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Chinese Investors Seeking U.S. Citizenship via Controversial EB-5 Visa Program Claim Fraud.

Chinese Investors Seeking U.S. Citizenship via Controversial EB-5 Visa Program Claim Fraud.

A Silicon Valley businesswoman was served a lawsuit for scamming 90 Chinese investors who paid her more than half a million dollars each for a green card. The money was for a controversial federal visa program that requires investors to create at least 10 jobs as a way to obtain immigration status.

The EB-5 visa program was created in 1990 to stimulate job creation and incentivise foreign investors to finance companies in the US. Since then, the program has been one of the primary ways for affluent foreign nationals to gain their green cards. EB-5 investors primarily hail from China, South Korea, India, Vietnam, and Brazil, with about 85% being Chinese nationals.

The fraud lawsuit is being directed to Golden California Regional Center – one of the federal-approved investment hubs for the EB-5 program. According to the plaintiffs, the center was ran by a Santa Clara County businesswoman named Bethany Liou, with whom they forged a deal with to finance the $45 million generated by the full group’s investments into a real estate development endowment named Cupertino Fund. But much to their dismay, they were told last December that the project won’t push through and their “eligibility for a green card” was “destroyed”.

Job Creation or Buying Visas?

While the amount involved in this charge is staggering, the case isn’t an isolated one. Since its inception, the EB-5 visa program has been riddled with scams and has come under a lot of criticism.

The EB-5 program requires investors to generate at least 10 jobs for American citizens in exchange for a green card. The program obliges foreign nationals to offer capital such as cash, equipment, inventory, other tangible property, cash equivalents, and indebtedness secured by assets they own for American businesses. Critics often refer to this as the fast track lane for the rich while millions of immigrants wait in line for their citizenship to be considered. Meanwhile, other countries have also followed suit, including Turkey’s Foreign Direct Investment Law which expanded the benefits of investing with the offer of citizenship.

Rife with scams

Much of the controversial cases stem from a 1992 Congress decision to create “regional centers” where EB-5 investors’ money can be diverted to. This expanded the provision on job creation and opened it up to holding companies and wholly owned subsidiaries – which some judges assert can’t be assessed in terms of creating the minimum jobs required. Since then, the Securities and Exchange Commission has brought several high-profile cases against regional center operators for misappropriating millions of dollars in EB-5 funds.

A $35.2 million EB-5 litigation case was recently transferred by a federal judge to the South Dakota Supreme Court. The lawsuit – also known as the Deadwood Mountain Grand loan – was filed by 65 Chinese nationals to recuperate the money, which the company refused to pay back. The delay in the verdict stems from documents that include personal guarantees allegedly signed under duress. This and other legal incidents related to the EB-5 visa program underscore the importance of properly handling electronic evidence, which Special Counsel says has been a key topic for litigation support, IT, and legal teams for years. The Deadwood Mountain Grand loan is one of at least two EB-5 cases still pending in Aberdeen alone.

The Obama administration proposed an EB-5 overhaul in January 2017 which didn’t push through, according to Bloomberg Law. Several Congress initiatives to amend the program are also still pending.