How Efforts to Overhaul Visa Program Failed on Capitol Hill

The Wall Street Journal
December 22, 2015
By Eliot Brown

For more than a year, U.S. Sen. Charles Grassley had been pushing to overhaul a controversial program that gives green cards to foreigners who invest at least $500,000 in certain businesses. So when congressional leaders last week moved forward with a 10-month extension of the so-called EB-5 program without any changes, the Iowa Republican was less than pleased.

“Maybe it is only here on Capitol Hill—an island surrounded by reality—that we can choose to plug our ears and then refuse to listen to commonly accepted facts,” he said in a 33-minute diatribe on the Senate floor Thursday. The program, he said, is “riddled with flaws and corruption.”

Despite broad agreement that EB-5 is in need of changes amid mounting allegations of fraud and abuse, lawmakers last week failed to reach an accord over just how to go about reform. Among the contested issues was a change—urged by Mr. Grassley and strenuously resisted by real-estate developers—that would have made it harder for luxury projects to benefit from a provision meant for economically ailing neighborhoods. In addition, developers worried about a provision that would have disrupted some EB-5 financed projects already under way, people briefed on discussions said.

But the prospects of an agreement on an overhaul could grow harder still in coming months, as investors and real-estate developers have been piling into the program at record pace, adding to the list of those who may balk at changes.

As of Sept. 30, there were 17,367 pending applications of investors who had committed to EB-5 projects, up from 12,453 a year earlier, according to the U.S. Citizenship and Immigration Services, the program administrator. Given that just 10,000 visas a year are allocated to EB-5—and that the typical investor secures visas for two additional family members—that means the pending applications account for four to five years of backlog.

Numerous new high-profile developments have come into the program recently, including the planned tower at 2 World Trade Center in Manhattan, for which developer Silverstein Properties Inc. is ultimately seeking $500 million in EB-5 funding.

Meanwhile, concerns about fraud are rising. The U.S. Securities and Exchange Commission has filed numerous lawsuits in recent months accusing various lawyers and others involved in EB-5 of failing to disclose conflicts to investors and of using money meant for a business for their personal gain.

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