From skyscrapers to ski resorts to scam restaurants, the United States' EB-5 visa program has seen it all, WILLIAM HENNELLY reports from New York.

On Brickell Avenue in Miami, the tallest building not only in the city but on the entire Eastern Seaboard south of New York City is under construction. The 83-story Panorama Tower will have 821 residences and 128 corporate suites.

The developer, Florida East Coast Realty, has secured a $340 million construction loan from Wells Fargo for the project, which is expected to be completed by mid-2017, with about 20 percent of the $800 million project's funding to come from the EB-5 visa program, the South Florida Business Journal reported.

Since it was authorized by the US Congress in 1990, the EB-5 program that gives foreigners a green card in exchange for investing in the country has been an economic bonanza, creating 57,300 jobs and injecting $8.6 billion into the economy.

And next to the US economy, the biggest benefactors have been the largest participants - the Chinese. But they've also been caught up in some of the program's failures. And now the program that is up for renewal in September is under review by the US Government Accountability Office (GAO).

"Initially envisioned as a program to attract investors from around the world, the EB-5 program has recently been flooded by wealthy Chinese nationals," said a critical Feb 26 report by the US-China Economic and Security Review Commission (USCC). "Instances of fraud and lax regulation have cast doubt on the ability of local authorities to screen Chinese EB-5 investors properly." The report calls for the EB-5 system to be scaled back or for the approval process to be improved.

EB-5 investors are issued conditional green cards valid for two years. To gain permanent residency, they must submit proof before the green card expires that they have established a "commercial enterprise"; invested the required amount of money and created jobs.

Investment rules

Individuals must invest $1 million or at least $500,000 in a "targeted employment area" - a high unemployment or rural area - and create or preserve at least 10 jobs for US workers, excluding the investor and his or her immediate family.

The US issues 10,000 EB-5 visas annually. Each country is entitled to 7 percent, or 700 visas, but the US State Department has let China override the limits because other countries weren't using all their slots.

Chinese citizens got 6,985 EB-5 visas in 2013, up from around 2,500 in 2011, according to a recent report by the US-China Economic and Security Review Commission (USCC). But last August, with China's share accounting for 85 percent of 2014 EB-5 visas, the State Department announced that the program would be closed to Chinese applicants until fiscal year 2015, which began in October 2014.

The USCC was created by Congress in October 2000 to produce an annual report on the national security implications of the bilateral trade and economic relationship between the US and China, and to make recommendations for legislative and administrative action.

On Jan 28, Congressmen Jared Polis, a Democrat from Colorado, and Mark Amodei, a Republican from Nevada, introduced the American Entrepreneurship and Investment Act of 2015 to permanently authorize EB-5, which is scheduled to expire on Sept 30.

The legislation would eliminate the per country quotas, which would benefit Chinese investors. The bill also seeks to fine-tune the definition of targeted employment areas, and deter fraud and abuse in securities compliance.

Senator Charles Grassley of Iowa, now chairman of the Senate Judiciary Committee, has frequently criticized the EB-5 program on grounds ranging from fraud to national security.

In December, the GAO began its review of the program at the behest of Republican senators Grassley, Bob Corker of Tennessee and Tom Coburn of Oklahoma.

Perhaps the greatest argument for the program's renewal is that it doesn't cost taxpayers any money.

One way that EB-5 visa-seekers are introduced to prospective investment projects in the US is through Immigrant Investor Regional Centers.

The regional centers, overseen by the United States Citizenship and Immigration Services (USCIS), under the Department of Homeland Security, are mostly private businesses located throughout the country. In a few instances, they are city- and state-run operations, such as those by Miami, Florida, and Vermont.

The USCIS website states that "USCIS approval of an EB-5 regional center application does not in any way: constitute USCIS endorsement of the activities of that regional center; guarantee compliance with US securities laws; or minimize or eliminate risk to the investor."

As of Feb 2, the USCIS had approved approximately 630 regional centers, which are allowed to operate in multiple states. More than 150 of the centers were located in California.

The USCIS also maintains a list of "terminated" regional centers. As of March 2, USCIS had shut down 18 regional centers in 12 states. Florida and Texas each had three centers closed; two were shut in California; and Georgia, Illinois, Kansas, Kentucky, Michigan, Missouri, New York, North Carolina, Wisconsin and Wyoming each saw one closed.

"Foreign investors are prone to mistaking the privately operated regional centers for government-sponsored areas vetted for development, the USCC report said. "Licensed regional centers, often for-profit operations independent of state governments, are zoned strategically to make maximum use of potential investment and to cater to the needs of visa seekers. A host of less than trustworthy companies and consultancies, exploiting a lack of regulatory oversight, have claimed experience in the EB-5 realm where none exists."

Sunshine State beckons

The Panorama Tower in Miami being developed by Florida East Coast Realty, led by Tibor Hollo, also will have medical offices, a hotel, restaurant and retail stores. The construction loan for the project is the largest in Dade County history, according to the Daily Business Review of South Florida. The tower is Miami's first EB-5 project, and won the designation because it's expected to bring 1,900 construction jobs, almost 200 management employees, 800 tenant employees and 220 visiting students.

Mikki Canton is the managing director of the Office of International Development and the City of Miami EB-5 Regional Center, which received USCIS approval in May 2014, thanks to the Panorama Tower plans.

Canton suggested the idea of a regional center to Miami Mayor Tomas Regalado after seeing how much overseas investment there was in Miami as a gateway to Latin America. Unrelated to the EB-5 program, Canton is also a driving force behind an effort to bring a Chinatown to Miami.

"To their credit, Chinese investors have become very savvy," Canton told China Daily. "Whereas in the past, Chinese investors would put their money into almost anything that was advanced to them nowadays there is such competition in the industry as well as such savvy and good professionals in China, that their (regional centers') homework has to be done a lot better, and therefore regional centers have got to really be on their toes when they deal with the Chinese.

"This regional center is not going to focus primarily on China, as others have done, but there is always going to be more money and more interest from China.

"I think the Chinese will be extremely happy to invest in South Florida ... because it's their gateway to Latin America, and the Chinese just love new opportunities," she said. "We expect to see a growth in Chinese demographics in South Florida."

David Schlamm's City Connections Realty in New York has applied to become a regional center.

Schlamm partnered with Min Chan, an immigration lawyer who joined his firm last year and proposed the idea of becoming a regional center to him, The Real Deal reported.

"The EB-5 program has been heavily leveraged in New York City, but not necessarilyby the small developers," said Chan, who also maintains a law practice that handles EB-5 cases. "It's a good alternative financing vehicle for them. In terms of Chinese investors, I'm not kidding if I say it's unlimited."

There are also family benefits for EB-5 investors.

"If you have an EB-5 visa, you're paying in-state tuition," Chan told China Daily. "You spend your $500,000 plus your kids can actually work here after they graduate" compared with other temporary visas.

She said the prospective center's focus will be on assisted-living facilities, community centers and not-for-profit organizations. For instance, such clients "may have a site but not funding", Chan said.

"A lot of philanthropists in China want to do some good in the project they're investing in," Chan added.

In New York, Related Coshas raised about$600 millionto finance part of the Hudson Yards project, while Forest City Ratner has raised more than $475 million for projects near the Barclays Center. Both projects have received EB-5 investments, and Related has its own regional center.

Opening an EB-5 regional center can cost around $200,000, The Real Deal reported. Chan said regional centers typically collect $50,000 to $60,000 per investor to manage the investment and help identify projects. Centers also can charge developers a fee.

In North Carolina, Jane Wu, an investor originally from Chengdu, Sichuan province, wants to build a 300-unit upscale apartment complexin Charlotte. The site is up for a rezoning hearing in April before the City Council.

Wu said she has a dozen foreign investors in the approval process and 45 more prospects lined up. She is working throughthe Carolina States Regional Center, which was approved by the federal government last February.

Wu anticipates breaking ground in late summer. She said the project would create more than 700 jobs and has an estimated cost of about $50 million; money from foreign investors could make up about 65 percent of the financing. She will use traditional financing for the rest.

"We want to build a good project that sets a tone for the area," Wu told the Charlotte Observer.

Wu first got to know the University City area in 2007 while pursuing a master's degree at the University of North Carolina-Charlotte. Wu has maintained family ties to Chengdu and said her family's background in development has helped line up investors.

Vermont has seen EB-5 money go toward leisure projects, such as ski resorts. Mount Snow got a 20-million-gallon water storage pond for snowmaking and a new 36,000-square-foot base lodge for skier services.

"We are excited about the future growth and redevelopment at Mount Snow," said Richard Deutsch, vice-president of Peak Resorts. "The EB-5 program has proven it's a successful way to raise capital and create jobs."

Mount Snow worked with the state of Vermont EB-5 Regional Center, the only USCIS-designated regional center owned, controlled and supervised directly by a state government. Vermont has had successful EB-5 projects, including the Jay Peak and Sugarbush resorts.

EB-5 also has helped fund a $100 million investment in Philadelphia's Comcast Tower. In Rockford, Illinois, 92 EB-5 investors, mostly from China, teamed with billionaire investor Warren Buffett to remodel a skyscraper together with a local urban renewal program. In Las Vegas, EB-5 money from Chinese investors has been used to finance several new casinos.

Problems with fraud

But the program has seen some spectacular failures.

In perhaps the most-noted scam, Anshoo Sethi, the promoter of a hotel and convention center near Chicago's O'Hare Airport, was indicted on fraud charges in the procurement of $160 million from 290 Chinese investors for the complex, which was never built. The government returned $147 million to the investors, but alleged Sethi misappropriated much of the rest.

In South Dakota, a state official committed suicide in 2013 after he was investigated for alleged mismanagement of Chinese and South Korean EB-5 funds connected to a failed beef-packing plant.

In California, Jianwei Li and two other wealthy Chinese businessmen wired $1 million each to a firm that had promised to build a Chinese restaurant in San Bruno, according to an April 2013 Los Angeles Times report.

The project had an alluring budget with multiple lucky 8s - $5,888,888 - and the three investors were assured it would create enough jobs to get them green cards.

After the passage of months and no activity on the project, Li's friends confronted the developer at a karaoke bar. The man, identified in court papers as Sammy Lee, plotted his escape, the Times reported.

"He went to the bathroom, fell to the ground and said he was having a heart attack," said Edward C.Y. Lau, of the Lau & Lau Law Group in San Francisco, who won a default judgment this year against Lee and his two associates. "The ambulance came and took him to the hospital. But [the hospital] said he was never admitted. He kind of woke up and left the scene."

"We can't find him," Lau replied when asked recently by China Daily of Lee's whereabouts.

Lau, whose practice is focused on the EB-5 program, finds the regional centers better equipped to handle investor documentation than groups of private individuals are.

"The most unpredictive types are the private investments," as was the case with the Chinese restaurants. Lau explained why.

"They're private individuals like a real estate broker who may say let's go buy some land and we're going to put a building on it; we're going to do construction that will create employment," Lau said. "It depends on where they're going to do this. If you're in an area like San Francisco or New York City, it may take a couple of years just to get your permits and do environmental impact reports before you can even get the construction permits.

"These regional centers need to be preapproved by (US) immigration first," he said. "After a while, the people who are in early, they have the benefit of knowing what problems there were the first time, and they get good at it there doesn't seem to be much of problem.

"The conservative to very good regional centers we find are easier to deal with simply because they know the ropes and how to document," Lau said. "There are people (investors) that have gotten their money back after five or six years.

One issue that Lau sees, particularly with China, is that not all EB-5 parties are familiar with the Chinese government's rules.

Foreign exchange

"China has foreign-exchange requirements," he said. "You can't just simply go to the bank and give them the equivalent of $500,000 in Chinese yuan and have them wire the money over here, because they limit the amount of foreign exchange you can send out.

"Some people, as they're marketing this particular project, they may not know some of the requirements that are needed to qualify for a green card," said Lau, such as queries as to how the applicants' wealth was obtained. "We find people that are being sold different projects they may not qualify to even get a green card because nobody knows about these specialized requirements that are required of Chinese investors that are different from most other countries."

A regional center in El Monte, California, promoted a "Transit Village" near the city's bus station with the goal of revitalizing its downtown, according to a Bloomberg.com story in March 2012.

Developers John Leung and Jean Lang pitched it as a ticket to a US green card. The pair solicited $500,000 from a South Korean citizen eager to win a resident visa. The developers' company went bust, the investor didn't get a green card and Transit Village didn't produce any jobs in the city of 120,000 east of Los Angeles.

"Little El Monte stepped up to expose these people," said Rene Bobadilla, the city manager. "Where the heck is the federal government?"

The USCIS closed the El Monte Regional Center in September 2011.

In September, the US Securities and Exchange Commission charged a Los Angeles-based immigration attorney, his wife, and law partner with running a scheme to defraud foreign investors through EB-5.

The SEC alleged that Justin Moongyu Lee along with Rebecca Taewon Lee and Thomas Edward Kent raised nearly $11.5 million from two dozen investors, according to the commission's press release. The Lees and Kent informed the investors, mostly from China and South Korea, that they would be EB-5 eligible if they invested in an ethanol production plant in Ulysses, Kansas.

However, the SEC said the money was misappropriated for other uses. The plant was never built and the jobs never created, yet the Lees and Kent maintained that the project was ongoing.

"These immigration lawyers exploited a desire by foreign investors to participate in a program that would not only generate them a positive investment return, but also provide them a path to legal residency in the United States," said Michele Wein Layne, regional director of the SEC's Los Angeles office.

Contact the writer at williamhennelly@chinadailyusa.com

A rendering of the planned Panaroma Tower in Miami, Florida. Florida East Coast Realty is developing the 83-story building, which is expected to be the tallest building on the Eastern Seaboard south of New York City. About 20 percent of its $800 million cost is estimated to be coming from foreign investors in the US EB-5 visa program. Provided To China Daily

(China Daily USA03/13/2015 page20)