Sunday, March 24, 2013

EB-5 down the rabbit hole: WSJ says "reputable businesses," including Barclays Center, have used immigrant investor funding (but it wasn't the arena)

A 3/18/13 front-page Wall Street Journal article, Chinese Investors Get Picky Over U.S. Visa-for-Cash Deal:
But as the 74-year-old Mr. von Trapp has discovered, would-be investors are getting much pickier. American businesses ranging from fast-food franchises to biofuel facilities to meatpacking plants are now competing for EB-5 funds. Some projects haven't produced the requisite number of jobs—prompting U.S. immigration authorities to withhold green cards. And word has spread about investment money disappearing in failed businesses or outright frauds.

"It's much more difficult than I anticipated," says Mr. von Trapp.

U.S. authorities say they have slowed visa approval because of fraud suspicions and defects in job-creation estimates by developers. Authorities also acknowledge their reviews of those estimates have been flawed. Last year, the federal Citizenship and Immigration Services agency, which oversees the program, hired a half dozen economists to better assess the job-production claims.

...The EB-5 program was created by Congress in 1990 to help lift the economy out of recession. It attracted minimal interest from U.S. businesses until the financial crisis hit in 2008 and traditional sources of financing got harder to tap.

Since then, numerous reputable businesses, large and small, have used the program to raise money. Marriott International Inc., Hyatt Hotels Corp. Hilton Worldwide Inc. are teaming up with EB-5 investment funds to build new hotels. An EB-5 project in Los Angeles raised money for Sony Pictures Entertainment and Warner Bros. Another in Brooklyn helped fund the Barclays Center, new home of the NBA's Brooklyn Nets.
Oh? Was the Barclays Center using the program, or were builders of the Barclays Center promoting the arena to entice investors? (That's putting aside the "reputable" question.)

Contrary evidence

Business Week reported 3/23/12:
The Atlantic Yards developer, Forest City Ratner Cos., is borrowing $228 million in EB-5 money for a $1.4 billion infrastructure and arena fund that’s paying for a new subway entrance, parking facilities, municipal water and sewer line upgrades and other work in the vicinity of Barclays Center, according to Joe DePlasco, a spokesman for the company. The arena, which is being built for the National Basketball Association’s New Jersey Nets, will be an anchor of the $4.9 billion development, planned to include up to 6,430 housing units and 247,000 square feet of retail space.
In an unskeptical 9/21/10 article, Ratner Mulls Visa Financing, the Wall Street Journal nonetheless provided this important detail, one that seemed contradicted by the project's promotion in China and the evidence that later emerged:
[Forest City Ratner executive MaryAnne] Gilmartin said she expects much of the money raised through the program would go toward financing the construction of a new rail yard for the Long Island Rail Road to replace the one that occupied a large portion of the site. Some may also be used to help pay off land loans on the project, she said.
Meanwhile, the evidence suggests the money is going to loan replacement.

EB-5 coverage

For another example of how EB-5 coverage is framed, see this 3/21/13 Washington Post article, Foreign citizens making big investments in U.S. in exchange for green cards:
The EB-5 program is booming in popularity, driven largely by a struggling U.S. economy in which developers are searching for new sources of capital. It is also fueled by rising demand from foreigners looking for access to U.S. schools, safe investment in U.S. projects and — in the case of China, where most of the investors are from — greater freedom.
The program has broad bipartisan support in Congress, and key senators who are negotiating an overhaul of the immigration system have said they are leaning toward expanding visa programs that provide an immediate boost to the economy.
But others argue that the EB-5 program amounts to buying citizenship, and that it unfairly allows wealthy foreigners to cut the visa line ahead of others who have waited for years.
“I don’t think we should sell admission to the United States,” said David North of the Center for Immigration Studies, which favors reduced immigration.
Supporters call the program a no-brainer, because it creates jobs and attracts investment.
“If you get highly skilled, highly talented immigrants with money, who are paying and committing to things that are positive, I’m inclined to think it’s terrific,” former Treasury secretary Lawrence H. Summers said.
The question is: who are the winners? Evidence suggests that everyone but the public at large come first: the immigrants accepting a lower interest rate for a green card, the middlemen getting fees, and the entrepreneurs getting cheap capital to save money on their projects. 

The "job creation"--ten jobs per $500,000--need only be on paper, and indirect jobs can be counted.

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