The American dream, for sale

San Francisco Bay Chronicle

Thousands of hard-working immigrants are getting deported every month. But unregulated private companies are offering a deal: for $500,000, you can get a green card.

For Mao Huajun and Wen Lin, a trip to San Francisco is a chance to stock up on American retail. With at least five bags in each arm, the couple from China is all smiles. Through an interpreter, they point to the tags on their new clothes and cologne and explain: "Made in China."

Consumer products devised here and made there are too expensive or not available for Chinese shoppers, so Mao and Wen, who come from Wenzhou, where Mao made a fortune in wood products and real estate, are taking full advantage of their trip.

But don't confuse them with typical tourists. The two are on a boutique pre-immigration tour of the Bay Area, tailored for rich people who want to move to this country — without the typical problem of getting documents.

An anti-immigration wave is sweeping across the country. The Obama administration has overseen the deportation of a record 390,000 people in the past year. College kids who came here as young children are finding they can't stay and work. The much-anticipated DREAM Act, which would allow college graduates a chance at citizenship, is in a Republican-induced limbo. Poor and working-class immigrants are getting kicked out of the country every day.

But private companies are going overseas and recruiting investors with the promise of a little-known federal program: For half a million bucks, you can get yourself a green card.

If you've got the cash, the promoters say it's easy. Invest that sum with a broker who's doing some sort of development in a low-income area and you're guaranteed the right to move to the United States, immediately, with your entire family. You can live anywhere you want (not just in the area where you invested). And you're on track to become a U.S. citizen.

But the program, known by its federal moniker of EB-5, is riddled with loopholes and lack of oversight. It has a history of creating few or no jobs, and the projects it funds can harm low-income communities. The immigrant investors aren't safe, either. They put their fate in the hands of brokers and immigration officials, and if everything doesn't go according to plan (and sometimes they have no control over that plan), they lose their money and face deportation — sometimes years after settling into their new lives.

In truth, the real winners in this program are the private brokers who profit by connecting immigrant investors with projects that desperately need funding.

San Francisco has been late to enter the EB-5 game — but now long-time political figures, including former Redevelopment Commissioner Benny Yee, are getting in on the action. Oakland has several EB-5 centers looking for money.

THE RICH ARE DIFFERENT
The federal government has long offered employment-based visas that allow people with exceptional skills or who are otherwise valuable to the American economy to immigrate to the U.S. But EB-5, created in 1990, is different: it places value on immigrants based on their wallets, not on their brains.

When Congress debated the creation of EB-5, politicians and members of the public saw it as a bona fide way to create citizenship opportunities. The rationale: people who create jobs with their money deserve to live here.

Federal officials and EB-5 experts told us how it works, at least in theory. To gain initial residence visas for themselves and their families, would-be immigrants have to invest $1 million in a new business or an existing and struggling one. If the business is in a Targeted Employment Area — defined by law as "a rural area or an area that has experienced high unemployment of at least 150 percent of the national average" — the investment requirement drops to $500,000.

The EB-5 applicants can invest on their own or they through a broker, known as a regional center.

Regional centers make the process easier for investors; they also pool investment to generate the capital necessary for big projects.

Each investor must create or preserve at least 10 full-time sustainable jobs within two years to stay in the country permanently.

Exact numbers aren't available, but government data shows that the vast majority of investors opt for the $500,000 plan — and few invest on their own. Luz Irazabal, spokesperson for United States Citizenship and Immigration Services, the agency overseeing EB-5, estimates that 80 percent to 90 percent of visas are granted through the regional centers.

So in practice, the program allows private, unregulated brokers to take the money of wealthy people and invest it in projects that are supposed to create jobs in low-income areas. It's not necessarily a bad idea, and there's nothing wrong with opening the most possible paths to legal residency.

But it doesn't always work out — for the immigrants or the community.

WIN-WIN-WIN-WIN?
The EB-5 program is booming. Only 11 regional centers existed in 2007. Today 133 businesses are designated as regional centers allowed to offer EB-5 visas to foreigners in exchange for their cash and 180 applications for the status are pending.

And while EB-5 started out slowly (only a few hundred green cards were issued in the first few years) and still isn't a huge factor in immigration (1,886 permits were issued last year), most observers agree it's on the rise.

"As domestic money has gotten tighter, project developers have discovered the EB-5 program as a possible way to obtain foreign capital," said Stephen Yale-Loehr, a professor at Cornell University Law School, veteran immigration lawyer, and self-described "guru" of EB-5."

Some are dubious. Henry Liebman, the Seattle-based CEO of one of the oldest and most successful regional centers, told us that "most of these [new] regional centers aren't going to raise a nickel." He added that EB-5 is "not going to be the panacea that's going to lift us out of the great depression."

And it's something of a Wild West. The federal agency that runs the program doesn't regulate the regional centers once they're approved for business. And even though the centers make loans and invest money, the Securities and Exchange Commission doesn't monitor them. Indeed, there's no real regulation at all.

Yale-Loehr says the program helps everyone. "Project developers can win because they can get access to capital for their projects. U.S. workers win because the EB-5 money will create jobs. U.S. taxpayers win because EB-5 money stimulates the economy and creates jobs at no expense to taxpayers. And foreign investors win because they get a green card through their investments."

Not exactly. A Dec. 22, 2010 Reuters news service report notes that "thousands of immigrants have been burned by misrepresentations that EB-5 promoters make about the program, inside and outside the United States. Many have lost not only their money, but their chance at winning U.S. citizenship."

In fact, the news service found that in 2009 "four Koreans who invested in a South Dakota dairy farm through EB-5 lost their entire investment when the price of milk collapsed and the operators of the farm stopped paying the mortgage. When the four, who had invested a total of $2 million in the dairy, tried to step in and save the venture, they discovered their partner had left their names off the title. When they tried to sue in state court, the case went nowhere."

If a project falls apart and no jobs are created, the immigrants face deportation.

And there's little guarantee that the projects these investors fund actually create any jobs for the communities where they're located.

Regional centers have plenty of ways to win.

According to center executives, they typically charge the investors a fee for facilitating the program they charge their clients. In some cases, the immigrant investors become part owners of a business enterprise; the investors and the regional center gets paid when the business turns a profit. But it's far more common for the regional center to lend the money for projects and collect the interest. Usually immigrant investors get paid only around 1 percent in interest and the regional center picks up the rest.

It's certainly worked for Liebman. He owns and runs 10 regional centers with offices throughout the United States and one in Tokyo. All his investments have gone into commercial real estate. "You don't get to be Bill Gates through EB-5, but it certainly raises your game," he said.

Yale-Leohr did say the program must be "done correctly" and that it's no piece of cake. "It is hard to set up a project that meets all immigration and securities-related requirements."

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