No amnesty but residency visas for sale by Government

Pay to stay: Visa program offers green cards to immigrants -- for a price
By Matt O'Brien
Contra Costa Times

05/23/2010

In bustling Oakland Chinatown, an office full of empty cubicles sits ready to greet executives -- all of them newly arrived immigrants who have paid as much as $500,000 for the privilege of living here.

Blocks away at Jack London Square, local developers have transformed a harbormaster building into a meeting place where they hope to channel foreign investments into new hotel construction.

In Napa and Sonoma counties, another venture hopes to woo would-be investors with wine tours, and convince them to buy some vineyards in the process.

The projects all hang on the promise of wealthy immigrants so eager to move to the United States they are willing to risk their own money to do so. By investing in a troubled sector of the American economy, in a venture that creates at least 10 full-time jobs, recipients of the investor visa, or EB-5, can get a green card.

"The majority of the inquiries come from China," said Christina Lau, director of the newly opened California Wineries and Vineyards Regional Center, which is seeking immigrants to pump money into troubled North Bay wine businesses. "It's amazing. Maybe they really have that much money to spend."

The number of immigrants getting EB-5 visas nearly tripled last year after a decade in which the 20-year-old program languished because of disinterest, complicated rules and a tarnished reputation.

Congress allows up to 10,000 immigrants to come in on the visa each year, but most years attract fewer than 1,000.

That is rapidly changing, as the number of visa-holders nationwide rose to 4,218 last year from 1,443 in 2008, according to government statistics.

In order to get a green card, which allows a person to become a permanent resident of the United States, investors have a choice: They can put $1 million into starting a new commercial venture or helping a troubled American business. Or, they can invest $500,000 in a business venture located in an area with high unemployment.

For the majority who choose the less expensive route, there are more than 80 regional centers across the country, and 23 in California, that are authorized by the government to recruit immigrant investors and pool their contributions into distressed regions.

Two years ago, there were only about 20 such centers, most of which are private companies, but the recession has caused a spike in activity.

The operators of the centers are responsible for formulating the business plans. One center collects investments to build Vermont ski lodges; another seeks investors to fund agricultural development in the jobs-scarce Central Valley. In Hollywood, a new center is looking for money to finance moviemaking. And in the Bay Area, a blossoming of new centers is focused on wine, real estate and green technology.

'Tremendous opportunity'

"Basically, the banks are not lending, so if you really want to get things going, here is a tremendous opportunity," said John Loh, an Oakland real estate broker looking to pool immigrant investments into local business projects.

The commercial broker last year cofounded the East Bay Regional Center, also known as Golden State Renaissance Ventures, and placed its headquarters inside the shop-lined Pacific Renaissance Plaza in Oakland Chinatown.

The urban mall known for its dim sum and pearl drinks is a place where newly arrived business people can get a foothold in the U.S. market, he said. Loh and his business partner, lawyer Eric Chelini, have cleared out desk space that newcomers to the city can rent for about $7 per square foot.

"They can have assistants if they want to, or rent out a desk," Loh said. "For Asians, this will be ideal. It feels like home. And once they assimilate, they can go live in Piedmont or Lafayette or Walnut Creek."

For now, the cubicles remain empty as Loh and Chelini work to attract enough investors to make it happen. The pair leave Wednesday for China, where they will meet with potential investors for their projects -- one Chelini described as a software and real estate deal, and a second centering around surgical device manufacturing.

Their center is one of five now located in the Bay Area. A year ago, there were none.

In Palo Alto, a new California Energy Investment Center in Palo Alto will focus on the solar panel manufacturing and installation industries, and in Santa Clara, the Green Energy Regional Center will focus on investments in alternative energy technologies, mostly in the Central Valley.

The two Oakland centers and the center focused on the wine industry are in the early stages of development and none has yet secured an immigrant's investment.

Many of the Bay Area centers were founded by experienced local business executives who thought this region, already a popular destination for high-skilled immigrants, was a prime spot for a program where immigrants bring new money to a down economy.

"It was the perfect storm. With the collapse of the finance capital markets, finance was tightening up," said Brendan Heafey, vice president of Oakland's other new regional center, the Bay Area Regional Center in Jack London Square.

Heafey, a broker, cofounded the company last year with James Falaschi, a developer responsible for much of the square's recent redevelopment, and private investor Michael Hastings. In a tough market for real estate, the trio is looking to tap into an international network of what Heafey describes as "high net-worth individuals" who can jump-start Bay Area commercial construction.

"People are looking for new avenues for how to finance projects," Falaschi said.

The Bay Area Regional Center hopes to fund $100 million worth of local projects and create about 2,000 new jobs beginning this year, said immigration lawyer Stephen Yale-Loehr, testifying in favor of the EB-5 program at a congressional hearing last year.

Congress last year reauthorized the program for another three years, but has yet to make it permanent.

High-unemployment areas targeted

The unemployment rate must have been 13.95 percent or higher in 2009 for a neighborhood, city or county to be eligible for the $500,000 investment. In the Bay Area, that includes urban areas in Oakland, Richmond, Pittsburg and East Palo Alto, but also rural places at the outskirts of the region, including parts of Napa and Sonoma counties.

Since the EB-5 visa category was created by Congress in 1990, an estimated 20,000 full-time jobs have been created through its use, and $1 billion has been invested into American businesses in the last decade, said Sharon Rummery, spokeswoman for U.S. Citizenship and Immigration Services, which administers the program.

Although the program, more than most immigration policies, has wide and bipartisan support, the recent proliferation of regional centers has been greeted with concern by some.

"People are looking at this either as cheap money or easy money, and it's neither," said Pat Hogan, who runs a center based in San Bernardino County.

Hogan's center, the California Military Base Regional Center, last year signed about 100 investors, bringing in about $50 million to bring new business to closed bases.

The center loans the money it gets from immigrant investors to local redevelopment agencies. That helps the agencies raise enough money to match a federal grant, which is used to build new roads and office complexes at the former military sites, he said.

"These are not fast food jobs," Hogan said. "Our model has worked well in helping the San Bernardino community out of the employment (slump) they have had for 15 years."

One of Hogan's investors last year was Paul Little, who made the $500,000 investment and moved to Hemet from Manchester, England. His father-in-law already lives nearby, one of the reasons for the move.

"We've been coming out here on vacation for nine, 10 years. We fell in love with California," Little said. "The children were 8 and 10. We thought, if we're going to move to the states, we're going to do it now."

Little, a former travel company executive, sold the house he inherited from his parents in rainy Manchester, where housing prices are triple those in Hemet, so he could raise enough money for the investment and the move.

"I expect to get it all back, plus maybe a little more," Little said. "Some of the other schemes say you're going to make X amount but it's not guaranteed. That's why I wanted to go for the most solid-looking."

As he and his wife adjust to Southern California life and new jobs, their children, he jokes, are already shedding their strong British accents.

"It's obviously really multicultural here. They love it," Little said. "They're not allowed to speak American to me. But at school, they don't want to stand out. They use the English accent when they need it."

Fast path to residency

Lau, a lawyer from San Mateo, says the exchange benefits both the area of investment -- in her case, Bay Area wine country -- and the family willing to risk so much money to get here.

"I think the real motivation for people who go for the EB-5 is because it is the fastest way to get a green card," Lau said. "Once you commit your $500,000 into the U.S., you should be able to bring your wife and your children here in less than a year's time."

Some regional centers come close to guaranteeing that investors will get their $500,000 back, but Lau said that's a dangerous proposition.

"We tell them, upfront, 'Can you bear the risk of losing $500,000?' " she said. "They have to understand there is the possibility they will definitely get their green card but not be able to receive their $500,000 (investment) back."

Loh, of the East Bay center, looks at the program through the prism of his own immigrant experience, viewing the regional center as a project to help entrepreneurial immigrants. Born in China, he spent years trying to get to the United States, finally arriving through the sponsorship of an immediate family member.

"The Chinese had to stand in line to come to America, and the average line was 20 years," Loh said. "So they went to Australia, Canada. In America, you wait in line, or nothing."

Loh said the backlogs create hardships on families, who are forced to move around constantly if they want to do business in the United States.

"The husbands become what we call astronauts," he said. "They commute to Asia. And we don't want them to do that."

Australia and Canada both have similar programs which attract thousands of immigrant investors each year, and many attribute the popularity of those programs to the greater guarantees immigrants have of getting their money back. Still, the expansion of America's EB-5 program has generated enthusiasm as more local players become aware of it and propose creative ways of channeling the money into useful projects.

"Their contribution goes beyond the $500,000," Hogan said. "They come here. They build homes. They buy homes. They set up businesses. They pay taxes. Instantaneously, they are a super-productive component of our society."

The potential for abuse

Hogan and others nevertheless add a note of caution and a reminder that another sudden spike of interest in the 1990s caused the program to be effectively shut down for many years.

"Concerns of insider access, suspicions of abuse, misrepresentation, and fraud surfaced in the mid-1990s at the same time that the EB-5 program was experiencing its most significant usage," said a report released last year by an ombudsman for the immigration service. Some of those concerns led to criminal convictions and a bad reputation that caused investors to steer clear.

When centers fail, those most at risk are the immigrants, who can lose all their money and their immigration benefits, Hogan said. The EB-5 visa is conditional for two years, and investors only get a green card if everything works out as planned.

"His ultimate penalty could be, he's deported if he doesn't create the 10 new American jobs," he said.

Federal officials and most regional center operators said the problems that allowed fraud have been resolved, though some also call for more clarity and flexibility in how projects and individual investors get government approval. One of the hardest requirements to measure is the creation of 10 jobs for each immigrant who obtains an EB-5 visa. Regional centers have to use economic modeling to show they can meet this commitment.

"The word is getting out that it's a more viable program than it was in the 1990s," Hogan said. "But unless USCIS continues to regulate, and regulate hard, regional centers will commit suicide. They will push the envelope. Too many people will get hurt."

Still, Hogan said, there are projects that do not fulfill the mission of investing in distressed areas.

"You have foreign nationals who can't even speak the language trying to inquire about an investment 2,000 miles away," Hogan said. "The potential is very big to set up a scammy program."

China was the top generator of immigrants who obtained an EB-5, or investor visa, last year, followed by South Korea and Britain.

China: 1,979
South Korea: 903
Britain: 326
Canada: 85
Japan: 84
India: 72
Russia: 60
Netherlands: 38
Mexico: 33
South Africa: 31
Source: Citizenship and Immigration Services, fiscal year 2009