Mike Rounds is proposing to reform and prolong a federal program that once threatened to derail his political career.
The Republican U.S. senator introduced an 87-page bill Tuesday that would alter numerous aspects of the EB-5 immigrant-investor program and extend its authorization to 2025. The program allows foreigners to enter the country and establish permanent residency in exchange for investments in job-creating U.S. projects. The investments are made through middleman-like entities called regional centers.
The bill includes numerous provisions intended to detect and prevent the kind of misdeeds that sullied the program in Rounds’ home state of South Dakota, where the term “EB-5” is synonymous with scandal.
Rounds said the bill took three years to draft while his office took input from other senators, regulators and people involved in EB-5 projects.
“I’ve never told anybody I was going to shy away from a challenge,” Rounds said in a Journal phone interview. “I think that would be almost like walking away from part of my job.”
Rounds and other supporters of the EB-5 program say it strengthens the U.S. economy by attracting foreign investments to major projects that might otherwise lack funding.
Opponents of the program, including David North, a fellow at the Center for Immigration Studies in Washington, D.C., call it a visa-for-sale program that puts foreign investments in the pockets of wealthy U.S. developers.
North wrote a blog post for the center describing Rounds’ legislation as a disastrous bill that is “covered with attractive cake frosting.” In email correspondence with the Journal, North expressed surprise at Rounds’ eagerness to sustain the EB-5 program.
“If I were Rounds I wouldn't get within a country mile of any EB-5 matter, but he chose differently,” North said.
After Rounds was term-limited as governor in 2010, revelations poured forth about the state-run EB-5 regional center that his administration oversaw (most other EB-5 regional centers are privately run). One former state official who was connected with the center committed suicide in 2013 while he was under investigation for grand theft, and another pleaded guilty to a felony in 2017 for illegally using funds associated with the program.
The U.S. Citizenship and Immigration Services subsequently terminated South Dakota’s EB-5 regional center, but the state appealed and the USCIS Administrative Appeals Office withdrew the termination and remanded it for further review in 2017. That review remains pending, a USCIS spokesman said Friday.
Fallout from the EB-5 scandal dogged Rounds throughout his 2014 Senate campaign. His support dipped as low as 39 percent in one poll before he ultimately won with 50 percent of the vote in a three-way race. Although he has not officially announced that he will seek re-election next year, his campaign committee has been raising money.
Rounds’ EB-5 bill is co-sponsored by two of his fellow Republican senators, Lindsey Graham of South Carolina and John Cornyn of Texas.
The term “EB-5” is shorthand for the employment-based, fifth-preference visa, which is issued to foreign investors who participate in the program. In recent years, approximately 10,000 EB-5 visas have been issued annually.
The visa permits program participants to enter the United States, where they and their family members can earn a green card to establish permanent residency.
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To earn a green card, EB-5 participants must invest money in a U.S. business project that creates or preserves 10 jobs. The minimum investment for projects in rural, high-unemployment areas — called targeted employment areas — is $500,000. The minimum investment elsewhere is $1 million.
The program is administered by U.S. Citizenship and Immigration Services, an arm of the Department of Homeland Security. Last summer, the department published new EB-5 regulations that will take effect Nov. 21. Among the changes is an increase in minimum investments, from $500,000 to $900,000 in targeted employment areas, and from $1 million to $1.8 million elsewhere.
Rounds’ bill would roll back those increases and set the minimum investments at $1 million and $1.1 million, respectively. The bill would also require inflationary adjustments to those amounts every three years.
The bill would change the definition of targeted employment areas to include rural areas, as well as areas near closed military installations, and opportunity zones as defined by the 2017 tax-cut law. The bill would require 30 percent of EB-5 visas to be reserved for targeted employment areas, with half of those reserved for rural areas.
Many provisions in the bill aim to prevent and catch malfeasance, including some highly specific provisions that read like a point-by-point reaction to some of the improprieties committed by South Dakota’s EB-5 program.
For example, the bill would:
- Prohibit people from serving as loan monitors for projects they were previously associated with as regional center employees.
- Require regional centers to provide 120 days advance notice of significant changes in their organizational structure, ownership or administration.
- Require evidence from regional centers that money invested by foreigners is committed to intended projects.
- Authorize the secretary of homeland security to suspend and terminate regional centers and third-party promoters for a number of program violations, and to fine regional centers up to 10 percent of the money invested through them.
- Require the Department of Homeland Security to perform site visits to regional centers and their projects.
- Require reports on various aspects of the EB-5 program from the Government Accountability Office and other federal offices.
- Allow the secretary of homeland security to deny program applications that are contrary to the national interest, for reasons pertaining to national security or public safety.
To pay for enforcement, the bill would establish an Integrity Fund. The fund would receive fines assessed against regional centers, plus fees of up to $20,000 annually from regional centers, and fees of $1,000 for each visa application.
Additionally, the bill would require each immigrant-investor to pay a $50,000 program improvement fee to the U.S. Treasury. The bill would allow regional centers to pay an optional $50,000 premium fee for expedited processing of various documents.
Debbie Klis, an EB-5 securities lawyer in Washington, D.C., said she likes the bill because it would introduce overdue transparency, oversight and regulation to the EB-5 program. She predicted the bill would weed out most bad actors from EB-5 projects and said the legislation is detailed and comprehensive enough to attract broad support in Congress, unlike other bills intended to reform the program.
“This is probably the first one I’ve read in the last four years that I actually think should pass,” Klis said.
North, the EB-5 critic, said the bill has concerning provisions, including one he described as a “bombshell.” That portion of the bill would give the secretary of homeland security power to temporarily parole any EB-5 visa petitioner (or their spouse or children) into the United States who has had a pending petition for three years, or has had an approved petition for three years but has not been allowed into the country because of the cap on visa numbers.
North said the parole option could allow a backlog of 73,000 immigrant-investors into the country, “thus blowing away the long-established 10,000 a year limit on this program.”
North said he fears the Rounds bill could get attached to spending legislation that Congress might pass this month to ward off a government shutdown. If that happens, North said, the Rounds bill could ride into law without any hearings or votes on the bill itself.
Asked if he wants to rush the bill through Congress, Rounds said, “Nothing in the Senate moves fast.” Meanwhile, other EB-5 bills are pending in Congress, ranging from an attempted repeal of the program to reforms similar to those sought by Rounds.