The Real Deal New York

Sen. Dianne Feinstein calls for an end to EB-5

Top Democrat says program sends “terrible message” that US citizenship is for sale

November 04, 2015 03:20PM
By E.B. Solomont


From left: Sen. Dianne Feinstein and Sen. Chuck Grassley

Sen. Dianne Feinstein, one of the Senate’s most senior Democrats, is calling for an end to the popular EB-5 visa program, which awards green cards to foreigners in exchange for economic investment in the U.S. and has become a key source of financing for New York developers.

“The bottom line is that the EB-5 regional center program sends a message that American citizenship is for sale, and the program is characterized by frequent fraud and abuse,” Feinstein wrote in an Op-Ed in Roll Call published Wednesday.

The California lawmaker, who sits on the senate’s appropriations, judiciary, and rules and administration committees, described the program as a “special path toward citizenship” that is riddled with problems.

The EB-5 program is wildly popular among New York developers. At least $3.7 billion in EB-5 money has flow into local projects over the past several years, according to a recent analysis by The Real DealOn Wednesday, the Wall Street Journal reported that Silverstein Properties is looking to raise $500 million from EB-5 investors for 2 World Trade Center.

Feinstein’s position aligns her with an unlikely alley, Sen. Charles Grassley, the Iowa Republican who is chairman of the Senate Judiciary Committee. Grassley says that some developers use the EB-5 program to build glitzy condos instead of funding projects in rural areas with low unemployment. Her sentiments also echoed those of former New York Gov. Eliot Spitzer, now a major developer in New York, who said the idea of foreign investors “buying” a path to citizenship rubbed him “the wrong way.”

Proponents of the program, including Steve Witkoff, Related Companies’ Jeff Blau and developer Michael Shvo, say that the program is a major job creator that helps speed up the pace of projects.

Unless it’s renewed by Congress, the EB-5 program is set to expire in December. Most stakeholders believe there’s little chance the program would end altogether, although there are a number of changes under consideration, including higher financial requirements for investors and added transparency measures.

A recent report by the Government Accountability Office “confirms the difficulty of substantiating sources of investors’ funds, which may come from illegal activities in their home countries,” Feinstein wrote in the Op-Ed. “The report says these difficulties pose a significant risk of fraud, particularly since the number of visas issued under the program increased from 3,000 to 9,000 between 2011 and 2014.”

Feinstein wrote that even as the U.S. Citizenship and Immigration Services is approving a record number of EB-5 visas, it has a backlog of family-related visa applications going back 23 years. “Simply put, EB-5 sends a terrible message to the millions of immigrants patiently waiting their turn to enter the United States legally,” she said. “It says that American citizenship is for sale.” [Roll Call]