Nick Mastroianni II Lends Insight to Forbes on Future of EB-5 Program

Nick Mastroianni II Lends Insight to Forbes on Future of EB-5 Program

Originally posted by

By Andy Semotiuk, December 17, 2015

Despite recent strenuous efforts made by the Chairs and Ranking Members of the House and Senate Judiciary Committees to improve the EB5 investor immigration program as part of an omnibus appropriations bill currently to be enacted, Congressional leaders decided to sidestep the efforts and instead simply renew the EB5 program in its present form until September 2016. The development came as a disappointment to many reformers but is also a relief to some foreign investors who have been working to establish their clean source of funds and still qualify under the old program. In view of the development, this may be a good time to review the terms of the program, spell out some deficiencies and look at what’s likely in store for it in September 2016.

Background Of The EB-5 Regional Center Program

The EB5 program was created by Congress 25 years ago to create jobs for American workers and to attract capital by offering foreign investors a green card for an investment of $ 500,000 for five years in a regional center project that has been approved by the U.S. Citizenship and Immigration Service (USCIS). The program requires that each investor create at least 10 jobs, directly or indirectly, as part of the investment. There are over 650 regional centers that currently offer eligible investment projects. Each year 10,000 immigrant visas are allocated to investors under the program. Despite its popularity and general success not all is well with the program.

According to a statement made today by Senator Grassley on the floor of the Senate, last June, Congress heard the following from a whistleblower in a Senate committee hearing:

“EB-5 applicants from China, Russia, Pakistan and Malaysia had been approved in as little as 16 days and in less than a month in most. The files lacked the basic and necessary law enforcement queries… I could not identify how USCIS was holding each regional center accountable. I was also unable to verify how an applicant was tracked once he or she entered the country…During the course of my investigation it became very clear that the EB-5 program has serious security challenges.”

The Senator later added that an internal national security report stated:

“As in any instance where significant investment funds are raised…the regional center model is vulnerable to abuse…the statute and regulations do not expressly prohibit persons with criminal records from owning, managing, or recruiting for regional centers.”

Fortune magazine reported how one man cheated potential immigrants out of $147 million dollars for a make-believe building project he never intended to finish. The article explains how the trickster claimed the project would create over 8,000 jobs. In reality, some 290 foreigners were tricked out of their cash.

Other similar examples were also cited. In his remarks Senator Grassley identified many other shortcomings in the program.

Clearly the program needs some reforms. So what reforms can we expect to the program next year?

To get some input on that I spoke to Carolyn Lee, the Co-Chair of the American Immigration Lawyers Association EB5 Committee and Managing Partner of the EB5 program at the Miller Mayer Law Firm and with Nicholas Mastroianni, one of the most active businessmen in this area who is President and CEO of U.S. Immigration Fund (USIF). USIF manages three regional centers and has raised over $ 1 billon in 17 successful projects having processed about 2000 EB5 petitions.

They told me that the amount foreign investors will need to invest in the future will likely rise, perhaps to $ 800,000 U.S. in EB5 projects in targeted employment areas (TEAs) and $ 1 million outside those areas. Lee estimated that over 70,000 EB5 visa applications are currently pending with the National Visa Center saying that, in the absence of adjustments to visa allocations or improvements in processing, there could be longer wait times, particularly for investors from China who already are backlogged two years. Mastroianni underlined the need for better integrity measures with respect to who can set up regional centers, how TEAs are determined and how many direct jobs will be required in the days ahead. His comments echoed Senator Grassley’s criticisms. An especially touchy issue will be whether new rules will take effect only when enacted, or will they be applied retroactively, or as of a cutoff date before enactment? All these issues are what we have to look forward to in the future.

 In the meanwhile, however, there is still time to bring investors to the United States in the EB5 program as it stands and to get them approved through the existing rules. In that regard the program’s abusers will just simply have to be kept in check by government regulators until the program is reformed.