Ordinary people like me get fleeting glimpses of outrageous developments and government proposals but have neither the time nor interest to collect all the required information to evaluate nor follow it through time. This is but one, and seemingly from out of nowhere has surfaced as a new outrage. But before getting to that, let’s do a rewind to better understand today.
Initially, it seemed more like a sad and blameless development but with a curious kick. Reported in late 2008 on some TV news show that I saw and the LA Times, Rich Chinese find lots of bargains in L.A. house hunt
Caravans of cash-rich Chinese in Hummers and Lincoln Navigators have been weaving through American neighborhoods in recent months, looking for foreclosures and other bargain properties to buy.
With housing prices crashing in the U.S., home-buying trips to America are becoming one of the more popular tour group packages in China. New U.S. visa rules for Chinese tourists and a loosening of foreign investment policies by China have made it easier for people such as Zhao Hongjun of Beijing to go house hunting across the Pacific.
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Chow said Chinese buyers’ affinity for paying in cash will benefit them during the credit crunch. Many of her mainland clients have paid with cash, often for mansions and condos in Arcadia, where they can begin the immigration process or leave their college-age children to live alone.
WTF — buy a US house and get a visa? At the time it didn’t seem to matter much because in the TV version, the Chinese tourists were looking and remarking on how cheap the houses were but they weren’t buying.
This more than flitted across the news in 2011 as a congressional effort with the support of the Obama Administration. The LA Times again: Bill would encourage foreigners to buy U.S. homes
Reporting from Washington and Los Angeles — American consumers and the federal government haven’t been able to bail out the sinking U.S. real estate market. Now wealthy Chinese, Canadians and other foreign buyers could get their chance.
Two U.S. senators have introduced a bill that would allow foreigners who spend at least $500,000 on residential property to obtain visas allowing them to live in the United States.The plan could be a boon to California, which has become a popular real estate market for foreigners, particularly those from China.
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The bipartisan proposal, part of a package that also would make it easier for international tourists to visit the U.S., is similar to an existing program that puts foreigners on a fast track to a green card if they invest at least $500,000 in an American business that creates at least 10 jobs.
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“Many people want to come and live in the United States,” said Sen. Charles Schumer (D-N.Y.), who introduced the legislation Thursday along with Sen. Mike Lee (R-Utah). “They will be here spending money and paying taxes, and the most important thing is they’ll sop up the extra supply of homes we have right now compared to demand, and that’s what’s dragging our economy down.”
Ah, so that 2008 report wasn’t quite accurate. Those house hunting Chinese tourists weren’t buying because it wasn’t a automatic path to a resident visa/green card. Chuckie and others in DC would fix that; with a $500,000 house, a Green Card gets thrown in for free.
Alas this report was slightly misleading. As reported six months later, April 2012, by USA Today:
Legislation proposed last fall by Sens. Charles Schumer, D-N.Y., and Mike Lee, R-Utah, would let foreigners get a three-year resident visa if they invest $500,000 in U.S. real estate, including $250,000 for a primary home. They’d have to live at least 180 days a year in the property and pay taxes here.
Schumer’s effort apparently died before it was formally introduced as legislation. However, something else had been wending its way down the halls of the Capitol. The Startup Visa. This too didn’t make it. Yet, these two efforts apparently drew the attention of some to an existing law — The EB-5 Visa.
The EB-5 visa provides a method of obtaining a green card for foreign nationals who invest money in the United States. To obtain the visa, individuals must invest $1,000,000 (or at least $500,000 in a Targeted Employment Area – high unemployment or rural area), creating or preserving at least 10 jobs for U.S. workers excluding the investor and their immediate family.
As with far too much federal legislation, the investment requirement wasn’t indexed for inflation. A million dollars in 2012 would only have been $560,000 in 1990. (Or a million in 1990 would have been equal to $1.78 million in 2012). An EB-5 visa was a bargain in 2012, and the race was on. Not that we plebes knew about it until after the fact and now longer after the fact —
January 19, 2015, My Palm Beach Post (hardly a national news outlet):
JUPITER – Nicholas Mastroianni II, developer of Harbourside Place in Jupiter, fraudulently uses money raised from foreign investors, and his actions would cause “serious problems” should there ever be an audit by the U.S. government, according to a lawsuit filed by Mastroianni’s former chief financial officer and business partner.
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Will return to this later after first presenting the sequential reporting on EB-5 visa.
Next the Boston Globe, April 14, 2015 Investor Visa Program Gains Foothold in Massachusetts
There, in November [2014], Samuels pitched his development and a visa program that provides green cards to foreigners who invest at least $500,000 in US projects that create jobs. Samuels hopes to use the program to entice about 100 foreign investors to put up nearly $50 million for his $290 million development, the Point, at Boylston Street and Brookline Avenue.
His company, Samuels & Associates, is among the increasing number of American businesses turning to the visa, called EB-5, to help finance enterprises from hotels to sports arenas to condominiums. EB-5 applications — nearly 11,000 last year — have surged more than eightfold since 2008; over the past decade, the program has attracted about $6.5 billion to hundreds of projects across the country and supported more than 130,000 jobs, according to trade groups.
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As the visa program gains more interest from developers, it has also drawn scrutiny from federal and state regulators, who have criticized it for poor oversight, fraud, and favoritism. Recently, the Department of Homeland Security’s inspector general reported that the former director of US Citizenship and Immigration Services intervened in three EB-5 visa projects that involved high-level Democratic politicians, giving them special access to the process and encouraging favorable reviews of their projects.
Reports in other publications followed this one in 2015. We here at The Pond read all about it in real time, didn’t we? (For myself that is a big fat no.) I’ll fast-forward to Bloomberg, March 6, 2016 when it became really important: Trump Tower Funded by Rich Chinese Who Invest Cash for Visas
Where the hell have the regulators and USG employees charged with managing this program been for decades? How much cash made its way from well heeled foreigners to the intended development purposes of this legislation? Or was it mostly money changing hands between wealthy Americans and wealthy foreigners?
More:
The Government Accountability Office, the investigative branch of Congress, found last year in a general report about the EB-5 program that many applications contained a high risk of fraud, and discovered cases of counterfeit documentation. State Department officials told the GAO that there is “no reliable method to verify the source of the funds of petitioners.”
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Last spring, a Homeland Security special agent testified that EB-5 applicants from China, Russia, Pakistan and Malaysia “had been approved in as little as 16 days, with files lacking basic law enforcement queries.” And a report last year by the Department of Homeland Security Inspector General found politically connected participants may have received favorable treatment, citing projects involving Virginia Governor Terry McAuliffe and Hillary Clinton’s brother, Tony Rodham.
iirc, that “last spring” was six years into the Obama administration. Did that administration and/or Congress jump in and clean it up in response to the 2015 GAO report?
Slate jumped right on that 1/15 Palm Beach Post report on April 4, 2017: Meet the Shady Broker Jared Kushner Used to Facilitate a Luxury High-Rise With Trump’s Name on It.
Can we, for once, not turn this into a partisan political battle? I’m not defending the sleazy business practices of either Trump or Kushner. If they weren’t in the WH and had never taken advantage of this poorly administered program that has facilitated corruption, would it have continued to operate without public awareness? Most likely and politicians and their well heeled supporters in both parties would have continued to feed at the trough.
It’s possible that KushnerCos has crossed some undefined line — The Kushner Project Touted in China Is in Trouble at Home — or maybe it’s only that they have been more blatant and/or are now more visible (1). Sunshine is good, but nationally, we want to get all the crooks and cheats and their domestic facilitators independent of political affiliation. Exclusively zeroing in on Trump associates smacks of liberals/Democrats being political opportunists instead of dealing with the full issue and likely protecting some of their friends. This is how knee-jerks on both sides of the aisle rush in to condemn or defend isolated instances of corruption.
The politician or political power player under attack may go down, but the corruption is hardly impacted at all. It lives on and somehow is perceived by ordinary people to be in operation; so, it’s not odd at all that many respond favorably to a political candidate that spouts “drain the swamp.” That was one theme by the out party in the 2000, 2008, and 2016 presidential campaigns and it had figured into many Congressional election cycles as well. Yet, all we do is change who gets to sit on top of the massive pile of corruption.
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For your pleasure – Hernandez Javier tweet:
Here’s a slide shown during Kushner Co. event in Beijing identifying @realDonaldTrump as “key decision maker” on EB-5 investor visa program
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(1) side note. Back in 2001, I was subjected to a company pitching the bucks to be made from and very specficially Cheney’s Energy Task Force. I walked out in the middle of one such dog-and-pony show. That one died relatively quickly on the vine with the subsequent energy company meltdowns. However the very broke Halliburton and KBR made out like bandits from it and the subsequent Iraq War.
UPDATE – Since posting this diary, the Wikipedia EB-5 Visa entry has been expanded and updated. It’s now a very good and relatively complete article. Highly recommend it, particularly for the coverage of how it’s been fraudulently used by administratively redefining TEAs. A few things to note:
Hotel and multi-use developments financed with EB-5 investments include Hilton, Hyatt Hotels, Marriott’s, Starwood’s SLS Hotel & Casino.
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…starting in 2008 there was a renewed interest in the “under-utilized” EB-5 visa program as the number of “wealthy investors” and “ultra-wealthy individuals” in emerging markets abroad increased and the access to “traditional domestic financing” in the United States had decreased because of the Great Recession. ……
The program reached capacity for the first time in August 2014 when the State Department stopped issuing EB-5 visas until the beginning of the next fiscal year, October 2014.[25] By 2014, the number of EB-5 visas granted had more than doubled since 2009.…
In February 2017 Senators Dianne Feinstein (D-CA) and Grassley, a critic of EB-5, introduced a bill in February 2017 to terminate the program.[12] In a joint statement they claimed that, “The EB-5 program is inherently flawed. It says that U.S. citizenship is for sale. It is wrong to have a special pathway to citizenship for the wealthy while millions wait in line for visas.”[12] Grassley and Feinstein say that “there is no reliable or verifiable way to measure how many jobs are created” and that “many of the wealthiest parts of the country have been incorrectly labeled as “high unemployment.”//…
On May 5 President Trump renewed the EB-5 Visa program as part of his first major piece of legislation, Bill H.R.244, which extended the spending bill—and Immigrant Investor Visa Program—through September 30, 2017
Other than Feinstein and Grassley, the EB-5 Visa program doesn’t seem to concern all that many. What others are exercised about is its use by fraudsters to scam investors out of their money and not the selling visas for cash component.
Jay Peak, a ski resort in Vermont, has been using this as a way to get condo’s built.
That was included in one of the articles I linked to. Don’t recall which one.
My reason for writing this diary is that I strongly suspect that the fraudulent use of EB-5 monies and visas has barely been scratched. String all of them up including the Trumps and Kushners. And as USG employees had demonstrated that they aren’t capable of managing the program, repeal it.
Take a look at a picture of the Vancouver, Canada skyline. Canada has the same law, and many of the buildings there were built with money from a very similar law.
Would appreciate it if you would provide a link or extract of the Canadian law. I’m aware of all the Asian investors (attributed to Chinese investors but that may be an overstatement) in Vancouver real estate that has inflated the price of houses and priced locals out of the market. Same with Sydney Australia.
The EB-5 Visa was not intended for foreigners purchasing houses or real estate or investing in real estate projects or business development projects outside of blighted or depressed areas. The US regulator is supposed to evaluate every investment and only those that meet the letter of the law approved. That’s where the breakdown is and the fraud the GAO found and reported on.
Another note — it was included in one of the linked articles — but the Chinese government is considering or has enacted stricter and lower limits on the money citizens can off-shore. So, that aspect may be significantly reduced or curtailed. However, this issue doesn’t only concern Chinese money. It’s anywhere that individuals have made a large fast fortune and want to secure it and themselves by moving abroad.
http://www.immigration.ca/canada-s-new-investment-immigration-scheme-residency-for-vc-fund-investmen
ts/
The Canadians changed their law, and it is worth noting that the provinces run their own programs.
The US and Canada aren’t the only ones that do this. The UK has a similar rule.
I am familiar with Jay because I am from Vermont, and my friends talked about it. What happened at Jay was outright fraud.
http://www.stowetoday.com/stowe_reporter/news/state_news/defrauded-jay-peak-investors-unable-to-get-
green-cards/article_8e5d5c0a-6560-11e6-a86b-7be99f78aa68.html
Has the Canadian program been renewed since 2014?
The programs in the US, Canada, and Australia use the same model. Business investment for a visa. More cash required in Canada and Australia, (must cost more to buy off politicians in those countries) but apparently looser codified investment criteria. With Chinese “investors” concentrating on Sydney and Vancouver in those two countries, all the negative impacts for local residents has been more apparent and they are screaming. Too spread out in the US to generate that much backlash.
You will note from the revised Wikipedia entry that U.S. states have also created their own quasi-programs by designating TEAs that are far outside of the intended federal legislation.
I’ve long been under the impression that many countries, Canada being only one of them, provide a greatly expedited path to citizenship for people willing to sink a large chunk of change into the local economy. Indeed, have a look at this website for all the countries that offer such deals.
This is old news. I read about those visa in a Forbes magazine in a doctor’s waiting room about five years ago. That article said that there are developments near Tacoma (and Vancouver, Canada has a similar law) that are pure Chinese with their own school district where all instruction is in Mandarin instead of English. Rich Chinese park their families there. They form a bolthole in case the businessman gets in trouble in China or the Red Guards come back. Or as I call it, colonization.
Your Walmart/Amazon dollars recycled.
I think a lot of money left Hong Kong in this way before it was handed back to the Chinese.
Indeed. A friend of my from Vancouver, BC told me about this in the 1990s. HK Chinese were buying properties for their kids to live in, attend school or university, establish residency etc. This played a not insignificant role in driving Vancouver real-estate prices out the roof.
The Vancouver, B.C. metro area has a number of Asian ethnic enclaves. The main Chinese one is the city of Richmond, just south of Vancouver proper. (I’m skeptical about schools with education entirely in Mandarin, at least if they’re public schools.) My friend lives in the town of New Westminster, east of Vancouver; parts of town are seemingly entirely Korean. And so on.
Forbes was explicit about those being public schools. Believe him or not. He printed it. Here in my town in Illinois, we have a “bi-lingual” public school. I was an election judge there. Never heard any language but Spanish.
Responded to your point above to fladem.
However, as I attempted to make clear, the legislation for the EB-5 visa to include the purchase of a house didn’t pass. So, these new Chinese immigrants in the US that have purchased houses are 1) using standard visa programs 2) making legitimate EB-5 investments or 3) fraudulently obtaining EB-5 visas.
I didn’t delve into the KushnerCos EB-5 investment sales pitch, but high-end projects in desirable locations don’t meet the test of the law. However there’s no prohibition on foreign investors purchasing US real estate or investing in a US real estate developments. It just doesn’t get them a visa; so, they would be absentee owners or investors. That might be why Vancouver and Sydney have become more attractive.
Yes, it is recycling or repatriating Walmart/Amazon/etc dollars. But wealth — either natural resources or industrial — extracted from “flyover country” has always quickly moved to money centers. Three of the Koch brothers make their homes and manage their investments in NYC and FL and not Kansas. Companies move out of locations where their wealth was built to wherever labor is cheaper. Until recently the moves were domestic, but for the past twenty years, foreign locations have been competitive or better (offshoring). But outsourcing is better still because they don’t have to invest in and own the foreign facilities and employ the labor. Next stage for Walmart is robot greeters and clerks; we’ll have to expand food stamps to include all household merchandise or Walmart won’t have enough paying customers.
It wasn’t EB-5. J something? K something? Maybe fladem knows the designation.
It didn’t have to be a house. If you buy half a million or so of timberland or grazing land that will do. I think I read this is happening in places like Montana and Wyoming. I suppose buying a chunk of stock would work also.
The rich always do what they please. Meanwhile poor Mexicans who only want to work hard and have a better life for their children run the gauntlet of “coyotes” and border patrols, then are shamefully exploited by employers (often countrymen) when they get here!
This program has probably been abused from day one. But when the number of visas issued are only in the hundreds, it’s not worth the effort for anyone to take a look at it. With China’s new wealth, along with its new and large wealthy class, and the US economy in recession for all but the upper 10%, we’re only too happy to sell our “seed potatoes” to anyone with the cash to buy.
And to the working class, it probably doesn’t matter who the owners are. It’s not as if white owners have treated them well.