EB-5 Program Extended for One Year

The Omnibus Bill to fund the spending of the U.S. Government for Fiscal Year 2016 included a measure to temporarily postpone the need for reauthorization of the EB-5 immigration program until September 2016. The EB-5 program, which offers visas to foreign investors that make qualifying investments in business projects here in the U.S., requires re-authorization by Congress every five years.

The extension of the program proved controversial this year as there were calls for major reform of it. The EB-5 Program was adopted as part of the 1990 Immigration Act in order to encourage job creation and economic development in blighted areas or locations with high unemployment. The program took some time to hit its stride, but it has seen an explosion in popularity since the Great Recession. With the increase in popularity has unfortunately come fraud and abuse of the system.

According to critics, much of the investment funds through the program have been used to spur business projects and real estate development in wealthier areas that are not in need of investment incentives. We have also seen a number of SEC enforcement actions against individuals defrauding investors through the program – either by misrepresentations of the status of the project, solicitation of funds by unlicensed brokers, or outright misappropriation and embezzlement of funds from foreign investors who were unable to protect themselves.

There have been a number of proposals to address the issues that led to fraud and abuse. Increased oversight of the projects, redrawing the qualifying Targeted Employment Areas (TEAs), and carve-outs of visas to be issued to projects in rural and urban impoverished zones have all been proposed.

We follow this immigration program because investments in it are regulated by the Securities & Exchange Commission. Attempts to defraud investors are securities fraud which can be reported to the SEC whistleblower program. Our whistleblower attorneys are prepared to assist insiders and investors reporting fraud against investors in an EB-5 project. If the SEC takes action and receives monetary sanctions in excess of $1 million, a reward will be paid to eligible whistleblowers in an amount of between 10 and 30 percent. There has already been one award paid to an EB-5 whistleblower and it would not surprise us if there were others in the works.