Various observers have raised concerns that South Dakota's use of the EB-5 visa investment program may have opened our doors to Chinese spies and mafia. Now, two years after Iowa Senator Charles Grassley started beating the drum about the possible national security risks posed by EB-5, ABC News goes to town and trumpets the evidence we've had for two years that EB-5 is rank with fraud and corruption:

But an ABC News investigation found that in addition to reaching wealthy foreign investors, the program has become a magnet for those seeking to sidestep the scrutiny of the traditional immigration process. In one case, immigration officials pushed through a visa application from Chinese investor in a Las Vegas hotel project despite an internal review that found the investor had previously been turned back at the border, and much of his visa application had likely been fabricated, immigration records show.

A Feb. 1, 2013 Homeland Security internal review obtained by ABC News also lays out in stark detail the breadth of the troubles afflicting some of the roughly 600 so-called regional centers -- private sector entities certified by Homeland Security to recruit foreign investors for specific business ventures that will qualify for EB-5 visas. The document summarizes 41 investigations, some open and some now closed, into allegations ranging from espionage to fraud to drug trafficking involving investors in various EB-5 investment projects [Brian Ross and Matthew Mosk, "Whistleblowers: US Gave Visas to Suspected Forgers, Fraudsters, Criminals," ABC News, 2015.02.03].

Ross and Mosk mention our own Senator Mike Rounds and his love of EB-5, though they fail to get into the details. They also mention well-placed Democrats Terry McAuliffe and Nevada Senator Harry Reid (whom this blog mentioned in connection with EB-5 last November) as having used EB-5 to do favors at the expense of national interests.

ABC News also mentions an EB-5 connection to Iranian terror networks (also reported on this blog in December 2013). ABC News says that EB-5 will come before the Senate Judiciary Committee, which Senator Grassley chairs, this year. Fortunately for us, Senator Mike Rounds is not on that committee. Maybe he'll be called to testify about why he gave such strong support to a program that appears to promoted crime, corruption, and possibly risks to American security in projects across the nation.

50 comments

Dan Lederman's Rushmore PAC is bringing Iowa Senator Chuck Grassley to a Sioux City fundraiser for South Dakota Republican Senate candidate Marion Michael Rounds.

$10 a plate? Heck, I'd pay double that to listen in on Grassley and Rounds discussing the EB-5 visa investment program. Let's sample Senator Grassley's public statements on EB-5:

Over the past three years, there has been a remarkable increase in the amount of foreigners using this visa program. At first glance, this appeared to be a positive development. But, as whistleblowers came forward, and we took a detailed look, there appear to be some major flaws that need fixing [Senator Charles Grassley, "EB-5 Visa Program Faces Tough Questions," official website, 2013.12.20].

According to the HSI memo, ICE identified seven main areas of program vulnerability with the EB-5 visa:

  1. Export of sensitive technology/economic espionage;
  2. Use by foreign government agents/espionage;
  3. Use by terrorists;
  4. Investment fraud by regional center;
  5. Investment fraud by investors;
  6. Fraud conspiracies by investors and regional center; and
  7. Illicit finance/money laundering.

The memo states: “The aforementioned vulnerabilities are directly affected by information gaps on the alien beneficiaries of the EB-5 program. Unlike most other permanent resident visa classifications, EB-5 beneficiaries do not need to establish a significant and verifiable background for program eligibility” [Senator Charles Grassley, letter to ICE Acting Director John Sandweg, quoted in "Internal Memo Outlines National Security Concerns with EB-5 Immigration Program," official website, 2013.12.12].

Along with the above national security concerns, Senator Grassley has raised alarm about abuse of EB-5 to benefit political cronies. Yet candidate Rounds has expressed unfettered fondness for the program that blossomed under his gubernatorial watch in South Dakota:

Rounds said EB-5 helped him create 28,000 jobs when he was governor, and it was used for several successful projects, including The Dakota Provisions turkey plant in Huron, several dairies and the Deadwood Mountain Grand hotel, casino and event center.

But EB-5 funds also were used to fund the failed Northern Beef Packers plant, which filed for bankruptcy protection last year because it lacked money to buy cattle for slaughter. The Aberdeen plant, which also used about $3.5 million in state Future Fund Grants and $845,000 in construction tax refunds, has been bought at auction but sits idle.

Rounds said the state's investment is offset by taxes generated from the plant's construction and the property takes paid to local jurisdictions.

Personally, I hope they continue the EB-5 program.... because it's one more tool available. We don't exactly have a lot of capital in South Dakota [Mike Rounds, quoted in Joe O'Sullivan, "Rounds Defends EB-5 Program,"Rapid City Journal, 2014.01.16].

And don't forget Rounds's unmitigated support for EB-5 expressed in the April GOP primary debate in Pierre:

Rounds, who now plays Michael Douglas to EB-5's Glenn Close but who keeps boinking her instead of drowning her in the bathtub as he should before she kills someone he loves, says EB-5 is all about creating job opportunities, and we can't turn down job opportunities in the middle of a recession (what? says the BEA). He pokes back at Ravnsborg (and any time the frontrunner pokes back, you guys are winning!) with semantics: EB-5 doesn't sell citizenship, just green cards. (Sure, Mike: try that distinction out at the next Tea Party forum.) Rounds claims South Dakota lost no taxpayer dollars on EB-5 (baloney at best, semantics at worst, if Rounds is parsing the argument that it was his beef plant NBP that lost the money and not his EB-5 program). To conclude with both irrelevancy and falsehood, Rounds claims to have created 28,000 jobs while governor (South Dakota Department of Labor statistics show 406,405 jobs in South Dakota in January 2003 and 422,445 jobs in Janaury 2011; net increase during Rounds administration: 16,040, meaning Rounds is exaggerating by 75%.) [C.A. Heidelberger, "GOP Senate Debate: Who Said What, and Who Won?" Madville Times, 2014.04.13]

Rounds expressed a similar sentiment in a May KSFY interview, in which he swept away any concerns about EB-5 with his implication that creating jobs makes everything o.k.

Lederman is keeping things tight: it's just brunch, one measly hour, 11 a.m. to noon, at Eldon's Restaurant (as in founder Eldon Roth of Beef Products, Inc.), this Saturday, August 16. So amidst all the hand-shaking and check-writing (checks, because you know Rounds doesn't dig all that new-fangled technology enough to have Square swipers on his iPad, right?), there probably won't be time for Grassley and Rounds to have a frank discussion about EB-5.

But for the sake of national security and honest economic development, maybe Grassley should make time to straighten Rounds out.

Related Reading: Remember how Canada shut down its immigrant-investor program, the one that inspired our EB-5, because they decided it wasn't producing significant economic benefits? Rich foreigners are now suing Canada to reopen the program... because, you know, rich people are entitled to buy whatever they want, including citizenship and your vote.

5 comments

In more EB-5 irony, some of the folks most passionate about investigating the EB-5 visa investment program that Republicans like Mike Rounds so eagerly promoted in South Dakota are Republicans from outside South Dakota. Testifying Wednesday in support of his bill to terminate South Dakota's involvement with EB-5 investment, Rep. Stace Nelson (R-19/Fulton) invoked the work of Republican Senator Chuck Grassley from Iowa, who has raised national security alarms about Communist China's interest in our EB-5 program. Grassley has also pitched a fit about apparent Obama Administration cronyism funneling EB-5 money to favored politicos.

Now Republican Senator Tom Coburn from Oklahoma is seeking more information about EB-5 regional centers. Not falling for the silly arguments we've heard from South Dakota state government that our EB-5 program involved a private contractor and thus can't be investigated, Senator Coburn has sent letters to these federally authorized entities and asked for...

  • Any approval from USCIS to participate in the EB-5 program regarding the regional center and its business plan, including any subsequent recertification;
  • The total annual amount of investment and the number of individuals by country of origin making investments through the regional center since it has been in operation;
  • The name, address, and a description of each business in which the regional center has made an investment of funds and the number of jobs created by each investment;
  • Any fees charged to EB-5 applicants or received by the regional center, including amount and description;
  • A list of any current or former corporate officers of the regional center, including title, position, and dates of employment; and
  • The name and address of any individual or entity — either foreign or domestic — that the regional center has an agreement with to provide legal, accounting, recruiting or consulting services, as well as a description of the service provided.

[David North, summarizing Senator Tom Coburn, letter to EB-5 regional centers, 2014.02.14]

Nationwide, the lawyers who make money coordinating EB-5 programs are decrying Senator Coburn's request for public accountability and urging their regional center clients to clam up. I am eager to hear whether Senator Coburn gets a response from South Dakota's terminated EB-5 exec Joop Bollen or from the reticent caretakers of the idled program in our Governor's Office of Economic Development.

I am also eager to see if South Dakota Republicans, who have blocked efforts for more serious investigation and outright stoppage of our state's EB-5 activities, will develop anything like Grassley's and Coburn's interest in EB-5.

Related: Canada is terminating its Immigrant Investor Program, the program that inspired the U.S. to create EB-5. Canada found that the mostly Chinese immigrants who took advantage of their program paid less in taxes than other immigrants, generated less investment income, and drove up housing prices.

12 comments

Republican state representatives Elizabeth May (R-27/Kyle) and Stace Nelson (R-19/Fulton) have bravely signed Rep. Kathy Tyler's (D-4/Big Stone City) petition calling for a special session to authorize a forensic audit of South Dakota's troubled EB-5 visa investment program.

Rumblings suggest that the Republican leadership is pressuring its members not to sign the petition and contending that the federal EB-5 investigation is all political machinations by U.S. Attorney and known Democrat Brendan Johnson. The latter is hogwash, given that great impetus for an investigation of the EB-5 program is coming from Republicans.

Recall that the federal investigation (read: the only serious investigation) of South Dakota's EB-5 program got rolling in part thanks to concerns raised at the national level by Republican Senator Charles Grassley of Iowa. Senator Grassley has been raising questions about the United States Customs and Immigration Service's supervision of EB-5 under Alejandro Mayorkas, who Grassley charges has fast-tracked Chinese EB-5 applicants as favors for well-placed Democrats Terry McAuliffe (now Virginia's Governor-elect) and Anthony Rodham (Hillary Clinton's brother). Mayorkas is President Barack Obama's nominee for Deputy Secretary of Homeland Security. While the DHS inspector general is still investigating Mayorkas's conduct in USCIS, Senate Democrats have decided to push ahead with his nomination.

In 2008, the percentage of EB-5 investors coming from China was 25%. Under the Obama Administration, that percentage has jumped to around 80%. Immigration rules ban members of the Chinese Communist Party from receiving U.S. visas, but enforcing that ban requires diligent oversight. Senator Grassley is concerned that such oversight is taking a backseat to political favors.

Conservative Republican Senator Tom Coburn shares Senator Grassley's concerns. He offers this damning assessment of the EB-5 program:

I have serious concerns about national security and criminal threats associated with the EB-5 program.... The program is vulnerable to fraud, and we are not doing nearly enough to ensure that program participants are not a security threat. The administration needs to have a candid conversation with Congress and the American people regarding the program’s problems [Senator Tom Coburn, quoted in Jeffrey Anderson and Shaun Waterman, "Homeland Security's Fast-Tracked Checks of Foreign Investors May Put U.S. at Risk," Washington Times, 2013.10.27].

Since its inception in the 1990s, the EB-5 program has been a disappointment and an embarrassment. Key national Republicans are raising alarms that Democrats are using EB-5 to do political favors, at the expense of national security. If that's true, then a politically motivated Brendan Johnson would be the last person who would be giving the EB-5 program more scrutiny... and anti-Obama, anti-immigration, anti-Communist South Dakota Republicans ought to be the first.

The only people who don't want to look into South Dakota's EB-5 program are the people who are afraid they may find their friends implicated in green-card-buying schemes that have offsprung corruption, local economic damage, and possibly national security risks. But if those harms are happening, we must find out and stop them. Republicans should be as committed to that goal as Democrats.

Republicans, join your colleagues Rep. May and Rep. Nelson. Sign Rep. Tyler's petition. You may be doing the Chinese Communist Party and President Obama a favor if you don't.

16 comments

My Chinese is worse than Mike Rounds's. But luckily for Rounds and China, everybody speaks dollar. The Chinese state news office archives this article from July 2009 showing then-Governor Rounds, his economic development chief Richard Benda, and EB-5 visa hustler Joop Bollen happily escorting Chinese executive Wang Limin around the state and talking up Basin Electric's Deer Creek Station, a combined cycle gas power plant built in part with what appear to be $110 million in investments from 220 EB-5 visa investors via two limited partnerships (SDIF LP3 and SDIF LP7) run under the South Dakota Investment Fund.

Governor Marion Michael Rounds meets with Chinese business executive Wang Limin. Photo credit: China.com.cn, 2009.07.15.

Governor Marion Michael Rounds meets with Chinese business executive Wang Limin. Photo credit: China.com.cn, 2009.07.15.

There's Smiling Mike, not looking terribly gubernatorial as he does official business in that rumpled shirt and blue jeans, eh, Joel? Pat?

Richard Benda, Wang Limin, and Joop Bollen at Pierre airport. Photo credit: China.com.cn, 2009.07.15.

Richard Benda, Wang Limin, and Joop Bollen at Pierre airport. Photo credit: China.com.cn, 2009.07.15.

There's Richard Benda, Wang, and Bollen at the Pierre airport, getting ready to fly.

And so on.

These photos touch in part on why Senator Charles Grassley of Iowa has seen fit to push an investigation of the EB-5 program that now includes the Northern Beef Packers debacle and the EB-5 visa investments solicited and managed by SDRC's Joop Bollen, former GOED boss Richard Benda, and former Governor Mike Rounds. Review this PDF packet of inquiries and memos from Senator Grassley's office, and you'll find Senator Grassley is alarmed that, among other things, the EB-5 visa program may open a window through which Chinese intelligence could spy on the United States.

This packet doesn't mention South Dakota, but it does mention situations in which lower-level officials in the United States Customs and Immigration Service blocked EB-5 investors for security reasons but were overruled by USCIS chief Alejandro Mayorkas. Senator Grassley also finds FBI agents alarmed that their San Diego building was constructed with EB-5 investment from China.

That's tenuous stuff, but think about it: Imagine the Cold War were still on. Imagine the EB-5 program had existed then. Imagine we found out that major projects were being built with millions of dollars sent to us by Russians who in return got clean immigration papers, sometimes expedited by our own officials over the concerns of lower staff. Might we not have worried about national security in that situation?

Yes, the Northern Beef Packers/EB-5/SDRC/Bollen-Benda-Rounds story is complicated. Keep watching....

p.s.: Note that the administration of Rounds's ascendant lieutenant, Dennis Daugaard, is distancing itself from the EB-5 visa program:

Venhuizen said Daugaard still sees value in the EB-5 program as an economic development tool, but of more limited value than at the peak of EB-5 activity half a dozen years ago.

“Certainly, we have a lot of other economic development tools that are more valuable and more important,” Venhuizen said. “Some of these projects are very concerning and could make anyone hesitant about the program, but on the flip side, there have also been some notable successes, including in South Dakota, where projects that were successful were funded in part by that program” [Dirk Lammers, "Beef Plant, Federal Program Investigated," AP via that Sioux Falls paper, 2013.11.01].

Let's see how many other ways the current administration seeks daylight between itself and its predecessor.

13 comments

Support Your Local Blogger!

  • Click the Tip Jar to send your donation to the Madville Times via PayPal, and support local alternative news and commentary!

South Dakota Political Blogs

Greater SD Blogosphere

SD Mostly Political Mix

Greater SD Blogosphere

Madville Monthly

Meta