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Times, in front-page story, critiques gerrymandering in New York's EB-5 projects, gets defensive response from feds; unmentioned are other rules being stretched

In a front-page article today headlined Rules Stretched as Green Cards Go to Investors, the New York Times jumps on one aspect of the EB-5 story, the gerrymandering to ensure that immigrant investor projects qualify as located in high-unemployment areas.

The Times cites the International Gem Tower in the diamond district, the Battery Maritime Building in Lower Manhattan, and yes, Atlantic Yards (as I wrote 12/9/11), as taking advantage of gerrymandering. The Battery Maritime Building's Targeted Employment Area, the Times reveals, even "jumps across the East River to annex the Farragut Houses project in Vinegar Hill, Brooklyn."

Unmentioned: other rules being stretched regarding EB-5, such as the lack of actual job creation (defined via murky, non-public reports by hired economists), or the credit given to immigration investors for investments made by others, including taxpayers.

Also unmentioned is the enormous, sometimes deceptive hype behind project promotion, as well as the participation by city and state officials in such promotion--and the finder's fee to the New York City Economic Development Corporation in brokering EB-5 deals.

In other words, the problem goes much deeper than gerrymandering.

In a sign of the power of the press--well, at least the Times--the federal official in charge of the EB-5 program expressed dismay about the newspaper's findings. And, in distinct contrast with a memo his agency just issued giving states authority to designate such Targeted Employment Areas (TEAs), the official said the issue might be revisited.

Passing the buck, or ignoring it

A state official responded with boilerplate denial of the facts uncovered: “This program serves as a valuable tool to support job-creating projects that will put areas of high unemployment on a continued path to economic recovery and growth."

The director general of the Extell New York Regional Center--the federally authorized investment pool that's raising funds for the Gem Tower--"said she could not explain how the tower’s zone qualified as needy."

Meanwhile, the New York City Regional Center (NYCRC), which went unnamed but is responsible for the Atlantic Yards and Battery Maritime EB-5 project, wouldn't talk. The NYCRC advertises that its projects are all in such TEAs.

The Times got officials in other states to express frustration that New York was gaming the system. And the Times got the director of the agency in charge, the United States Citizenship and Immigration Services, to express concern. (I got boilerplate when I asked what they were doing about gerrymandering.)

USCIS response disregards how law works

The Times reports:
“The question is, are the state authorities adhering to the spirit of the law?” said Mr. Mayorkas, the federal immigration official who is the director of United States Citizenship and Immigration Services. “Where is the project being developed, and where are the jobs being created? Are the people from the areas of high unemployment being employed? Because that’s really the purpose. If they’re not being hired from those areas, then the question is justified.”
Actually, and disturbingly, Mayorkas doesn't understand the law as interpreted by his agency. The agency says it doesn't do oversight over the TEA, though in practice that sometimes happens. Perhaps that's why a new draft memo, issued in November, formalizes that the USCIS won't interfere with the states; according to advocates, that policy has already gone into effect.

More importantly, there's no requirement that people be hired from the TEAs, because there's no requirement that the jobs counted be direct jobs. In other words, an economist's report suffices. The USCIS states in the draft memo:

For a new commercial enterprise that is not a troubled business and is located within a regional center, the EB-5 Program provides that the full-time positions can be created either directly or indirectly by the new commercial enterprise.  8 C.F.R. § 204.6((j)(4)(iii).  Indirect jobs are those that are held outside of the new commercial enterprise but are created as a result of the new commercial enterprise.  For indirect jobs, the new full-time employees would not be employed directly by the new commercial enterprise.  For example, indirect jobs can include those held by employees of the producers of materials, equipment, or services used by the new commercial enterprise. 
So, if the head of the federal agency in charge of EB-5 thinks "people from the areas of high unemployment" are supposed to get jobs, but they don't--with or without gerrymandered TEAs--shouldn't the program get a little bit of an overhaul?

Mayorkas told the Times that the disparity between legislative intent and actual performance deserves consideration, as the regional center program faces renewal.

Note that, at a recent Senate hearing on EB-5, the issue of gerrymandering didn't come up--though it has long been acknowledged as a problem.

The AY mention

Graphic for Atlantic Yards Report by Abby Weissman
Here's the paragraph:
The giant Atlantic Yards project in Brooklyn, which abuts well-heeled brownstone neighborhoods, has also qualified for the special concessions using a gerrymandered high-unemployment district: the crescent-shaped zone swings more than two miles to the northeast to include poor sections of Crown Heights and Bedford-Stuyvesant. A local blogger and critic of Atlantic Yards, Norman Oder, has referred to the map as “the Bed-Stuy Boomerang.”
Given that Atlantic Yards is the largest and most controversial EB-5 project in New York (and one of the largest and most controversial in the nation), and that, unlike some other projects mentioned in the article, it's already subscribed, shouldn't it get more coverage?

And, given that the parent New York Times Company built the Times Tower with Atlantic Yards developer Forest City Ratner, doesn't the newspaper have an obligation to be exacting and thorough in its coverage of Atlantic Yards? Nah.

Diminishing AYR impact

Describing me as a "local blogger," while not inaccurate, also is imprecise, and diminishes my experience as a journalist. It makes it harder to believe that I might have written more than 100 articles investigating the EB-5 issue.

Moreover, the paragraph leaves the impression that the gerrymandered map was publicly known, and that I merely named it. Rather, the issue was first reported on this blog, based on documents gathered via a Freedom of Information Act request.

Because it had been reported, that likely led the Times--in a common but dismaying journalistic practice--to downplay the issue. Otherwise, it might have diminished the claim that the article contained "an examination of the program by The New York Times."

The Times's investigation was not spurred by my coverage, I've learned, but the Times still should have credited my work. As then-Public Editor Daniel Okrent wrote in February 2004:
It has long been Times policy to credit other news organizations for their scoops: ''Such and so was first reported Monday in 'The Daily Bugle.
Not always.


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