlier comments in
your statement about the increase demand that we have seen
recently. So we are all well aware here that demand really
started in 2008. I would argue that that is when the price
matched the demand, which allowed the supply of the visas to be
utilized. So it wasn't until 2008 that $500,000 was actually
the right price for the market demand.
Now, it seems that $500,000 is a bit low for the market
demand, and that it would be better served with an increase in
the price. We support that. I support that as a company and as
a stakeholder in the industry. What I support, though, is a
single investment amount that would drive more investment to
distressed areas in a set-aside program instead of forcing them
into a reduced investment amount below what the higher
qualified areas could receive.
Chairman Goodlatte. I am way over my time here. I just want
to make one more point. I agree with your assessment that a lot
of this got started following the financial crisis in 2008,
because there was a severe shortage of capital at the time and
this became attractive, but it didn't shoot through the roof
until you get to about 2013 or 2014. That is the first time we
ever hit the cap. And now, in the 3 years since then, when
capital has been far more abundant and it has been noted far
more capital flows into the United States for other reasons
than this reason that we have this huge backlog, and now as we
are trying to reform this program, we see tremendous resistance
from people who don't want to see greater investments or who
don't want to see the reforms take place until this entire
investment backlog now 7 or 8 years is worked down. I find that
intolerable given the problems the program has.
I am now happy to yield to the gentleman from Michigan, Mr.
Conyers, and I will be generous with his time as well.
Mr. Conyers. Thank you, Mr. Chairman.
Let me start with Ms. Mends-Cole. In your testimony, you
mention that your organization works in areas experiencing
economic distress. What kinds of EB-5 finance projects can be
made in this area, in your view?
Ms. Mends-Cole. There is a lot of opportunity for EB-5. And
examples of existing projects that are on the pipeline are the
Hardesty Federal Complex in Kansas City. It is an 18-acre
brownfield site in which a nonprofit regional center is looking
to secure capital. It is working with Northwest Missouri State
University. And the purpose of this project is both the
educational facility as well as addressing the needs of a food
desert.
Another example is the George Washington bus station
restoration which is in a distressed census tract in upper
Manhattan. This is a 15,000 square feet development and it is
projected to create 250 jobs and has leveraged $5 million worth
of tax credits.
Mr. Conyers. Now, let me follow up on the idea, what kind
of revitalizing impact could these projects have on distressed
urban areas?
Ms. Mends-Cole. Both examples in Hardesty Federal Complex
and also in your home city of Detroit, Michigan, where Bedrock
Ventures is looking at investing utilizing EB-5, specifically
looks at vacant properties. Properties--for example, the
Hardesty Federal Complex has been abandoned since 2002, and
Bedrock's looking at some of the most distressed census tracts
in neighborhoods in terms of the abandonment and vacancy in the
country.
Mr. Conyers. Good.
Let me ask Mr. Sam Walls. We have heard testimony today
from others in the EB-5 industry that targeted employment areas
should take into account commuter patterns, that is whether
those working in projects from distressed areas. What are your
thoughts about this kind of an approach?
Mr. Walls. I disagree. The problem with--I look at
congressional intent. And if you look at congressional intent,
clearly, it wasn't a function of we want to just create jobs
and then people that live in those poor areas can commute to
those good jobs in better areas of their cities or from rural
communities into larger areas around them. Clearly, the
congressional intent was looking for investment within those
census tracts.
We are an economic development entity so we have a saying
around our shop; it is activity begets activity. And so,
clearly, what the intent was to see investments physically--
actually end those census tracts and then the subsequent
advantages that come with that investment. We do a lot with new
market tax credits with one of our other entities. And it is
the same thought process: Catalytic investment.
And that is clearly what the TEA intent was. And so to
modify that to say TEA now as if they can drive somewhere
closely, I think is inconsistent with what the intent was to
begin with.
Mr. Conyers. Thank you.
Ms. Brunner, you raise in your testimony concerns that EB-5
program has to compete with about 40 other countries that also
have investor programs, and that raising the U.S. investment
threshold to over $1 million could make EB-5 noncompetitive.
But that doesn't seem to be the case. For example, the United
Kingdom offers temporary visas for investments of $2.5 million
in effect. Australia has three programs requiring $5 million,
$15 million, and $1.5--these are in Australian dollars--and
$1.5 million in Australian dollars.
Is there reason to believe that a U.S. investor program
cannot compete with these other programs if the investment
threshold is raised beyond $565,000 as you propose in your
testimony?
Ms. Brunner. The demand for the U.K. program and the
Australian program in the markets that the U.S. is competitive
in, primarily China, is much less than the demand for the U.S.
program. To adjust the amount up, I think the market can
accommodate some adjustment, but to approach those levels, I
think you have to ask yourself, is this an economic development
program or is it something else? If it is going to be an
economic development program, then we want to maximize the
demand at the right price threshold. That is a delicate--that
is a delicate task that I think warrants continued
conversation, and it certainly is worthy of our effort. But we
have to strike that balance if we want to continue funding.
For example, I funded food deserts; I have put 70,000
square feet of retail back into commission in Washington, D.C.
My pipeline includes the Greyhound bus station in Washington,
D.C. I hope to put hundreds of millions of dollars into the
State of Michigan, and I hope to start with the city of
Detroit. All of these things are economic development for me.
They won't be possible if we raise the investment amount too
high.
Mr. Conyers. Thank you so much.
Mr. Chairman, I yield back.
Mr. King [presiding]. The gentleman from Michigan yields
back the balance of his time.
I now recognize myself for 5 minutes. And I would turn
first to Ms. Brunner. I think I heard Mr. North mention that he
expects that the Chinese would come up with 1.35 million in
lieu of the half million that we are discussing here. What is
your estimation of how that might affect their investment in
this country should that number be increased to 1.35?
Ms. Brunner. Sure. Well, it is one of the reasons why I
advocate for the elimination of TEAs. I do not want the market
to have an option of a lower investment amount. I want to
eliminate that option.
Mr. King. And do you think if we raised it, then it would
affect the flow of capital coming from China into the United
States?
Ms. Brunner. I think it will. In any supply and demand
model you have three variables: You have the supply, you have
the demand, and you have the price. The only thing that we can
change is the supply of the visas. I understand that is not
really--Congress really isn't inclined to do that, so the thing
that we can change is price. There seems to be some agreement
on that. So we need to figure out the right price to maintain
this as an economic development program.
Mr. King. In listening to Mr. Conyers, did you reflect that
other countries are selling access to a path to citizenship at
a much higher price than the United States is?
Ms. Brunner. Well, no other country in the world uses it
for economic development. We are the only country in the world
with a job creation requirement.
Mr. King. You heard the quotes from Mr. Conyers that it was
substantially higher than half a million dollars, I think up to
$2.5 million in one case. That is what I reflected.
And so if we repeal EB-5, what does that do to the flow of
capital into some of the investments that you are promoting?
Ms. Brunner. It will stop it.
Mr. King. And what would be the next source of capital for
those investments?
Ms. Brunner. Well, I have been in economic development in
Washington, D.C. since 1999, and when I came here, the city was
selling houses for $1. And I asked why and they said because of
the riots. And I said, what riots? And they said the Martin
Luther King riots. So I imagined the development would stop.
Mr. King. I have a bit of a different estimate, but I
appreciate your testimony.
I turn to Ms. Gambler, and I just ask you this, when I
think about some countries that are not emerging as our
friends, China to a degree, Russia to an increasing degree,
especially in the last couple of months, if you were Saudi
investors and you wanted to infiltrate people who were
sympathetic to the cause of some of the people who flew planes
into the building, what method would you use to bring those
folks into the United States?
Ms. Gambler. Well, sir, I think there are a couple of
comments in response to that. We do have some ongoing work
right now looking at the vetting and background check process
for individuals who are coming to the U.S. on visas. And we
would be happy to come up and talk with you about that as well,
about what that work is.
With regard to the EB-5 program, we have identified through
our work some concerns with fraud in the program. We have
talked about that a little bit this morning. And that is why it
is important, as it relates this program, for USCIS to do the
fraud risk assessments that we have been calling for them to do
to include identifying what the inherent risks are in the
program.
Mr. King. Let's just say you are a drug cartel in Mexico
and you want to get some of your people into the United States.
They are the masters at laundering money. And so to be able to
trace that back to them, but the dollars and identify whether
or not those people are affiliated, it seems to be to be a very
difficult task. Second thing would be, from a national security
standpoint, although I always hear vetting, better vetting,
extreme vetting. But I am not one who is convinced we can
actually vet people when their children become radicalized. And
so I will submit that if you are strategizing against the
interest of the United States and you want your people into
America and you had money and you wanted a return on that
investment, you would look at the EB-5 program as the perfect
tool for access into the American society and, by the way, to
be able to maneuver and operate throughout the business circles
in the United States.
I was on a plane not that long ago, a man sat next to me
and I ask him what he did. We had that little conversation. He
was putting together an EB-5 hotel, a $30 million hotel that
had 60 Chinese investors. And I wonder, would that hotel be
built if it weren't for EB-5. But I am going to turn to Mr.
North with that question, would that hotel be built if it
weren't for EB-5?
Mr. North. In many cases, the EB-5 program is an income
transfer program from rich Chinese to rich Americans. What
happens is there is something called mezzanine financing, which
is the financing that goes into real estate developments where
you do not have either ownership or a mortgage, and so it is
kind of risky. And mezzanine financing typically produces--
again I am not an economist, I don't do this sort of thing--but
produces a fairly substantial interest rate because there is no
guarantees.
However, if you bring in EB-5 money, not looking for
guarantees particularly, they can get their mezzanine financing
for about 1 percent. So there is--I am sure there are hotels
that would not have been--or projects that would not have
happened without the EB-5. In most cases, it is just simply a
question of making it easier and more profitable for the U.S.
developers.
Mr. King. Does anybody on the panel know how much U.S.
capital is stranded overseas because of our current tax policy?
That number would be in the trillions. Does anybody have that
number?
Mr. North. It is a big number, but it is--I think it is
beyond my expertise.
Mr. King. I would submit that repatriating U.S. capital
would be a far better thing to do than to open our doors up for
these kind of nefarious activities that appear to me to be
taking place.
I thank you, all the witnesses, and I yield back the
balance of my time.
I now recognize the gentlelady from California, Ms.
Lofgren.
Ms. Lofgren. Thank you, Mr. Chairman.
I don't know if anyone can answer this question, but this
is obviously something that is program of interest both to the
Congress but also to the executive branch. In the newspapers it
has been reported that a key adviser to President Trump, his
son-in-law, Jared Kushner, has used the EB-5 program to build
hotels and other investments in New York City. Is that true?
And if that is true, I wonder whether we might ask the
administration to take steps to guard against being influenced
by the financial benefit to that key adviser.
Mr. North. If I may, I sense that the Kushner family has
heavily invested with EB-5 money in Jersey City, which is right
across the river from midtown Manhattan. I do not know if there
are--and the enterprise is a Trump center--Trump Plaza, excuse
me--I do not know whether there are any EB-5 projects in New
York City that are funded for the Trump family from EB-5. I
don't know about that, but there is one right across the River.
Ms. Lofgren. Does anyone else know about this? Perhaps it
is unfair, you wouldn't necessarily know. But I think some
research ought to be done on that, Mr. Chairman, to make sure
that we are getting unbiased participation by the executive.
Just a word on the investment level. I come from Silicon
Valley where recently a double wide was put up--double-wide
trailer was put up for sale for almost $400,000. So a $500,000
investment seems incredible. You know, this has got to be
updated. In looking at the investments required by other
countries, I think a substantial increase is required. I will
just put that out there.
One of the questions I have is whether, in addition to
looking at the dollar amount, whether we ought to--and the
gerrymandering, whether we ought to look at the nature of the
investments themselves. You know, recently, somebody who is
doing a project said that the funding through EB-5 was being
used for the basic infrastructure. Well, you can't get a bank
loan to do the sewers and the infrastructure that then allows
development on top of that. Would it make sense for us to
direct these funds to something that then creates a platform
for investment from other sources to be successful? Does
anybody have a thought on that?
Apparently not. But at a later date, I mean, I think that
that is--we ought to take a look at what promotes development
and growth and job structure best. And right now, this is
primarily used as funding for hotel construction. I am
certainly not against hotel construction if it makes sense, but
that is certainly not the only economic need, and some might
argue, not the most important economic need in the United
States.
You know, I was wondering, Mr. North, you mentioned the
reform that was necessary. I am thinking about, if we do a
reform package, when that reform should be put into place.
There is a backlog I think of nearly--well, it is over 20,000
petitions, and some have argued that the--whatever reform that
we do, assuming we get there, should be instituted only after
the backlog is cleared. Others have said if you do that, we
might as well not do the reform, because there is such a
backlog in hand.
I am wondering if anybody has an observation on the timing
of reform question.
Mr. North. I do. I think that to postpone it until all the
backlog is used is kicking the can down the road squared, and I
don't think it should be done that way. There may be a problem
about changing the dollar value. I don't think you can change
the dollar value of the minimum investment retroactively, but I
think you certainly can immediately----
Ms. Lofgren. Well, I think certainly you can. I don't think
the people have a vested actionable interest in a law that
could be changed by the Congress.
Mr. North. But I think that the administrative reforms that
I have been suggesting and also the TEA reform should be done
right away.
Ms. Lofgren. I know my time is close to running out. Ms.
Gambler, you had important testimony last year about the
immigrant investors who were vulnerable to fraud schemes. And I
am wondering, in addition to all of the investor alerts that
were done, what further steps USCIS should take to protect
innocent investors from being defrauded.
Ms. Gambler. There are a couple of key issues there,
Congresswoman. One, as I mentioned, they have made progress on
doing fraud risk assessments identified the inherent risks in
the program. They need to continue to do that. I think they
also need to continue to look at the fraud prevention and
assessment tools that they do have, including things like
random site visits to some of these projects, doing interviews
and proving the data and information they are collecting from
investors and regional centers. So they have made some progress
in these areas, but there is additional work they could do.
Ms. Lofgren. Just one final question. It is--some have
suggested that the middlemen that are essentially charging very
high fees to investors outside the United States for kind of
act as the broker have not really been scrutinized adequately
by our government. Do you have insight into that allegation?
Ms. Gambler. That is part of some of the unique fraud risks
that our report from 2015 identified. And we would say that is
part of assessing the risk in the program. That could be one of
the inherent risks that should be looked at.
Ms. Lofgren. Okay. My time has expired, Mr. Chairman. Thank
you very much.
Mr. King [presiding]. The gentlelady's time has expired.
The chair now recognizes the gentleman from California, Mr.
Issa.
Mr. Issa. Thank you, Mr. Chairman.
Mr. North. Senator Feinstein has called EB-5 selling
citizenship. Some might say renting for citizenship. But is
there any reason to say that if this is a good program, we
should cap it at 10,000? If we're going to sell citizenship and
earn $1.5 billion a year of loaned money for a total of about
$7.5 billion in investment, in this $18 trillion, $19 trillion
economy, we have 1.2 million people who receive green cards,
why not sell them all? Why not make it 100,000 and be getting
$15 billion a year if it is a good thing? So the question is
are we selling citizenship?
Mr. North. Well, first of all, to be narrow, we are selling
green cards rather than citizenship.
Mr. Issa. Yes. Green cards lead to the ability to have
citizenship.
Mr. North. I understand that.
Mr. Issa. So we are selling the ability to permanently be
here. Maybe I will phrase it to you another way. Why is it we
see sell for a temporary loan, a temporary investment, a
permanent right to be here? Why wouldn't we have temporary
visas for temporary investment?
Mr. North. I don't think renting or selling visas is a good
idea. I think it is amoral; if not immoral. I would be opposed
to it, but--and that is our basic position.
Mr. Issa. Okay. Well, it is not my basic position, but I
could get there if we can't reform it.
Mr. Walls, regional centers by definition, by testimony,
essentially get--are part of giving us, whether gerrymandered
or not, virtually 100 percent of the investments are made at
500,000 per investor. That is right. So if we assume for a
moment under current rules--we will forget about whether they
are gerrymandered or not--that all the investment is going to
underserved areas, why wouldn't we simply eliminate any
investment except in underserved areas? In other words, since
desirable areas shouldn't have a problem getting money, and I
would say that Beverly Hills is pretty desirable, but assuming
that we are only talking undesirable, for such a small program
that is so oversubscribed, why wouldn't we go to 1.8 or 2
million per investment and have them only in underserved areas?
Why would we have two tiers at all? Why wouldn't we just
mandate that the only way you get in and get what Mr. Walls,
Mr. North and I might consider to be selling residency, why
wouldn't we require that you invest in underserved areas?
Mr. Walls. Well, I think there are two questions there.
One, you know, what is the dollar amount? And I actually agree
with the industry and Ms. Brunner that, you know, I think there
needs to be additional conversation as to what the true market
for what we should charge, though. So setting that aside.
Mr. Issa. But you know the true market is a lot higher than
what we are currently charging?
Mr. Walls. Absolutely.
Mr. Issa. The oversubscription tells us that.
Mr. Walls. We agree to that. We agree. It is just what that
number is.
As far as--again, you go to congressional, what do you want
this program to do? Clearly, it appears to me that the intent
was to--you know, this two tiered of, hey, if it is a good
project and creates jobs regardless where it is, we are
prepared to accept that, but, you know, there is less risk
there, real or perceived. And we as a country are prepared to
put a certain amount, a dollar amount. But if you want to--we
want to encourage economic development in these areas, we will
give it a break and try to mitigate that risk.
Mr. Issa. What is interesting is I have looked at the
history of it, and, of course, two things that were assumed:
One is that the investors and the entrepreneurs would come
together, that somehow there would be a connection. But in
fact, in almost every case, the investor--the green card holder
goes one place and the money goes another, and there is no
participation almost always. So we failed in that presumption.
We also set aside about 3,000 of 10,000 slots for
underserved. That was to assume that it would still be hard to
get them into underserved.
Mr. Walls. Right.
Mr. Issa. So if eventually we live up to what Senator
Grassley and the chairman had been working on so long and hard
with members on the other side also, maybe what we need is a
set-aside without a discount, because ultimately, then you
would get that amount in underserved areas and you could be
stringent about it, but you wouldn't necessarily be selling
anything for less, because right now, the incentive has been
get to the lower price. But the incentive does not seem to be
get to the true underserved area.
Ms. Brunner, you are shaking your head in a way that I
really want to know your answer.
Ms. Brunner. Well, thank you, Congressman. I am extremely
in favor of a single price because I don't think that it is
fair that if you are designated a set-aside area, distressed
area, or rural area, that means then that you have to
compromise and receive less capital.
Mr. Issa. The----
Mr. Walls. If I may answer the question as well.
Mr. Issa. Go ahead.
Mr. Walls. I just--respectfully, if you are going to
drive--again, the intent behind it was those underserved areas
have challenges. Congress deals with those challenges in a
number--new market tax credits; USDA guarantees; in my area,
Delta Regional Authority. Saying there is one tier, and the
set---aside is a short-term answer to that, but involvement in
the market, without a true meaningful difference in that, you
are not going to ultimately accomplish what you say----
Mr. Issa. Let me just ask a closing question for the entire
panel, with your indulgence, Chairman. Is it fair to say that
if we were doing an overall today, and if we set the price
where we knew 10,000 slots, and all 10,000 would be sold,
whatever that price is, is if fair to say that we look at
original intent and the best and the highest use for this
investment, that really all of it should go to underserved
areas? Whatever that definition is. We don't think it is
Manhattan or Beverly Hills, but just a general yes, would you
say if we were starting over from scratch and assuming we are
not killing the program, we are setting at a price at some
level, and because so many agree to a single rate, isn't the
best part of what this program could do is get investment where
it otherwise wouldn't go, which is underserved areas? Please,
if I could get a yes or no from each of you.
Mr. North. I would say yes. Yes.
Ms. Mends-Cole. I would also say yes.
Ms. Brunner. I would say yes, but the goal is to create the
highest wage living--living wage jobs.
Mr. Issa. Good point.
Mr. Walls. Yes.
Ms. Gambler. Yes.
Mr. Issa. Thank you. I will quit on yes.
Mr. King. The gentleman's time has expired.
And the chair now recognizes the gentlelady from Texas, Ms.
Jackson Lee.
Ms. Jackson Lee. First, I would like to thank the witnesses
for I think a very thoughtful discussion. And I believe that
there is value to the EB-5, but let me be very clear. As we
have listened to some of the reforms, I just wonder why we sell
ourselves so cheap, putting aside present governmental
challenges. This is a great country to come to, a great country
to invest in. And from recent international trips, one that
many people are eager to come to.
So let me ask Ms. Brunner the first question. And let me
thank you for your work and Ms. Mends-Cole's work. What is the
amount that you would think would be viable? And you are
supporting the one tier as opposed to--and that would be how
much?
Ms. Brunner. I am going to have to lean heavily on my
Princeton economics background on this.
Mr. Issa. Go Tigers.
Ms. Brunner. Go Tigers.
I would have to say that that can be modeled, and I would
look to the GAO's work and I would look to the committee's work
that we should be able to actually mathematically find that
price. And that is the price that I would support. I agree that
it is above $500,000. I believe, from my experience in the
market, with almost a 1,000 investors, that that amount is less
than $1 million.
Ms. Jackson Lee. So I would probably--and I appreciate both
the cautiousness, but also the intellectual assessment which is
that you look at the economic modeling. But I would immediately
go to $1 million to $2 million. And I think we are, in essence,
undermining the competition here in the United States. We are
undermining the viability of projects, if we would be at that
level. I don't even know we can do it with $500,000. I guess it
is used as a leverage, or $750,000.
So I would argue against modeling--well, I wouldn't argue
against modeling, but I would argue against anything below $1
million, and I would argue for $2 million. But I think the EB-5
program has a great deal of merit, but let me ask--and so thank
you.
Let me ask Ms. Gambler, if I could, to indicate in your
review, in your reform--or in your suggested reform or reforms,
does the regional centers go away?
Ms. Gambler. So it is not our proposed reform----
Ms. Jackson Lee. DHS.
Ms. Gambler. I am with GAO. I am so sorry.
Ms. Jackson Lee. I understand. Does DHS go away? Does the
regional centers go away?
Ms. Gambler. Under DHS's current proposals and the
regulation, no, there is no proposal to eliminate the regional
centers.
Ms. Jackson Lee. And what is your assessment of the
regional centers?
Ms. Gambler. Based on the work that we have done, I think
there are some questions about them, particularly as it relates
to EB-5 investors being able to take credit for all of the jobs
created by the total investment in projects that are funded
through regional centers and other projects as well. So I think
there are some open questions that stakeholders and Congress
has raised about the program.
Ms. Jackson Lee. And do see the reforms helping with the
gerrymandering aspect so that you don't draw in Beverly Hills
along with maybe one or two blocks that are distressed?
Ms. Gambler. The proposed rulemaking on the TEA seems to be
a reasonable step forward to addressing some of the concerns
that have been raised by the TEAs. And I think USCIS seeking
comments from the public and from stakeholders and industry
will be helpful to inform that rulemaking process as well,
including asking for feedback and input on the potential
effects of changes to the TEAs.
Ms. Jackson Lee. And let me give three questions and then
you all can answer them. To you, Ms. Gambler, what about the
ability of the Immigration Services to vet the whole project
and economic aspect of it; in your review, what did you see in
that?
Let me ask questions to Mr. Walls. How do you respond to
arguments that the current system operates as a one-tier level
investment?
And then to Ms. Mends-Cole, the cited projects that you had
in distressed areas, if these projects are already happening,
why do you think the program needs reform?
So, Ms. Gambler, on the review by the Immigration Services,
do they have the wherewithal to do so? Should we set up a
certain--another entity to do that?
Ms. Gambler. So I don't know for certain that they would
have the staff with the right skills and abilities. But what I
would say is, in the past, both we and the DHS IG have reported
in other areas related to the EB-5 program on the need for
USCIS to increase staff in both numbers and skills. And USCIS
has been taking steps to do that over the course of the past
few years.
Ms. Jackson Lee. Mr. Walls.
Mr. Walls. I agree that it has been operating as a one-tier
investment system, but it was contrary to the intent of
congressional intent. It was intended to be a two tier. It just
has operated a one tier because of misuse of the TEA
designation.
Ms. Jackson Lee. And Ms. Mends-Cole.
Ms. Mends-Cole. These projects have largely been happening
not because of but despite of the current status quo. I believe
that a reform would allow for greater geographic distribution
both at a national level, but also within a State level. So
some of the projects that were discussed are largely heavily in
New York, upstate New York. Places like Utica that desperately
need these dollars have been overlooked because of the
attraction for at-risk capital to very low risk investments.
Ms. Jackson Lee. Thank you.
Mr. Chairman, I would just like to conclude by saying I
think it is very important that this committee looks to
improving distressed areas and creating jobs in all areas, both
urban and rural, and I hope we can do this together. With that,
I yield back.
Mr. King. The chair thanks the gentlelady from Texas.
And now recognizes the gentleman from Idaho, Mr. Labrador.
Mr. Labrador. Thank you, Mr. Chairman. And thank you to all
the witnesses for being here today.
As you know, Senator Grassley testified that the original
intent of the investor visa program was to create new
employment for American workers and infuse capital into
distressed or rural areas.
Ms. Gambler, is the program accomplishing those goals?
Ms. Gambler. Based on the sample of files that we looked at
for the report we issued to this committee last year, we found
that the majority of projects within our sample were going to
areas or were located in census tracts, census areas that had
unemployment rates of 6 percent or less. So the majority of
projects in the sample we looked at, they were located in areas
that had an unemployment rate of 6 percent or less.
Mr. Labrador. Okay. Mr. Walls, in the past I have expressed
concerns about how gerrymandered districts have led to so many
urban projects in low unemployment areas, while the rural
communities and the true high end unemployment urban centers
have been largely forgotten. Do you think the proposed
regulatory changes stopped the gerrymandering that has been
occurring?
Mr. Walls. Yes. Sorry, the microphone comes in and out.
Mr. Labrador. That is okay.
Mr. Walls. Yes. As proposed, it does address the
gerrymandering issue.
Mr. Labrador. Okay. Mr. North, same question. Are the
proposed changes to the TEA definition sufficient to end the
gerrymandering that has been occurring in the program?
Mr. North. I think it helps. I would rather do it the way
the--some of you may recall in this room--the Appalachian
regional development commission was done. You would have to put
your investment in a previously defined depressed county, which
was the minority of the United States, the minority of the
geography of the United States. If you do it that way, then
Congress has some control over it. Otherwise, various creative
people do as they are currently doing, and I don't like that.
Mr. Labrador. Okay. Mr. Walls, my State Idaho like Arkansas
is a rural State and I am concerned about the lack of
investment going to those areas. Will the proposed changes lead
to more investment in those areas?
Mr. Walls. Well, I think, again, our motivation is the
changes are a step towards that. We agree with--ultimately,
legislation is the best answer for this thing. This is a step
towards it as an incentive to--in the markets that we are
having to go to for these investors for them to, I think, more
realistically or more honestly or openly want to look at
investments in those areas outside the gateway cities in the
major States.
Mr. Labrador. So you mention it needs to be done through
legislation, and we have been working on legislation to improve
the program. What more can be done to ensure that these rural
and true high unemployment areas are able to attract investors?
Mr. Walls. I think I mentioned in my statement, I think our
concern has been there had a been a small group that--again,
sorry, the microphone goes in and out--have a vested interest
in the status quo. And, you know, when you talk about market,
you are talking about--there is two markets you are talking
about: There is the 10,000 visa market. And right now that is
oversubscribed, that has been mentioned. And I think the issues
that we are all concerned about is what pricing and how does
that effect the overall market.
But you also have, certain parties, they are looking at the
market is defined as the market that they have enjoyed for the
history of the program. We understand that to be over 90
percent of investors are going a very select market, or very
affluent, nondistressed area. And so invariably, whatever
reforms happen, it is going to affect that market, and they
certainly are vested to keep that from happening. We as a rural
State admittedly would like to see more of that dispersed in
other areas of the country, like Arkansas and Idaho.
Mr. Labrador. Okay. Thank you.
Mr. North, if we are going--so let's assume we are going to
continue the investor program, and I understand you don't want
to continue it, but if we do, what other changes would you
recommend to actually accomplish the goal of attracting capital
to rural and high unemployment areas?
Mr. North. I would change the definition of where the money
should be spent. And I am not happy with the thought that
developers are going to figure this out and create, you know,
their own maps as they have done. So I would make it a
different definition, and I would make it--I would try to get
something that would really push investment into rural and
genuinely distressed areas, such as downtown Detroit.
Mr. Labrador. Okay. Ms. Brunner, you stated that both the
proposed increasing investment amounts and the proposed changes
to the definitions will have a negative impact on your ability
to attract investors. Is it the combination of both changes
that will impact investment or is the one change more likely
than the other to have the negative impact?
Ms. Brunner. They will a work in concert, Congressman. The
increased numbers don't seem to--well, they are tied to a CPI
calculation going back to 1990. They don't seem to be tied to a
supply-and-demand model where you would try and figure out at
what price can you achieve the same demand, which is the
question I would like this committee to ask and get answered.
So that is a very serious concern. That will impact demand.
The second thing that will impact demand is the ability of
projects to qualify. The arbitrary and capricious nature of the
TEA--of the existing TEA definition and the proposed TEA
definition do a disservice to the program. At minimum, I would
invite the committee to explore what other definitions are used
within the Federal Government. And in the absence of that, our
preference is that you eliminate the TEA, allow identical
investments in distressed and rural areas and other areas,
create set-aside programs that properly incent the investors.
The only variable that investors seem to care about right
now is time. And so what I would invite the committee to do is
to explore what they can do to manipulate the time factor for
investors. If you manipulate that factor, you can drive
investment anywhere you want it to go.
Mr. Labrador. Okay. Thank you, I yield back.
Mr. King. The gentleman from Idaho yields back his time.
And the chair would now recognize the gentleman from New
York, Mr. Nadler.
Mr. Nadler. Thank you, Mr. Chairman.
Mr. Chairman, in less than 2 months in office, President
Trump has issued two unconstitutional and immoral executive
orders attempting to enact the Muslim and refugee ban, is
reportedly considering ordering women separated from their
children, has threatened to punish so-called sanctuary cities
even though doing so will likely make those communities less
safe, and has embarked on building an unnecessary and fiscally
irresponsible wall across the southern border. In short, he has
fundamentally reoriented our immigration policy toward one of
exclusion based on fear and ignorance rather than adhering to
our historic commitment of being a place of refuge based on the
belief we are stronger as a nation because of those who come to
our shores.
In light of this radical departure in Federal policy, it
seems a bit incongruous for our first immigration hearing since
the Trump administration began to be focused on the EB-5
investor visa program, a useful but relatively minor program
that offers visas in exchange for significant economic
investment in the United States.
I hope we will soon conduct oversight into President
Trump's cruel and shortsighted immigration policies. In the
meantime, since we have the opportunity to consider the EB-5
program today, I want to ask a few questions about that
program.
Now, Ms. Brunner, some critics of the EB-5 program argue
that certain regional centers are in effect gerrymandering
census tracts in order to create targeted employment areas and
take advantage of the lower investment criteria for TEAs. Do
you believe that the proposed regulations and other proposed
reforms account for the unique circumstances of major urban
centers where a census tract may only consist of a block or
two?
Ms. Brunner. No, I do not, Congressman.
Mr. Nadler. Could you elaborate?
Ms. Brunner. Sure. Urban areas--first of all, census tracts
are designated by density of population. So, in a rural area,
you may have a single census tract in Wyoming or another rural
State that covers 20-plus miles, single census tract. In an
urban area, you may have a census tract that covers maybe four,
six blocks.
Mr. Nadler. In my area, you have a census tract that covers
half a block.
Ms. Brunner. There you go. Exactly. Exactly to my point.
So, when you use census tracts as a basis of designation,
either it be 12 in California or the doughnut approach that is
used in the current proposed regulations, you completely ignore
any principle of economic development. It is completely
unrelated, actually, to the purpose of the TEA designation,
which is to determine unemployment. You really have to look at
the area in a whole different light.
Now, the Federal Government does an excellent job of that.
There has been a lot of thought through a number of agencies,
USDA, HUD, a number of agencies, not to mention the State-level
work that is done on--that has been done on enterprise zones in
the past or the current designations or the rural designations
that exist.
I would invite the committee to not reinvent the wheel and
either lean on the work that has already been done so
diligently by other agencies in the Federal Government or to
eliminate the conversation.
As much as the conversation of TEA designation and
gerrymandering has hijacked this committee and the entire
reform conversation, I think the most responsible thing we can
do is to eliminate the conversation and eliminate TEAs.
Mr. Nadler. What do you mean by ``eliminate the
conversation''?
Ms. Brunner. We need to go to a single investment tier, and
we need to use set-asides.
Mr. Nadler. And let me just elaborate for a moment. Also,
if the purpose of this is to generate employment in under--in
low-income areas, basically, in high-unemployment areas, not
only do you have the distortion here where a census tract can
be half a block or a block or two, but does it also ignore the
fact that, in an area like an urban area, like in New York, you
may have Hudson Yard, very upscale development, half a mile
away from a very depressed neighborhood where the workers live?
Ms. Brunner. Well, I am actually in favor of commuting
patterns because I think that they demonstrate the actual
reality of economic development in the United States, that
people--the variable that Bureau of Labor Statistics and a
number of other Federal agencies use is, what is the commute
that people would endure to go to work? That is why high
speed----
Mr. Nadler. What I am saying is that, if you are looking,
you are saying, as the chairman implied when he was reading
that ad--that ad from that development, Hudson Yards, he was
implying that this is a very rich area; you are not going to
help low-income people, unemployed people. But that area, that
high-end development area, is half a mile from Harlem and less
than a mile from the South Bronx, which are very depressed,
low-income areas where workers live.
Ms. Brunner. That is right.
Mr. Nadler. In other words, by looking at this and not
taking that into account, you are distorting the reality of the
effect of the economic development here, which is to help,
arguably, to help low-income workers who live nearby, albeit in
a different census tract and, therefore, to gerrymander the
census tracts to--not to master reality but to show the reality
that the low-income workers are living--who are being aided are
living near the development, that is not wrong.
Ms. Brunner. That is correct.
Mr. Nadler. You agree with that?
Ms. Brunner. I do.
Mr. Nadler. Okay. I see that my time has expired.
I yield back, thank you.
Mr. King. I thank the gentleman from New York.
Now I recognize the gentleman from Texas, Mr. Gohmert.
Mr. Gohmert. Thank you, Mr. Chair.
I appreciate the witnesses being here today.
Director Gambler, I understood you had commented about the
vetting that occurs with those who want to invest in this EB-5
program. What kind of vetting goes on?
Ms. Gambler. So, as part of our work, Congressman, we did
not get into a lot of details on the background check process.
However, sir, I would be happy to get some followup information
and get back to you and your office with much more detail.
Mr. Gohmert. Well, obviously, from the comments here, the
focus is in the EB-5 program, you know, getting financial
investments in the United States. And that seems to be the
focus of the State Department as well. Much more important that
we get the price we have named for prostituting our own visas
than it is to figure out whether these people are going to be
good, moral, upstanding folks here in the United States. And
although a colleague may call two executive orders
unconstitutional and immoral, it doesn't make them so any more
than the Supreme Court saying the Dred Scott decision was
constitutional. It was constitutional. Calling it so one way or
another does not make it so. And there is nothing immoral about
a President trying to protect people.
It really is astounding. As I sit and listen--I was
listening in the back as well. I mean, it really is like that
story, you know, we are just haggling over price. We have
established what you are. The United States is willing to sell
its soul. How much are we going to get for the price of selling
our souls?
I wasn't even aware of the EB-5 program until my sheriff
let us know.
But here is part of the story: A former Mexican Government
official wanted for embezzling millions was arrested in Texas
this month, then promptly ordered released by the State
Department. A day after pulling rank on Smith County law
enforcement officials, the State Department rescinded the
order, but Hector Hernandez Javier Villarreal was gone by then.
Villarreal, the former Secretary Executive of the Tax
Administration Service of Coahuila, Mexico, was arrested on
charges in Mexico relating to an alleged scheme involving
embezzling millions of dollars from the Mexican Government. He
posted a $1 million cash bond, then got himself a U.S. visa and
skipped town. Villarreal surfaced in Tyler, Texas, when he, his
wife, Maria Botello, and another man were pulled over for a
routine stop. ``All we did was make a traffic stop; they didn't
have a front license plate,'' Smith County sheriff, J.B. Smith
told FOX News. Police were given permission to search the
vehicle. They found $67,000 in cash and a shotgun. Anyway, he
said Homeland Security officials had told his department
Villarreal was a high-profile and wanted fugitive. ``We placed
them in jail on money-laundering charges, seized the vehicle
and the money; ICE came, picked him up from our jail, took him
to Dallas, and that is the last we have seen.'' Villarreal and
Botello posted bond on February 6, were released in the custody
of Homeland Security Immigration and Customs. They were taken
to a Dallas detention center for deportation. That is when
State Department intervened. Homeland Security officials called
to tell him the Federal diplomatic agency had ordered
Villarreal and his wife released.
And so, anyway, I don't know that they have ever been
found, but it seemed pretty clear the focus was getting the
money. And, once again, like has been talked about, this guy
offered 500,000 to invest, and he got a visa very immediately.
And what comes to mind is, how many people in the world have
massive amount of money that was obtained from immoral or
illegal purposes, and we in America seem to say, ``we don't
care how you obtained your money; you could have swindled it
from the Mexican people, but we want you in America if you will
put some of that cash where we tell you to put it, and we won't
even be that particular about where we tell you to put it''?
So I am appalled at this program. You know, America has
degenerated to the point that, you know, our soul is for sale,
and now we have got to negotiate about how high of a price we
want. Give us your tired, your energetic. We don't care. Give
us your immoral, your degenerate. As long as they have got
money, the message is we want them in America, and we will give
them a visa to get their money. I think it is an immoral
message to send to the world. It feeds the hatred that some
have for America that we don't care about being moral and
upright in America; we care about the all mighty dollar. I for
one would like to see it stop.
I yield back.
Mr. King. The gentleman from Texas has yielded back.
The chair now recognizes the gentleman from Louisiana, Mr.
Johnson.
Mr. Johnson of Louisiana. Thank you, Mr. Chairman.
Director Gambler, this is a couple for you. We are all
committed to rooting out fraud, waste, and abuse, and I thank
you for your commitment to that and your important work on it,
all of you, for helping on that.
Just three quick questions on that topic. When the GAO was
conducting its review to the proposed project investments in
the targeted employment areas, was the information you were
seeking easily accessible when you were trying to understand
how the EB-5 recipients were actually investing this money?
Ms. Gambler. We specifically looked at files that were
submitted in the fourth quarter of fiscal year 2015. That was a
sample that was readily available for our review. It did
require us to go through paper files for the 200 sample files
that we looked at.
Mr. Johnson of Louisiana. So, of the sample files, did you
find that it was clear and concise? I mean, it was easily
understood where the money went and how they created jobs?
Ms. Gambler. We were able to get the data for our review
out of the files. I would add, though, that some of the files
can be thousands of pages long. And one of the key challenges
with the program that we have pointed out in our work is the
lack of data being readily available in an electronic format
that allows for the agency to do things like identify fraud
risks, look at trends in the program, that kind of thing.
Mr. Johnson of Louisiana. So is the need for additional
information, or just is it a formatting issue to make it more
readily accessible?
Ms. Gambler. In part, it is having the information
available in such a way that it can be searched and utilized
more easily for the purposes of like risk assessment and other
things. USCIS is working toward a case management system, and
so they are making some progress there, and that is a good and
important step.
Mr. Johnson of Louisiana. So do we know when the case
management system will be completed or released? Is there a
target date for that?
Ms. Gambler. USCIS, I believe, was hoping to get something
underway this fiscal year. We would be happy to follow up with
them and get back to your office if that time frame has
changed.
Mr. Johnson of Louisiana. I am just curious. I mean, we are
all interested in increasing transparency, and the more that we
can make it readily available and accessible, understandable
for, you know, just taxpayers, the better, I think because we
want to know, really, where all this money is going and how it
is being spent, obviously.
Is the completion of the case management system, is that
a--do you think it is a funding issue, or is it just timing; it
is on their things-to-do list?
Ms. Gambler. At the point in time that we were doing our
work last year, I think they were figuring out, kind of, what
the parameters would be for that, what the requirements would
be. So I think it is more just that they have to go through the
process of determining what their requirements are and what
type of system will meet their needs.
Mr. Johnson of Louisiana. Have you given them feedback or
ideas on what will make it easier for you when you went through
this process?
Ms. Gambler. Not specifically as it involves to a case
management system related to the EB-5 program. But, more
broadly, I think, as you are probably aware, USCIS relies on a
paper-based process for adjudicating immigration benefit
applications, and they are working through their transformation
program to move to a more electronic system. And we have made a
host of recommendations to the USCIS on that broader
transformation effort designed to help them implement that
program on a more effective basis.
Mr. Johnson of Louisiana. All right. Thank you.
I appreciate all of you being here.
Thank you.
Mr. King. The gentleman from Louisiana returns his time.
And this concludes today's hearing. I want to thank all of
our witnesses for your testimony here today and your response
to all the questions of the panel.
Without objection, all members will have 5 legislative days
to submit additional written questions for the witnesses or
additional materials for the record.
This hearing is now adjourned.