George P. Kazen Federal Building and United States Courthouse

Floor Speech

BREAK IN TRANSCRIPT

Mr. President, I heard my friend and colleague Senator Leahy express his opposition, and opposition that I share, to the EB-5 Regional Center Program. I am here for the same purpose, to express the same opposition to the EB-5 Regional Center Program that was extended without reforms. One year ago, we made similar statements. I could easily read the same statement I gave at that time and it would be just as relevant today. We are very disappointed that reforms were not included in the continuing resolution, which simply extended this very flawed immigration program.

The EB-5 Regional Center Program has been plagued by fraud and abuse. It poses significant national security risks. There are serious allegations that the program may be facilitating terrorist travel, economic espionage, money laundering, and investment fraud. Yet considering all of those things, the continuing resolution before us fails to include much needed reforms.

So after a year, we have yet another missed opportunity. The chairs and ranking members of the House and Senate Judiciary Committees have agreed on a package of reforms. We have worked in a bipartisan and bicameral fashion. We have agreed--all four of us--on every aspect. We instituted compliance measures, we instituted background checks, and we instituted transparency provisions. We made sure rural and distressed urban areas benefited from the program, as Congress already intended and as Senator Leahy very clearly laid out the problems.

Despite the bipartisan support, not a single one of our recommendations will be implemented. Instead of reforming the program, we will have the status quo. The status quo means the following:

Investments can be spent before business plans are approved.

Regional Center operators can charge excessive fees of foreign nationals in addition to their required investments.

None of the jobs created have to be ``direct'' or verifiable jobs, but rather they are ``indirect'' and based on estimates, not knowing for sure if there are jobs created or based upon economic modeling-- again, not knowing for sure if jobs are created.

Investment funds are not adequately vetted.

Gifts and loans from anyone are acceptable sources of funds from foreign nationals.

There is no prohibition against foreign governments owning and operating regional centers or projects.

Regional centers can be rented or sold without government oversight or approval.

Regional centers don't have to certify that they comply with securities laws. There is no set of sanctions for any violations--in other words, no recourse for the bad actors.

There are no required background checks on anyone associated with these regional centers. The investment level is lower than Congress ever intended.

Gerrymandering continues, and rural and urban distressed areas then lose out.

Site visits or even audits are not required.

There is no transparency on how funds are spent, who is paid, and what investors are told about the projects they are investing in.

The preferential treatment we have seen in the past is enabled without a strict code of conduct rules.

Those are just some of the things that are wrong.

The four of us on the two committees, in a bicameral and bipartisan way, tried to address awareness and have a process for dialogue leading to reform. My committee held two hearings this year. The House held one. Staff met with very interested stakeholders who asked for and we offered more concessions than we did last year. To top it off, we were ready to provide a 6-year reauthorization. This would have provided long-term stability for investors and regional centers.

But let's talk about why this package was not acceptable to some, most notably, the U.S. Chamber of Commerce, which was the most rigid in not compromising. Here is a list of issues raised by this leading voice of business in opposition to our package.

They want, in effect, one investment level. They don't want any meaningful discount for rural or urban distressed areas. Don't forget that this law was passed 20 years ago to help rural and high- unemployment areas. That is the purpose of it.

They don't want visas set aside for areas that Congress selected as targeted employment areas for fear that investors in affluent areas would have to wait slightly longer for a visa.

They didn't want to incentivize foreign investors to fund manufacturing projects that create long-term, sustainable, and real jobs that this country desperately needs.

They wanted to make it harder for rural areas to qualify at a discount investment level, even though it is
common knowledge that small and rural communities have a harder time attracting capital.

They wanted certifications and compliance measures to be delegated to the agency. They did not want Congress to dictate transparencies and reporting requirements.

We must remember that our job is to legislate, not to delegate. Delegating authority to the executive branch on this program would result in more of the same, because even by the departments in charge, there is very little oversight and monitoring now, even if it might be required by law. But not enough of it is required by law. That is why they get away with all this stuff.

The Chamber of Commerce didn't like a provision saying a foreign national had to be 18 years old to invest and obtain a green card through the program. They would like children as young as 14 to be able to make these major financial decisions and invest up to $1 million--a 14-year-old, to do that.

They wanted restrictions on where investor funds came from lifted. Our package limited a foreign national from taking out a questionable loan or taking gifts from unknown sources. One way to find out what is wrong is to follow the money. We wanted to be sure that those investing were doing so because they obtained funds lawfully. The U.S. Chamber of Commerce wanted no such restrictions.

They wanted foreign governments and even sovereign wealth funds to own EB-5 projects. They wanted to delay rules saying foreign governments could not own or administer regional centers by requiring bureaucratic rulemaking. Despite the changes we made this year on this very strict provision, they continued to want to water it down in every negotiating session we had.

They didn't want regional centers to have to consult with local officials about EB-5 projects to ensure that economic development efforts were coordinated.

They wanted to do away with a requirement that a foreign investor would have to create at least one direct job before obtaining a green card. Now, here we have a situation where a program was instituted 25 years ago to create jobs--particularly in rural America and high unemployment areas--and they don't even want the investors to show that they are going to create at least one job right now.

Then they used economic modeling to show indirect jobs. Neither the existence of those jobs nor the location of those jobs can truly be verified. When you have the Federal Government setting up a program like this that is supposed to create jobs in rural areas and high unemployment areas, wouldn't you think there ought to be a way of showing that those jobs are actually created?

They raise new concerns about provisions that have been discussed way back since last June, such as requiring regional centers to pay a fee to an enforcement and monitoring fund.

They wanted a 3-day notification of a site visit by the agency to determine if the regional center truly exists. Sure, tell the inspectors you are coming so you can get everything in order before the inspectors get there.

They fought efforts to require transparency of how investor funds were used. Now, this is a major problem of the existing program. Nearly every story of fraud relates to how regional center operators use EB-5 funds for their own personal gain and luxury.

This program is meant to create jobs, not to help individuals in charge of the program have personal gain and, more importantly, even the luxury that might go with that.

But the kicker in all of this is that these business interests insist on more visas and to make those visas even cheaper. They want Congress to increase immigration numbers through controversial recapture mechanisms or by exempting certain people from the annual cap. The pro- EB-5 groups want more visas for an already faulty program, which makes more money and puts more money in their pockets.

On top of that, they asked us to make the visas cheaper than it is even under current law. I, of course, refused to do that. I refuse to go below the $1 million level that has been in law since 1990. The demand for visas is there. There is no justification to further cheapen this program and the green cards that come with that program.

We will have 5 months until we are faced with another reauthorization because that is how far this continuing resolution goes. In those 5 months, I expect that proposed rules changing the investment level and stopping gerrymandering will be published by the end of the year by the Obama administration, and I will support those proposed rules. I will be asking the new Trump administration to keep those new regulations and build off them.

In regard to the new administration coming in, they took a very strong position on various immigration issues. In taking that position, I would expect them to consider very closely the fraud and misuse of the EB-5 Program. When this administration sees things wrong with it and they correct those things that are wrong with it through regulation, those are regulations that should be backed up very solidly by the new administration coming in.

Next year, we will have to start over again. So as we heard Senator Leahy speak about this--and we know his feelings and mine are very similar; I have already referred to the House Judiciary Committee--we will continue to work in a bipartisan and bicameral way to ensure this program.

Now, I want to speak about the new ranking member, Senator Feinstein. I intend to continue this work as closely with her as I did with Ranking Member Leahy, and Ranking Member Leahy will still be involved in this process. I want to point out that she is not a fan of this program at all, and she has been very vocal about closing this program down because of all the fault we find with it, whether it is fraud, whether it is misuse of the program, whether it is possible terrorist activity taking advantage of it, or whatever it is for national security reasons--all of those. Some of these have been pointed out by law enforcement agencies at the Federal level.

So I want everybody to know that change is coming. I have always wanted to reform the program, but I am not sure that the industry will ever come around. The leadership of this body and the other body could help by ending this program in a continuing resolution. Let it sunset, and let all these people come to the table with a more compromising point of view to correct everything that is wrong here. But the industry loves the status quo and, of course, they love the billions of dollars that pour into affluent areas. Consequently, the money is not directed where it was intended to in 1990, when this legislation was passed, which was to rural areas and high unemployment areas.

I am not sure, with the attitude of the industry, that reforms are possible. So just leaning on Senator Feinstein a little bit and considering her point of view, it may be time to do away with the program completely.

I said that same thing a year ago, and I repeat: Maybe we should spend our time, our resources, and our efforts in other programs that benefit the American people as opposed to benefiting the well-healed and the
well-connected. Maybe it is time this program goes away.

I yield the floor and thank Senator Leahy for his speaking on it.

BREAK IN TRANSCRIPT

Source