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.