By Kevin Bogardus - 09/30/13 11:49 PM EDT
Washington lobbyists are coming to the rescue of an investor visa
program that has become a source of controversy for Virginia
gubernatorial candidate Terry McAuliffe (D).
Created in 1990, the EB-5 visa program attracts foreign capital by offering investors permanent residency if they invest $500,000 to $1 million in projects that would create at least 10 U.S. jobs. Investors can pool their money in EB-5 regional centers that funnel capital to specific regions or businesses.
Use of the visas has exploded. While only 802 EB-5 visas were issued in 2006; 7,641 were issued in 2012, according to the State Department.
“I think it was a product of the recession quite honestly,” said Omar Franco, managing director at Becker & Poliakoff. “I think people started looking for alternative ways to find capital.”
But the visa program is also attracting scrutiny from whistle-blowers who argue the program is in need of review.
The Securities and Exchange Commission (SEC) is taking a closer look, and this year charged a businessman with defrauding investors by using EB-5 visas as bait.
McAuliffe, meanwhile, has come under fire for the visa connections at GreenTech Automotive, an electric car company he co-founded.
The SEC is investigating GreenTech’s pursuit of EB-5 visas to solicit foreign investments, according to The Washington Post. Regulators have subpoenaed the company for documents and are paying particular attention to the claim that it “guarantees returns” in solicitations to investors, according to the Post.
In an Aug. 16 Post op-ed, McAuliffe said investigators have not contacted him, and he hopes the company will succeed.
Republicans and Democrats back the visa program. Lobbyists defend it as well, arguing it maintains tough standards and charges the economy.
“I think there has been some unfortunate publicity about the EB-5 program,” said Ben Barnes, a former Texas lieutenant governor who founded the Ben Barnes Group. “There is a political race going on. If there wasn’t a governor’s race going on, there wouldn’t be any TV ads running, talking about EB-5s.”
Barnes registered to lobby for CanAm Enterprises this year, which has brought in millions of dollars in foreign investment through EB-5 regional centers. He’s also lobbying for Staten Island Marine Development — an EB-5 project that would build a docking facility, which he has an equity stake in.
The regional centers have begun to pop up on other K Street client sheets. At least 10 different companies and EB-5 regional centers have hired firms this year to lobby on the program.
Brownstein Hyatt Farber Schreck has even created a special EB-5 team, led by David Cohen, who was chief of staff to three different U.S. Customs and Border Protection commissioners. The firm has lobbied on the EB-5 program for more than a half-dozen clients in 2013, earning roughly $400,000 in fees from them, according to lobbying disclosure records.
Other big K Street names like Holland & Knight, K&L Gates and Patton Boggs have all registered this year to lobby for clients on the EB-5 visa program.
While the visa program is authorized through September 2015, Franco said many on K Street fear the program could fall victim to congressional gridlock.
“The guys I deal with, they’re worried it’s not going to be reauthorized in this crazy climate, and it could fall off by the wayside,” Franco said.
The Senate-passed immigration reform bill would make the visa program permanent, but that legislation has stalled in the House, which may force lobbyists to find another vehicle to keep it alive.
K Street feels it has a good story to tell Capitol Hill. An economic study commissioned by the Association to Invest In USA (IIUSA) — the EB-5 regional center trade group — said spending associated with EB-5 investors contributed more than $2.6 billion to the gross domestic product and supported more than 33,000 U.S. jobs from 2010 to 2011.
“This is a program that speaks for itself, which brings economic benefits and can stand up on its own two feet,” said Peter Joseph, IIUSA’s executive director.
But investigations have put the program under a harsh light.
Lawmakers say the Homeland Security Department’s inspector general is investigating the visa program. That probe has delayed action on the nomination of Alejandro Mayorkas to be deputy secretary at the Homeland Security Department. Mayorkas previously helped oversee the EB-5 program as director of U.S. Citizenship and Immigration Services.
Sen. Chuck Grassley (R-Iowa) has sent Mayorkas a series of letters asking questions about how he handled the visas.
In a statement to The Hill, Grassley said, “whistle-blowers came forward outlining national security concerns and political favors surrounding the EB-5 program” with Mayorkas “at the heart of the [their] concerns.”
“There also seems to be a great deal of abuse of the EB-5 program. I’ll be working to see how we can address those concerns, and will continue to seek administrative changes, especially if an immigration bill isn’t signed into law,” Grassley said.
Earlier this year, Sen. Patrick Leahy (D-Vt.), chairman of the Senate Judiciary Committee, added an amendment with the panel’s backing to the immigration reform bill to strengthen oversight of the EB-5 regional centers. It would allow the Homeland Security secretary to bar people who have committed crimes from using the program and ensure visa users comply with securities law, among other items.
Lobbyists said they welcome the congressional spotlight on the visa program.
“Let the chips fall where they may. … I think it’s good that the SEC is looking at the program. I think it’s good that Sen. Grassley is asking some questions,” Barnes said.
“Like with any other government program, sometimes we have people that don’t want to play ball by the rules, so that’s why we have safeguards.”