Law Enforcement Focused on EB-5 Visa Program (Criticized as “Buy A Green Card” Program)

Congress is likely to renew a controversial visa program just as fraud committed as part of the program is getting increased scrutiny from regulators and the media.  Anyone participating in the EB-5 Visa Program should take note that the SEC, DHS, and FBI are on the case and putting these investments under the microscope.

The EB-5 program is intended to promote foreign investment in projects that create American jobs, especially projects in poor and rural areas.  It allows non-US nationals who invest at least $500K in projects that create or preserve at least 10 jobs for American workers for two years to obtain green cards.  The program has been criticized by some as simply a way for wealthy foreign investors to buy U.S. residency, and as rife with fraud and lack of oversight.

The program is coming up for renewal and is likely to be extended ( just as federal regulators are stepping up enforcement actions.  Last week the SEC filed civil fraud charges against a doctor and his associate accusing them of misappropriating money they raised through the EB-5 visa program.  According to the LA Times this is the fifth EB-5 fraud case filed by the SEC in 2015, after only three were filed in the last two years.   At the same time, criminal investigations of fraud committed under the program are picking up steam.

All of this follows a recent GAO report which found that the program is easily susceptible to fraud both by potential investors and their cronies who vastly overstate the benefits of proposed investments, and by unscrupulous folks here who take the investors’ money and run.  Search for EB-5 scam on Google and you get over 1.6 million hits.  In addition, the lack of oversight of proposed projects remains a problem: PBS points out that “targeted employment areas” eligible for investment under the program can include high-rent midtown Manhattan.

All of this attention suggests that while the program will be extended, anyone taking advantage of the program by investing in, or gathering funds for, EB-5 projects should be ready for a close-up with government agents who may want to review the transactions.