The EB-5 visa immigrant investor and the regional center program provide an important pathway to a green card and citizenship for wealthy foreign nationals. While it is in vogue to criticize the program because it allows wealthy foreigners a path to citizenship that is not available to all, the program has important economic benefits for all current and future American citizens. Under the program, a qualifying investment into a new U.S. commercial venture that creates or preserves 10 full-time jobs can lead to a green card and citizenship. The program attracts the world’s best and brightest who will bring their business, technical, and entrepreneurial skills to the United States. Furthermore, the EB-5 program can also attract invest to rural areas and areas of high unemployment which would otherwise be underserved.
However, that is not to say that there aren’t some correctable issues with the EB-5 and regional center programs. One of the issues with the program that has long been a pet cause for critics of the program, and a justifiable one, has been addressed by USCIS. The agency has begun the process to terminate the South Dakota Regional Center due to a myriad of problems. This decisions by the agency underscores the importance of performing one’s due diligence and investing wisely when engaging in the EB-5 program.
Problems With the EB-5 Program in South Dakota
The South Dakota EB-5 program has long been a lightning rod for controversy and has served as an example of how a well-meaning program can run into difficulties in a particular jurisdiction due to non-responsive governance and administration. The program was first run by the state government by employee Joop Bollen from 2004 to 2008. In 2008, Bollen would continue to run the program privately after arranging a business deal that placed a corporation founded by Bollen, SDRC Inc., in a management position for the regional center. After arranging a consulting contract with South Dakota’s Department of Tourism and State Development, Bollen resigned from his state job. South Dakota has now filed a lawsuit again Bollen claiming that SRDC failed to provide sufficient funding for a required indemnity account. Furthermore, the lawsuit claims that the state has not been provided access to a second required indemnity account that should contain at least $1 million. Other allegations regarding improprieties in the South Dakota EB-5 program include:
- $5 million is unaccounted for and cannot be traced or located.
- $1.7 million was transfers to a Cyprian holding company that owns Russian rail ventures.
- Approximately $5.1 million was used to purchase a Hong Kong money-lender who had previously provided a loan costing the center nearly 4.5 million.
- Investor agreements may have been impermissibly modified.
- Several dairies participating in the EB-5 program have gone bankrupt.
- Program money was impermissibly commingled and loaned between projects.
These allegations are extremely troubling and underscore the importance of performing one’s due diligence before making any investment. This is especially true for an EB-5 investment that is primarily made for citizenship purposes.
The Importance of Selecting a Reputable EB-5 Project That is Likely to Succeed
While the consequences for those who invested into the program have yet to be fully explored, it is important to note that an EB-5 investment must be “at-risk.” “At-risk” means that the funds must actually be placed in jeopardy and evidence of that risk must be shown as part of the EB-5 petition. In other words, there must be a chance for a loss of the investment and also a chance to increase the investment. But part of the at-risk nature of the investment means that if the investment fails to produce or preserve the required number of jobs, the opportunity to secure a permanent green card through this investment will be lost. Furthermore, if the business fails, the immigrant investor can lose both the invested funds and this particular opportunity for a permanent green card.
However, the opposite is also true. An immigrant investor who invests wisely into a reputable EB-5 or regional center project can receive his or her investment, with interest, back while receiving a permanent green card. But since returns are typically modest, the main concern is limiting the risk of the investment to increase the likelihood that the party will be able to successfully petition to remove the conditions on his or her green card. And just to be clear, we want to emphasize that no decision has been made regarding the fate of those who invested into the South Dakota EB-5 project. However, there remains a real risk that these investments may not result in a successful petition for a green card.
Rely on Our Experienced Miami EB-5 Visa Lawyer
Working with an experienced Miami investor visa attorney who can alert you of foreseeable risks regarding your EB-5 investment, can make the difference between a successful petition and having to engage in the EB-5 process anew.