March 24, 2012

High-paying, scandal-plagued immigration racket

If you have the bucks and the right investment project that will create jobs, you can become a permanent resident of the United States. At least, that's the idea behind the EB-5 visa category. Foreign nationals with $500,000 to spend on a project here can gain entrance to the US and apply for a green card, along with their spouses and children (under age 21), as long as they invest in something that will create at least 10 full-time, continuing jobs.

Trouble is that the program is an abyssmal mess. Bloomberg News has a report highlighting cases of investors who came here expecting to be able to stay but are facing deportation because their investments went sour, they got taken for a ride and have lost their money and their legal right to be here.

Developers John Leung and Jean Lang "solicited $500,000 from a South Korean eager to win a resident visa" through the EB-5 program for a redevelopment project in California. But it wasn't to be. "The developers’ company went bust, the investor doesn’t have a green card and Transit Village didn’t produce any jobs in El Monte, a city of about 120,000 east of Los Angeles. Leung and Lang said they did nothing wrong. City officials said federal authorities didn’t do enough."

The story of EB-5 is much the same everywhere says David North. According to North's research "EB-5 has generated large numbers of financial disasters and scandals.... [including], among many others, bankrupt dairy farms in South Dakota, a questionable sewage treatment plant in the Mojave Desert, banned Iranian money proposed to refurbish Washington’s Watergate Hotel, and a bit of economic sleight of hand and Wall Street-area gerrymandering that made the front page of the New York Times."

Meanwhile, the Obama administration has been trying to promote this program and increase the number of visas issued. "The President’s Council on Jobs and Competitiveness has called for the EB-5 program to be “radically” expanded to generate at least 40,000 jobs a year," reports Bloomberg. But the job number seems to have been calculated in fantasy land given the lack of previous job creation.

"Some claims about job generation are dubious, said Michael Gibson, a Tampa-based investment adviser who vets EB-5 deals for foreigners. When a project “substitutes EB-5 capital for more expensive bank financing or bond funding or even equity,” he said, “that isn’t really creating new economic activity. It’s margin for the developer.”

Just look at the new Brooklyn arena for the New Jersey Nets. "The Atlantic Yards developer, Forest City Ratner Cos., is borrowing $228 million in EB-5 money for a $1.4 billion infrastructure and arena fund that’s paying for a new subway entrance, parking facilities, municipal water and sewer line upgrades and other work in the vicinity of Barclays Center, according to Joe DePlasco, a spokesman for the company." But the foreign investors are claiming responsbility for all of the supposedly 8,000 permanent jobs that Atlantic Yards will create.

North also criticizes the notion that immigration officials are best suited to judge the likelihood that any proposed investment opportunity will yield jobs or value.

One final point: Giving visas to wealthy foreigners who can pay for the priviledge is actually not a bad idea (if the program were administered better), if the current immigration system made more room for other employment-based visas. Currently, only seven percent of all legal visas are labor-based and of those, almost none are for low-skilled or unskilled non-agricultural labor, such as the hot dog vendors, ticket-takers and janitors who will one day be working at the Atlantic Yards arena.

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