The EB-5 “cash for visas” program essentially came to a halt when Congress failed to reauthorize its regional centers last year.
Now one of these centers — crucial intermediaries between developers and foreign investors — claims they should be allowed to continue operating anyway.
California-based Behring Co. filed a lawsuit in federal court in California against the USCIS, the Department of Homeland Security, and the Department of State, alleging the agencies exceeded their authority in shutting down the centers last year.
EB-5 was once one of the hottest ways for developers to raise cheap financing for U.S. projects. They used the regional centers to pool investments from foreigners, who got visas in return. But challenges with visa applications and fraud caused the program to fall out of favor.
Things got even worse when Congress could not agree on a deal to reauthorize the regional centers program and let it expire last summer. Since then, investors, regional centers, and developers in the process of raising money through EB-5 have been in limbo, awaiting new legislation or guidance.
Behring’s suit argues that the regional center program was supposed to be permanent. The federal agencies, according to Behring, incorrectly interpreted the expiration of one incentive to mean the end of the entire program.
To initially attract investors to EB-5, Congress created an incentive to set aside visas for regional centers. That incentive — but not the regional center program on the whole — was set to expire in five years, according to the suit. The wait for visas is often longer than five years, so lawmakers would not have set such a limit, Behring claims.
“It is unfathomable that Congress would design a program where foreign nationals could invest their life savings in U.S. businesses and pay USCIS millions in application fees only to watch the program self-destruct in the middle of a years-long wait for a visa,” said Behring CEO Colin Behring in a statement.
But that is exactly what has happened. The minimum investment in EB-5 is $500,000, and would have been nearly twice that had Behring not won a federal lawsuit to lower the minimum.
Behring alleges that USCIS is refusing to process tens of thousands of visa applications. The regional center wants the court to declare the program unexpired and order visa processing to resume.
A USCIS spokesperson said the agency does not comment on pending litigation.
Behring’s previous success in EB-5 litigation gives credence to its latest suit. Last year, a federal judge reversed an increase in the minimum EB-5 investment to $900,000. EB-5 proponents had argued that the hike would decimate demand for the program.
But without regional centers to act as a middleman between developers and foreign investors, the cash-for-visas program is essentially dormant.
Even if the centers are re-authorized, EB-5 still faces issues. The wait for an application to be processed can be more than a decade. And abuse remains a major concern. A number of regional centers and developers have faced allegations of fraud and misleading investors overseas.
In one example, a Palm Beach developer siphoned off millions of dollars to fund a lavish lifestyle, complete with a 151-foot yacht named “Alibi.”