Green Card Program for Rich Foreigners is Fraud Risk, GAO Says

Program's Benefit to US Economy May be Overstated

Immigrants being sworn in as American citizens
Immigrants Become American Citizens In Naturalization Ceremony. John Moore/Getty Images

A federal government program that helps wealthy foreigners get temporary U.S citizenship “green cards” is a bit too easy to trick, says the U.S. Government Accountability Office (GAO).

The program is called the EB-5 immigrant investor program. The U.S. Congress created it in 1990 as an economic stimulus measure, but legislation funding the program is due to expire on December 11, 2015, leaving lawmakers scrambling to revise and revive it. One proposal would raise the minimum required investment to as much as $1.2 million, while retaining same the job creation requirements.

To qualify for the EB-5 program, immigrant applicants must agree to invest either $1 million in a U.S. business that is to create at least 10 jobs, or $500,000 in a business located in an area that is considered rural or has an unemployment rate at least 150% of the national average rate.

Once they qualify, the immigrant investors are eligible for conditional citizenship status allowing them to live and work in the United States. After 2 years of living in the United States, they can apply to have the conditions for legal permanent residency removed. In addition, they can apply for full U.S. citizenship after 5 years of living in the United States.

So, What Are the EB-5 Problems?

In a report requested by Congress, the GAO found that efforts by the Department of Homeland Security (DHS) detect and prevent fraud in the EB-5 visa program have been lacking, thus making it hard to determine program’s actual positive impact on the economy, if any.

Fraud in the EB-5 program ranges from participants overstating job creation figures to applicants using illegally gained funds to make their initial investments.

In one example reported to the GAO by the U.S. Fraud Detection and National Security Directorate, an EB-5 applicant concealed his financial interests in a number of brothels in China. The application was ultimately denied. Drug trade is one of the most common sources of illicit investment funds used by potential EB-5 program participants.

While the GAO gave no details for reasons of national security, there is also a possibility that some applicants for the EB-5 program may have ties to terrorist groups.

However, GAO reported that U.S. Citizenship and Immigration Services, a DHS component, relies too heavily on outdated, paper-based information, thus creating “significant challenges” to its ability to detecting EB-5 program fraud.

The GAO noted that the U.S. Securities and Exchange Commission reported getting more than 100 tips, complaints, and referrals related to possible securities fraud violations and the EB-5 Program from January 2013 through January 2015.

Overstated Success?

When interviewed by the GAO, U.S. Citizenship and Immigration Services (USCIS) reported that from 1990 to 2014, the EB-5 program had generated more than 73,730 jobs while contributing at least $11 billion to the U.S. Economy.

But the GAO had a major problem with those figures.

Specifically, the GAO stated that “limitations” in the methods Citizenship and Immigration Services uses to calculate the program’s economic benefit may cause the agency to “overstate some economic benefits derived from the EB-5 Program.”

For example, the GAO found that the USCIS’s methodology assumes that all immigrant investors approved for the EB-5 program will invest all the money required and that that money will be spent totally on the business or businesses in which they claim to be investing.

However, GAO’s analysis of actual EB-5 program data revealed that fewer immigrant investors successfully and fully completed the program than were approved in the first place. In addition, “the actual amount invested and spent in these circumstances is unknown, noted the GAO.