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EB-5’s underbelly (EB-5的软肋)

Delays and fraud have given the visa-funding program a bad rap

June 01, 2015       By E.B. Solomont

http://therealdeal.com/issues_articles/the-underbelly-eb-5/

中国房地产开发商鑫苑置业去年因为从Fortress Investment Group获得1.65亿美元的贷款来建造南威廉斯堡公寓–Oosten而登上新闻头条。现在鑫苑置业正在通过大肆鼓吹的EB-5项目寻求另外5000万美元的资金。

当下的障碍?有100人正在排队等待投资这个项目。

EB-5项目可以给予外国投资者绿卡以换取他们对一个在美国且能创造10个以上工作岗位的项目50万美元的投资。尽管该项目在投资者中受到巨大的欢迎并且房地产开发商也可以利用他们的资金,这个项目其实是一个非常冗长、耗力而又复杂的过程,即便是在最好的情况。并且这个延迟还在不断加剧。

基于曼哈顿的Advantage America的纽约区域中心是投资者和开发商之间的中介,它的总经理Julia Park说“这个项目就像跳圈,因为它是政府的项目”。

该项目也在与多方面的公众看法做斗争。批评者认为该项目允许富有的外国人来花钱买美国身份,而这很容易滋生诈骗。

虽然该项目有许多不足,在过去的几年里它的需求一直在增长,尤其是在中国投资者之间。但是这股浪潮却让比之前要多处理几千份签证申请的美国移民官员陷入困境。

漫长的通过EB-5来获得绿卡的步骤的第一步–I-526申请表的处理时间目前是14个月,相比之下2011年只需要6个月,并且这个延迟会继续增加。5月1号,负责监管该项目的联邦部门USCIS对中国寻求EB-5签证的投资者施加了等待名单,这意味着任何现在申请的人都会自动被排在等待队伍的末端。

这个等待名单之所以被设立是因为EB-5项目要求来自任何一个国家的投资者获得的该签证的数目不能超过整体的7%。到目前为止,这个项目还有没有被充分利用。如果来自其他国家的投资者没有使用完他们的配额的话,这些签证就会给中国的投资者。

“在这一点上,美国政府不会受理任何没有提前至少2年以上的申请”,Savills Studley 纽约办公室的首席经济学家Heidi Learner说。她在三月份发表了一篇关于EB-5对房地产影响的白皮书。

纵使这样的积压不打击投资者的热情同时很多人也认为不会,因为投资者的首要目的是获得绿卡。这种额外的等待也会被转移到开发商身上。有很高的可能性部分开发商会回避较长的贷款期限。“这会减少整体可选择的项目范围”,Greystone的总经理Justin Gardinier说。

充满争议的开始

从EB-5的诞生开始,它就饱受争议。

一个2013年国土安全部检察长办公室的例行审计得出结论:美国政府无法证明EB-5投资的经济好处。

就在上个月,芝加哥大学法学院的教授Eric Posner在Slate上发表的一篇文章里严厉批评了该项目。Poser引用了许多批判者的话说,EB-5是糟糕经济、政治任用亲信和不公平的最差组合。

其中对EB-5最大的抱怨就是它给富有的外国人提供了获得美国公民身份的机会,但是Posner也认为这个门槛太低了。

“此外,想要搞清楚一项投资究竟是创造了就业岗位还是只是将他们从一个地区转移到了另外一个地区几乎是不可能的”,他说到。“光天化日的诈骗和政治上任用亲信的案例也存在。”

批评者说该项目容易被人利用,一些不诚实的推广方用这个项目来欺骗投资者。

Simon Henry,中国地产网站Juwai.com的合伙创办人说,直到几年之前,EB-5投资在中国有非常坏的名声。早些时候,寻求EB-5资金的项目的质量和开发商的能力都非常匮乏。很多投资者因此损失惨重。但是现在情况有所改变,EB-5的小作坊产业还是保留了它不确定性的因素。

Paul Hastings的EB-5律师Joel Rothstein频繁来往于洛杉矶和北京之间,他说他在中国的酒店大堂里看到了无数EB-5的活动和展示。

“有许许多多的中介代理和推广方在收取费用来说服投资者,而这种行为会有商业不道德因素”,他说。那些中介代理通常和纽约市的开发商没有什么关联,但是开发商常常不得不应对EB-5项目整体的消极形象。

在美国国内,区域中心将交易汇集到开发商来收取一定的费用。目前大约有640家这样的区域中心在美国,其中62个在纽约。此外,全国范围内还有340家的成立申请正在被审批。但是,开发商只愿意和一小部分区域中心合作。

“开发商不想卷入到糟糕集资者的丑闻当中”,他说。“你与何人同床共枕?这对于银行来说是一个大问题。EB-5是金融领域里无人监管的的区域。”

Rothestein还补充到,银行仍然不愿意和EB-5资金打交道。

在2014年,发生在芝加哥的,政府指控了EB-5推广方Anshoo Sethi从投资者那里欺诈性集资1.6亿美元的丑闻加剧了对该项目的指责。根据起诉方,Sethi提供了虚假的文件给投资者来暗示这个项目受到美国政府和几个大型开发商的支持。他也声称已经花掉了从几百名投资者那里收取的1100万美元中介费的绝大部分。最终,Sethi和SEC以几百万美元的罚款结束此案。

最近,EB-5又因为前USCIS主管受有影响力的民主党派人士指示暗中操控了移民申请的指控而陷入舆论批评的枪口。

一份3月份由国土安全部发布的报告显示,前主管Alejandro Mayorkas 加速了EB-5申请通过的进程以取悦总统候选人Hillary Rodham Clinton 的弟弟、同时也是位于费城的Global City 区域中心负责全球EB-5投资者关系和政府事务主管的Anthony Rodham,还有前宾夕法尼亚州州长Gov. Ed Rendell,参议院多数党领袖Harry Reid 和弗吉尼亚州州长Terry McAuliffe。

Advantage America 区域中心的Park反对EB-5充满欺诈的观点。她说高曝光度的事件是被政治化和被该项目的批评者利用。

“到底有没有欺诈呢?答案是有。有没有欺骗性项目呢?当然有,因为有人参与,只有人参与就有欺诈”她说到。“这和其他融资方式没有区别,我不认为EB-5在这一点上有什么不同。”

政府打压取缔

HKS Capital Partners的负责人Ayush Kapahi说EB-5之所以吸引人是因为资金的成本非常低,但是他说还有很长的路要走。

“我认为最好表述的说法是,如果你有耐心,你可以追求EB-5来给你的项目融资而这可以帮你省掉很多钱,”他说。但是这个过程会抛弃一切商业和地产的原则因为它要经过政府。

对欺诈的指控刺激了在中国和美国的监管。2011年,中国政府对EB-5项目的营销推广方施加了管控。

“中方正在做更多应有的调查,”Mona Shah & Associates 的律师Mona Shah在上个月的The Real Deal的开发展会和论坛上说。“他们不会依赖于美国的合作伙伴,他们想要亲自去看工程项目。”

在芝加哥诉讼案和最近的检察长报告之后,SEC也在打压EB-5。

Greenberg Traurig的EB-5律师Kate Kalmykov说,加强了的SEC监管包括了对给投资者提供信的中介更加深入的核查。而这反映了EB-5作为一个市场的演化。

“2009年、2010年它还处于初始阶段,”她说到。“随着它的发展和增长,几百亿美元被集资。这一定得有更多的规章制度。”

目前,区域中心被要求要每年提交合规报告。去年秋季,Kalmykov 说移民局表示将会开始拜访工程项目来检查投资者的钱被如何使用了。“但是据我所知,他们还没开始这么做。”

当然,根据他们的官方网站,USCIS会关闭没有提交正确表格的区域中心,或者没有按照要求促进经济增长的区域中心。到5月7号为止,它已经关闭了29个区域中心,包括纽约州唯一被关闭的区域中心–水牛城区域中心。

但是想要了解区域中心的功效是出了名的困难。

“USCIS不是一个透明的机构,它通常只会公开极少的信息或数据,NYU的教授Jeanne Calderon和律师Gary Friedland在他们最近的一篇论文《A Roadmap to the Use of EB-5 Capital: An Alternative Financing Tool for Commercial Real Estate Projects》中写道。

真对区域中心的要求和标准很少,而且这些区域中心的拥有者也并没有被要求具备任何特殊的资格,教育或者经验。

许多区域中心连一个成功用EB-5资本资助项目的案例都没有。

 

EB5-fraud-2

Chinese developer XIN Development made headlines last year when it landed a $165 million loan from Fortress Investment Group to build its South Williamsburg condominium, the Oosten. Now, the developer is looking for another $50 million via the much-ballyhooed EB-5 program.

The immediate obstacle? Lining up 100 individuals who want to help fund the project.

Under the EB-5 program, foreign investors are granted a green card in exchange for a $500,000 investment in a U.S.-based venture that creates at least 10 jobs. But despite enormous popularity among investors and the real estate developers tapping into the cash, the program is a lengthy, labor-intensive and complex process, even in best-case scenarios. And the delays are getting worse.

“There really are hoops to jump through because it is a government program,” said Julia Park, managing director of the Manhattan-based Advantage America New York Regional Center, which acts as an intermediary between developers and investors.

The program is also battling a multi-layered public perception problem, with critics saying it allows wealthy foreigners to buy their way into the country and that it breeds fraud.

Despite the program’s shortcomings, demand has been surging over the past few years, particularly among Chinese investors. But that surge has further bogged down U.S. immigration officials, who are processing thousands more visa petitions than they used to.

The processing time for I-526 petitions — the first hurdle in the long process of obtaining a green card through EB-5 — is currently 14 months, up from roughly six months in 2011. And the delays are set to grow: On May 1, the U.S. Citizenship and Immigration Services (USCIS), the federal agency that oversees the program, imposed a Chinese “retrogression,” or wait list, for Chinese investors seeking EB-5 visas, meaning that anyone who applies now automatically takes a spot at the end of the line.

The wait list was put in place because the EB-5 program dictates that no more than 7 percent of visas can be allocated to investors from a single country. Until now, the program was underutilized; if investors from other countries didn’t use their alloted visas, the visas were offered to Chinese investors.

“At this point, the U.S. government is not processing any visas for people who haven’t initiated the process two years ago,” said Heidi Learner, chief economist at Savills Studley’s New York office, who published a white paper in March on EB-5’s impact on real estate.

Even if the backlog doesn’t depress demand — and many say it won’t, because investors’ top priority is obtaining a green card — the extra wait will be passed on to developers. And there’s a good chance some will balk at longer loan terms. “It reduces the overall universe of eligible projects,” said Justin Gardinier, a managing director at Greystone, who is establishing a new EB-5 platform for the Manhattan-based financial services firm.

Controversial start

From its inception, EB-5 generated backlash.

A 2013 routine audit by the Department of Homeland Security’s office of the Inspector General concluded that the U.S. government was “unable to demonstrate” the economic benefits of EB-5 investment.

As recently as last month, University of Chicago Law School professor Eric Posner lambasted the program in an article published by Slate. Voicing the views of many critics, Posner said of EB-5: “It’s the worst combination of bad economics, political cronyism and unfairness.”

One of the biggest complaints about EB-5 is that it offers wealthy foreigners the chance to buy U.S. citizenship, but Posner also argues that the cost of entry is far too low.

“Among other things, it’s almost impossible to figure out whether a specific investment generates jobs rather than reshuffles them from one place to another,” he wrote. “There have also been examples of outright fraud and political cronyism.”

Critics say the program can be dodgy, citing some less-than-honest promoters who used the program to defraud investors.

Simon Henry, a co-founder of the Chinese property website Juwai.com, which is headquartered in Shanghai, said EB-5 investment had “quite a bad reputation” in China until about a year ago. Early on, the quality of projects and caliber of developers seeking EB-5 funding was lacking, he said. “A lot of Chinese got burned pretty badly,” he said. While that has changed, EB-5’s cottage industry has retained dubious elements.

Joel Rothstein, an EB-5 attorney at the law firm Paul Hastings who splits his time between Los Angeles and Beijing, said he’s seen countless EB-5 events and presentations in hotel lobbies in China.

“There are all these agents and promoters out there earning fees to rope in investors and that part has a little bit of sleaze to it,” he said. While those agents are generally not affiliated with established New York City developers, those developers often have to deal with the fallout of overall negative perceptions of the program.

EB5-fraud-chart

On the domestic side, regional centers funnel deals to developers — for a fee. There are currently more than 640 regional centers throughout the U.S., including 62 in New York. In addition, nationwide there are another 340 applications pending.

And yet, there are only a few dozen regional centers a developer would want to do business with, said Rothstein.

“The developer doesn’t want to get caught up in a scandal with a bad fundraiser,” he said. “Who are you getting into bed with? It’s a huge issue with the banks. EB-5 is the wild west of finance,” he said.

Rothstein added that banks still don’t like to participate in deals with EB-5 money.

“They do deals notwithstanding EB-5, not because of it,” he said.

In 2014, a scandal in Chicago fueled critics of the program after authorities charged EB-5 promoter Anshoo Sethi with fraudulently raising $160 million from investors. According to the indictment, Sethi provided phony documentation to investors that suggested the project had backing from the U.S. government and certain major developers. He also allegedly spent most of the $11 million in fees he collected from hundreds of investors. Ultimately, Sethi settled with the SEC and was fined several million dollars.

Most recently, the EB-5 program came under fire amid allegations that the former director of USCIS influenced immigrants’ petitions at the behest of influential Democrats.

A March report by Homeland Security concluded that former Director Alejandro Mayorkas accelerated the approval of EB-5 applications as a favor to Anthony Rodham, brother of presidential candidate Hillary Rodham Clinton and chief of global EB-5 investor relations and government affairs for the Philadelphia-based Global City Regional Center, as well as former Pennsylvania Gov. Ed Rendell, Senate Majority Leader Harry Reid and Virginia Gov. Terry McAuliffe.

Park, of the Advantage America Regional Center, dismissed the notion that EB-5 is saddled by widespread fraud. Instead, she said high-profile incidents have become politicized and have been seized on by critics of the program.

“Is there fraud? Yes. Are there fraudulent programs? Of course, because people are involved and when people are involved, fraud gets involved,” she said. “That’s no different from any other financing. I don’t think EB-5 is special in that way.”

Government crackdowns

Ayush Kapahi, a principal at HKS Capital Partners, said EB-5 is compelling because the cost of capital is so low, but he said it’s a long road.

“Look, I think the nicest way to put it is, if you have the patience, you could pursue EB-5 capital for your project and pay significantly less,” he said. But the process “inevitably leaves all fundamentals of business and real estate aside because it has to go through the government.”

Allegations of fraud have spurred increased regulatory oversight, both in China and the U.S. In 2011, the Chinese government imposed regulations on marketers of EB-5 projects.

“The Chinese are doing a little more due diligence,” said attorney Mona Shah, principal at Mona Shah & Associates in New York, speaking at The Real Deal’s New Development Showcase and Forum last month. “They will not rely on the American counterpart going across … they want to come over here and visit [the project] themselves.”

The Securities and Exchange Commission, too, is cracking down on EB-5, in the wake of both the indictment in Chicago and the latest Inspector General’s report.

Kate Kalmykov, an EB-5 attorney at Greenberg Traurig, said the beefed-up SEC oversight, including closer examinations of the broker-dealers who source investors and the soundness of regional centers, reflects the evolution of EB-5 as a market.

“It was in its infancy until 2009, 2010,” she said. “As it’s grown and developed, many billions have been raised. There has to be more compliance.”

Currently, regional centers are required to file annual compliance reports. This past fall, Kalmykov said the immigration agency indicated it would begin conducting site visits to see how investor funds were being used. “They haven’t done that yet, to my knowledge,” she said.

Of course USCIS can shut down a regional center if it doesn’t file the right forms, or if it fails to “promote economic growth as required,” according to the agency’s website. As of May 7, it terminated 29 regional centers, including the Buffalo Regional Center, the only terminated center in New York.

But it’s notoriously difficult to pin down the efficacy of a regional center.

“USCIS is not transparent, and generally makes very little information or data available for public release,” wrote Jeanne Calderon, a professor at NYU, and attorney Gary Friedland, in their recent paper, “A Roadmap to the Use of EB-5 Capital: An Alternative Financing Tool for Commercial Real Estate Projects.”

Further, there are “few requirements or standards” placed upon regional centers. And those centers and owners, the report said, are not required to possess any special qualification, education or experience.

“Many Regional Centers,” the paper states, “have not sponsored even a single project resulting in a successful EB-5 capital raise.”