Industry Voice: ‘The EB-5 Regional Center Program Should Stay Expired’

A voice within the industry has written an article urging that “The EB-5 Regional Center Program should stay expired as a better alternative already exists”.

The writer, new to me, is Kurt Reuss, who identifies himself as a securities broker and the founder of the eb5Marketplace website.

He makes the sound point that all of the scandals within the EB-5 program have come from pooled investments run by Department of Homeland Security-recognized regional centers, and none have come from the smaller program that allows alien investors to make direct investments in U.S. economic deals. The alien investors may, but do not have to, manage the resulting operation; most do not.

Though I am not at all sure that we should let anyone buy a green card, Reuss’ reasoned comments are welcome.

The regional center part of the program, which had been the heart of the EB-5 program, lapsed on June 30 of last year when Congress refused to re-authorize the always temporary program, as we reported at the time. Meanwhile, the direct investment program remains on the books.

An alien in the old program could put $500,000 in a pooled investment run by a recognized regional center and get a family-sized set of green cards two years later; in the meantime, the alien, his or her spouse, and their under-21-year-old kids could obtain temporary legal presence and work permits. If all went well, at the end of the two years the temporary documents became green cards. There was widespread corruption in the program, and some investors lost money and did not secure green cards.

Both the Obama and the Trump administrations wanted to reform the program, but those efforts were shot down by a federal magistrate judge, who has since been nominated to a federal district court judgeship.

The rules of the ongoing direct investment program allow the same benefits for an investor as those under the regional center part of the program, but there is no need for a middleman. Since the regional centers had extensive sales teams, most of the money in the program went to them; those seeking to promote the direct investment program do not have a similar sales force, and it operates on a much smaller scale.

Meanwhile, though the direct investment part of the EB-5 program may be alive, it is not well. There are 10,000 visas available a year from the program, meaning that 833 visas (for both investors and dependents) can be issued monthly. We have been following State Department data on visa issuances for the program, and note that the number of EB-5 visas issued in the five countries that dominated the old EB-5 program dropped from 31 to 15 between November and December. At 15 visas a month, the program is operating at only 1.8 percent of capacity.