Senators Leahy and Grassley Introduce EB-5 Investor Visa Integrity Reform Bill

Brenda Hamilton was recently quoted in an article published on the EB5 Investors blog. EB5 Investors is one of the world’s largest publications in the immigration law industry.  The article, published on June 16th details a recent court order by a California federal court mandating that defendants Charles Liu and his wife Xin Wang repay $20.8 million in disgorgement to the U.S. Securities and Exchange Commission.

“This case demonstrates the vulnerabilities of foreign investors seeking to enter the U.S. using the EB-5 Visa program and the SEC’s interest in pursuing securities violators like Liu and Wang who take advantage of these vulnerabilities.”

The full article can be read at https://www.eb5investors.com/blog/eb5-visa-liu-fraud-case.

With the EB-5 Investor Visa Integrity Reform Bill EB-5 Regional Center Program set to expire on June 30th, absent bipartisan integrity reforms, Senator Patrick Leahy (D-Vt.), a senior member and former chairman of the Judiciary Committee, and Senator Chuck Grassley (R-Iowa), Ranking Member of the Senate Judiciary Committee, introduced the EB-5 Reform and Integrity Act of 2021 to address fraud and national security vulnerabilities in the EB-5 investor visa Regional Center Program, which has been exploited and abused for years.

Their bill includes significant integrity reforms to protect against fraud and national security weaknesses within the program, promote program integrity and improve oversight of the program. It also reauthorizes the EB-5 Regional Center Program, which is currently set to expire at the end of June.

The EB-5 Regional Center program began in 1993 as an outgrowth of the EB-5 visa. The current program provides a green card to individuals who invest $1.8 million in a business in the United States that creates 10 jobs. The investment amount is lowered to $900,000 in high unemployment and rural areas—areas that typically struggle to attract development and retain jobs.

The Regional Center program allows multiple EB-5 investors to pool capital, which can generate significant investment. Since September 2015, the authorization for the Regional Center program has generally been tied to spending vehicles. However, in recent years, the program has come under intense scrutiny. Concerns have been raised related to national security and the program’s susceptibility to fraud and abuse.

The new legislation authored by Leahy and Grassley will enable the Department of Homeland Security (DHS) to better guard against abuse and promote program integrity, as well as provide all users of the program critical safeguards against fraud and the stability of a 5-year reauthorization.

The legislation contains the core oversight provisions:

• Extends the program through 2026;
• Requires regional centers, which are responsible for overseeing EB–5 projects, to have policies and procedures in place to protect against fraud;
• Requires that regional centers file proposed EB–5 project business plans with DHS, including offering documents and marketing materials;
• Requires more disclosures to investors regarding material business risks and conflicts of interest in EB–5 projects;
• DHS approval of business plans is binding for subsequent investors in the same project unless there is evidence of fraud, misrepresentation, or a material change;
• Strengthens the definition of “created jobs” to ensure that job creation statistics are supported by validated methodologies and created jobs are new and not simply re–located or estimated to be created through the purchase of publicly available bonds;
• Requires that regional centers notify DHS of significant changes to their structure;
• Requires DHS to audit regional centers every 5 years;
• Requires DHS to perform site visits to EB–5 projects;
• Requires regional centers to provide annual statements to DHS and to their investors accounting for investor capital and certifying compliance with program requirements;
• Requires background checks of regional center and certain project principals, and requires that regional center principals, responsible for overseeing the foreign investor’s participation in this visa program, be U.S persons or lawful permanent residents;
• Clarifies that EB–5 project offerings are subject to U.S. securities laws and regional centers must use commercially reasonable efforts to ensure compliance with securities laws;
• Establishes an “EB–5 Integrity Fund” in which regional centers and investors would pay fees to be used by DHS to conduct audits and site visits to detect and investigate fraud in the United States and abroad;
• Requires that foreign agents and third–party promoters of the EB–5 program abroad register with DHS and adhere to guidelines for representing the visa process and complying with the law;
• Strengthens DHS’s ability to vet foreign investor capital to ensure it is lawfully sourced, including any capital gifted or loaned to the investor;
• Allows good–faith investors who were defrauded the ability to continue participating in the program if they were not involved with the fraud and they associate with EB–5 entities in good standing and meet all other program requirements;
• Provides increased authority to DHS to deny or revoke the approval of applications where there is fraud, criminal misuse, or a threat to public safety or national security;
• Provides investors and petitioners with administrative appellate review of certain DHS decisions and adjudications;
• Requires that investor capital be maintained in non–comingled accounts in U.S. banks to prevent the misuse of investor funds;
• Requires that EB–5 projects utilize a fund administrator or commission an independent annual audit to prevent the misuse of investor funds;
• Integrity measures would take effect 90 days after enactment.

The proposed legislation also protects against the age–out of the children of certain EB–5 investors, decreases petition processing times, which have been plagued by massive delays, and improves accountability and transparency by requiring that DHS employees document certain communications and by prohibiting preferential treatment.

Invest in the USA (IIUSA), a national trade association, negotiated with Senators Chuck Grassley (R-Iowa) and Patrick Leahy (D-Vt.) to establish the bipartisan EB-5 Reform and Integrity bill. The hope is that the bill will be passed into law before June 30, 2021.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com.  This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
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Telephone 561-416-8956