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08/2/2018

New Website Documents Fraud & Corruption from EB-5 Immigration Program

WASHINGTON, D.C. – Aug. 2, 2018 – Today, Cause of Action Institute (“CoA Institute”) launched a new website www.EndEB5.org, documenting  questionable investments and investigations relating to the EB-5 Immigrant Investor Program (“EB-5”) and the Regional Center Program. As the Cause of Action’s website reveals, the EB-5 program is ripe for fraud, corruption, can pose a national security threat, and provide questionable value to taxpayers and the U.S. economy. The website launched with more than a dozen examples of questionable investment. The organization has identified more than 50 examples and will release more troubling investments over the next two weeks.

CoA Institute created the website in response to Sen. Diane Feinstein asking the director of the program for a list of “shady programs.” The director didn’t have a list of “shady programs,” so CoA Institute put one together. As Congress weighs whether to extend or allow the Regional Center Program component of the EB-5 program to expire, CoA Institute urges Congress to review this website and recognize the severe flaws in the EB-5 program and let it expire on Sept. 30.

John J. Vecchione, president and CEO of CoA Institute, issued the following statement:

“The EB-5 Program faces legitimate scrutiny due to allegations that it’s become ripe for fraud and corruption and become a pay-to-play scheme. As our research illustrates, EB-5 and the Regional Center Program amounts to a pay-to-play scheme that enriches questionable actors who defraud investors and visa seekers and poses a threat to national security. We urge Congress to review the cases we have identified and allow this program to expire.”

BACKGROUND & HOW IT WORKS:

  • The Immigration Act of 1990 created EB-5 and permits foreign nationals to apply for a conditional visa by making a $1,000,000 investment in an American business that creates at least 10 jobs.
  • Alternatively, a visa-seeker can invest $500,000 in a “targeted employment area” (rural or area of high unemployment) to satisfy the visa requirement.
  • In 1992, the “Regional Center Program” was created to allow pre-approved third parties to pool EB-5 investments from foreign nationals toward American development projects.
  • The Regional Center Program is a source of much of the fraud in EB-5 Immigrant Investor program.
  • CoA Institute has found numerous cases where individuals who controlled a pre-approved Regional Center Program, use the program to collect huge sums in “investments” and fees from individuals seeking a visa, only to use the funds not to create jobs in the U.S. but to fund their lavish lifestyle.

On June 19, 2018, the U.S. Senate Committee on the Judiciary held a hearing on EB-5 with Lee Francis Cissna, Director of the U.S. Citizenship and Immigration Services (“USCIS”), the agency responsible for the program. In this hearing, when Senator Feinstein asked Director Cissna for a list of “shady investments” the agency has found while investigating fraud in this program, Cissna stated he was unable to produce one.

In response, CoA has begun tracking and identifying examples of fraud or other questionable investments made through the EB-5 program. The website includes 13 examples and CoA Institute expects to release as many as 50 examples of questionable investments under the EB-5 project files page, detailing projects that have been proven to be fraudulent and failed to provide the proposed economic benefit.

The countless documented instances of fraud and corruption developed through this program have pushed the EB-5 program far beyond the point of corrective legislative reform. CoA Institute will continue to publish findings on this website as Congress decides whether to allow the program to expire on September 30.

About Cause of Action Institute

Cause of Action Institute is a 501(c)(3) nonprofit, dedicated to providing government oversight, transparency and advocating for economic freedom and individual opportunity advanced by honest, accountable, and limited government.

Media Contact:

Matt Frendewey
matt.frendewey@causeofaction.org
202-499-4231

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06/29/2018

Congress Should Let the EB-5 Cash-for-Visa Program Expire

Can the EB-5 Immigrant Investor Program be fixed? It’s been over a year since we called for an end to the program that is now set to expire unless renewed by September 30. As we previously wrote: 

Simply stated, the EB-5 Program operates as a cash-for-visa scheme. Whatever economic advantage it might offer is outweighed by the corruption it engenders and negative influence it has on national security and good government.  Congress should end the program or work to reform its governing rules to prevent continued abuse by the political class. 

There wasn’t much congressional interest in ending the program when we wrote that in May 2017, but the tide appears to be turning. The Senate Judiciary Committee recently held a hearing to discuss the EB-5 program with Lee Francis Cissna, Director of the U.S. Citizenship and Immigration Services (“USCIS”), which is the agency responsible for the program. At the hearing, members of both parties and Director Cissna agreed that, barring legislative reform or publication of long-pending modernization rules, the EB-5 program should be allowed to expire. 

Below are the key quotes and exchanges from the hearing:

Chairman Grassley’s opening statement laid out the significant issues associated with the Regional Center Program:  

As interest in the EB-5 Regional Center Program has grown, so have cases of fraud, corruption and threats to national security. There are many, many well-documented examples of the inherent problems in this program. In fact, over the last five years, I along with several of my colleagues, have written over thirty oversight letters highlighting the various vulnerabilities of this visa program. 

USCIS Director Cissna agreed that the program is rife with fraud and should be eliminated. In his opening statement, he said, “In the absence of legislative reforms, I believe Congress should indeed consider allowing the program to expire.”  

Senator Feinstein then prodded Cissna, “That’s the reason I’m concerned with this program, I think its rife with fraud.” In response, Cissna carried Feinstein’s concern even further, stating, “I think a lot of the cases . . .  involve full on criminal activity too. Fraud with our agency is one thing, but then it often gets magnified into full on criminal activity.”  

Senator Feinstein stated, “It’s no secret that I oppose this program. I believe it should be eliminated entirely.” She continued, lamenting that “under the EB-5 system, the wealthy can cut to the front of the line. This on its face is fundamentally unamerican.” These are the same cronyism concerns that we’ve been worried about throughout our time investigating the program. 

Finally, Senator Durbin said, “I am proud to be the only cosponsor of the Grassley-Feinstein bill to eliminate this program, I hope others will join us.” He then claimed that the EB-5 program is “outrageous and embarrassing to this nation.”  

Come September 30, Congress should allow the EB-5 program to expire with or without modernization rules. While the modernization rules would be better than the current system, they will not fix the endemic problems of fraud and corruption with the cash-for-visa program. It’s time to end it.  

Max Menkes is a Research Fellow at Cause of Action Institute.

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03/12/2018

Bankrupt: Terry McAuliffe’s Crony Green Energy Venture Folds

There has been yet another development in the saga of GreenTech Automotive—the “green energy” car company that sought to profit from its ties to former Virginia Governor Terry McAullife, Chinese businessman Charles Wang, and Secretary Hillary Clinton’s brother, Anthony Rodham.  According to papers filed in federal court last month, GreenTech and its sister corporations, including Gulf Coast Funds Management—GreenTech’s “cash-for-visas” outlet—are declaring bankruptcy.

GreenTech cites various reasons for its financial woes but emphasizes negative publicity stemming from critical reportage by the Franklin Center’s Watchdog.org, as well as investigations into possible fraud and wrongdoing by the Securities and Exchange Commission and the Department of Homeland Security Office of Inspector General.  GreenTech’s bankruptcy petition recounts that the company “received investments aggregating $141.5 million from a total of approximately 283 investors,” nearly all of whom were Chinese nationals lured by the promise of permanent residency through the EB-5 Immigrant Investor Regional Center Program.  (The future of the EB-5 visa program remains undecided by Congress.)

But nobody seems to know where all that money has gone, and former Governor McAuliffe and his former partners have never adequately explained its disappearance.  Although GreenTech refers to “personnel issues” and “other difficulties experienced in pursing” an “ambitious business plan,” there is little evidence that much capital was ever spent on employee salaries or manufacturing, let alone research and development.  As recently as May 2016, GreenTech employed only seventy-five people, never finished building a fully-operational manufacturing plant, and never sold a single vehicle.

In addition to the newly-initiated bankruptcy proceedings, GreenTech is still embroiled in several ongoing lawsuits.  The State of Mississippi sued the venture last November to recover $6 million in taxpayer-funded loans and to seek forfeiture of the land provided for the never-realized car factory.  GreenTech originally promised to create upwards of 25,000 jobs in the state, but later signed a pledge to invest $60 million and create 350 full-time jobs.  Even those promises came to naught.

GreenTech—and Governor McAuliffe in his personal capacity— is also defending itself in a lawsuit filed by thirty-two Chinese nationals, who describe the crony venture as being part of a “$120 million scam.”  Because GreenTech never created a sufficient number of qualifying jobs under the EB-5 visa program’s rules, these foreign investors face revocation of their green cards and deportation.  They seek damages of at least $17.92 million.  The court is now considering GreenTech’s motion to dismiss, as well as a request that proceedings be stayed pending resolution of the bankruptcy petition.

As I have previously discussed, GreenTech has been a suspicious operation from the start.  It thrived only as long as it could rely on its politically-connected principals.  When Cause of Action Institute released its investigative report on GreenTech in September 2013, we warned how the company’s exaggerated job-creation estimates, questionable advertising, and readiness to take advantage of favorable political connections, could violate federal law and be part of a larger scheme to defraud investors.  It appears those warnings are now proving prescient.

Unfortunately, a crony venture such as GreenTech Automotive is not an outlier.  For years, taxpayers have subsidized failed businesses that rely on political connections to transfer wealth to their principals, who then walk away without consequences while leaving others to pick up the pieces.  It is time to get the government and the American taxpayer out of the business of picking economic winners and losers.

Ryan Mulvey is Counsel at Cause of Action Institute

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12/11/2017

EB-5 “Cash-for-Visa” Investors Sue Casino Project Linked to Former Senator Harry Reid

According to the Los Angeles Times, “[s]ixty Chinese investors,” who participated in the EB-5 Immigrant Investor Program, have sued the developers and managers behind the SLS Las Vegas Hotel & Casino for failure to deliver on “promised green cards.”  According to the investors’ lawsuit, the hotel redevelopment project has “not turned a profit from day one and is currently on the verge of bankruptcy.”  “To make matter[s] worse,” the lawsuit continues, “the SLS Hotel[’s] revenue was less than 50% of what was projected so the project has not created sufficient jobs to allow all investors . . . to get green cards.”

The exaggeration of job-creation estimates and misleading advertising to foreign nationals is hardly unique to the SLS Casino.  News of the lawsuit follows the opening of two other prominent EB-5 cases.  Last week, the Securities & Exchange Commission filed a fraud lawsuit against an immigration lawyer and his firm for failing to disclose to clients that the firm was receiving substantial commissions on EB-5 transactions—“at least $1.6 million . . . from no less than six regional centers[.]”  Also, in late November, The Washington Times reported that a group of thirty-two Chinese investors had filed suit against outgoing-Virginia Governor Terry McAuliffe, and his former business partners behind GreenTech Automotive, for perpetrating a “$120 million scam.”  Just like the SLS Casino, GreenTech failed to create promised jobs, leaving immigrant investors to face revocation of their visas and possible deportation.

Entirely absent from the Los Angeles Times’s report, however, is the crony connection between the casino project and former U.S. Senator Harry Reid.  In December 2013, CoA Institute filed a request for investigation with the Senate Select Committee on Ethics after learning that Reid contacted officials at the U.S. Citizenship and Immigration Services—including then-Director Alejandro Mayorkas—in an attempt to influence and expedite the approval of EB-5 visa applications that had been flagged for “suspicious financial activity.”  The Senate Ethics Committee ignored CoA Institute’s request, claiming that it never received a copy despite evidence to the contrary.  And the motivation for Reid’s intervention?  His son, Rory Reid, and Rory’s law firm, Lionel, Sawyer & Collins P.C., were legal counsel to the SLS Casino, which itself was a major contributor to the Democratic Party and its candidates.

CoA Institute’s concerns about the SLS Casino and Senator Reid’s inappropriate intervention were confirmed in March 2015 when the Department of Homeland Security Inspector General released a report detailing the discomfort of career staff with the favoritism toward Senator Reid.  In response, a defiant Reid dismissed agency whistleblowers who had a problem with his lobbying as a “bunch of whiners.”  “If I had to do it over again, I would . . . [and] I would probably be stronger than I was,” he claimed.

Such rampant abuse and blatant politicization in the administration of the EB-5 program is one reason why CoA Institute has called for the end of the “cash-for-visa” regime all together.  Too many politicians have hijacked the system to enrich themselves and others close to them.  Such preferential treatment skews the marketplace and unfairly results in American taxpayers underwriting speculative business ventures that only profit so long as they have advantageous political connections.

Ryan P. Mulvey is Counsel at Cause of Action Institute

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07/24/2017

GreenTech Automotive, Terry McAuliffe, and crony capitalism

SMOKE AND MIRROS

GreenTech Automotive, Terry McAuliffe, and crony capitalism

By John J. Vecchione and Ryan Mulvey | Jul 22, 2017

A politically connected “green energy” vehicle company that never delivered on its promises is finally being taken to task. A state auditor in Mississippi is demanding GreenTech Automotive repay its public loans after taxpayers were taken for a proverbial ride — though certainly not in one of the company’s elusive vehicles.

Read the full column at Richmond Times-Dispatch

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05/9/2017

It’s Time to End the Federal Government’s Cash-for-Visas Program

The Washington Post rightly called on the Trump Administration yesterday to end the government’s controversial EB-5 visa regime and, in particular, its Regional Center Program, which was recently extended until the end of September 2017. In most cases, the “Immigrant Investor Program,” or Employment-Based Preference Five (“EB-5”) cash-for-visa program, permits foreign nationals to apply for a conditional visa by investing $500,000 in an area of “high unemployment.”  Once certain job creation requirements are satisfied, the visa holder can apply for a green card (i.e., for permanent residence).  Although advocates contend that EB-5 is good for the economy, the program has been beset with controversy.  Most recently, President Trump’s son-in-law, Jared Kushner, came under scrutiny for his family’s efforts to “push” EB-5 visas to wealthy Chinese investors.

Cause of Action Institute’s (“CoA Institute”) investigation into various aspects of the EB-5 cash-for-visa program and the Regional Center Program have shown that these initiatives are continually abused for political or fraudulent purposes—a fact now acknowledged by the Government Accountability Office.

  • CoA Institute published a comprehensive report detailing how Virginia Governor Terry McAullife’s former company, GreenTech Automotive, used his political connections to garner millions of taxpayer dollars in loans and tax incentives. GreenTech remains embroiled in an investigation by the Securities and Exchange Commission for its involvement with EB-5. The Inspector General for the Department of Homeland Security reported that McAuliffe and friends—including Anthony Rodham, brother of former Secretary of State Hillary Clinton—benefited from political favoritism in the administration of the visa program.
  • CoA Institute’s report on Forest City Enterprises explained how corporate interests and state and local government worked together to take advantage of weak and ambiguous regulations governing EB-5—manipulating census data to create “targeted employment areas” and relying on questionable job prediction models to meet green card conditions. CoA Institute also discovered that Forest City contracted the same immigration lawyer and economist as GreenTech.
  • CoA Institute filed an ethics complaint against former Senator Harry Reid, who contacted officials at the U.S. Citizenship and Immigration Services in an attempt to influence the approval of EB-5 visa applications for a casino development project owned by Reid’s donors and represented by his son. The Senate Ethics Committee ignored the request, claiming that it never received a copy despite evidence to the contrary.
  • In the wake of the DHS Inspector General’s report, CoA Institute called on the Department of Justice to investigate a number of government officials for violation of federal laws.

Simply stated, the EB-5 Program operates as a cash-for-visa scheme. Whatever economic advantage it might offer is outweighed by the corruption it engenders and negative influence it has on national security and good government.  Congress should end the program or work to reform its governing rules to prevent continued abuse by the political class.

Ryan Mulvey is Counsel at Cause of Action Institute

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05/8/2015

Weekly Rundown 5-8-2015

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CNN Money: Whistleblower accuses cybersecurity company of extorting clients – Cause of Action’s fight against the FTC continued on Tuesday… Read More

Law 360: Analyst Backs LabMD In FTC Row, Alleges Fraud At Tiversa — “LabMD Inc. on Tuesday scored a major hit in its data security fight with the Federal Trade Commission after a former analyst at the cybersecurity firm Tiversa Inc. testified that his company lied to the agency about the extent of LabMD’s data leaks after the medical testing firm turned down its services… According to LabMD’s attorney Reed Rubinstein… the testimony marked a “remarkable day” in the case and vindicated the company’s assertion that “the FTC action was based on manufactured evidence.” At the close of the hearing Tuesday, Rubenstein announced that LabMD will seek a criminal investigation against the Tiversa…” Read More

Epoch Times: EB-5 Visa Limits May Slow Flow of China’s Elite to US – Cause of Action will not allow public officials to take advantage of the EB-5 visa program… Read More

Fox News: Clinton agrees to testify this month before House committee on Benghazi, private emails — “Democratic presidential candidate Hillary Clinton has agreed to testify on Capitol Hill this month about two controversial issues when she was secretary of state — the fatal terror attacks in Benghazi, Libya, and using a private server and emails for official business, her attorney said Tuesday…” Read More

Washington Times: IRS still targeting tea party: Nine groups awaiting agency approval — “Nine tea party groups were still awaiting IRS approval for nonprofit status nearly two years after the political targeting program was exposed, the inspector general said in a report Thursday that, despite hiccups, claimed the tax agency has generally done a good job of cleaning up its act…” Read More

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