[Senate Hearing 111-256]
[From the U.S. Government Publishing Office]
S. Hrg. 111-256
PROMOTING JOB CREATION AND FOREIGN INVESTMENT IN THE UNITED STATES: AN
ASSESSMENT OF THE EB-5 REGIONAL CENTER PROGRAM
=======================================================================
HEARING
before the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FRIST SESSION
__________
JULY 22, 2009
__________
Serial No. J-111-37
__________
Printed for the use of the Committee on the Judiciary
----------
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Washington, DC 20402-0001
COMMITTEE ON THE JUDICIARY
PATRICK J. LEAHY, Vermont, Chairman
HERB KOHL, Wisconsin JEFF SESSIONS, Alabama
DIANNE FEINSTEIN, California ORRIN G. HATCH, Utah
RUSSELL D. FEINGOLD, Wisconsin CHARLES E. GRASSLEY, Iowa
CHARLES E. SCHUMER, New York JON KYL, Arizona
RICHARD J. DURBIN, Illinois LINDSEY O. GRAHAM, South Carolina
BENJAMIN L. CARDIN, Maryland JOHN CORNYN, Texas
SHELDON WHITEHOUSE, Rhode Island TOM COBURN, Oklahoma
AMY KLOBUCHAR, Minnesota
EDWARD E. KAUFMAN, Delaware
ARLEN SPECTER, Pennsylvania
AL FRANKEN, Minnesota
Bruce A. Cohen, Chief Counsel and Staff Director
Matt Miner, Republican Chief Counsel
C O N T E N T S
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STATEMENTS OF COMMITTEE MEMBERS
Page
Franken, Hon. Al, a U.S. Senator from the State of Minnesota..... 3
Kohl, Herb, a U.S. Senator from the State of Wisconsin, prepared
statement...................................................... 116
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont. 1
prepared statement........................................... 122
Sessions, Hon. Jeff, a U.S. Senator from the State of Alabama.... 3
WITNESSES
Dougherty, Michael, former Ombudsman, U.S. Citizenship and
Immigration Services, Washington, DC........................... 11
Drinkard, Ron, Director, Alabama Center for Foreign Investment,
Montgomery, Alabama............................................ 13
Kruszka, Robert, Deputy Chief, Service Center Operations, U.S.
Citizenship and Immigration Services, Washington, DC........... 4
Stenger, William, President, Jay Peak Resort, Jay, Vermont....... 8
Yale-Loehr, Stephen, Executive Director, Invest in the USA,
Ithaca, New York............................................... 6
QUESTIONS AND ANSWERS
Responses of Robert Kruszka to questions submitted by Senators
Hatch, Leahy and Specter....................................... 23
Responses of Stephen Yale-Loehr to questions submitted by Senator
Leahy.......................................................... 32
SUBMISSIONS FOR THE RECORD
Anderson, K. David, President, Whacom Opportunities Regional
Center (WORC), Bellingham, Washington, July 17, 2009, letter... 37
Artisan Business Group, Brian Su, CEO/President, Springfield,
Illinois, letter............................................... 38
Bellingham Hearld, John Stark, July 17, 2009, article............ 39
Bissell, William, P.E., Montpelier, Vermont, June 18, 2009,
letter......................................................... 40
Black River Design, John Hemmelgam, Partner and Rick Burroughs,
Partner, Montpelier, Vermont, June 17, 2009, letter............ 41
Caledonian-Record, St. Johnsbury, Vermont:
Jay Peak Co-Owner Eyes Bio-Tech Jobs, July 18, 2009, article. 42
Jay Peak Resort has Impact on Economy, July 20, 2009, article 44
Chang, Lawrence, President & CEO, Maryland Center for Foreign
Investment, LLC, Federally Designated Regional Center,
Columbia, Maryland, July 15, 2009, letter...................... 46
CanAM Enterprises, LLC, Tom Rosenfeld, President & CEO, New York,
New York, July 20, 2009, letter................................ 48
Candido, James, ACCD Regional Center Director, Montpelier,
Vermont, statement............................................. 52
Chae, Min, M&D Regional Center, LLC, Lynwood, California, July
17, 2009, letter............................................... 56
Conrad, Robert, President, Conrad Construction, Inc., Derby,
Vermont, June 1, 2009, letter.................................. 58
Cummings, Alan G., Chief Executive Officer, Seldon, Windsor,
Vermont, July 21, 2010......................................... 59
Dougherty, Michael, former Ombudsman, U.S. Citizenship and
Immigration Services, Washington, DC, statement................ 60
Drinkard, Ron, Director, Alabama Center for Foreign Investment,
Montgomery, Alabama, statement and attachments................. 105
Hardy Structural Engineering, Tim Hardy PE, Owner, Colchester,
Vermont, June 24, 2009, letter................................. 112
Harrison Concrete Construction, Inc., James A. Harrison,
President, Georgia, Vermont, June 23, 2009, letter............. 113
Heafey, Brendan, Principal, Bay Area Reional Center, LLC,
Oakland, California, July 16, 2009, letter..................... 114
Kruszka, Robert, Deputy Chief, Service Center Operations, U.S.
Citizenship and Immigration Services, Washington, DC, statement
and attachments................................................ 117
Levinsohn, Paul, Esq., Managing Principal, New York City Regional
Center, New York, New York, July 17, 2009, letter.............. 124
Lewison, Michael, California Global Alliance, Selma, California,
July 17, 2009, letter.......................................... 127
Mirabella, James, President, Granite State Contract Furnishings,
LTD, (GScf), Intervale, New Hampshire, June 26, 2009, letter... 128
O'Neil, Thomas P., III, Chief Exective Officer, O'Neill and
Associates, and William J. Leong, Managing Director, Boston,
Massachusetts, statement....................................... 129
Padgett, Jeffrey A., P.E., Principal Engineer, ESI, Burlington,
Vermont, June 17, 2009, letter................................. 135
Pappalardo, Michael, President and CEO, Mike's Electric Inc.,
Jay, Vermont, June 23, 2009, letter............................ 136
Ryea, Richard R., Ryea & Sons Masonry, Richford, Vermont, June
24, 2009, letter............................................... 137
Schwartz, Chester P., Manager, Waveland Ventures, LLC.,
Subsidiary Colorado Regional Center, LLC, Grenwood Village,
Colorado, July 16, 2009, letter................................ 138
Schwigen, Kraig A., Executive Director, on Behalf of Patrick F.
Hogan, President, CMB Export LLC, Moline, Illinois, July 17,
2009, letter................................................... 140
Shea, Timothy P., Vice President and Congressional Liaison, Lake
Champlain Regional Chamber of Commerce, Burlington, Vermont,
June 24, 2009, letter.......................................... 144
South Florida Investment Regional Center, LLC J. Eric Gould,
Partner, Miami, Florida, July 17, 2009, letter................. 146
Stenger, William, President, Jay Peak Resort, Jay, Vermont,
statement...................................................... 148
Sutton, Sam, Managing Member, Lake Buena Vista Resort, Coral
Springs, Flordia, July 16, 2009, letter........................ 154
Western Washington University, Hart Hodges, PHD, Director,
Bellingham, Washington......................................... 155
Weststeyn, Stephen, Northern California Regional Center, Linden,
California, July 15, 2009, letter.............................. 156
Yale-Loehr, Stephen, Executive Director, Invest in the USA,
Ithaca, New York, statement.................................... 167
PROMOTING JOB CREATION AND FOREIGN INVESTMENT IN THE UNITED STATES: AN
ASSESSMENT OF THE EB-5 REGIONAL CENTER PROGRAM
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WEDNESDAY, JULY 22, 2009
U.S. Senate,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 10:07 a.m., Room
226, Dirksen Senate Office Building, Hon. Patrick J. Leahy,
Chairman of the Committee, presiding.
Present: Senators Sessions and Franken.
OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM
THE STATE OF VERMONT
Chairman Leahy. Thank you. Thank you all for being here. I
thank Senator Sessions and Senator Frank. Like everybody else,
we all have about 12 things going on, but this hearing I think
is very, very important. We are going to talk about the EB-5
Immigrant Investor Regional Center Program, which is quite a
mouthful for something that really works.
It is nice, in this economy, to have something that does
work. It has been responsible for the investment of hundreds of
millions of dollars. It has created tens of thousands of jobs
in American communities since 1993. It has paved the way for
ski resort expansion in Vermont and dairy operations in Iowa,
energy development in Oklahoma and Texas, the manufacture of
hurricane-resistant housing in Alabama, which is something we
would like to think that we do not need, but, unfortunately and
tragically, we do need in our country.
Many of these things can be talked about as things that can
bring about exporting. If somebody comes from another country
to ski in Vermont, it is like an export. It is money to our
state. If another country finds a need for the kind of housing
you have in Alabama or the technology, then that is an export.
But this is the nature of the projects financed by foreign
investment through the Regional Center Program.
One of the frustrating things for investors is that it has
been reauthorized on a temporary basis, currently set to expire
in September. That is why earlier this month I offered, along
with Senator Sessions' support, an amendment to the Department
of Homeland Security appropriations bill to do just that, to
make it permanent, and the amendment was adopted on July 8 and
I hope it will become part of that bill.
I will be on that committee at conference and I hope to
make sure it works. But I also want to make changes to improve
the overall program. I have not yet introduced a broader EB-5
bill this Congress. So I invite the witnesses to suggest
improvements that we might make to make it more workable for
the agency, and for the communities and other stakeholders, for
investors.
I really see this meeting as something that we can do as
kind of a dialog that will help all of us. I thank the U.S.
Citizenship and Immigration Services for testifying today. The
agency does have a crucial role to play.
I welcome Bill Stenger from Vermont. He recognized the
opportunities the Regional Center could bring to Vermont and
used it to expand Jay Peak. Jay Peak is up in an area we call
the Northeast Kingdom of Vermont, a very beautiful, very rural
area. I am well familiar with it, especially because my wife
was born there.
He has turned Jay Peak into a year-round resort. What had
been just a resort for a few months a year, he has turned it
into a year-round one. He is attracting foreign investment
dollars. But what it has done is it has also made it possible
for the ripple effect in a community which really needed jobs,
and now they have them.
Sugarbush is another Vermont ski resort that took advantage
of it to generate much needed capital. I know that resort well
because every time I look out my living room window in Vermont,
I am looking across the valley at it.
Just last week, my staff visited with a company in Windsor,
Vermont, called Seldon Technologies, inventors of carbon
nanotube water purification systems, and they are thinking of
the EB-5 program to fund domestic manufacturing jobs here in
the United States.
I also welcome--and I am sure the ranking member will be
doing this later--Ron Drinkard of the Alabama Center for
Foreign Investment and Stephen Yale-Loehr, who is actively
involved in the EB-5 Regional Center Program, and Michael
Dougherty, a former Ombudsman for USCIS.
This type of immigration program is not unique to us. We
have seen how Canada and England and the rest of the United
Kingdom have used this very, very effectively. In fact, in the
current difficult economy, Canada has been promoting their
immigrant investment program all around the world and grabbing
these investments.
It is one of the reasons why we need to make sure, for
investors, that it is permanent here in the United States, so
we can do the same thing. We have a lot of foreigners who do
want to invest here, and I will put my full statement in the
record about the things they have to follow to do it. It is not
just an easy given to get visas. They have to actually get
actively involved. But we should look at what other countries
do to get that investment.
I will put my full statement in the record.
[The prepared statement of Chairman Leahy appears as a
submission for the record.]
Chairman Leahy. Senator Sessions.
STATEMENT OF HON. JEFF SESSIONS, A U.S. SENATOR FROM THE STATE
OF ALABAMA
Senator Sessions. Thank you, Mr. Chairman. I believe that
this EB-5 program should be part of our immigration mix. It
seems to me to meet the needs of people who like to come here
and, quite significantly, it seems to me to be the kind of
program that serves a legitimate interest of the United States.
Whereas some people who come to our country, I think it is
no doubt, do take jobs that would go to Americans, this program
would appear to be the kind of program that creates jobs. In a
time of rising unemployment, in particular, I think that the
program makes a lot of sense.
I was happy to accept Chairman Leahy's amendment, second
degree amendment to my E-Verify amendment recently which made
it permanent. I think perhaps this will lay the groundwork for
more expansion of it. There are 60 approved regional centers in
24 states and in June of 2007, our Alabama Center for Foreign
Investment, located in Montgomery, was approved. It is one of
the only two statewide centers in the nation, and I am happy to
work with Ron Drinkard working on that.
You have been a staunch advocate and you have taken a lot
of time and effort to explain to us the details of the program
and it gives me confidence that this is a sound program. It is
the kind of thing I would like to see expanded.
It is estimated that 75 to 80 percent of all EB-5 green
card petitions are filed through these regional centers and it
has attracted more than $1 billion in foreign investment and
created an estimate aggregate of 20,000 jobs for U.S. workers.
The program has doubled between 2006 and 2007, but it does
appear to be underutilized and could be more effective.
On March 18, our Ombudsman, Mr. Dougherty, published a
report detailing the recommendations that could be implemented
to make the program more efficient. According to the report,
less than 1,000 of the allocated 10,000 immigrant visas per
year were being used due to program instability, the changing
economic environment, and more attractive immigrant investor
programs in other countries.
So we look forward, Mr. Chairman, to hearing more about
this. It seems to me Canada has proven the viability of these
kinds of programs. If we think carefully and study this in the
right way, I believe this program could be expanded and would
benefit the American economy. Thank you.
Senator Franken, you had a couple of comments you wanted to
make.
STATEMENT OF HON. AL FRANKEN, A U.S. SENATOR FROM THE STATE OF
MINNESOTA
Senator Franken. I do, Mr. Chairman. Thank you, Chairman
Leahy. Our country is experiencing the highest national
unemployment rates in three decades. While Minnesota State
unemployment rate has traditionally been lower than the rest of
the country, we have a number of counties that have
unemployment rates well below the national average.
Clearwater County, for example, had an average unemployment
rate of over 19 percent in the first 5 months of 2009, more
than double the national average in the same period. Clearwater
County is no outlier. In the first quarter of 2009, 12 of our
87 counties had unemployment rates that were greater than 150
percent of the national average.
In times like these, any program that spurs investment in
our economy should be strongly supported. I am particularly
interested in the EB-5 Regional Centers Program, because it
allows for foreign investment to concentrate in a particular
geographic area and lowers requirements for rural regions or
high unemployment areas, where an added stimulus is especially
needed.
This is a win-win program, the kind I like. Our local
economies benefit, as do skilled entrepreneurial foreign
investors who can join our national community and who surely
will make further contributions to our economy.
I am pleased that the program combats the old and false
stereotype that immigrants take away our jobs. Immigrants add
to and stimulate our economy. This program is an excellent
showcase of just that trend.
I fully support Chairman Leahy's recent provision that will
make the EB-5 Regional Center Program permanent. I will also
support any measures to streamline and expand the program,
particularly to states like Minnesota.
Although three of our neighbors--Iowa, Wisconsin and South
Dakota--have EB-5 Regional Centers, as of yet, we do not in
Minnesota and I want to find out how we can change that. Thank
you, Mr. Chairman.
Chairman Leahy. Thank you very much, Senator Franken. Our
first witness is Robert Kruszka. He is the deputy chief of
Service Center Operations for U.S. Citizenship and Immigration
Services, an agency he has served for over 20 years. He
previously worked in the Fraud Detection and National Security
Division at USCIS headquarters. He also serves as a senior
special agent for the Investigative Services Division.
Incidentally, all of you, your full statement will be
placed in the record, but please go ahead, Mr. Kruszka.
STATEMENT OF ROBERT KRUSZKA, DEPUTY CHIEF OF SERVICE CENTER
OPERATIONS, U.S. CITIZENSHIP AND IMMIGRATION SERVICES
Mr. Kruszka. Thank you. Chairman Leahy, Ranking Member
Sessions, Senator Franken and your staffs, I am grateful for
the opportunity to appear before the Senate to discuss various
aspects of the EB-5 immigrant investor program. My name is
Robert Kruszka and I am the deputy chief of Service Center
Operations for U.S. Citizenship and Immigration Services.
I am extremely involved in the management and oversight of
the EB-5 immigrant investor program. We want to thank the
Chairman and the Committee for their support for this program,
especially for the recent amendment to the Department of
Homeland Security fiscal year 2010 appropriations bill to make
the EB-5 Regional Center pilot program permanent.
USCIS has been working to improve the investor program by
providing it with more dedicated resources, including more
comprehensive training in the adjudication of this work to
USCIS officers. All EB-5-related adjudications have been
consolidated exclusively at our California service center.
Previously, this workload was divided between two centers.
The California service center now adjudicates all regional
center proposals and any associated petitions and applications.
USCIS believes that this workload consolidation will result in
more consistent and expeditious EB-5 adjudications.
Processing times have improved significantly as a result of
these changes. One year ago, it took USCIS an average of 14
months to process a regional center proposal. It now takes 4
months. The average processing time for individual investor
petitions has dropped from 7 months to 4 months and the
processing time to remove the conditional status of permanent
residents has dropped from over 18 months to 6 months.
There are currently a total of 60 approved and active
regional centers present in 24 different U.S. states, inclusive
of the District of Columbia. This is an increase from 23
regional centers a year ago. The list of active regional
centers is posted on the USCIS Website and is updated anytime
there is a change.
USCIS has developed an e-mail account at
[email protected] for external EB-5
stakeholders to use when seeking general EB-5 program
information, inquiring about the status of pending cases, or
requesting the expedition of a pending EB5 case.
USCIS has undertaken a series of initiatives to provide
further transparency and streamline the adjudications process.
Currently, there is no official application form for the
regional centers' proposals or subsequent amendments, and,
thus, no fee is charged for these filings.
Adjudications of regional center proposals are highly
complex and time-consuming for USCIS personnel. USCIS has
drafted a regional center application form which is in the
process of being cleared for use. Further, a fee study is
currently underway to determine the appropriate fee to collect
for the adjudication of the regional center proposals.
USCIS believes that the transparency in the administration
of this program is critical to its success. To this extent,
USCIS is holding quarterly meetings with external EB-5
stakeholders, to include the gentlemen to my left, to discuss
any pending EB-5 issues or concerns that have surfaced in the
program and to provide additional clarification and guidance as
needed regarding the adjudication and/or processing of EB-5
petitions and related applications.
USCIS notes that the uncertainty of whether the program is
extended poses operational challenges for USCIS, as well as a
troubling concern among the EB-5 stakeholder community. When
the pilot program was scheduled to sunset without further
legislative action by Congress, USCIS had to advise
stakeholders of the steps it would take to hold pending
regional center cases in abeyance for a finite period pending
further congressional action.
USCIS also advised EB-5 stakeholders that it would have to
reject any future regional center proposals and associated
regional center I-526 individual investor petitions submitted
after the sunset date. The uncertainty as to whether the
immigrant investor pilot program will remain a viable vehicle
for immigration to the U.S. through investment hampers
marketing efforts by regional centers to attract prospective
immigrant investors and also creates unease and apprehension
among the existing regional centers as to whether their
business plans will come to fruition.
If the program is not permanently extended or, at a
minimum, the President's budget request to extend the pilot
program for three more years is not enacted, then further
uncertainty would be created among the EB-5 stakeholder
community.
Once again, thank you for the opportunity to be here today
and for your support of this program. I am happy to answer any
of your questions that you may have.
[The prepared statement of Mr. Kruszka appears as a
submission for the record.]
Chairman Leahy. Thank you. Thank you very much. Our next
witness is Stephen Yale-Loehr. Stephen Yale-Loehr is the
executive director of Invest in the USA, a trade association of
EB-5 Immigrant Investor Regional Centers. Mr. Yale-Loehr has
been practicing in the field of immigration law for over 25
years; author of a multi-volume treatise on immigration law;
teaches at Cornell Law School. He is also counsel to Miller
Mayer in Ithaca, New York.
Mr. Yale-Loehr, please go ahead, sir.
STATEMENT OF STEPHEN YALE-LOEHR, EXECUTIVE DIRECTOR, INVEST IN
THE USA
Mr. Yale-Loehr. Chairman Leahy, Senator Sessions, Senator
Franken, thank you very much for inviting me to testify. I plan
to do four things in the next 5 minutes.
First, I will summarize the EB-5 program. Second, I will
summarize the economic benefit that the program is bringing to
the United States already. Third, I will identify some problems
that hamper the current EB-5 program. Fourth, I will offer some
recommendations to improve the EB-5 program so it can achieve
its true potential.
First, a short summary of the EB-5 program. Congress
created the fifth employment-based preference category, which
is why it is called EB-5, in 1990. Investors have to invest in
a U.S. company and create or save 10 jobs for U.S. workers to
be able to get a green card. They have to invest at least
$500,000 in a rural or high unemployment area.
To encourage immigration through the EB-5 program, Congress
set up a pilot program in 1992 that sets aside 3,000 of the
10,000 EB-5 green cards each year for people who invest in so-
called regional centers. That part of the EB-5 program is very
successful. The USCIS estimates that 91 percent of all people
who get EB-5 green cards do so through regional centers, not in
their own companies.
As the USCIS has just testified, there are 60 regional
centers that are approved and 40 more that are pending. So
within a year from now, there will be 100 regional centers
around the country stimulating our economy.
Second, the economic impact of the EB-5 program. As Senator
Sessions has already pointed out, in 2003, the GAO reported
that the EB-5 program has been underutilized. Nevertheless,
even though it has not been used very much, it still had
managed to stimulate $1 billion of investments in the United
States. That number has significantly increased in the last 5
years since that report.
My written testimony includes several examples of current
projects that regional centers are doing around the country.
Just those examples alone will create tens of thousands of jobs
for U.S. workers in the next few years.
These examples illustrate that although the EB-5 program is
small in terms of the numbers of people coming to the United
States, it packs a powerful economic punch. If all 10,000 EB-5
green cards were used each year, that would be $5 billion that
would be invested in the U.S. economy each year.
Yet, there is a lot more beneficial impact to the EB-5
program besides just the investment by the investors. EB-5
investors also buy houses here. They send their children to
private universities here. They pay taxes here. They invest in
the stock market. They make other investments. For example, I
know one person who is bringing $15 million of his family
wealth to the United States as an EB-5 investor.
EB-5 investments also fuel large projects that otherwise
would not get off the ground. For example, one regional center
in the District of Columbia is poised to prime $1 billion worth
of real estate investments just here in the local economy. All
these projects will produce thousands of jobs at no expense to
the U.S. taxpayer.
Congress and the immigration agency should view the EB-5
program really as an economic stimulus tool, not primarily as
an immigration program.
Next, I want to talk about some problems with the current
EB-5 program. First, as the other witnesses have pointed out,
we need to make the EB-5 program permanent. The lack of
permanency deters investors from investing in the United
States. They are not sure whether they are going to be able to
keep their green card if the program goes away.
I thank Senator Sessions and Senator Leahy for their
leadership in trying to make sure that we have a permanent
extension and I hope that a permanent extension is included in
the final DHS appropriations bill.
Second, USCIS should process EB-5 cases more quickly. As
Mr. Kruszka has already pointed out, EB-5 processing times have
improved recently, and I thank him for that. But they are still
erratic.
One investor in a regional center may have his project
approved in 2 months, while another investor in the exact same
project may have to wait 6 months. This delays money getting to
the project when it is needed.
The USCIS should allow immigrant investors to pay an
additional fee to get their cases processed more quickly. When
they are investing $500,000 to get a green card, they are happy
to pay another $1,000 or $2,000 to get their green card more
quickly.
Next, the USCIS should provide greater clarity on key
issues. EB-5 regional centers are concerned that there is not a
lot of clarity in the EB-5 process. Although the USCIS is
working hard to provide more clarity, there are still a number
of issues that remain unresolved.
For example, even after the USCIS approves a regional
center's job creation methodology as part of the regional
center petition process, the agency nevertheless often issues
requests for evidence to individual investors who are investing
in that regional center questioning that same methodology.
USCIS should give regional centers the option to have their
new projects in an already approved regional center an
opportunity to sit down with the USCIS to go over the project
and resolve project-general issues so that they can be resolved
and out of the way before the first investor actually invests
in that project. This would make EB-5 processing quicker and
provide more certainty.
Next, the USCIS or Congress should resolve certain
ambiguities in what we mean by rural or high unemployment. The
immigration statute defines a targeted employment area as
either an area that has an unemployment rate that is 150
percent of the national unemployment rate or is rural.
But a high unemployment rate may change over time and that
can hurt large projects that take more than 1 year to try to
get investors to go into that project. The USCIS or Congress
should specify that if a project qualifies as high unemployment
when it starts, it should be grandfathered as high unemployment
throughout the project, until the last investor has invested in
that project.
Lastly, the U.S. Government should promote the EB-5
program. It does little good to have a program if foreign
investors do not know about it. The USCIS should work with the
Department of Commerce to promote the EB-5 program overseas.
Thank you very much for your time and I look forward to
your questions.
[The prepared statement of Mr. Yale-Loehr appears as a
submission for the record.]
Chairman Leahy. Thank you very much. Our next witness is
Bill Stenger, William Stenger, whom I know well, along with his
establishment. Many times, we have worked together on EB-5
matters, traveling abroad and educating investors about
opportunities in the United States. He is currently the
president and chief executive officer and co-owner of the Jay
Peak Resort in Jay, Vermont.
He has been chairman of the Vermont Ski Area Association
for the past several years, was chairman of the Vermont Travel
Council from 1998 to 2007. He was instrumental in creating the
Vermont Regional Center.
Looking in the Caledonian-Record, which is an area
newspaper, yesterday, he was speaking about designing biotech
jobs. He is quoted as saying Jay Peak is one of the most
successful EB-5 developments in the country.
I am not saying anything different than I haven not said
before, but I agree with that. Please go ahead.
STATEMENT OF WILLIAM J. STENGER, PRESIDENT, JAY PEAK RESORT,
JAY, VERMONT
Mr. Stenger. Mr. Chairman, Senator Sessions, Senator
Franken, it is a pleasure to be with you today and I am pleased
to share with you my perspective of our EB-5 Regional Center
Program and how it has affected my employees, my community, and
the State of Vermont.
My company, Jay Peak, was founded in 1955 as a winter-only
ski resort. We are located three miles from the Canadian
border. Mr. Chairman, as you said in your opening remarks, it
is the Northeast Kingdom, a term that former U.S. Senator
George Aiken coined many, many years ago as one of the
beautiful parts of Vermont.
Jay Peak is one of the most significant employers in
Orleans County, a place of great rural agricultural character,
beautiful mountains and streams, but it is also the home of the
most significant poverty and economic challenge of any region
in the State. Every socioeconomic indicator that we measure is
worst in our county. Unemployment, drug abuse, spousal abuse,
child issues are most serious there, and it is all because of
economic challenge.
However, despite these issues and the most profound
economic issues that we have seen in generations in Vermont and
the nation, I am very optimistic about the future of our
community and its citizens.
We are seeing at our facilities the significant creation of
the biggest positive life-changer a person needs--a job, a job
that will sustain them and their families with benefits and a
future that inspires and rewards their economic and human
spirit.
We are seeing this employment creation at Jay Peak and our
surrounding communities in this terribly troubled economy
solely because of the EB-5 foreign investor program. In today's
economy, what is strangling the small business community in
Vermont and nationally is the lack of access to capital.
Affordable capital is almost nonexistent in this marketplace.
However, through the EB-5 regional center pilot program, at
Jay Peak, we are well on our way to raising $100 million of
equity capital. This capital will help us build year-round
facilities that we desperately need in order to be competitive,
but, also, it helps us create full-time opportunities for so
many citizens throughout the northeastern part of Vermont,
where we have the highest unemployment communities.
Senator Franken, you mentioned that this is a win-win
program. It certainly is. It is a win for Jay Peak because we
can build the things we need. It is a win for the investor
because they get to come to this country and find a new life.
It is a win for the government because we are creating tons of
jobs in our whole area. So it is truly a win-win-win situation.
I have personally met almost every investor that is
participating in the Jay Peak program. They are a group of
wonderful people. I can tell you that their equity investment
is changing our region in a profound and positive way and once
in the United States, they will continue to do so, being
contributors to their communities and continuing to invest in
their daily lives.
Without the EB-5 source of affordable capital, none of this
significant economic growth would be taking place in Jay Peak
or in our region of the United States. I have had the
opportunity to travel around the world, visiting various
countries in promotion of Jay Peak's program and I have had the
opportunity to meet other business opportunities.
There are many, many small business opportunities in
Vermont that can benefit from the EB-5 program. I met Alex Choi
in Korea a couple of years ago and we are now working together
on bringing a biotech research, development and manufacturing
facility to the northern tier of Vermont, something that you
would have thought a few years ago would be an impossibility.
But it is a real possibility now and it is a tangible thing
that we are working on right away.
Steve Yale-Loehr made some important points and I would
like to emphasize one, and, of course, it is the permanency of
the program. Mr. Chairman, I compliment you for the leadership
and Senator Sessions, as well, for supporting the permanent
aspect of this program.
Without that, programs will not be able to plan and
investors will not be able to consider their futures correctly
and, frankly, CIS will not be able to really address the issues
on a continuous basis. If this program is made permanent, the
projects will be better. They will be better planned. The
investors will know how to plan their lives and focus on a
program that they know can work, and CIS will be able to better
plan its future from a staffing level and an administrative
level.
So permanency is vitally important in this. A 3-year
extension and a 5-year extension, that would help, but
permanency is the answer to the success in the future.
In conclusion, Mr. Chairman, distinguished members of the
Committee, this country needs all the equity investment it can
get right now. The EB-5 program is a wonderful example of an
economic stimulus that is tax-free, not a burden to anyone, and
has nothing but good benefits for all involved.
I thank you very much for giving me the opportunity to be
with you today. Thank you.
[The prepared statement of Mr. Stenger appears as a
submission for the record.]
Chairman Leahy. Well, thank you. Thank you for coming down.
You have come down and helped before. You mentioned Senator
Sessions' support. I cannot emphasize enough that in passing
the extension on the Senate, it was essential that Senator
Sessions was involved and was supportive of that, because it
was as an amendment to a bill of his.
So I do want to applaud him on that. It was a bipartisan
effort and we just want to now make sure we get it through both
parties.
Michael Dougherty, do you pronounce it Dougherty?
Mr. Dougherty. Either way is fine, Senator, Dougherty,
Dougherty, it works.
Chairman Leahy. Which do you prefer?
Mr. Dougherty. I do Dougherty.
Chairman Leahy. I have found, when I go to Ireland, that
Leahy is pronounced about four different ways, depending upon
where it is. He is the director of Immigration Control for
Raytheon Homeland Security. Until recently, Mr. Dougherty
served as the Ombudsman of U.S. Citizenship and Immigration
Services.
Of course, all of us on the Committee know him because he
used to be counsel to Senator Kyl and what was then called the
Subcommittee on Terrorism, Technology and Homeland Security, if
I am correct. So we welcome you back. It is good to see you
again. Thank you for joining us.
STATEMENT OF MICHAEL DOUGHERTY, FORMER OMBUDSMAN, U.S.
CITIZENSHIP AND IMMIGRATION SERVICES
Mr. Dougherty. Thank you. Chairman Leahy, Ranking Member
Sessions, Senator Franken, it is a pleasure to be with you. I
will clarify for you a little bit what the Ombudsman's office
does. Congress created that office within the Homeland Security
Act in order to look into U.S. Citizenship and Immigration
Services and to determine where the problem areas were and to
suggest solutions and make formal recommendations to USCIS,
which would then be transmitted to Congress in an annual
report.
The Ombudsman's office has recently done that. On June 30,
the office gave a report to Congress that illuminated much of
the work that it had done in the prior year and suggested new
activities that USCIS could look into to improve benefits.
I am not appearing today as a Raytheon employee. I am
currently working with Raytheon, but my testimony is limited to
my role as a former Ombudsman and I should not be regarded as
expressing the views or opinions of the Raytheon Company,
affiliates or employees.
I respectfully request that the Ombudsman's EB-5 report
from March of 2009 and USCIS' response be included in the
record.
Chairman Leahy. Without objection.
[The information appears as a submission for the record.]
Mr. Dougherty. Thank you. One of the things that I learned
when I was the Ombudsman is that USCIS is at its very best when
it directly communicates with people. This includes individuals
who are trying to come to the United States and obtain lawful
permanent residence.
In this perspective, within the regional center program, it
is going to be the ability to reach out to stakeholders and to
explain to them clearly what the rules are. We need clear
rulemaking to come out of USCIS to benefit the program, and
USCIS should make every effort to engage the people who are
putting significant amounts of money at risk in the EB-5
program to engage in that type of dialogue.
Folks who are putting $500,000 down would probably benefit
from engaging the agency ahead of actually filing their
petition. I think it would be good for the California Service
Center to proactively engage those people so that they can
understand what their plans are, how the financing is going to
occur, and to eliminate doubt going into the application
itself.
If USCIS is able to do that, I think it is going to reduce
the overall work for USCIS. They will not have to send out
requests for evidence to clarify what an application meant.
They are not going to ask other questions that are going to
slow the entire process down for both the Department and for
the investor.
I think that is key and one of the things that I pointed
out in my written testimony was that if you are going to engage
in that type of communication, you are going to eliminate a lot
of wasted time and money, both for the government and for the
investor.
The integrity of the program is always going to be
protected when you have clear, definitive rules that everyone
understands. USCIS should engage in that type of rulemaking
now.
I understand that USCIS is very taxed with other things
that they have to do, they have other regulations to write,
they have mandates coming out of the administration that they
have to pursue, but I think now would be a very good time, if
the amendment is successful, if we get it in the
appropriations, that this becomes a permanent program, it is
going to allow us to do that type of rulemaking. Now is the
time to do that.
If folks are going to stake significant amounts of money on
coming into the United States, they need to know clearly what
the rules are.
Communications from the California Service Center have, in
the past, been outstanding. I have talked to a lot of folks
that are in the high end immigration business, trying to get
foreign nationals of extraordinary ability into the United
States, and they had great things to say about how California
did business back in the day.
A lot of it, though, had to do with a customer's ability to
pick up the telephone and to make a call and talk to some live
person who has got subject matter expertise. I think that is
the best way for an agency like USCIS to operate. I know that
poses operational challenges for USCIS, but at the same time, I
think it is a good way to do business.
In making these comments, I am aware that USCIS does a
significant amount of work with customer outreach. Their
customer service, I think, is outstanding. If they can just do
more of it, it will benefit everyone.
One of the things that was observed by the Government
Accountibility Office is that qualifying a person for EB-5
status is one of the most complicated subspecialties in
immigration, because a sophisticated knowledge of corporate
tax, investment and immigration law are required.
It is a complex area. It is complex for people to file
these applications. It is also very complex to adjudicate them.
The better your training is for your USCIS adjudications
officers, the faster they are going to be able to work, with
greater accuracy, to protect the integrity of the entire
process.
If USCIS is going to rely on modeling to prove indirect job
creation, USCIS employees should actually be trained in how
models are put together.
Business modeling is very important. It is a growing area.
It helps you avoid mistakes. It helps you to predict effects.
If USCIS is able to put a modeling curriculum together for
those adjudicators, that will benefit everybody in the long
run.
Thanks again for the opportunity to testify today.
[The prepared statement of Mr. Dougherty appears as a
submission for the record.]
Chairman Leahy. Thank you very much. Senator Sessions and I
were just commenting here. We both agree, if it is going to
work, the need is there to make it permanent. If I am an
investor in another country, I am not about to put my money in
here if I think it may get yanked out.
I think it will be permanent, but if you are the one
writing the checks, you may want more than that to go on. The
United States is a great place to invest, but they may look at
our neighbor to the north as a place to invest. I think we have
to make it permanent if we want it to work, and most of us want
it to work. That is a bipartisan feeling.
Ron Drinkard is the director of the Alabama Center for
Foreign Investment. That was created under the EB-5 employment
creation visa program. He has over 34 years of experience in
economic development and banking; served both as vice president
for Industrial Development AmSouth Bank and for Southwest Bank-
Wachovia.
Glad to have you here and I will yield to Senator Sessions,
who has some comments.
Senator Sessions. Thank you. Mr. Drinkard, we are glad that
you are here. I know you have been very active an advocate for
this program. You know it well. You know how it plays out in
the real world. We are glad you are here, glad to have a Troy
University graduate, even though you got a banking degree from
LSU. We will forgive you for that.
I look forward to your testimony. You have got some
suggestions for us and I look forward to those.
STATEMENT OF RON DRINKARD, DIRECTOR, ALABAMA CENTER FOR FOREIGN
INVESTMENT
Mr. Drinkard. Thank you, Senator Sessions. Mr. Chairman
stepped out, but we appreciate the opportunity to be here.
Senator Franken, I am a fan of yours in your prior life and we
do appreciate the interest that you are expressing in the
program by virtue of your presence here today.
As the Chairman mentioned, I am director of the Alabama
Center for Foreign Investment, which is a regional center
covering the entire State of Alabama. Senator Sessions, in the
Chairman's absence, if you do not mind, I may deviate a little
bit from the testimony I submitted and take maybe a less rigid
approach in my comments.
Senator Sessions. That is fine. I am sure the Chairman will
make your remarks a part of the record, and I think that would
be appropriate.
Mr. Drinkard. Thank you.
Senator Sessions. Tell us what you think.
Mr. Drinkard. My partner, Boyd Campbell, is an immigration
lawyer with 20 years experience. I have 34 years of experience
in banking, economic development, and governmental relations.
Between the two of us, we really thought that we could solve
any problem that we ran into regarding the EB-5 program.
Not only were we wrong, but 2 years down the road, we are
still learning something knew and important about this program
virtually every week. It was pointed out by Mr. Dougherty, next
to me, he mentioned difficulties and complex. That is so very,
very true.
Mr. Kruszka pointed out the need for additional resources
and more training; also, very, very important. The two fit
together almost perfectly. Let me say this about Mr. Kruszka,
too. We have had a tremendous working relationship with Mr.
Kruszka and his colleagues, Kevin Cummings and Joe Whalen. We
could not ask for more support from these individuals than we
have received.
In my opinion, we have got the best people we could have in
those positions, but, unfortunately, there are some situations
where, in my opinion, their hands may be tied where they may
not be able to do some of those things that they would like to
do to make this program more user-friendly, and I think the key
to it is making it more user-friendly.
There is a tremendous misconception out there. There is a
perception that this program is immigration related. It is
really not. This is an economic development program. It
virtually has nothing to do with immigration. It may be this
much immigration, but it is this much economic development.
In addition to that, we have the greatest opportunity that
we could ever have to play some role in the recovery of this
nation's economy and the best part of it all, it does not
affect our tax dollars. Our taxpayers do not have to spend one
penny on this.
We are currently spending tax dollars doing many things
that this program can do and can do very effectively at no
cost. But there are some things that we could consider that
would perhaps make it easier to do this. You have heard
mentioned permanency of the program. Of course, it is difficult
for anyone to consider getting into anything unless they know
it is going to last. We do not get on a plane headed somewhere
unless we think it has got enough fuel in it to get to the
destination. Same thing with these investors.
The preapproval process, if we use that analogy with the
plane, yesterday, when I was going through Atlanta, it occurred
to me that the experience there was very similar to this
program. When I go to the first checkpoint, I have to show a
driver's license or a passport. Those are preapproved things
that our government has provided, which gets me past that.
If we can have preapproved projects, we get past that first
point quickly and it is going to save a lot of time and a lot
of money on the part of the government regarding these
adjudicators at the California Service Center. If that project
can be approved, that proposal, that PPM, does not have to be
reviewed in every case.
They can look it and they can see it has been approved and
they can spend their time doing on something very, very
important, checking out that individual. Just like going
through that airport, none of us wants to get on a plane with
someone that could be harmful to us or the other passengers.
Same with this program.
None of us want anyone involved in this program that is
going to do any harm to U.S. citizens. Look at it like this.
When your baggage goes through that x-ray machine like mine did
yesterday, they took a pretty close look at it and if there is
anything in there suspicious, they are going to pull me aside
and take a look at it.
The same thing will happen in this program. If there is
anything in that documentation that throws up a yellow flag,
they are going to stop them. They are going to take a look at
it. None of us involved in this program have anything more on
our mind than security and making sure this program works.
Now, I mentioned, in making it work, the permanency of the
program. There are some other things, and let me also say this.
There are a lot of opinions and things that are discussed here
today from those of us representing very, very different roles
in the EB-5 program, but every issue is uniform and it is
across the board. We all are experiencing them.
As most of you know, this program has had some problems--
had problems back in the 1990s. It had a terrible reputation.
There were some people that got involved and we had a lot of
problems as a result of that.
What we have got to do is make sure that we do not allow
those problems to happen again. Not only do we know to overcome
that, we have got to be extremely careful not to let it happen
again.
It would be my recommendation that we have something out
there in place to make certain that these regional centers,
myself included, obviously, have the ability and the knowledge
to run that center properly and stay within the guidelines and
the regulatory environment of USCIS, extremely important.
I already mentioned project preapproval, something that we
need. You have heard some of the individuals mention that we
need a longer period of time for the creation of these
employees, of this job creation. As you know, we have to create
a minimum of 10 jobs, direct, indirect and induced, for each of
these investors.
There are projects, large and small, where this is
virtually impossible. There is a planning stage. There are so
many things that have to be done. There are environmental
studies in many cases that could take up to a year on some of
these sites.
Chairman Leahy. In fact, on that, let me pick up on that,
because I have discussed this with Mr. Stenger and what you are
talking about is for an investor to convert a 2-year
conditional green card to a traditional green card, he or she
typically has to show that they created 10 new jobs.
In Alabama, as you pointed out, there could be
restrictions, hurdles you have to go through. In Vermont, along
with the permitting factor, we can have severe weather. It can
be 20 and 30 below zero during construction season.
So these delays can happen, notwithstanding good faith.
Would you talk to that, Bill? I am thinking the challenges of
the weather and other requirements, what Mr. Drinkard was
talking about, too.
How do we get around some of those? You do not want an open
ended process, but how do you get around it within that 2-year
requirement? Are there other things we should be doing?
Mr. Stenger. Well, I would support what Ron said about the
planning that has to go on in a project. The better a project
is planned, the better its life is going to be. So often in
business, you see projects that are too quickly planned. People
do not think about the details that go with the project and
failure is at the other end.
So proper planning and in our State and I think throughout
the country, environmental permitting at the State and Federal
level are substantial oftentimes. To conceive an idea, do the
permitting, do the planning, build the project, hire the
people, grow your business and meet some job level within a 24-
month period, in today's world, I would say it is impossible,
even for the smallest of businesses, to do it correctly.
We are talking about businesses that are not insignificant.
They are small businesses in most cases, but they have to do
the same planning and work that others do.
Now, the reality of the regional center pilot program
regulations, as they exist today, is that there is no
obligation to prove job creation after 24 months. In fact of
law, there is no obligation to do that within a 24-month
period.
What you do need to do is you need to do what you said you
were going to do at the beginning. When we submit our programs
to CIS, they look at them, they give us advice, they approve.
In a sense, they give us direction. We build what we say we are
going to build. We create what we say we are going to create
and if we do that, those jobs are going to occur, because we
have done the economic modeling in advance.
I think if there is an area that we can all work together,
it is probably on making sure the economic modeling is
something we are confident about and feel good about. But if we
do that, the job creation will be there.
In our case, we are a big employer, in a sense, but we are
a small employer in Vermont. But the indirect jobs of these
projects are where so much emphasis really lies, and it is not
easy to look at somebody along the road that is driving past
you and say, ``That is a job I created.''
The indirect job creation of these EB-5 programs is
profound. So I would say that within a 24-month period, very
difficult to take a project from an idea to the employment
levels that may be expected. It may take longer. The weather
may affect you, the permitting may affect you, and the economy
may affect you.
So those are my thoughts, Mr. Chairman.
Chairman Leahy. Let me ask Mr. Kruszka about that, because
we have been talking about the fact that a large number of the
visas authorized are never used, but we know that there is
substantial growth in popularity for the regional center
program.
What is the biggest impediment to growing this program? I
would like to see these visas used. What tools can we give you
from the Congress to make it possible to move and create them?
Do we have to look at the 2 years? What is your analysis?
Mr. Kruszka. I think the biggest impediment right now is
the fact that the program is not permanent and that has
sunsetted several times. That has created an operational
problem for us, an unease in the stakeholder community, and it
is hard to attract the investors that way.
I hear what Ron Drinkard and Bill Stenger are saying about
the 2-year job creation memo. We set that limit at 2 years and
I think that if that is an issue for the projects, and I hear
that it is, we have been hearing it for a while, we think that
it would help if Congress would actually clarify the language
for us, because it seemed to be moot on that point.
Everything else in the immigration realm, you need to
remove your conditional residence within 2 years and if you are
filing within that 2-year period, we expect that you have to
follow through with your investment, which the investment is
one part and the other part of it is creating the 10 jobs. I
think that causes some problems for everyone.
Chairman Leahy. Mr. Yale-Loehr talked about business plans
and the preapproval by the agency. The approval process for a
given project would be, as I understand, separate than the
immigrant investor petition process.
Did I state your position correctly?
Mr. Yale-Loehr. Correct.
Chairman Leahy. What kind of benefits do you see coming
from that? I am thinking working from the stakeholder side of
the equation. Does it result in USCIS adjudicating quicker?
Mr. Yale-Loehr. I think, as the other witnesses have
pointed out, it makes everything more efficient. If you have
more talking, more dialog between the stakeholders and USCIS,
then you can resolve problems up front. Right now, the regional
center gets approved as a general regional center, but they do
not necessarily have a project in mind when they are approved.
So then they put together a project. They look at the
regulations. They try to anticipate what they think is going to
work, but they do not have a chance to dialog with USCIS in
advance. Instead, the first investor in that project is sort of
the guinea pig as to whether the project itself meets the EB-5
program requirements.
That is an inefficient use of the regional center's time of
USCIS' time. If you can have dialog up front and say, ``OK,
this is what we want to do. We want to do this building in the
District of Columbia. We want to do this ski resort in Vermont,
but we think we want to do it this way. Is this OK,'' and USCIS
says, ``Well, you ought to change something along these
lines,'' the regional center is happy to change them up front.
They want to make it work. They are partners with the
USCIS. If you get that taken care of up front, then the USCIS
can spend its time, as Mr. Drinkard pointed out, looking at the
individual investor and that he or she earned his money
correctly.
So it makes everything more efficient if you have more
dialog up front and the preapproval process is one way to do
that.
Chairman Leahy. Thank you very much. I will submit a couple
questions for the record.
Senator Sessions.
Senator Sessions. Thank you. Mr. Drinkard, would you share
for us the kind of inquiries you get and the nature of the
investors and what their motivations might be and how this
program ideally should work?
Mr. Drinkard. Yes, sir. Thank you. Again, I will start out
by saying it is an economic development program. In Alabama, we
have numerous job clusters, which includes everything from
agriculture, high technology, light manufacturing, heavy
manufacturing, schools, resort amenities, hotels, golf courses,
even cruise ship lines, virtually anything that can create
jobs, employ people.
So we have a very wide variety. As a result of that, we
look at numerous projects that would like to be considered for
EB-5 funding. But the big problem or one of the biggest
problems we have is these people, as has been pointed out and
forgive me for just reiterating it, but these people, in so
many cases, are hesitant to get involved if this thing is not
going to last.
For the past year or so, we have been put on a CR,
continuing resolution, for just a few months. Prior to that, we
had been considered 3 to 5 years. This is something that needs
to be made permanent in order for us to get more attention from
these people.
Senator Sessions. Just to get a little more background,
what is it that attracts, say, an investor to this program? Why
would they like it?
Mr. Drinkard. What attracts the best, our experience has
been, first and foremost, is the green card. The second is the
return of their initial investment at the end of a 5-year
period, unless it is an equity investment, of which it would be
a different term.
Third, any return on that investment during that time,
those funds are invested in a regional center project.
Senator Sessions. So these provide incentives to make
people be interested in the program. Mr. Kruszka, does it have
any impact on a major CEO of a company, international
corporation, that builds a plan in Alabama or any state? Can
they access the benefits of the immigration provisions?
Mr. Kruszka. They can. Currently, though, it is difficult
to do a large project the way the program is set up.
Senator Sessions. I just know an example of a major
international corporation and the individual wanted to be an
American citizen and was hiring 4,000 Americans, Alabamians, to
work in his plant and it took a while to get it.
So this necessarily would be the vehicle that individual
would use to become an American--green card, permanent
resident, perhaps a citizen later.
Mr. Kruszka. Yes. They could do that.
Senator Sessions. They could use this program.
Mr. Kruszka. Yes, they could.
Senator Sessions. Mr. Yale-Loehr, did you have any comment
on that, on whether that is a wise policy?
Mr. Yale-Loehr. It is a wise policy. If the CEO is bringing
that many jobs to Alabama, then certainly they should be able
to get a green card and the EB-5 program is one way to do that.
But as you have seen from the various witness testimonies,
it is not easy for anyone to get an EB-5 visa right now and the
question is how can EB-5 regional center stakeholders work with
the agency and with you to try to make the program achieve its
true potential.
Senator Sessions. You do not seem to count in your
numbers--I know one plant in Alabama recently, a few years, was
a $1 billion investment, 4,000 employees at the main automobile
plant.
You are not counting those as part of this program,
obviously. Your numbers would be higher, I think, if you were
counting that kind of foreign investment.
Mr. Kruszka. Well, it would have to be approved and it
would have to--I am not sure which automobile plant you are
talking about, but the investors would have to come forward and
the way the program is set up right now, they would probably
have to stagger the investors to be able to create that many
jobs in the timeframe that is currently set up in the program.
Senator Sessions. Mr. Drinkard, do you have a comment?
Mr. Drinkard. Senator Sessions, I agree with those
comments. It is a little more complicated in that in a project
that large, you are going to have a minimum of a 2-year
construction period. Now, it gets a little fuzzy on how you
include construction workers.
It is my understanding, and Mr. Kruszka can address this
much better than me, but there is a possibility to include
indirect and induced jobs that are created by those temporary
construction workers.
There is also the possibility, if those construction
workers have been there or if those positions have been there
for 2 years or more, that those jobs can be included. For
instance, if you have got a very large manufacturing facility
that has 2,000 construction workers 2 years or more, then it
gets a little hazy whether you count just those workers or
whether you count those workers and the induced and indirect
with them.
Those could help get the funds into the program quicker,
but at the same time, take into consideration that these----
Senator Sessions. But apparently, when they make their
decision, they do not access this program.
Mr. Drinkard. They cannot get the funds, Senator. That is
just it. The funds will go into an escrow account and until
that I-526 petition is approved, the funds do not break escrow.
So these petitions could be approved at different times,
which could hold up those funds for that project. That company
may be very hesitant and unable to depend on those funds, not
knowing when they are going to get them.
Senator Sessions. Mr. Kruszka, some critics have said that
this program amounts to the selling of a national birth right
or could allow people to abuse the system, have governmental
moneys from foreign countries come in for spying or other
intelligence interests that they might have.
Do you have any thought about that? I do not believe that
is a legitimate complaint, but what would you say to those
complaints?
Mr. Kruszka. We have heard those complaints before, Mr.
Senator, but we have not been able to verify any of that being
an issue in the program. We do verify where the money is coming
from and that is an extensive process between the investor in
the petitioning process, and we have not had a problem. I do
not think that is an issue with this program.
Senator Sessions. Do you have a fraud rate and is there
anything that can be done to reduce any fraud that might occur?
Mr. Kruszka. We do not have the same fraud that was
mentioned in the early 1990s that somebody mentioned earlier
today that we are aware of. We are looking for fraud. We do
have fraud units in the center to review fraud, if fraud is
apparent. But I am not aware of any large-scale fraud scheme in
any of the EB-5 investment schemes.
Senator Sessions. Mr. Drinkard, you note that we need to
make the regional center move from pilot program to permanent
program. I would just note that I am glad Senator Leahy is
going to be on the conference committee and maybe he can--that
is really critical.
We have got to have some other folks come along on the
House side to get this thing done. Mr. Chairman, I am glad you
are there.
Chairman Leahy. Senator Franken.
Senator Franken. Thank you, Mr. Chairman. I would like to
thank both you and the Ranking Member, Senator Sessions, for
encouraging making this program permanent. I want to learn a
little bit about it. Basically, I understand there are 24
states that have regional centers and Minnesota is not one of
them. Iowa, South Dakota and Wisconsin do.
So basically, I want to kind of know how to get in on this,
because I do believe it is a win-win. How does an EB-5 regional
center start? Does it start with a project? For example, how
did yours start, Mr. Stenger?
Mr. Stenger. Actually, Senator, the Chairman and the then
Governor of Vermont, Howard Dean, in 1997, we collaborated on a
project for Jay Peak, but when we got to the point of
determining what should the regional center be, ``the Secretary
of the Vermont Agency of Commerce and Community Development, a
fellow by the name of William Shouldice, called me and he
said,'' ``Do you see any reason why the whole state should not
be a regional center? ''
I said, ``I do not see any reason why it should not be.''
The entire State of Vermont is a regional center. Now, I am not
here to give you advice, but that is one point I might suggest.
Senator Franken. So it started with you and the Senator and
the Governor saying, ``Let us do this.''
Mr. Stenger. Let us do this and, in our case, we are a
statewide regional center and one of the few.
Senator Franken. How did you attract your first investment?
Mr. Stenger. We put together a project that would be a job
creator, that would help us create and develop services that we
did not have. We put together a marketing plan. We started to
reach out to places in the world where we knew people were
interested in coming to the United States.
Our first market was the United Kingdom and I would say in
our first project, about 60 percent of our investors are from
the U.K. Many of them, frankly, just want to move to the United
States where it is warmer, parts of the United States that are
warmer.
Senator Franken. So I take it they can live not in the
regional center itself.
Mr. Stenger. They can live and work anywhere in the United
States they wish.
Senator Franken. Hence, a warmer place.
Mr. Stenger. The investment goes into our job-creating
program and I recommend that you work with your state economic
development department and you would do a lot worse by
mirroring Vermont.
Senator Franken. Professor Yale-Loehr.
Mr. Yale-Loehr. I actually had a phone conversation with
somebody from the Minnesota Economic Development Agency about 2
months ago inquiring about setting up a regional center in
Minnesota. So I can put you in touch with him and we can see
how we can get going a regional center in Minnesota.
Senator Franken. Obviously, you are the kind of person, Mr.
Stenger, who knows how to find these people. When you said we
started looking where we knew there were people who wanted to
come to America and had money to invest, how do you know that?
How did you know that?
Mr. Stenger. Well, Senator Leahy was referring to Canada.
There are immigration seminars around the world where Canada,
New Zealand and Australia collaborate together and I went to
London to observe one of these seminars and I was amazed at the
thousands of British citizens who attended this seminar to
learn about immigrating to Canada, New Zealand and Australia.
It is a process. We did not go from knowing everything
about where the market is to being there. It will take time.
But believe me, Canada, New Zealand and Australia are in the
business of finding capital and they are out there.
Senator Franken. And what is a regional center physically?
Is it an office within the state's economic development office?
What is it?
Mr. Stenger. In our case, the Department of Commerce in
Montpelier, our capital, they are responsible for overseeing
the regional center and they are our go-to sponsor, so to
speak. When we have a project, whether it is a biotech research
idea or a hotel or some other small business, you would go to
the Department of Commerce, run your ideas past them.
If they feel it is consistent with what the spirit of the
regional center is all about, they may communicate with CIS and
let them know that this is a bona fide project in their eyes
and then you can move forward.
Senator Franken. Thank you.
Mr. Stenger. Thank you.
Chairman Leahy. I should note, when you mentioned the
weather, Senator Franken and I are not concerned about the
weather.
Senator Franken. We have beautiful summers, lovely falls,
and wonderful springs and Minnesotans have learned to adapt to
winter by wearing warm clothes.
Chairman Leahy. A lot of warm clothes.
Senator Franken. Well, not necessarily. There has been a
lot of technology in Thinsulate and other things that make
Minnesota an incredible place to live and do business.
Chairman Leahy. Let us ski Vermont.
Senator Franken. We do not have mountains. We have other
things. We have lakes, beautiful lakes, fish.
Chairman Leahy. This could degenerate beyond one evening.
Senator Sessions, unless you have further questions, I am going
to put--I will close up. I do have submissions from both Mr.
Stenger and Mr. Yale-Loehr. Mr. Stenger has asked that several
letters from contractors and other businesses around Vermont be
included, and they will be part of the record.
[The letters appear as a submission for the record.]
Chairman Leahy. Mr. Yale-Loehr has asked that several
letters from regional centers across the country be placed in
the record, and they will be.
[The letters appear as a submission for the record.]
Senator Sessions. I would just note and observe that
Canada, New Zealand and Australia have thought a lot about
immigration policy and a more merit-based point system is what
they use and they are, wisely, I think, looking for investors
who will create jobs in their country, and we can do better
about that.
Mr. Yale-Loehr, do you think that our program is
competitive with, say, the Canada program that has been ongoing
for quite a few years? I think they are very happy with it.
Just how would you compare the two programs?
Mr. Yale-Loehr. Well, I know the EB-5 program in the United
States has not raised nearly as much capital as in Canada, for
example. I am not an expert on the other immigrant investor
programs, but I know, in Canada, they raised $6 billion coming
into Canada in the same time period that we raised $1 billion.
I think based on the suggestions at this hearing today,
there are a lot of ways that we can make this program in the
United States run more effectively and I think that will do a
lot to increase the number of investors who come to the United
States and thereby help the EB-5 program achieve its true
potential.
Senator Sessions. Thank you. I appreciate the entire panel.
I believe you have provided valuable information to us. Thank
you very much.
Senator Franken. I just want to thank you all and I will
follow up with Professor Yale-Loehr on the Minnesota contact.
Thank you, Mr. Chairman.
Chairman Leahy. We are adjourned.
[Whereupon, at 11:20 a.m., the Committee was adjourned.]
[Questions and answers and submissions for the record
follow.]
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