[Congressional Record (Bound Edition), Volume 161 (2015), Part 15]
[Senate]
[Pages 21432-21435]
[From the U.S. 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

[[Page 21433]]

     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 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

[[Page 21434]]

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.
  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.

[[Page 21435]]




                        `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 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.

                          ____________________