[Congressional Record Volume 161, Number 184 (Thursday, December 17, 2015)]
[Senate]
[Pages S8752-S8755]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
EB-5 PROGRAM
Mr. GRASSLEY. Mr. President, at 1:30 a.m. Wednesday morning, an
omnibus appropriations bill was filed to keep government operating for
the remainder of this fiscal year. This bill, which will be voted on by
the House on Friday, includes a straight and clean extension of a
program called the EB-5 Immigrant Investor Program. This program has
been plagued with fraud and abuse, but more importantly it poses
significant national security risks. Allegations suggesting the EB-5
program may be facilitating terrorist travel, economic espionage, money
laundering, and investment fraud are warnings against this bill too
serious to ignore. Yet they are being ignored. The omnibus bill fails
to include much needed reforms.
The spending bill being considered by the House and Senate is a major
disappointment. I am frustrated that despite the alarm bells and
whistleblowers, warning us in Congress about the EB-5 program,
Republican and Democratic leadership in the House and Senate decided to
simply extend the program without any changes. This was a missed
opportunity to protect America.
What makes this especially frustrating is that the chairs and ranking
members of the House and Senate Judiciary Committees--both Republican
and Democratic--agreed on a bill. We had consensus. I appreciate the
support of Senator Leahy, the ranking member of the committee. I also
commend Chairman Goodlatte, Ranking Member Conyers, Congressmen Issa
and Lofgren. In a bipartisan way, we worked this bill out. We agreed on
every aspect--maybe naively but believing in our hearts that we were
doing the right thing. We found common ground on national security
reforms. We made sure rural and distressed urban areas benefited from
the program, as was intended when it was first written. We instituted
compliance measures, background checks, and transparency provisions.
All of those things were meant to protect our national security and
weed out waste, fraud, and abuse. Through months of hard work, we put
together a great deal, but despite this broad, bipartisan support, and
the work of the committees of jurisdiction, not a single one of our
recommendations will be implemented. Instead of reforming the program,
some Members of leadership have chosen the status quo. This failure to
heed calls for reform proves that some would rather side with special
interest groups, land developers, and those with deep pockets.
It is widely acknowledged that the EB-5 program is riddled with flaws
and corruption. Maybe it is only on Capitol Hill--an island surrounded
by reality--that we can choose to plug our ears and then refuse to
listen to commonly accepted facts. The Government Accountability
Office, our free media, industry experts, Members of Congress, and even
Federal agency officials have concurred that the program is a serious
problem with serious vulnerabilities.
Why did congressional leaders ignore the chairmen and ranking members
of both the House and Senate committees who were spearheading EB-5
reform? Why, at the same time--and maybe more importantly because they
aren't colleagues--did they ignore the Government Accountability Office
or ignore the FBI or ignore the Secretary of Homeland Security?
Allow me to remind my colleagues why the EB-5 Regional Center is in
need of reform. For several years I have kept close tabs on this
program, thanks in part to the reports of wrongdoing brought forth by
whistleblowers. The fact is that other Federal agencies, including the
FBI, have raised national security concerns. Whistleblowers say that
requests from politically influential people were being expedited. Last
June, Congress heard from a whistleblower who was harassed for speaking
out against the problem--in reference to the countries of China,
Russia, Pakistan, and Malaysia, countries not known to be friends of
the United States.
This whistleblower said:
EB-5 applicants from China, Russia, Pakistan and Malaysia
had been approved in as little as 16 days and in less than a
month in most. The files lacked the basic and necessary law
enforcement queries . . . I could not identify how USCIS
[Customs Immigration Service] was holding each regional
center accountable. I was also unable to verify how an
applicant was tracked once he or she entered the country. In
addition, a complete and detailed account of the funds that
went into the EB-5 project was never completed or produced
after several requests. During the course of my investigation
it became very clear that the EB-5 program has serious
security challenges.
There are also classified reports that detail these problems, much as
the whistleblower said. Our committee has received numerous briefings
and classified documents to show this side of the story. Our own
executive branch agencies have communicated to us their concerns about
the program. Just listen to these people concerned about it. Officials
within the Securities and Exchange Commission, the FBI, and Immigration
and Customs Enforcement expressed concerns about the program and how
prone it is to fraud. We ought to be concerned about waste, fraud, and
mismanagement. We ought to be concerned about national security. The
way this bill is ending up, with just a 10-month extension, nobody is
taking that into consideration.
An internal national security report stated the following:
As in any instance where significant investment funds are
raised . . . the regional center model is vulnerable to
abuse. The capital raising activities inherent in the
regional center model raise concerns about investor fraud and
other conduct that may violate US security laws. Third Party
promoters engaged by regional centers to recruit potential
investors overseas fall outside of the U.S. Citizenship and
Immigration Services' regulatory authority and may make false
claims or promises about investment opportunities.
Unregistered broker-dealers may operate outside of U.S.
Citizenship and Immigration Services' statutory
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oversight to match prospective investors with project
developers. Moreover, the statute and regulations do not
expressly prohibit persons with criminal records from owning,
managing, or recruiting for regional centers.
Just think of that, ``Statute and regulations do not expressly
prohibit persons with criminal records from owning, managing, or
recruiting for regional centers.'' Don't we think that is a threat we
ought to be considering? How many more intelligence reports are needed
for my colleagues to understand this problem? How many more headlines
are needed before we have the will to deal with this problem? How many
more whistleblowers are going to be demoted for telling us about these
problems, merely committing the one crime that whistleblowers commit--
telling the truth.
The Secretary of Homeland Security sent a letter to the Judiciary
Committee and requested more authority to deny, terminate or revoke a
regional center's designation. They wanted more authority to root out
the bad apples. They have been requesting this since 2012. Considering
that the Secretary of Homeland Security would say that--and he has to
carry out this legislation and can't prevent some of the bad things
that are happening from happening under existing law--that ought to be
enough to guarantee Congress would pay heed to these problems and do
something about it. As I indicated, our bill would have done just that.
But the fact that our bipartisan bill was dismissed by congressional
leadership means bad actors and bad regional centers will continue to
operate.
The EB-5 program also encourages a whole host of financial fraud and
corruption. The program's abundant loopholes and lack of regulation
have created a virtual playing field for unethical gamesmanship and con
artists. Fortune Magazine reported how one man cheated potential
immigrants out of $147 million for a make-believe building project he
never intended to finish. The article explained how the trickster
claimed the project would create over 8,000 jobs. In reality, some 290
foreigners were tricked out of their cash. This is not the only example
of how regional centers can be used to defraud people out of millions
of dollars for nonexistent projects.
Another government agency we ought to pay some attention to, the
Securities and Exchange Commission, encountered another fake project in
which two men in Kansas purported to build an ethanol plant in that
State. The Commission stated in a litigation release that ``the plant
was never built and the promised jobs never created, yet the [two men]
continued to misrepresent to investors that the project was ongoing.''
That same report goes on to say that millions of dollars of investor
money was used for other purposes--can you believe this?--even going to
another completely unrelated project in the Philippines.
Just last month, the National Law Review reported another case in
which Security and Exchange Commissioner filed suit against the owner
of a regional center who allegedly stole $8.5 million in EB-5 funds.
The owner claimed that all the money provided from the foreign
investors would be held in escrow until the approval of their green
cards. Instead, the article reports that the owner of the regional
center blew the money on two different personal homes, a luxury
Mercedes, a BMW, and a private yacht. All the while, clueless investors
were exploited by loopholes in the EB-5 program.
For example, the article states that both the investors and the
owners of the regional center were represented by the same attorney.
But for many potential EB-5 immigrants, a safe investment is not the
main concern because it is simple. You can buy your way into the United
States. Paying $500,000 is simply the price of admission that they are
able and willing to pay. For these wealthy elites, a profitable
investment is just icing on the cake of buying green cards.
I hope some of my colleagues will talk to Senator Feinstein about why
she thinks this program should be wiped out. Even considering our
reforms, she still takes that view. She feels it is just plain wrong to
sell access to the United States through buying a green card.
A lot of the debate in the past 2 months has been on targeted
employment area reforms. The targeted employment areas created by
Congress to steer foreign investment to rural and distressed areas have
been greatly abused. The designations have been gerrymandered--
gerrymandered just like congressional districts--to include the most
lavish developments in the richest neighborhoods, where this law of 20
years was never expected to be used because these are not distressed
areas as were anticipated by the original law.
The Hudson Yards project has generated millions of dollars for a
luxury apartment complex in Midtown Manhattan. Manhattan was in here
complaining about needing investment, when every day you read in the
newspaper that Chinese entrepreneurs are investing in New York all the
time. Not far away, another flagrant example of gerrymandering is the
Battery Maritime Building, right next to Wall Street, in Lower
Manhattan. The New York Times described it by saying it ``snakes up
through the Lower East Side, skirting the wealthy enclaves of Battery
Park City and Tribeca, and then jumps across the East River to annex
the Farragut Houses project in Brooklyn.''
That is the gerrymandering that goes on here to get a project in a
very wealthy part of New York to qualify.
I have to ask my fellow Senators: How many more media reports will it
take to understand the extent of EB-5 gerrymandering? Have the Senators
who helped table our reforms ever read those reports in the Wall Street
Journal? I can say with certainty that the status quo will not benefit
middle America. It benefits New York City and other affluent areas at
the expense of areas in Iowa, Kentucky, Wisconsin, and Vermont. Another
way to put it is that it is not going to benefit those who were the
original intent of the legislation when passed two decades ago. It was
supposed to deal with rural areas and with high-unemployment areas.
Some may say that there wasn't enough debate or public input on EB-5
reforms. Well, I would like to walk through how much debate we have had
on this issue, besides what is very obvious from the newspaper reports
or from what whistleblowers say or what the FBI says or what the
Securities and Exchange Commission says or even what the Secretary of
Homeland Security says.
In the history of our leading up to this legislation, the Judiciary
Committee held a hearing on the program in late 2011 and at every
hearing since in which Secretary Johnson has testified, the issue of
EB-5 has come up. The Homeland Security and Governmental Affairs
Committee, as well as House committees, have had hearings on this
program.
In 2013 the Senate debated an immigration bill that was over 1,000
pages long. In a few short months, we voted that bill out of this body.
Parts of the bill that we were working on to be included in this
omnibus appropriations bill included EB-5 reforms that we talked about
in that immigration bill of 2 years ago.
Then in 2014, the House Judiciary Committee voted out a bill that
included some changes in the program. The bill would have raised the
investment level to $1.6 million. This year in June, Senator Leahy and
I introduced S. 1501. We called it the American Job Creation and
Investment Promotion Reform Act. It was a tough, serious bill to
overhaul the program.
Since June, we have listened to other Members of Congress. We have
heard input from their constituents and regional centers in their
States. We listened to stakeholders. We met with lawyers, lobbyists,
and regional center operators. We listened to groups that represented
trade and labor union groups. We met with the agency at the Department
of Homeland Security that runs the program. We worked with them and the
Securities and Exchange Commission on language. We consulted other
congressional committees.
We took this input from a wide range of sources and made changes to
our bill. On November 7, we circulated a new draft with Chairman
Goodlatte, chairman of the House Judiciary Committee. Ranking Member
Conyers of that committee joined our conversations, as well, and I want
to tell you that Ranking Member Conyers has had invaluable input into
this bill.
[[Page S8754]]
Again, I want to emphasize--because that is what the leadership of
this body is always talking about: Do things in a bipartisan way.
Again, we had a bipartisan, bicameral agreement with the four leaders
of the committees of jurisdiction. The leaderships of both bodies said
that committees would do their job and be relevant to the legislative
process again, except for the EB-5 program, evidently.
We weren't the only ones who wanted action. We had colleagues such as
Chairman Corker and Chairman Johnson, who on November 6 joined me in
sending a letter to Leaders McConnell and Reid, urging them to include
critical provisions that would better guard against fraud and abuse and
give the Department of Homeland Security the ability to terminate
centers that Secretary Johnson didn't feel he had the authority to
terminate and where there was obvious fraud.
As I said about Senator Feinstein when I referred to her position on
this issue, she would prefer to see the program end. In early November
she wrote:
We have seen in recent years that the program is
particularly vulnerable to securities fraud. According to
legal complaints, applicants for some projects were swindled
out of their investment, and jobs were never created. . . .
When the program comes up for renewal in December, Congress
should allow the program to die.
She is a respected Member of this body and very involved in national
security and intelligence issues. When she sees something wrong with a
program such as this, we ought to give it proper attention.
Two weeks ago the Judiciary staff was asked, after all these changes
were made in the bill, to come in and talk to Democratic and Republican
leadership. Staff was asked to hear out the U.S. Chamber of Commerce,
the Real Estate Roundtable, and other industry representatives. I don't
think there is anything wrong with listening to anybody's view about
any legislation we have--whether it is an individual or an organization
representing individuals. But to have them right there in the room
writing legislation, I think, goes a little bit too far.
On that first day of December negotiations, there was a lot of
discussion about how New York wouldn't be able to compete with rural
America if our reforms were enacted. They thought the bill was unfair
to urban areas, and they wanted every project in the country to qualify
for the special targeted employment area designation. The solution was
to provide a set-aside of visas at the higher levels to ensure they
could use the program. It was apparent that an agreement was in the
works. But, when you have these greedy people coming to talk to you,
there is no end to what they are going to ask for.
When the group returned the next day for discussion, the U.S. Chamber
of Commerce and the Real Estate Roundtable, along with a small group of
developers represented by law firms in town, came with yet another new
list of demands. They had half a dozen major issues, not to mention
their so called technical changes.
After nearly 12 hours in the room with EB-5 protectionists, Judiciary
Committee staff conceded and tried to find common ground, because we
wanted to at least take care of these national security issues and get
some of the fraud out of the program. The group I am talking about left
with an agreement in concept. But again, you think you are satisfied,
and you have something to go on, and then all of a sudden you find out
the next day, when staff was called in to finalize the language, that
the industry said they wanted more.
This is a very common theme. The industry wants more, and they wanted
more, and they wanted more. It made one really wonder if they actually
wanted a bill with reforms.
This was an effort to hoodwink people into what we thought were good-
faith negotiations, and it turned out it wasn't in good faith. Then,
after all the concessions made to the industries, some Members in the
Senate came to us and wanted to make even more concessions. Despite all
these challenges, the four corners of the Judiciary Committees
compromised more. We gave in on many areas for the sake of national
security and, hopefully, taking fraud out. We tried to strike an
agreement, as much as it made the bill weaker, because the security
reforms are also desperately needed. But after all of that, our House
and Senate leadership failed us. They extended the program without any
changes whatsoever for 10 months in the appropriations bill that we
will vote on tomorrow. No reforms. No plugs for national security. No
safeguards against fraud and abuse--it will go on for at least another
10 months.
The bill we presented to the Republican and Democratic leadership
took into consideration edits from the industry, immigration attorneys,
and several congressional offices.
I am very disappointed that the leadership simply extended a very
flawed program. But I also know the product we provided them on Monday
night did not accomplish much that we were hoping to do. It was a very
flawed, compromised bill. It was too watered down. It was a giveaway to
New York City, Texas, and rich developers who simply wanted to protect
their projects. It was a giveaway to affluent urban areas and a failure
for rural America.
This morning we had the benefit of some enlightenment as to how this
happened. I have an ABC News report stating that more than $30 million
was spent this year alone in a lobbying effort against the reforms--$30
million.
Mr. President, I ask unanimous consent that the ABC News article
entitled ``Lobbyists Declare Victory After Visa Reform Measure Dies
Quietly'' be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From ABC News, Dec. 17, 2015]
Lobbyists Declare Victory After Visa Reform Measure Dies Quietly
(By Matthew Mosk)
After a multi-million dollar lobbying effort, congressional
leaders Tuesday night quietly scuttled a bi-partisan attempt
to reform a little-known immigration program that offers
wealthy foreigners access to visas and U.S. Green Cards but
has been beset by allegations of fraud and abuse.
The EB-5 program, called so due to its visa designation,
allows rich foreign nationals a shortcut to a Green Card as
long as they invest $500,000 in a designated job-creating
project in the U.S. Designed to spur the American economy,
the program is also feared to have been exploited by spies,
money launderers and other criminals, as revealed in an ABC
News investigation earlier this year.
``There are well-documented national security concerns and
abuse of the program, and a bipartisan, bicameral agreement
on reform,'' Sen. Chuck Grassley told ABC News in a written
statement. ``It should have been a no-brainer, but now it's a
missed opportunity.''
But there were opponents to reform with money to spend--
private groups that paid out more than $30 million in a
lobbying effort to protect the EB-5 program this year alone,
including more than $23 million from the National Association
of Realtors, according to an analysis of lobbying
registration reports for ABC News by the Center for
Responsive Politics.
At the Capitol, the legislation was defeated by a group of
lawmakers led by New York Democrat Chuck Schumer, who argued
that security improvements were a good idea, but the way the
reform was written would unfairly hurt investments in his
home state.
Regardless of how it died, lobbying groups cheered the
reforms' downfall Tuesday night. A lobbyist for one group,
called the ``EB-5 Investment Coalition.'' posted a message on
Twitter declaring victory.
``So proud of our EB-5 Investment Coalition . . . TY [Thank
You] Schumer, Cornyn and Flake,'' it read, referring to other
opposition lawmakers Sens. John Cornyn, R-Texas, and Jeff
Flake, R-Ariz.
`In Dire Need of Reform'
Sen. Patrick Leahy, D-Vermont, who worked with Grassley on
the program's overhaul, said the EB-5 program has ``long been
abused and is in dire need of reform.''
``We pushed aggressively for its inclusion in the omnibus
appropriations bill but congressional leadership inexcusably
rejected this much-needed reform,'' he said.
Brokers who advertise overseas as agents who can help
procure visas for wealthy investors have repeatedly been
accused of defrauding those foreigners who put up $500,000 in
the hopes of obtaining a Green Card. The EB-5 program was
being abused so frequently this way that the Securities and
Exchange Commission took the unusual step of posting a public
warning to potential investors to be wary of such offers.
ABC News reported on an EB-5 program that promised to use
foreign investment to rebuild New Orleans in the aftermath of
hurricane Katrina. Investors sued, alleging the money had
been squandered or stolen, and said they were unable to get
Green Cards because no jobs were created.
The program was also criticized for how it was used
legally.
Critics say that while it is intended to funnel EB-5
foreign investment to business
[[Page S8755]]
projects in poor regions around the country and in turn
promote job growth, a majority of the funds are actually
supporting high-end real estate projects in wealthy areas.
``This program was established to help areas with high
unemployment, but it's been hijacked by investors with
$500,000 putting their money in Chelsea, not the Bronx,''
said Nancy Zirkin, executive vice president of The Leadership
Conference on Civil and Human Rights, which supported the
reform bill. ``Our communities, in Baltimore and Ferguson and
other places, need the infrastructure and just aren't getting
it.''
Outside opposition to the reform proposal was led largely
by real estate developers who have increasingly come to rely
on the money from foreign investors, mainly from China.
To add to the pressure from Leahy and Grassley to impose
new restrictions on foreign investment visas, there was also
pressure for Congress to act because the entire EB-5 program
was set to expire this month.
Unexpected Defeat in Congress
Leahy and Grassley, both senior members of their parties in
high ranking positions, said they thought they had the
support needed to push through the reform measure. But during
weeks of discussions behind closed doors, Sen. Chuck Schumer
(D-N.Y.) emerged as a staunch opponent, arguing that the
changes to the program would unfairly limit the amount of EB-
5 money that could be used on projects in New York City.
That's because of a provision in the reform proposal intended
to more narrowly direct the investment money to projects in
low income areas.
At present, close to 20 percent of the investment funds
raised by foreign investors seeking visas winds up backing a
New York City development. Many of those projects include
glitzy high rise buildings in wealthier parts of New York.
But even those projects, Schumer argued, were able to create
large numbers of jobs in neighboring, low income parts of the
city.
A spokesperson for the senator told ABC News that Schumer
did not oppose efforts to eliminate national security and
fraud risks associated with the program.
``Sen. Schumer supports reforms that will bring
transparency and accountability to the EB-5 program, but
strongly believes that the EB-5 program should continue to
act as a catalyst for thousands upon thousands of jobs
throughout New York,'' said Matt House, a Schumer spokesman.
``The proposed reforms would have crippled the program and
would have held back job growth in urban and low-income areas
in cities across the country.''
Negotiators said Schumer attracted support from Republican
Sens. Cornyn and Flake. Instead of passing the reform
measures, they agreed, they would extend the program for
another 10 months without making any changes.
Grassley expressed deep disappointment in the outcome.
``Leadership allowed the negotiations to be hijacked by a
small number of special interest groups who wanted the
status-quo and the necessary reforms were shoved aside,'' he
told ABC News.
A Washington, D.C. group called IIUSA, formed to advocate
for EB-5 investment, posted a statement online expressing
gratitude for the decision by Congress to keep the EB-5
program running.
``IIUSA will continue to advocate for a long term
reauthorization with reasonable reforms that succeed in
enhancing Program integrity and effectiveness,'' the
statement said.
Mr. GRASSLEY. So this is where the years of work to reform EB-5 have
come. So this is how several years of work ended--a reform blocked by
selfish interest.
I have to be an optimist around here, and I believe that, eventually,
right wins out. It is time for things to change. I was for reform. I
wanted to make it better. But now, I am not so sure reforms are
possible. It may be time to do away with EB-5 completely. Maybe we
should spend our time, resources, and efforts on other programs that
benefit the American people. Maybe it is time that this program goes
away.
The next 10 months will be spent exposing the realities and
vulnerabilities of this program. As chairman of the Judiciary
Committee, I will exercise oversight of this program even more than I
have in the past. I will ask tough questions and make more
recommendations. My quest to either have EB-5 reformed or to end the
program has just begun. This is not the end, this is just the
beginning.
I yield the floor, and if I have any time, I reserve the remainder of
my time.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. THUNE. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from South Dakota.
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