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Foreigners making big investments in U.S.

By Kevin Sullivan
Washington Post

UBLY, Mich. Sitting around the long, wooden kitchen table in their farmhouse on a Sunday afternoon, Rene and Judith Dekker were tired-eyed from rising before dawn to tend to their 1,200 dairy cows.

Their two older kids were packing up for the drive back to college – Bart wanted to know whether Mom had ironed his dress shirt, while Susanne gently scooped her live goldfish into a plastic bag. Mathias, 16, had algebra homework, and Benny the chocolate Lab bounced around outside.

They looked like any other family here in rural Michigan, but they are Dutch citizens. And they are faces of a fast-growing U.S. visa program in which foreigners can gain permanent residence by investing $500,000 in a U.S. project that creates at least 10 jobs.

Through the program, known as EB-5, the Dekkers have a half-million-dollar stake in the Marriott Marquis Hotel rising in Washington, D.C., next to the Washington Convention Center.

In return for their investment – and filing a foot-high stack of documents that includes bank and tax records, criminal background checks and even syphilis tests – they got five shiny new green cards in November.

The cards, emblazoned with their photos and an image of the Statue of Liberty, give them temporary residency that will become permanent in two years – so long as the Marriott project succeeds.

The Dekkers need it to keep their family together. Although they have lived on their farm off a country lane called Bad Axe Road since 2000, they had temporary visas that required their children to leave the country upon turning 21. Investing in the Marriott was their way to prevent that.

“We love our life here,” said Judith Dekker, 48. “We have invested so much money because we want to live here in Michigan. And we don’t want to split up our family.”

Selling admission

The EB-5 program is booming in popularity, driven largely by a struggling U.S. economy in which developers are searching for new sources of capital. It is also fueled by rising demand from foreigners looking for access to U.S. schools, safe investment in U.S. projects and – in the case of China, where most of the investors are from – greater freedom.

The program has broad bipartisan support in Congress, and key senators who are negotiating an overhaul of the immigration system have said they are leaning toward expanding visa programs that provide an immediate boost to the economy.

But others argue that the EB-5 program amounts to buying citizenship, and that it unfairly allows wealthy foreigners to cut the visa line ahead of others who have waited for years.

“I don’t think we should sell admission to the United States,” said David North of the Center for Immigration Studies, which favors reduced immigration.

Supporters call the program a no-brainer, because it creates jobs and attracts investment.

“If you get highly skilled, highly talented immigrants with money, who are paying and committing to things that are positive, I’m inclined to think it’s terrific,” former Treasury Secretary Lawrence Summers said.

Since the EB-5 program began in 1992, more than 29,000 people have received visas, foreigners have invested more than $6.8 billion and 50,000 American jobs have been created, U.S. officials said.

Three-quarters of all those visas have been issued since 2008, when the recession hit and developers started having trouble finding capital.

The program also provides cheap financing for U.S. developers. EB-5 investors are offered very small returns on their investment – usually about 1 to 3 percent – rather than the much higher rates developers would have to pay for traditional financing.

Angelique Brunner, president of EB5 Capital, a D.C. firm that coordinates EB-5 investments, said investors are far more interested in obtaining green cards than big returns.

State Department officials said they are on track to issue a record number of visas this year – more than 9,000, close to the annual limit of 10,000 mandated by Congress, out of a total of 140,000 employment-based immigrant visas.

More than 70 percent of those are going to Chinese investors, with many also coming from South Korea, Taiwan, India, the United Arab Emirates and Canada.

The program requires foreigners to invest $1 million, unless a project is in a rural area or a place with a particularly high unemployment rate, where the required investment is $500,000. The vast majority of visas issued are for the lower amount.

Alejandro Mayorkas, director of U.S. Citizenship and Immigration Services (USCIS), which oversees the program, said the number of staff members reviewing EB-5 applications has grown from 10 to 50.

Mayorkas said he has added economists and business lawyers to review complex applications and hopes to shorten application processing times, which can take more than a year. That would help make the United States more competitive with Canada, Britain, Australia, New Zealand and other countries that have similar programs.

The U.S. hotel industry has been especially enthusiastic: Marriott International has raised $500 million in EB-5 capital; Hilton Worldwide has raised $100 million.

“I understand why the government has really pushed this,” said William Fortier, Hilton’s senior vice president for development in the Americas. “It’s come out of nowhere in the past couple of years as a real help to get things going in this industry.”

Problems with program

The EB-5 program was so poorly run in the 1990s that it was effectively shut down from 1998 to 2003. A 2005 GAO report found that problems arose when many investors were allowed to give promissory notes instead of cash. U.S. officials said the program also has suffered from state and local officials skirting the rules to make projects qualify for financing.

As EB-5 has grown, it has sprouted a huge network of recruiters and middlemen who connect foreign investors who want visas with U.S. developers who want capital.

Some have been incompetent or corrupt.

Last month, for example, the Securities and Exchange Commission brought fraud charges against Anshoo R. Sethi, 29, who ran a regional center in Chicago. The SEC alleged that Sethi bilked 250 mainly Chinese investors out of nearly $11 million in administrative fees after getting them to put up EB-5 investments in a hotel project that did not have proper building permits.

Without a valid project, the SEC said in a statement, Sethi “exploited these investors’ dream of earning legal U.S. residence.”

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