Thursday, December 23, 2010

In Reuters investigation of EB-5 program, NYC Regional Center principal admits lies in arena project pitch, but blames affiliates. That's not so.

A major investigation of the EB-5 immigration visa program by Reuters, Special report: Overselling the American dream overseas, turns up numerous reasons for skepticism and an admission by a principal of the New York City Regional Center (NYCRC) that potential investors have been lied to about the Brooklyn Arena and Infrastructure project.

Astonishingly, however, the NYCRC's George Olsen gets away with blaming immigration brokers in foreign lands--in this case, Korea, not China--rather than acknowledging, or being forced to acknowledge, that the same statements have been made, in documents and on video, by the NYCRC itself.

In South Korea

Reuters reports:
At a recent seminar in Seoul, an agent for the Kookmin Migration Consulting Co., working on behalf of the New York City Regional Center, told would-be investors if they invested in the company's latest project their permanent green cards were "guaranteed." He also implied the investors would be financing the construction of the new home for the New Jersey Nets NBA basketball team.

In a subsequent interview with Reuters, George Olsen, managing principal of the New York City Regional Center acknowledged the claims were "not accurate" - the investors will finance the rebuilding of a rail yard and some related infrastructure near the new basketball court -- and promised he would jump on Kookmin "with two feet."

"But that's what's frustrating," Olsen said. "You can't be at every seminar, you can't be at every meeting, you can't be in the room when one of these people is talking. To raise $100 million, you have to get 200 investors. That's a lot of people. So there's a certain amount of mass marketing that has to go on. And once you get into that realm, it's hard to control."
Oh, come now. The same statements have been made by the NYCRC's Gregg D. Hayden in China, as I've documented. Here's my FAQ, and here's a report, with video.

"The project itself involves three components," Hayden said (at 1:33) in a webcast, excerpted below. "The Brooklyn arena; the related infrastructure to the lands; and the redevelopment and expansion and upgrading of the [city's] third largest transportation hub, in Brooklyn, called the Atlantic Terminal."


"The first major advantage is that the approval process, from USCIS, having already been accomplished, takes all of the immigration risk out of the process for the EB-5 investor," Hayden claimed in a webcast (below) at 1:00. "[O]ur job creation, which is the focus of getting the condition removed in two years, is so extremely certain with this approval process from USCIS," he continued, at 4:25.



Government involvement

Reuters reports:
The agent from Kookmin, for instance, said during the Seoul sales presentation that the government of New York state was involved in the rail yard project. Olsen said that claim was inaccurate as well.

But such claims get made over and over again -- especially outside the United States.
And they get made by the New York City Regional Center.

It looks like the Empire State Development Corporation's Peter Davidson, who joined the NYCRC in China, was a convenient prop. Reuters reports:
Still, the visits by high-profile politicians, including sitting state governors, continues, encouraged by the overseas promoters.

"We ask them to invite their government officials," said Hong Yu, a project manager based in Florida for the Wailian Overseas Consulting Group, which, like Maslink, works to find investors for the program. "That's very important ... to the Chinese people. Chinese people think, 'OK that project is government supported.' ... It feels safer."

But the impression is utterly false. Bentley, the USCIS spokesman, is unequivocal on the point: Just because a business has been designated as an approved EB-5 investment "does not mean that the projects are government-backed or guaranteed."
From my report

The NYCRC portrays the "Brooklyn Arena and Infrastructure Project" as funded, in part, by city and state contributions and suggests government agencies are partners in the job-creation effort.

The page below left from the project brochure is headed "Government Support" (according to a translation I commissioned), with the first line stating, "Different levels of government agencies have already approved the key components of the project."

However, that refers to the overall Atlantic Yards project, given that the "Brooklyn Arena and Infrastructure Project" did not exist at the time.

The second page of the brochure states that the NYCRC, along with the city and state governments, "join hands together" to announce the project. (The brochure is embedded in full below.)

Neither the city nor state government is a formal partner with the NYCRC in the project as presented to the Chinese investors. Each has made previously-funded subsidy commitments.

In an NYCRC project video presented in China to potential investors, the narrator states, "The New York City Regional Center is pleased to offer EB-5 investors another secure, job-creating project in conjunction with the government of both the state of New York and the city of New York."

The term "in conjunction with" is vague, though it could leave the impression of a formal partnership.

Similarly, in the opening of an EB-5 event in Beijing, as shown on this video, Hayden saluted Chinese partners by saying, "For the State of New York, for the City of New York, and on behalf of all of us in New York, we appreciate your strong efforts." That also could leave the impression of partnership.

Later in that event, he said, "As you saw in the [official project] video, we have very generous support from the governmental agencies of New York City and New York State; specifically, in the video, you heard [Mayor] Michael Bloomberg talk about job creation and how important it is to New York City."

However, government agencies have not invested in the regional center, and Bloomberg was talking about job creation for the Atlantic Yards project as a whole.

Conflict of interest

The Reuters report also touches on the issue of conflict of interest for attorneys, an issue I've explored:
Another big problem with the program: The attorneys the immigrants rely on as they navigate the EB-5 maze in the United States are often deeply conflicted, accepting commissions from the businesses they steer the immigrants to. It's a practice the lawyers do not always disclose and one that may violate U.S. securities laws.
The essential argument

Here's the core of the investigation:
Over the past two decades, thousands of immigrants have been burned by misrepresentations that EB-5 promoters make about the program, both inside and outside the United States. Many have lost not only their money but their chance at winning U.S. citizenship.

"I always tell the people who approach me that the EB-5 investment program is a risky business," said Brian Su, a Springfield, Illinois-based immigration consultant who publishes a popular blog on the program. "If you cannot bear the loss, the total loss of your investment, don't play this game."

But those risks are downplayed by almost everyone involved in the program -- including the USCIS itself. Chris Bentley, the agency's spokesman, for instance, said "the overwhelming majority" of EB-5 investors and their dependents go on to qualify for permanent resident status. An analysis of USCIS's own data, however, suggests that's not true. Nearly half the immigrant investors who won EB-5 visas during its 20-year history have failed to obtain permanent residency.

The rise in recent years of an unregulated industry paid to fill the EB-5 pipeline with rich foreigners has only added to the dangers. The U.S. businesses the immigrants are now steered to -- by firms like Maslink and by U.S. immigration attorneys -- are often the ones paying the highest commissions, not the ones offering the best investments, according to the industry insiders who spoke to Reuters.

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