[Senate Hearing 112-939]
[From the U.S. Government Publishing Office]
S. Hrg. 112-939
REAUTHORIZING THE EB 5 REGIONAL CENTER PROGRAM: PROMOTING JOB CREATION
AND ECONOMIC DEVELOPMENT IN AMERICAN
COMMUNITIES
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
DECEMBER 7, 2011
__________
Serial No. J-112-56
__________
Printed for the use of the Committee on the Judiciary
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COMMITTEE ON THE JUDICIARY
PATRICK J. LEAHY, Vermont, Chairman
HERB KOHL, Wisconsin CHUCK GRASSLEY, Iowa, Ranking
DIANNE FEINSTEIN, California Member
CHUCK SCHUMER, New York ORRIN G. HATCH, Utah
DICK DURBIN, Illinois JON KYL, Arizona
SHELDON WHITEHOUSE, Rhode Island JEFF SESSIONS, Alabama
AMY KLOBUCHAR, Minnesota LINDSEY GRAHAM, South Carolina
AL FRANKEN, Minnesota JOHN CORNYN, Texas
CHRISTOPHER A. COONS, Delaware MICHAEL S. LEE, Utah
RICHARD BLUMENTHAL, Connecticut TOM COBURN, Oklahoma
Bruce A. Cohen, Chief Counsel and Staff Director
Kolan Davis, Republican Chief Counsel and Staff Director
C O N T E N T S
----------
DECEMBER 7, 2011, 10:01 A.M.
STATEMENTS OF COMMITTEE MEMBERS
Page
Grassley, Hon. Chuck, a U.S. Senator from the State of Iowa...... 3
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont. 1
prepared statement........................................... 50
Schumer, Hon. Chuck, a U.S. Senator from the State of New York,
prepared statement........................................... 52
WITNESSES
Witness List..................................................... 25
Divine, Robert C., Attorney, Baker, Donelson, Bearman, Caldwell,
and Berkowitz, P.C., and Vice President, Invest In the USA
(IIUSA),
Chattanooga, Tennessee......................................... 8
prepared statement........................................... 41
North, David, Fellow, Center for Immigration Studies, Washington,
DC............................................................. 7
prepared statement........................................... 32
Stenger, William J., President and Chief Executive Officer, Jay
Peak Resort, Jay, Vermont...................................... 5
prepared statement........................................... 26
QUESTIONS
Questions submitted to Robert C. Divine by Senator Grassley...... 56
Questions submitted to Robert C. Divine by Senator Klobuchar..... 59
Questions submitted to David North by Senator Grassley........... 55
Questions submitted to David North by Senator Klobuchar.......... 58
Questions submitted to William J. Stenger by Senator Grassley.... 53
ANSWERS
Responses of Robert C. Divine to questions submitted by Senators
Grassley and Klobuchar......................................... 67
Responses of David North to questions submitted by Senators
Grassley and Klobuchar......................................... 60
[Note: At the time of printing, the Committee had not received
responses from William J. Stenger.]
MISCELLANEOUS SUBMISSIONS FOR THE RECORD
Atteberry, Kimberly, President, Vermilion Consulting LLC,
statement...................................................... 116
Berthel Fisher and Company, Thomas J. Berthel, Chief Executive
Officer, December 5, 2011, letter to Senator Grassley.......... 101
City of Amarillo, Hon. Paul Harpole, Mayor, Amarillo, Texas,
December 5, 2011, letter to Senator Hutchison.................. 87
City of Dallas, Hon. Michael S. Rawlings, Mayor, Dallas, Texas,
November 28, 2011, letter to Senator Hutchison................. 79
City of Houston, Hon. Annise D. Parker, Mayor, Houston, Texas,
December 6, 2011, letter to Senator Cornyn..................... 92
City of Houston, Hon. Annise D. Parker, Mayor, Houston, Texas,
December 6, 2011, letter to Senator Leahy...................... 140
City of New York, Hon. Michael Bloomberg, Mayor, New York, New
York, statement................................................ 138
Civitas Capital Group, Daniel J. Healy, Chief Executive Officer,
statement...................................................... 93
Civitas Capital Management, LLC, Daniel J. Healy, Managing
Partner,
November 28, 2011, letter to Senator Cornyn.................... 76
Cornyn, Hon. John, a U.S. Senator from the State of Texas,
submission of eight letters and one statement.................. 120
EB5 Capital, Angelique G. Brunner, President, Owner, DC Regional
Center, and Principal, EB5 Sugarbush, statement................ 102
Greater Des Moines Partnership, The, Jay R. Byers, Senior Vice
President, Government Relations and Public Policy, December 5,
2011, letter to
Senator Grassley............................................... 86
Greater New York Chamber of Commerce, Mark Jaffe, President and
Chief Executive Officer, December 5, 2011, letter to Senator
Leahy.......................................................... 84
Harry's Cafe and Harry's Steak, New York, New York, November 30,
2011, letter................................................... 110
Hilton Worldwide, William B. Fortier, Senior Vice President,
Development--Americas, December 12, 2011, letter............... 113
Hyatt Hotels Corporation, Stephen G. Haggerty, Global Head Real
Estate and Development, December 14, 2011, letter to Senator
Leahy.......................................................... 109
Iowa Economic Development Authority, Deborah V. Durham, Director,
December 8, 2011, letter to Senator Grassley................... 114
LinkAmerica, Inc., Andres Ruzo, Chief Executive Officer, November
29, 2011, letter to Senator Cornyn............................. 80
Marriott International, Inc., Anthony G. Capuano, Executive Vice
President, Global Development, December 6, 2011, letter to
Senators Leahy and Grassley.................................... 90
Matthews Southwest, Jack Matthews, President, November 28, 2011,
letter to Senator Cornyn....................................... 78
New York City Regional Center, Paul Levinsohn, Esq., Managing
Principal, and George Olsen, Esq., Managing Principal,
statement...................................................... 141
Real Estate Roundtable, The, Jeffrey D. DeBoer, President and
Chief Executive Officer, December 5, 2011, letter.............. 88
Spencer Crain, Elise A. Healy, Attorney at Law, December 2, 2011,
letter to Senator Leahy........................................ 83
StoneGate Senior Living, LLC, John F. Taylor, Chief Executive
Officer,
December 1, 2011, letter to Senator Cornyn..................... 81
Texas Association of Business, Bill Hammond, President, December
13, 2011, letter............................................... 144
REAUTHORIZING THE EB-5 REGIONAL CENTER PROGRAM: PROMOTING JOB CREATION
AND ECONOMIC DEVELOPMENT IN AMERICAN COMMUNITIES
----------
WEDNESDAY, DECEMBER 7, 2011
United States Senate,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 10:01 a.m., in
Room SD-226, Dirksen Senate Office Building, Hon. Patrick J.
Leahy, Chairman of the Committee, presiding.
Present: Senators Leahy, Grassley, Sessions, and Cornyn.
OPENING STATEMENT OF HON. PATRICK J. LEAHY,
A U.S. SENATOR FROM THE STATE OF VERMONT
Chairman Leahy. Good morning. Thank you for being here on a
rainy, sloppy morning. I am hoping that in Vermont the
temperature is 10 or 15 degrees lower because that would mean
about 10 inches of snow, which we describe as something between
a dusting and a snowfall back there.
I thank our witnesses for joining us today to discuss the
EB-5 Regional Center Program and its proven record of creating
jobs in America. In 2011 alone, this program is on track to
create an estimated 25,000 jobs and provide direct investments
in American communities of $1.25 billion. And, of course, there
is great potential to increase the program's annual benefits.
If the full number of visas allocated to the program are
utilized, based upon investment and job creation requirements,
the program has the potential to create or preserve 100,000
jobs per year, with contributions of $5 billion in foreign
capital investment. That is as much of a win-win program as one
could think of. The benefits come at no cost to American
taxpayers. The program is and should continue to be an
important component of our overall immigration system.
Now, the current authorization for the program is set to
expire at the end of September 2012, and I have talked with a
number of Senators, both Republicans and Democrats, who believe
along with me that it is critical that Congress support U.S.
Citizenship and Immigration Services, which administers the
program, along with the many men and women who are working hard
to bring jobs to their communities, by enacting the permanent
authorization legislation that I introduced in March of this
year. I thank the Chairman of the Subcommittee on Immigration,
Refugees, and Border Security, Senator Schumer, for joining me
as a cosponsor of the legislation. I know that like many parts
of the United States, from Alabama to Vermont, entrepreneurs in
New York City have turned to financing through the EB-5
Regional Center Program.
Like any program, there is always room for improvement, and
I commend Director Mayorkas at USCIS and Homeland Security
Secretary Janet Napolitano for making the program a central
part of the Department's contribution to the President's
broader job creation efforts. The history of our Nation has
been written in part through the contributions of immigrants.
My maternal grandparents came to Vermont from Italy and started
a small stone-carving business in South Ryegate, Vermont, as
Mr. Stenger knows. That is up near his part of the State. The
place does not have many jobs. It had a lot more jobs once they
started their business. That is replicated in so many other
areas, not only in our State but all 49 other States. And the
EB-5 visa and other employment-based visa categories within our
immigration system can play a meaningful role in writing our
future economic resurgence.
I have been working for many months with interested parties
and USCIS to put together a legislative framework to make
significant improvements to the overall program to provide them
with additional authorities to ensure that the program
maintains the highest level of integrity and efficiency. I have
shared this framework with the Judiciary Committee's Ranking
Member, Senator Grassley, and I hope we can work together to
make the program an even more secure and effective job creator.
But I think we should move forward with a permanent
authorization without further delay. I think Congress has to
show potential investors from around the world that America
welcomes immigrant investors and values their contributions. If
not, then we are going to lose those potential investors to our
neighboring country of Canada or to the United Kingdom or to
Australia or other nations that recognize immigration through
investment and seek it out. We are already hearing that the
uncertainty about the program's future is a drag on investment
and on our economic recovery.
We are going to hear from Bill Stenger of Jay Peak,
Vermont. His work, financed in part through the EB-5 Regional
Center Program, has revitalized a very rural part of Vermont.
It has turned a beloved and iconic Vermont ski resort into a
world-class, four-season resort. I know that when I go up there
and I hear carpenters and plumbers and electricians from that
area who live in that area tell me they are making more money
than they have ever made before, and they have been able to do
more for their kids, they can invest in the community, they are
seeing the training they had as Vermonters pay off, and now
they are actually making money in an area where there was not
much money to be made, it really makes this Vermonter happy.
In Texas, the city of Dallas has recently entered a
partnership with a capital management firm to create the City
of Dallas Regional Center to create jobs for the people of
Dallas. Companies like Marriott Hotels and Lennar Homes have
turned to the EB-5 program to finance job-creating projects
around the country. So this is happening all over, and, again,
I think that is why we have support for this from both
Republicans and Democrats. But I would like to see--I will put
my full statement in the record, but I would like to see this
become permanent so that investors can plan.
[The prepared statement of Chairman Leahy appears as a
submission for the record.]
Chairman Leahy. Senator Grassley.
OPENING STATEMENT OF HON. CHUCK GRASSLEY,
A U.S. SENATOR FROM THE STATE OF IOWA
Senator Grassley. Thank you, Mr. Chairman.
This program and its regional centers, now 21 years old,
was created to benefit American communities through investment
and job creation. Certainly at a time of economic uncertainty,
high national unemployment, and stagnant growth, we must
consider all tools at our disposal to increase economic
activity.
While I supported the EB-5 Regional Center Program in the
past, I hope to hear how this program can better serve our
Nation's needs in the future. Today's hearing is a way for us
to conduct our constitutional duty of oversight. It is
important for us to review the EB-5 program to determine how
many jobs are created and hear whether the program is
increasing economic activity in the areas most needed.
I hope to work with the Chairman on reauthorizing a
reformed and cost-effective program in addition to several
other immigration programs that will expire at the same time.
We need to enact reforms that will make the EB-5 Regional
Center program worthy of its goals.
Some may argue that the EB-5 Regional Center Program is
doing very little to stimulate the economy. I appreciate the
administration's recent attempts to focus energy and attention
on reforming the program and increase participation in regional
centers. The changes they institute will help, but at the end
of the day, one fact remains. The program is simply a way for
wealthy investors to buy a green card, not only for themselves
but for their families. No skills or management experience are
needed. One only needs to write a check to gain entry into the
United States. While taking a financial risk in projects or
businesses in the United States is admirable, evidence suggests
that it is not doing enough to spur job creation.
Since Congress kept the number of employment-based
immigrants that are allowed to enter the United States each
year, it is important that we utilize those visas to the best
extent possible. We must have an immigration system that is
based on merit. We should be taking the best and the brightest.
We can afford to be choosy, so we must elect to provide
immigrant visas to those with tremendous skills that will
benefit our country in the long term.
So, in that vein, we must figure out where the EB-5
Regional Center Programs fit into this equation. I have the
question of whether or not the EB-5 program attracts the
individuals we need or are we simply selling visas to the
highest bidders.
I want to take a moment to express serious concern about
reports that the EB-5 Regional Center Program is creating jobs
for people in this country illegally. The U.S. Citizenship and
Immigration Services Administrative Appeal Office reviewed the
applications for one investor in the South Dakota Regional
Center. The AAO said that the agency was correct in denying his
request for green card status because the employees were in the
country illegally. If we are going to allow wealthy foreigners
to enter the United States to create jobs, I would sure hope
that U.S. citizens are the benefactors. I would like to hear
today about how the centers create jobs, how they report this
information to the Federal Government, and whether the USCIS is
doing substantial auditing of centers to verify the information
received from the regional centers.
We must also do a better job of rooting out abuse in EB-5
promoters abroad. Reuters recently reported on how cash-hungry
American businesses are working abroad to promote EB-5 Regional
Center Programs. Many of these EB-5 promoters are
mischaracterizing the program, luring investors here and
robbing them of the American dream. In fact, China has
reportedly put restrictions on these promoters. When asked by
Reuters, both the USCIS and the Securities and Exchange
Commission were unaware of any marketing abuses. Maybe it is
time that these agencies figure out what is truly going on.
I would like to work with Chairman Leahy on ways to
strengthen the oversight over the program. I think he may have
some good ideas on doing that, including requiring more
reporting by the centers and ending centers that are not
producing as they promised.
In addition to restoring program integrity, I think it is
important to consider whether the dollar amount should be
raised. They have remained $500,000 and $1 million since the
early 1990s.
Finally, we must close any loopholes that allow a foreign
investor to bring capital to the table, receive a green card,
and then withdraw his financial support and walk away from the
regional center. I realize that we have testimony from every
single regional center program citing the benefit foreign
investment has provided their community. I appreciate Mr.
Stenger appearing before us again today and sharing with us how
the program has benefited Vermont.
Conversely, I look forward to hearing from Mr. North, a
Fellow at the Center for Immigration Studies. Mr. North will
provide a different perspective.
I also look forward to hearing from Mr. Divine, who had
experience in overseeing the operation of the program when he
worked as Chief Counsel and Acting Director of the U.S.
Citizenship and Immigration Service.
Thank you, Mr. Chairman.
Chairman Leahy. Well, thank you, and I can assure you I
will work with you on what we can do to make this permanent. I
know Senator Sessions and Senator Cornyn on this Committee and
Senator Schumer and others have expressed an interest in going
forward with the program, and I am happy to work with them. I
just want to bring enough stability into it so that people can
plan.
Now, William Stenger, our first witness, comes to us today
from my home State of Vermont, as I have said. He is currently
the president and chief executive officer and co-owner of the
Jay Peak Resort in Jay, Vermont. He has served as the chairman
of the Vermont Ski Areas Association and was chairman of the
Vermont Travel Council from 1998 to 2007. The Vermont Chamber
of Commerce in a statewide vote selected him as the 2011
Citizen of the Year for his work in transforming Jay Peak into
a four-season resort, and also not just for what he has done
for Jay Peak, but the huge amount of economic development it
has created in the Northeast Kingdom of Vermont. Mr. Stenger
was instrumental in creating the Vermont Regional Center in
1997.
I would note also for the record that both he and his wife
are personal friends of me and my wife. We value their
friendship, and I especially value all the jobs you created up
there.
Mr. Stenger, please go ahead.
STATEMENT OF WILLIAM J. STENGER, PRESIDENT,
JAY PEAK RESORT, JAY, VERMONT
Mr. Stenger. Mr. Chairman and Senator Grassley, thank you
for this opportunity to be before you today. My name is Bill
Stenger, and I am president and co-owner of Jay Peak Resort
located in Jay, Vermont.
I am very appreciative of this opportunity to meet with you
today and share with you my perspective on the significant
value the EB-5 foreign investor Regional Center Program
represents to my employees, my community, and the State of
Vermont and why I urge Congress to make this program permanent.
My company, Jay Peak Resort, was founded in 1955 as a
winter ski resort. It is located in Orleans County, 3 miles
from the Canadian Border. George Aiken, one of Vermont's most
revered U.S. Senators, called the northern region of Vermont
the ``Northeast Kingdom'' because of its beauty and authentic,
hardworking people.
Orleans County is a place of great rural agricultural
character, with beautiful mountains, streams, and lakes, but it
also has the most significant unemployment and economic
challenge of any region in Vermont.
However, despite these facts, I am very optimistic about
the economic 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 rural communities in this terribly troubled
economic time solely because of the EB-5 foreign investor
program.
In 1997, I had the opportunity to work with you, Mr.
Chairman, and at the time Governor Howard Dean to create the
Vermont Regional Center and its first EB-5 Pilot Project in
Vermont. In 2004, because of improved CIS efforts and the
renewed commitment of our State officials led by Governor Jim
Douglas, the EB-5 program became truly functional from our
perspective in Vermont.
Since 2005, Jay Peak has developed several EB-5 projects at
the resort creating over 2,000 jobs in our region and over the
next 2 years will create that number of jobs again in this
northern rural community.
The EB-5 program has provided us the most important tool we
need to build our business and create economic energy:
affordable equity capital.
Affordable capital is almost non-existent in this
marketplace. However, through the EB-5 Regional Center Pilot
Program, Jay Peak has raised over $250 million of equity
capital by welcoming over 500 investors from 56 countries. This
capital has helped us build year-round facilities that we
desperately need in order to be competitive, but also helps us
create full-time job opportunities for so many citizens
throughout northern Vermont's highest unemployment communities.
The EB-5 program is a win-win-win program for all involved.
Jay Peak is gaining access to equity capital to create
facilities it needs, and by doing so scores of quality year-
round jobs are created in a rural, high unemployment area where
our Government wants to see job creation.
In exchange for the job-creating equity capital investment,
the foreign investor benefits from a green card for themselves
and immediate family members. I have met personally almost
every investor participating in the Jay Peak program. They are
a group of wonderful people, so appreciative of the opportunity
to live in and contribute to our society. I can tell you that
their equity investment is changing our region in a profound
and positive way. Once in the United States, they have
continued to contribute as every one of them are well-educated,
successful people who have brought their family values and
capital with them. They are now living throughout the United
States and contributing to the communities they live in.
The success of Jay Peak's EB-5 program has now led to other
important job-creating projects in our community. Ariel Quiros,
my partner in Jay Peak, and I have created AnC Bio Vermont, a
biotech research company that will employ 200 people in
Newport, Vermont, and will open in 2012-13. EB-5 investment has
made this possible. We are also working on additional Orleans
County commercial facilities, affordable housing and
infrastructure programs, all scheduled for 2012 and 2013,
resulting in several thousand more job opportunities--all EB-5
funded, all with overwhelming community support and significant
economic impact. However, unless this program is extended, none
of these job expansions will take place.
I would like to close by mentioning a few things that will
make the EB-5 program better for all concerned.
Congress must make this program permanent so regional
centers can concentrate on developing quality programs and
long-term job-creating programs. The short-term extensions that
have taken place in the past cripple the effectiveness because
the projects cannot plan correctly and potential investors will
not have the confidence to stick with the program because of
its uncertainty.
USCIS should make every effort to be as efficient as
possible with swift EB-5 case processing so that predictability
can become a program asset and not a program concern.
Mr. Chairman, Senator Grassley, thank you again for this
opportunity. I look forward to answering questions you might
have in a few minutes.
[The prepared statement of William J. Stenger appears as a
submission for the record.]
Chairman Leahy. Thank you very much, Mr. Stenger.
Our next witness is David North, a Fellow at the Center for
Immigration Studies, which is a Washington, DC, think tank. He
joined in 2008. In addition to posts in Federal and State
government, he is a former Assistant Secretary of Labor, and he
has conducted immigration policy research for several decades.
Mr. North, welcome. Please go ahead.
STATEMENT OF DAVID NORTH, FELLOW, CENTER FOR IMMIGRATION
STUDIES, WASHINGTON, DC
Mr. North. Thank you, Mr. Chairman, Senator Grassley. We
are gathered here to discuss what I think is, contrary to what
my friend to the right just said, a dysfunctional portion of a
silly program which should be allowed to wither and die.
As background, the INA and its employment-based section
permits aliens to secure green cards by investing various sums
in the Nation. This is the program for the fifth and lowest
priority of aliens coming through the employment-based section,
therefore it is called EB-5. The most troublesome part of the
EB-5 program relates to the regional centers, largely private,
for-profit entities--not true in Vermont--that identify
investments that can provide green cards to aliens making half-
million-dollar short-term investments. That sum allows the
alien and his family after 2 years to secure a full set of
green cards.
The other part of the program permits the issuance of green
cards for a full-million-dollar investment without reference to
the regional centers. It is the regional center part of the
program which is up for reauthorization, not the larger
program, which has some of its own problems. My conclusions
about these programs come after examining the American program
from the outside fairly carefully and after having been
retained by the Government of Australia some years ago to
evaluate its somewhat comparable program from the inside. There
are seven reasons for my views.
First, the program is placed in a very odd and non-helpful
bureaucratic location for the stimulation of international
investment in the United States.
Second, its scale is all wrong. We are giving away too much
for too small of an investment. Further, raising venture
capital half a million dollars a tranche is, to say the least,
inefficient. The big guys do not do it that way. The regional
centers, with their half-million schemes, essentially undercut
the more sensible million-dollar part of the EB-5 program.
Third, such programs, if we have them at all, as they do in
Australia, should be about creating business entities, not
passive investments. It should be about creating real jobs, not
elaborate calculations about the indirect creation of jobs,
which is now part of the legislation.
Fourth, the EB-5 program by its nature attracts sub-par
investments and often scandals. Perhaps that is one of the
reasons why it has failed year after year to reach the
legislative goal of 10,000 investment visas.
Fifth, the Regional Center Program is inherently clumsy,
and the program is too filled with middlemen, both public and
private. The program has more than its share of scandals, which
I will get into later if anybody is interested.
Sixth, it should not be streamlined, which is what USCIS is
currently suggesting. This is an agency that loves to say yes
to applicants, but as the table in my testimony shows, USCIS
officers have much more trouble with EB-5 applications than
others. I think that is something that nobody has really talked
about much. There are high rates of internal denials in this
program and for good reason. Some of the paper they see must be
pretty dreadful.
Seventh, in this program visas go to people who could not
get them any other way and to people whose planned investment
is actually less, according to the Federal Reserve, than the
average mean net worth of all American families in 2007.
Let me expand on one of my observations. In 2009, total
foreign investment in the United States increased by $1.9
trillion, according to the Department of Commerce. My estimate
based on the investors' green card applications filed 2 years
after the first investment--these are the solid ones that
remain and are approved. This is 2009--was that they had about
$191 million confirmed--that is my estimate. USCIS does not
provide the kind of data that we could use on this. And that
was a good year for the program. So for every $100 of increased
foreign investment that year, the EB program contributed one
penny.
Under a much more wobbly statistical base, the initial
applications of would-be immigrant investors, USCIS is telling
journalists that the level of investment in the just-concluded
year was about $1.2 billion. Let us accept that. But even that
number makes that ratio only 6 cents for every $100 of
additional foreign investment in a typical year.
Thank you for listening to me. I look forward to your
comments and questions.
[The prepared statement of David North appears as a
submission for the record.]
Chairman Leahy. Thank you.
Our next witness is Robert Divine. He is a shareholder of
Baker, Donelson, Bearman, Caldwell, and Berkowitz. He is the
head of the firm's immigration practice group. Mr. Divine
served as Chief Counsel of the United States Citizenship and
Immigration Services from July 2004 until November 2006, the
year in which he was Acting Director, and then Acting Deputy
Director. He has worked extensively with the EB-5 program in
private practice. He was elected, as I understand, vice
president of the Association to Invest in USA, the national
industry association of regional centers.
Mr. Divine, we are delighted to have you here. Please go
ahead, sir.
STATEMENT OF ROBERT C. DIVINE, ATTORNEY, BAKER, DONELSON,
BEARMAN, CALDWELL, AND BERKOWITZ, P.C., CHATTANOOGA, TENNESSEE,
AND VICE PRESIDENT, INVEST IN THE USA (IIUSA)
Mr. Divine. Thank you, Mr. Chairman, Senator Grassley, and
others. Thank you for having me.
I have submitted written testimony, and I am not going to
read from it. It is there and I hope it provides useful
background.
Chairman Leahy. It will be part of the record.
Mr. Divine. And it will be part of the record, so I thank
you for that. I will try to just give a brief bit of
information that might put things in perspective and respond to
a few questions that Senator Grassley embedded in his comments.
Yes, the investor visa, this EB-5 program, is one of many
ways that we allow immigrants to come to the United States. At
most, if all 10,000 slots were used, it would be 1 percent of
the immigration annually to the United States. It is not near
that yet, but it is growing and getting toward that.
Particularly as USCIS, the agency that oversees the
program, has been making the rules clearer and the processes
more rational and clear for the people who are organizing
investments and for the investors who are investing, more
people have been willing and able to put effort and money into
the process to find good projects and develop them, and then
more investors have been willing to invest their money and take
the risk and use the money to create the jobs that is the point
of the program.
If the agency can continue to speed their adjudication,
which they are trying to do--they are staffing up--that will
really help to improve the number of projects, the quality of
projects, and help the program meet its potential, because
people need to be able to get the approvals quickly in order to
take advantage of the opportunity for whatever project is
there. These projects do not wait around forever, and USCIS
understands that and are trying to speed the program, speed the
process.
That does not mean that they are relaxing their scrutiny,
and, in fact, they are ready to deny applications that are not
qualifying. And they do so, as was mentioned.
The EB-5 program or category is permanent in the code. The
regional center part of the program is not. It is part of an
appropriations bill that was enacted in 1992, and since then
that program has been extended five times for 19 years. It is
time for it to be permanent, and it needs to be done now and
not nearer to the date of expiration in September. People need
to plan. The process takes a good while to work up a project
and then to get the investors approved. And they do not want
their money flowing through until they have been approved. And
the specter of the expiration of this Regional Center Program
in September is already discouraging the development of
projects. So it really matters to do it now and not later.
I would like to clarify that the Regional Center Program is
not the same as the half-million-dollar thing. The idea of half
a million or a million is a function of the regular EB-5 law
that is part of the code. It just is a reality that most of the
regional centers that are pooling investments have set those in
places of high unemployment or in rural areas where half-
million-dollar investments are allowed, and that makes sense.
But it is not--those two are not necessarily tied together.
I think at this point I would emphasize in terms of the
dollar number, half a million dollars versus a million, it is a
good question. You know, is half a million dollars enough? The
idea of that level that is set in the code was that that amount
could be used if it is in a certain targeted area of high
unemployment or in rural areas. I guess the program has worked
in that almost all of the investment has been spurred in those
kinds of areas.
But half a million dollars is a lot of money. It is a lot
of money for one person to put in one risky project, and if you
put together a bunch of half million dollars in a pool in a
project, that can be a big project, and it can create a lot of
jobs.
I think I will stop there and be happy to answer questions.
[The prepared statement of Robert C. Divine appears as a
submission for the record.]
Chairman Leahy. Well, I appreciate that very much, and let
me ask a few questions.
Mr. Stenger, you have been involved with this program for
many years. Obviously, in the kind of business you are in, you
have to look for investment and financing opportunities
wherever you can. Tell me about what opportunities you have
been able to pursue because of financing through EB-5.
Mr. Stenger. Senator, we have been able to expand our
resort that, as I said earlier, was founded in 1955, a very
popular ski resort. Our goal from a business standpoint is to
convert it to a year-round facility. We are currently
employing--this coming winter we will employ over 1,200 people
at the resort itself. A year from now, that will exceed 2,000.
Because of the success of our EB-5 program and the job
creation that we are seeing at Jay Peak, we are also seeing
opportunities to develop investment in our region in areas like
technology, manufacturing, infrastructure development, and it
has been because of the EB-5 funding that we have been able to
develop that these other opportunities are taking place.
Now, you are very familiar with our region of Vermont. It
is all small businesses. Mr. North was mentioning that the big
guys do not raise money this way. Well, we are a small company
in a rural part of Vermont, and raising capital this way has
been effective for us. We are changing the lives of many
hundreds of people in our region. The $500,000 investment is a
marketable thing for us. We have worked hard at it, and we are
changing the landscape of the economy in an otherwise
incredible difficult time.
So I would tell you that the EB-5 program has helped us
build our company, but we are also making an impact on other
businesses and other opportunities in our region at a time when
development is just not taking place elsewhere.
Chairman Leahy. Well, you mentioned Mr. North. He has also
said that this money is more likely to show up in decaying ski
resorts in Vermont. I realize if you work at a think tank
inside the Beltway the idea that somebody would actually
believe in a ski resort--I mean, this is a town that will close
down in 3 inches of snow. We stay open with 2 feet of snow
overnight. But let me ask you this: You have traveled
extensively. You have talked to many potential investors around
the world. We have these current short-term authorizations.
What kind of reaction do you get from these investors around
the world when they see us going from short-term to short-term
to short-term reauthorizations?
Mr. Stenger. Senator, in a word, it is uncertainty, and
with uncertainty goes the question of whether or not an
investor should participate in a program. Having a permanent
authorization will give projects the opportunity to plan and
develop good programs and good projects, but it also gives the
investor the sense of confidence that what they become involved
in will have an opportunity to be developed to its completion.
Chairman Leahy. Well, let me ask a little bit more about
that. You talk about having, when this is finished, up to 2,000
people working there. I know this area very, very well, as you
have mentioned, and an awful lot of the jobs there are minimum
wage jobs when they are available at all. It had the highest
unemployment rate before you started doing this in the State.
I get the impression, talking to carpenters and plumbers
and electricians there, that they are doing a lot better than
they did before. Is that correct?
Mr. Stenger. I would tell you that the workforce that is
involved in our programs, there are two kinds of workers. There
is the developmental group, and then there is the operational
group. The developmental group are the construction workers. I
happen to bring a photo with me--and I will share it with you
afterwards--of just a fraction of the construction workers that
were involved in this past winter, last winter. We had 550
construction workers on our project in northern rural Vermont.
It was the largest construction project in the State. A
profound economic impact. Now that the construction is nearing
completion and we are going on to other construction programs,
the operational aspect of the facility kicks in. And we are
increasing our full-time employment this year by over 500
people alone just this year. So it is a remarkable
transformation, and it is taking place in a rural community
that, without this program, none of this would be going on.
So I have to just restate what an important win this is for
our community, what an important win it is for the State of
Vermont in terms of job creation. And, of course, it is a win
for the investor because they get access to coming to this
country. But I would restate again what--in our particular
case, we have doctors, lawyers, engineers, accountants,
entrepreneurial people, all part of our investment group
bringing their skills, their education. They are living around
the country. They are making contributions to their
communities, and they have certainly made a contribution to the
success of our community, and I am very grateful for that.
Chairman Leahy. It is not what you would call a decaying
ski resort.
Mr. Stenger. No. I would just share that we are about to
really kick the ski seasons off in Vermont. We will welcome 4
million skiers to the State. We have 16 wonderful ski areas. It
is 25 percent of our economy. We have 12,000 employees in our
industry, and we are not decaying. We are thriving, and we are
a wonderful place to visit, and I invite you all to come.
Chairman Leahy. The number of millions you are talking
about, I should just note for the record, Senator Grassley, we
are a State of 650,000 people, so that has a multiplier effect.
But you have heard that these EB-5 programs that immigrants
who come here have nothing to offer our Nation other than their
initial investment. But you said in the past that you make it a
point to get to know your investors. Would you agree they have
nothing to offer us other than their money?
Mr. Stenger. No, I could not disagree more. One of the
great benefits for me personally in this program has been the
opportunity to meet and welcome almost every investor to our
facility. We have 500 investors from 56 countries. I have met
personally 95 percent of them, welcomed them to the area, shown
them what we are doing. They have seen firsthand the impact
that their investment is making. They have walked the property.
They have seen the hundreds of construction workers. They take
great pride in what we are doing. They take great pride in the
fact that they are a partner in that effort. They see the job
creation. They see the gleam in the eyes of the employees that
know they have got a future. And they are proud of it.
They are skilled, educated people. As I said, they are
living in various States around the country, professional
people, well educated, many of them engineers, scientists. They
are a wonderful group, and they are all family people. And I
have been proud to meet them and proud to welcome them.
Chairman Leahy. Also, as my last question, in some of the
testimony this morning there has been a suggestion that, of
course, just with all the hundreds of billions, trillions of
dollars ready to invest, you should just go somewhere else.
Have you found that in this current economic environment it is
that easy to go somewhere just to raise money?
Mr. Stenger. I would tell you that in this climate the
ability to raise capital for the things we are doing would
have--it is impossible to do so in a manner that would allow us
as effectively and as quickly create the things we have done.
You can borrow money if you have got 50 percent down. And if we
have--we are just opening a $25 million indoor water park
facility. I could have borrowed half of that if I had the $12
million in cash to put up. Everyone knows that, yes, banks have
money to loan as long as you have got half of it in your pocket
before you ask for the other half. That is not how business
works these days.
Chairman Leahy. You are speaking from a real-world
experience, not from a think tank experience. I will leave that
simply as a gratuitous comment from the Chairman.
Senator Grassley.
Senator Grassley. Thank you.
I want to be responsible in this issue of undocumented
workers. I want to admit that we only have anecdotal
information, but I would like to ask you to what extent you
have to go or do go to make sure that the centers make sure
that the investments do not create jobs for people here
illegally. And I might also add to that whether or not it is
the center's responsibility, it is the investor's
responsibility, or the business that is involved.
Mr. Stenger. Senator, I am a hands-on owner of a business,
and I am on-property every single day. We have hired--as I
said, at the Peak we had 550 construction workers on our
project. The marching orders that I gave to my team is that we
are to hire local companies in almost every instance to do all
of the construction. We know these companies. They are made up
of 10, 15, 20, 30 employees. They are from our local counties.
They are Vermonters. They are benefiting directly from the
investment.
So we are a hands-on facility. I know the workers, I know
their families, and we have been able to employ--through these
last 3 years of terrible economic turmoil, we have been able to
employ almost every construction worker in our county and the
surrounding counties. They are U.S. residents. They live in the
area. Their families are there. They are invested in the
communities, and they are all U.S. workers.
Senator Grassley. You do not have to use e-verify, but I
would like to know whether or not you do.
Mr. Stenger. We do.
Senator Grassley. You do. Okay. Thank you.
Mr. North, along the same lines of the question I asked
him, has your research shown examples other--and I only gave
one example, so I want to admit that and be responsible about
it--of centers hiring undocumented individuals?
Mr. North. That kind of data is very hard to obtain from
USCIS, and I must say that what we do know about many of the
internal things about that agency as far as this program is
concerned relates to cases in which the staff has said no to an
application of some kind and then the regional center or the
individual entrepreneur has gone to the Administrative Appeals
Office--which is part of the agency--and there we get
documents, we get a hearing officer telling us what is going on
in that particular case. There were 28 cases that were appealed
in the year, I think, 2009, and in every single case the AAO
hearing officers, administrative law judges, said, ``Yes, the
staff was right. This is a bad application.''
So there is a quantity of bad applications out there, but
only once that process gets before an administrative law judge
do we see much in the way of detail.
Now, there was one case that you mentioned, and let me just
elaborate on that a little bit. This is a bankrupt--and there
is a lot of this going on--dairy farm in South Dakota that was
funded by----
Senator Grassley. Do not take too long because I want to
ask another couple questions. But go ahead and quickly finish.
Mr. North. The dairy farm had claimed 17 workers, and they
got into it, and the judge found that 16 of them were illegals.
Now, that is the one example I have, and it is a good example.
Senator Grassley. Okay. I am going to ask separate
questions of each of the three of you, but it deals with this
one issue. As I said in my opening statement, I am concerned
about the potential loophole that allows investors to withdraw
their investment in regional centers after receiving their
green card. So, Mr. Divine, are you aware of any instances in
which an investor withdrew the investment and walked away
immediately after receiving a green card? And if you are, or if
you think it is a problem, do you think that it is a loophole
that should be closed?
Mr. Divine. I would say that most of the investors, if you
asked them what are their goals, they would say, ``I want to
get a green card, and I want to keep it. In order to keep it, I
will need to see the jobs created in the time frame that they
need to be created.''
Two, ``One of these days I want to get my principal money
back. I do not want to lose my money.''
And, three, ``I would like to make some money if I can.''
Those are their priorities.
Sure, would they like to get their money out of a
particular investment quicker after the conditions are removed
from their permanent residence? I would say most people
probably would say, ``Yes, I would like to realize some gain
from that investment and then diversify.'' Ask anybody who has
made a bunch of money in any investment, they will tell you
that. But, in reality, very few of these investors have been
able to take their money out. If I put my money in a hotel
development----
Senator Grassley. Can I assume then that you are saying
that there does not need to be any changes made in that regard?
Mr. Divine. I do not think so.
Senator Grassley. Okay. Let me ask Mr. Stenger, is it
common for an investor in your experience to withdraw his or
her investment immediately after receiving a green card?
Mr. Stenger. Senator, no. Our programs require that the
investor be invested for a minimum of 5 years and be paid back
only if the business is in a position to do so at the end of
that time. So we have the benefit of the capital to create the
business, get it running, make it successful, assure that the
jobs will be created and maintained, and then only if the
business is successful will there be an exit strategy for the
investor.
Senator Grassley. And, Mr. North, do you have any comment
in regard to my question or what the other two witnesses have
suggested?
Mr. North. Yes, I do. Very quickly, the law says you can
take the money out after 2 years. In some cases you will find
that that is maybe not a good idea. Or maybe the investee will
not let you. But the law says you have got to invest for 2
years and that is all.
Second, at one of the stakeholders meetings put on by
USCIS, I asked a question: Have you done any research on how
much money stays beyond the 2 years? And the answer was no.
There is sort of a lack of curiosity in that agency about some
of these things.
Senator Grassley. Thank you, Mr. Chairman. I would like to
have a second round.
Chairman Leahy. Certainly.
Let me just ask, Mr. Divine, you hear this criticism that
the money only has to remain invested for 2 years. Has that
been your experience?
Mr. Divine. If money gets put into a hotel, as I was
beginning to explain earlier, the developer of that project
would have to be able to find somebody to buy the hotel or
would have to be able to find somebody to refinance it with
other money. That is not easy. It is not any easier necessarily
than when it was in the conditions that led to the foreign
investors being the best option for financing the thing in the
first place.
But, hey, if it is a successful project, it makes money,
and it can be sold, I do not see any reason why the project
should not be able to be sold and for the investor to be able
to realize the return of his investment, maybe gain on his
investment, just like every other investor.
Chairman Leahy. If you have a project that is funded
directly through the Immigrant Investor Program and it is
believed to be employing undocumented workers, Immigration and
Customs Enforcement could investigate the employer, could they
not?
Mr. Divine. They could. I mean, I think what we need to
realize also is that the case that is being cited as evidence
that sometimes these projects have hired an unauthorized worker
is one in which USCIS did some kind of checking and determined
that the worker was not authorized and stopped it. I mean, the
process worked.
Chairman Leahy. But that would be the same with any
company.
Mr. Divine. Every one of these employers is required to
complete the I-9 form, but USCIS goes a step further and does a
check of some kind that led to the case that has been
mentioned.
Chairman Leahy. I am not a witness here, but I am so struck
by Mr. North speaking of these decaying ski resorts in Vermont
and the suggestion that this is not creating jobs. I mean, I
recommend that all of you actually--Mr. North, in your case,
get out from inside the Beltway and go up there and talk with
some of these people. For one thing, you do not have too many
illegal immigrants who quite have the Vermont accent you hear
around there, especially when they talk about their
grandparents who live there, and parents and so on. In fact,
you almost need a simultaneous translation. They will say, ``We
have got about nine of us here, and we have been here since 5
o'clock this morning, Mister.''
[Laughter.]
Chairman Leahy. Not quite what an illegal immigrant might
be saying. In fact, I think Mr. Stenger would say that one of
his British investors was thinking, ``Are we all speaking the
same language here?''
Mr. Divine, let me ask one more serious question about the
short-term authorizations we have had in the program. I asked
Mr. Stenger this. Let me ask you what your experience is as a
former agency official. What does it do if Congress keeps
running up against a last-minute reauthorization? In this case
it would be, I think, September of next year, September of
2012. What does that do to an agency trying to administer a
program if Congress waits until the last few days to
reauthorize it? What is the practical effect?
Mr. Divine. I mean, the agency in effect is--USCIS is a
fee-funded agency, so it is essentially kind of running a
business and has to cover its expenses with the income that is
generated. To run this program correctly, USCIS needs to staff
up in a big way, dealing with the volume that is already there
and anticipating the increased volume of more investment as we
get even close to half of the 10,000 visas that are available
in this category.
But, you know, imagine running an agency where you are
running up against the possible sudden end of the program,
essentially, but you are trying to staff up in a big way to
handle the volume that you hope will come. I mean, that has got
to feel like a conflicting situation, and you would imagine
that it is going to hold somebody back.
Now, I am not saying that they are holding back, and I know
that they are trying to staff up because I am sure they believe
and hope that the program will be reauthorized for the benefit
of the Nation. But I think, you know, the concern is there. And
is that really where they are going to be able to invest their
time and resources in trying to clear up the rules of this
program so that everybody knows whether they can qualify or not
and which kinds of projects are going to qualify and so forth?
We need that continually.
Chairman Leahy. And, Mr. Stenger, we in Vermont--again, a
small State, but we have the State government involved with the
Vermont Regional Center. Does that add benefits to Vermont's
program?
Mr. Stenger. The fact that the State of Vermont is the
regional center administrator, and actually I guess you would
call it the owner of the regional center, has been a tremendous
benefit. As you know, in Vermont we have local, regional, and
State regulations both at the planning stage as well as
permitting. We have worked hand in hand with the State. Our
Governor has been very supportive. It is a win for us to be in
partnership with the State of Vermont as the regional center.
Our investors recognize the stability and the continuity of the
State's involvement. They appreciate our continuity and our
stability.
So for us, the Vermont Regional Center has been a wonderful
partnership, and we look forward to that continuing.
Chairman Leahy. And we are small enough that people could
be reached easily. I think everybody finds that surprising when
they find that certainly past governors, and I believe the
current Governor, myself, and others have listed home phone
numbers.
Mr. Stenger. We are a small State, a small community, and
we know how to get things done.
Chairman Leahy. Yes. Mr. North, I made a few comments about
your comments. Is there anything you would like to add, out of
fairness to you?
Mr. North. Thank you, sir. I would like to make simply one
point. We have apparently a tremendous success story. We have
not heard about the profits that the investors received on this
thing yet, but we apparently have a successful operation.
I do not think that the United States Senate should operate
on anecdotes, and I think that looking at this thing from a
greater distance, perhaps without knowledge of ski resorts--I
am a little old to ski--I do not think that we should rely too
much on one glorious anecdote, and I will leave it at that.
Chairman Leahy. Well, I appreciate that, and I appreciate
your implication of that, that we Senators only rely on
anecdotes. We study a great deal more than that. I mean, I
realize I may live on a dirt road in a small town, I am just a
small-town lawyer, but I actually read other things and I
actually have even traveled outside of Washington to other
parts of the country, and I actually have the ability to learn.
I do not work for a think tank, but I actually do have a fair
amount of information that comes through to me every day.
Senator Grassley.
Senator Grassley. Mr. Chairman, I live on a dirt road, too.
[Laughter.]
Senator Grassley. And I have traveled some with you.
I have just two questions, and if I could have the
Chairman's attention on the first one, I think that this--this
is going to go to Mr. Divine mostly, but I think that this is
something that you see as maybe an issue that ought to be dealt
with because I think you got something on this in your draft
legislation. You do not have to listen to everything. I just
wanted to make----
Chairman Leahy. I will listen to it.
Senator Grassley. Okay. Reuters recently reported on how
cash-hungry American businesses are working abroad to promote
the EB-5 Regional Center Program. Many of these EB-5 promoters
are mischaracterizing the program, luring investors here and
robbing them of the American dream. And, admittedly, if you get
something out of Reuters, I suppose it has got to be considered
somewhat anecdotal, too. But China has reportedly put
restrictions on these promoters. And when asked by Reuters,
both the USCIS and the Securities and Exchange Commission were
unaware of any marketing abuses. So, rhetorically, I want to
ask but do not expect an answer from any of you on this point:
Is it possible that everyone outside the Beltway is aware of
these promoters and yet our Government sits idly by?
So, Mr. Divine, since you worked at USCIS, can you tell us
if these promoters were on the radar screen at the agency?
Mr. Divine. Well, I will confess that when I was there, I
was not really much aware of, you know, what was going on in
promoting these projects in China or in any other place back in
2006, when I left. But since then, I have become very aware of
how the whole thing works, and I want to make clear, first of
all, that these projects for pooled investments where people
are investing passively, they are an offering of a security,
and they are covered by the U.S. securities laws. And the
parties who put these offerings together take great pains to
describe--and, you know, people like me help them articulate
for the investor, hey, these are the risks associated with
investing in this thing.
There is a whole section of the placement memorandum that
is given to each one of these people that describes all the
risks: You could lose all your money from this; you could lose
all your money from that. And it goes on pages and pages. Those
things are given to each investor. They have to sign off that
they have seen all those things, and it is very carefully
managed.
Now, what gets said on the ground in another country about
what those documents are, is it possible that there are some
promoters in China or elsewhere who are mischaracterizing in
Chinese what these documents say? It is possible. If that did
happen, then that would be a violation of the U.S. securities
laws, and it also would be a violation of Chinese securities
laws, by the way. And to my understanding, China has a fairly
significant regulatory scheme for these immigration brokers.
They are kind of a combination of immigration agent and
securities broker. And they have to, in fact, each put up a
million dollars to get a license from China for each city in
which they are operating. This is my understanding.
They are heavily regulated, and the Chinese Government does
not suffer misrepresentation to Chinese investors well, and my
understanding is they actually implemented the death penalty
for somebody in China who was promoting fraudulent investments
to people. So it is pretty serious there.
Is it possible that there could be fraud in the offering of
securities? Sure. This is human behavior, and it is the same as
it always ever has been. But there are securities laws and the
SEC who are there to address these issues, and USCIS, as I
understand it, is working more closely with the SEC and
coordinating with them on these issues.
Senator Grassley. I would just ask, following on in the
same question, your experience on whether anything more needs
to be done or if you even see it as a problem. Mr. Stenger
first and then Mr. North, and then I will go on to my last
question.
Mr. Stenger. Senator, there are different markets in the
world that are involved in this program. As I mentioned, we
have welcomed investors from 56 countries. China has an
enormous population with an enormous interest in this program.
As a policy, with our particular program, we meet every
investor that we can, and by doing so we get any middleman, if
you call it, out of the way. I want them to see the project. I
want them to come and see what we are doing, understand it
themselves on the ground. And when we have done that, it has
been incredibly successful for us and for them. And any
regional center that is in the marketplace--and there are some
200 around the country. If they take that approach, they will
avoid problems such as being mentioned.
Senator Grassley. Okay. Mr. North, if you see it as a
problem, give me your answer.
Mr. North. I do see it as a problem, and it is aggravated
by the fact that the agency, the USCIS, is currently trying to
streamline its review of these proposals. They have set up a
new command structure. They are bringing in new staff hopefully
that will say yes a little more often than the staff that is
there now.
There is a tremendous flow of questionable documentation.
USCIS picks up some of it, as you see in the table in my
report. And a lot of it does not get picked up until later, and
it shows up in the Administrative Appeals Office decisions.
There have been difficulties--and I would just tick these
off very quickly--with a plan to use Iranian funds to revive
the old Watergate Hotel here in town; a scheme so lacking in
integrity in the Mojave Desert that the EB-5 Center itself was
terminated; similarly, one in El Monte, California, where it
turns out that some of the developers had some pretty
questionable backgrounds. There is an attempt----
Senator Grassley. You can go on, but I want to----
Mr. North. I will not.
Senator Grassley. I think you are talking about my last
question.
Mr. North. All right.
Senator Grassley. No, go ahead. I just kind of want you at
that point, as long as you are using it to answer the other
question. Mostly explain what went wrong at these centers,
Mojave and the real estate development in El Monte.
Mr. North. Generally, it turned out that not necessarily
the regional center people but the developers--and these are
two different sets of people. The developers in those two
places were snake oil salesmen, and USCIS sort of found out in
this case, but there are other snake oil salesmen out there
that have not been detected, and I just think there ought to be
more, not fewer, checks and balances.
Senator Grassley. Thank you, Mr. Chairman.
Chairman Leahy. Thank you. Fortunately, that is the only
Government program where people come in like that. We certainly
have nothing of that sort from anyone involved with our
contractors in Iraq.
I notice that Senator Sessions and Senator Cornyn are here.
Before I yield to you, I ask unanimous consent to place a
statement from Senator Schumer in the record. Without
objection, that will be done.
[The prepared statement of Senator Schumer appears as a
submission for the record.]
Chairman Leahy. I will also submit for the record a number
of letters from the EB-5 Immigrant Investor Program, including
letters from Marriott International and the Real Estate
Roundtable.
[The letters appear as submissions for the record.]
Chairman Leahy. I might just read a couple sentences from
Thomas Berthel from Marion, Iowa, from Berthel Fisher and
Company. He says, ``Rarely do we find a program that does not
rely on taxpayer funding or bank funding that is available at
reasonable rates of return. It is our opinion it may be poor
fiscal policy to cut off such a funding stream at this critical
time.'' And that I will also place in the record.
Senator Grassley. And I will say for those people, they are
reputable people as far as I know.
Chairman Leahy. Thank you very much.
[The letter appears as a submission for the record.]
Chairman Leahy. And I will put letters from the regional
centers from 17 States who have written to their Senators and
Representatives and asked them to go forward.
[The letters appear as submissions for the record.]
Chairman Leahy. We will go to Senator Sessions, who has
worked with me on this subject for years, and then Senator
Cornyn.
Senator Sessions. Thank you, Mr. Chairman. You and I talked
about this before, and I think we share a common understanding
that the EB-5 program can be good for America. It can
strengthen our country and direct a number of immigrants to our
country that have a real chance of creating jobs and growth in
the economy. So I think it has potential.
My fundamental view of the immigration situation of our
country is that more people want to come here than we can
accept. In fact, we have billions of people in the world who,
economically and health-wise, would be better if they could
live in the United States.
Canada has gone through a series of debates over many
years, and they concluded that a good immigration policy would
serve the interest of the people of Canada. It is Canada's
policy and it is Canada's interest that they are seeking to
advance, and they have utilized investment from foreigners as
part of their immigration policy. And, Mr. North, I think maybe
Australia has, and I will ask you in a second about how they do
it.
But I guess I just would say that this has got real
potential, Mr. Chairman. Thank you for your personal leadership
on it. I do think we are at a point where we probably are ready
to make it permanent, and if so, we ought to take the
opportunity to review it very carefully because, if not
properly drafted, it can be an abused program. I do not think
there is any doubt of that. So that is just what I would say.
I am sincere in saying EB-5, I believe, should be a
significant part of our immigration system. Of the hundreds of
thousands that come to our country legally every year, this
program should represent a part of that because in most
instances, they will be investors with wealth to bring, will be
job creators, will not drain the treasury but actually making
money and increasing the U.S. treasury. And that is what a
country with common sense should seek in its immigration
policy.
Mr. North, would you share about Australia or Canada, if
you would, and how they feel about it and how you evaluate its
success or failure in those countries?
Mr. North. I will comment on Australia because I know
something about that, and less in Canada. Australia is
interested in entrepreneurs and people who are going to put
together businesses as opposed to passive investment. Our
program is largely one of passive investment. Australia also is
more demanding about age. They want you to be under 45 under
one set of circumstances, under 55 in another. They have a
strong preference for managers, and they also ask for more
money than we do. This is American dollars, not Australian
dollars. They want $778,000 for one class and $1.5 million for
another class. So they are getting more money from their
people, and since theirs is a smaller economy than ours, the
same amount of money goes a lot further. And so they are
getting a lot--they got more bang for their buck than we do,
and I think that what Australia is doing is typical of a bunch
of other countries, that they require more money than the
United States does, and if we are going to be doing this, I
think we should be doing it at least at the $1 million level.
Senator Sessions. I think that is something we should
consider. And I believe the age factor is very real. Canada
emphasizes age, that it is healthier for Canada, they have
concluded--rightly, I believe--that younger people are able to
contribute more to society normally than an elderly person
would. As I reach my Federal health care Medicare age, that is
something that has become personally real to me.
So, Mr. Chairman, thank you for your leadership. I will not
take any more time. I do think that we ought to think it
through, look toward the implementation of a permanent policy
that serves the interests of the United States, and the age,
the amount of money, the quality and nature of the investment,
maybe we should look at it. We are in a situation where a lot
of people would like to come, so we can try to make the
legislation work in a way that it serves our interest.
Thank you.
Chairman Leahy. I have worked with the Senator, as he
knows, on a lot of different issues in the past, but when we
join hands, we usually get things passed. So I will work with
him on that.
Senator Cornyn, we were talking about Texas in here
earlier--in a very positive way, I assure you. I am delighted
to have you here. Go ahead.
Senator Cornyn. Well, Mr. Chairman, like so many of us, we
have dueling obligations. I was over at the Senate Finance
Committee, so I am glad I was able to come over here and say a
few words.
The first thing I would like to do is to ask unanimous
consent to have some letters made part of the record. I have
letters from the cities of Houston, Dallas, and Amarillo and
from business leaders around the State all urging the
reauthorization of the EB-5 Regional Center Program.
Chairman Leahy. They will be made part of the record.
[The letters appear as submissions for the record.]
Senator Cornyn. And we also have with us Dan Healy today
from Civitas Capital Management of Dallas. He has offered some
written remarks that I would like to be made part of the
record. He has been working closely with the city of Dallas to
develop their regional center.
Chairman Leahy. Without objection, it will be part of the
record.
[The information appears as a submission for the record.]
Senator Cornyn. I will not detain the witnesses much
longer. I did see, Mr. Divine, after Mr. North commented, you
apparently had something you wanted to add. I will give you a
chance to do that.
Mr. Divine. Well, I wanted to add a perspective on the
other countries' program. In particular, it is my
understanding--and I do not claim to be an expert on the
immigration law of every other country. But it is my
understanding that Australia has two programs that are sort of
relevant to this. One is an entrepreneur program that
specifically requires the person to create two jobs over a
period of a year, and then they can keep the visa longer if
they keep the jobs in place. But they also have a raw investor
visa which only requires, just as is the case in Canada and in
the U.K., a money investment that is essentially equivalent to
buying treasury bills, keeping the money in place for 3, 5
years. You get a green card. There is no risk of the money.
There is no job creation component whatsoever. And the Canadian
amount has been $800,000 and still is operative in Montreal in
that regard. And they have filled their program with this.
Canada has beaten the United States in attracting foreign
investors with their program because of the lack of risk and
job creation requirements.
But, okay, that is the program here that is requiring job
creation. That is part of the deal. You cannot keep your green
card if you cannot show that you created ten American jobs for
your money. No other country does that.
Senator Cornyn. Well, thank you Mr. Divine.
Mr. Chairman, I would just say that I look forward to
working with you on this, and I agree with Senator Sessions, we
ought to--we naturalize 1 million people as new American
citizens each year in America. We are a very welcoming country
when it comes to legal immigration. That is not to say our
system is perfect, because it is far from it. We need to do a
lot to make it better. But I do agree with Senator Sessions'
orientation that says that we ought to look at what is in the
best interests of our country and our economy, because we have
seen countries like Japan, Russia, and others lose population
because people are having fewer children and in some instances
dying much younger--in Russia, for example--and it has a
dramatically negative impact on the economy and one that
immigration, sensible immigration, can help improve.
But the two areas that I really think we need to look at
closely, too--and I realize this is a multifaceted issue, as
the Chairman knows--is obviously making sure that we stop the
problem when it comes to unauthorized entry into the country as
much as we possibly can by providing more security at the
borders. The combination of increased enforcement at the
borders and our slower economic, and higher growth rate, for
example, of the economy in Mexico have meant that we have had
fewer people coming across our southern border. But we need to
deal with that as a confidence-building measure for the
American people because they frankly do not trust the Federal
Government right now in this area. We need to show that we
deserve their trust.
The other areas I mentioned were just on the e-verify
program that I know Chairman Smith on the House Judiciary
Committee is working on, working to try to get input from a
broad array of stakeholders to make sure it is done the right
way, but to make sure that we actually are able to permit
employers to verify who can legally work here in the United
States while permitting, in my view guest worker programs and
others to provide for temporary needs or less than
naturalization.
Finally, I would just say the one area that I am really
most concerned about that we talk very little about is the US-
VISIT program, people who come into the country on a visa and
simply overstay, and they melt into the American landscape, and
it is 40 percent, by some accounts, of our illegal immigration,
much higher than the number of people who come across the
southwestern border, and it is something we have to get a
handle on.
But I applaud your concentration on this particular aspect
of the program and look forward to working with you on this and
other aspects of our broken immigration system.
Thank you.
Chairman Leahy. I appreciate that. And as the Senator
knows, I was one who supported former President George W.
Bush's call for a comprehensive immigration bill, which would
still be my preference. But if we are not going to get to a
comprehensive one, there are a number of these areas. Chairman
Smith and I have talked about e-verify and others. Certainly
EB-5 is one that we ought to be able to work closely together
on. While we will not rely just on anecdotes, I look at how
well it has worked in my State. But I see letters from Dallas
and other areas how well it has worked there.
If you have people who want to come into the country and
create jobs, especially when most of the jobs go to Americans
who are already here who could use the jobs, then we ought to
be supportive.
I also think that we cannot lurch from a year-by-year
reauthorization. We have got to fish or cut bait on this thing
and say if we are going to do it, let us do it permanently. Let
us find out if there are problems, let us correct the problems,
and let us make a piece of legislation that can have bipartisan
support, bicameral support, and that will allow investments to
continue.
Senator Cornyn. Mr. Chairman, if you will permit me, I
would just say, just to make sure we keep at the top of our
list, too, or toward the top the H-1B visa issue, highly
skilled people who come to our colleges and universities and
get degrees, subsidized in part by the American taxpayer, and
who then we do not permit to stay here even though we need some
of those skills.
Chairman Leahy. I was speaking on that just the other day,
and it just makes no sense, especially in these universities
and colleges, whether private or public, we are subsidizing one
way or the other. Even the private ones, they still get tax
benefits elsewhere. And it makes no sense to say, ``Come on
over here, get these advanced degrees, and, oh, by the way, you
cannot stay, go back to your own country and create jobs there
and compete with us.'' I would kind of like to keep them here.
Thank you. We stand in recess.
[Whereupon, at 11:23 a.m., the Committee was adjourned.]
[Additional material submitted for the record follows.]
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