After a multi-million dollar lobbying effort, congressional leaders Tuesday night quietly scuttled a bi-partisan attempt to reform a little-known immigration program that offers wealthy foreigners access to visas and U.S. Green Cards but has been beset by allegations of fraud and abuse.
The EB-5 program, called so due to its visa designation, allows rich foreign nationals a shortcut to a Green Card as long as they invest $500,000 in a designated job-creating project in the U.S. Designed to spur the American economy, the program is also feared to have been exploited by spies, money launderers and other criminals, as revealed in an ABC News investigation earlier this year.
“There are well-documented national security concerns and abuse of the program, and a bipartisan, bicameral agreement on reform,” Sen. Chuck Grassley told ABC News in a written statement. “It should have been a no-brainer, but now it’s a missed opportunity.”
But there were opponents to reform with money to spend -- private groups that paid out as much as $30 million in a lobbying effort to protect the EB-5 program this year alone. Some of the National Association of Realtors’s $23 million lobbying budget targeted the issue, according to an analysis of lobbying registration reports for ABC News by the Center for Responsive Politics. A spokesman for the association would not provide a breakdown indicating the amount spent to lobby the EB-5 issue.
At the Capitol, the legislation was defeated by a group of lawmakers led by New York Democrat Chuck Schumer, who argued that security improvements were a good idea, but the way the reform was written would unfairly hurt investments in his home state.
Regardless of how it died, lobbying groups cheered the reforms' downfall Tuesday night. A lobbyist for one group, called the "EB-5 Investment Coalition." posted a message on Twitter declaring victory.
“So proud of our EB-5 Investment Coalition... TY [Thank You] Schumer Cornyn and Flake," it read, referring to other opposition lawmakers Sens. John Cornyn, R-Texas, and Jeff Flake, R-Ariz.
'In Dire Need of Reform'
Sen. Patrick Leahy, D-Vermont, who worked with Grassley on the program's overhaul, said the EB-5 program has "long been abused and is in dire need of reform."
"We pushed aggressively for its inclusion in the omnibus appropriations bill but congressional leadership inexcusably rejected this much-needed reform," he said.
Brokers who advertise overseas as agents who can help procure visas for wealthy investors have repeatedly been accused of defrauding those foreigners who put up $500,000 in the hopes of obtaining a Green Card. The EB-5 program was being abused so frequently this way that the Securities and Exchange Commission took the unusual step of posting a public warning to potential investors to be wary of such offers.
ABC News reported on an EB-5 program that promised to use foreign investment to rebuild New Orleans in the aftermath of hurricane Katrina. Investors sued, alleging the money had been squandered or stolen, and said they were unable to get Green Cards because no jobs were created.
The program was also criticized for how it was used legally.
Critics say that while it is intended to funnel EB-5 foreign investment to business projects in poor regions around the country and in turn promote job growth, a majority of the funds are actually supporting high-end real estate projects in wealthy areas.
“This program was established to help areas with high unemployment, but it’s been hijacked by investors with $500,000 putting their money in Chelsea, not the Bronx,” said Nancy Zirkin, executive vice president of The Leadership Conference on Civil and Human Rights, which supported the reform bill. “Our communities, in Baltimore and Ferguson and other places, need the infrastructure and just aren’t getting it.”
Outside opposition to the reform proposal was led largely by real estate developers who have increasingly come to rely on the money from foreign investors, mainly from China.
To add to the pressure from Leahy and Grassley to impose new restrictions on foreign investment visas, there was also pressure for Congress to act because the entire EB-5 program was set to expire this month.
Unexpected Defeat in Congress
Leahy and Grassley, both senior members of their parties in high ranking positions, said they thought they had the support needed to push through the reform measure. But during weeks of discussions behind closed doors, Sen. Chuck Schumer (D-N.Y.) emerged as a staunch opponent, arguing that the changes to the program would unfairly limit the amount of EB-5 money that could be used on projects in New York City. That’s because of a provision in the reform proposal intended to more narrowly direct the investment money to projects in low income areas.
At present, close to 20 percent of the investment funds raised by foreign investors seeking visas winds up backing a New York City development. Many of those projects include glitzy high rise buildings in wealthier parts of New York. But even those projects, Schumer argued, were able to create large numbers of jobs in neighboring, low income parts of the city.
A spokesperson for the senator told ABC News that Schumer did not oppose efforts to eliminate national security and fraud risks associated with the program.
“Sen. Schumer supports reforms that will bring transparency and accountability to the EB-5 program, but strongly believes that the EB-5 program should continue to act as a catalyst for thousands upon thousands of jobs throughout New York,” said Matt House, a Schumer spokesman. “The proposed reforms would have crippled the program and would have held back job growth in urban and low-income areas in cities across the country.”
Negotiators said Schumer attracted support from Republican Sens. Cornyn and Flake. Instead of passing the reform measures, they agreed, they would extend the program for another 10 months without making any changes.
Grassley expressed deep disappointment in the outcome.
“Leadership allowed the negotiations to be hijacked by a small number of special interest groups who wanted the status-quo and the necessary reforms were shoved aside,” he told ABC News.
A Washington, D.C. group called IIUSA, formed to advocate for EB-5 investment, posted a statement online calling the decision by Congress to keep the EB-5 program running “good news.”
“IIUSA will continue to advocate for a long term reauthorization with reasonable reforms that succeed in enhancing Program integrity and effectiveness,” the statement said.
Correction, Dec. 18: This article has been updated to clarify that some, but not all of the National Association of Realtor’s $23 million lobbying budget was spent on the EB-5 issue.