Looking back at Biden DHS nominee Mayorkas and EB-5 investor visas; he wasn't "guilty," but he alarmed colleagues, over-generously interpreted "job creation," and didn't get gerrymandering

So, President-Elect Joe Biden's nominee to head the Department of Homeland Security, Cuban-American lawyer Alejandro Mayorkas, is under fire for his stewardship of the DHS component United States Citizenship and Immigration Services (USCIS) during the Obama administration, notably regarding EB-5 investor visas.

My take: it's worth looking at the full story, which casts further clouds over EB-5, a program that makes few elected officials look good. I don't think this disqualifies him, but it should prompt questions.

Sen. Tom Cotton (R-AR) tweeted, "Alejandro Mayorkas was found by Barack Obama’s Inspector General to be guilty of selling Green Cards to Chinese nationals on behalf of rich, democratic donors. He is disqualified from leading the Department of Homeland Security."

Yesterday, the Brian Lehrer Show had Democratic insider John Podesta on the air, and the host brought up Cotton's tweet.

"It's not true," said Podesta, who pivoted to point out that Congress established the program that permits people "to invest in the United States and receive green cards."

"And that's a policy that you probably think is ripe for reform," Lehrer said. "You're saying that, if people look more closely at this, they will not find that Mr. Mayorkas 'sold green cards to Chinese nationals' that is in any ways outside the parameters of that policy?"

"Yes," responded Podesta. "Again, he didn't sell green cards. Congress set up this program. If I had my druthers, I'd get rid of it.... this is outside the bounds of what we think is good immigration policy."

Looking at the evidence

Wait a sec--it's not that simple, as I explained in a tweetstorm.

The DHS Inspector General did not find Mayorkas "guilty" of anything. And while Mayorkas didn't "sell green cards," he didn't cover himself in glory.

As I wrote in my original 2015 coverage, the IG's report found that, in three matters involving clients allied to Democrats, "Mayorkas communicated with stakeholders on substantive issues, outside of the normal adjudicatory process, and intervened with the career USCIS staff in ways that benefited the stakeholders. In each of these three instances, but for Mr. Mayorkas’ intervention, the matter would have been decided differently."

Mayorkas later apologized for "the perceptions that my activities created," and said that he had "helped ensure that those cases were decided correctly, nothing more and nothing less." 

The bigger picture

We shouldn't be shocked, shocked that we "sell" visas, though that's imprecise shorthand, given that private entities have the most control and the most clout. Some countries require immigrant investors to pay the government, buying bonds or otherwise investing.

As I've argued, our program is worse, since EB-5 requires investment in a purported job-creating investment. But loose standards mostly aid the borrowers, who gain cheap financing, and the middlemen, which reap fees, and many of the jobs would be created without the financing, as I wrote in 2015. 

Unwary investors can be misled by hype and pomp, and some charge that they were victimized by deception.

What's alarming is that a staff member told the Inspector General, summarizing Mayorkas' remarks:

The Director stated that he believes that nothing is more important to the United States at this time than the creation of jobs for U.S. workers. This will inform how he views every classification. So, if the regional center claims that it will create jobs for U.S. workers, he will read the statute and the [regulations] as generously as possible. 

That, to me, is very unwise, since, in many cases, such below-market financing has been "profit enhancement," in the words of expert Gary Friedland.

The bottom line

I don't find that episode reflects well on Mayorkas, but it's not necessarily definitive regarding his fitness to head DHS.

And I think Cotton, though it's legitimate for him to point to this episode (though he shouldn't do it inaccurately), should recognize that EB-5 raises bipartisan concerns.

Republicans and Democrats, in Congress and in gubernatorial offices, have been big boosters of EB-5, since who doesn't link cheap financing so they can cut a ribbon on a new project. Anyone heading DHS deserves tough questions about that program, and should offer scrutiny of it.

The question of gerrymandering

Mayorkas in December 2011 also didn't cover himself with glory when the New York Times reported (after I had done so) on the common tactic of gerrymandering areas of high unemployment so that EB-5 projects could qualify for a lower level of investment, $500,000 per investor, rather than $1 million. 

That floor last year was raised to $900,000, when the Trump Administration implemented rules proposed by its predecessor.

The Times reported in 2011:

“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.”

As I wrote, Mayorkas didn't understand the law as interpreted by his agency, which deferred to decisions by state agencies, which of course want to foster investment. Nor is there a requirement that people be hired from those areas, since there's no requirement that jobs be direct jobs, rather than calculated from spending.

Notably, gerrymandering was also curtailed as of the new rules. But dubious job-creation math persists.

The bottom line 

If we don't end EB-5, the question is how and whether the public gets any value. As Dartmouth's John Vogel put it in 2013:

One of the oddities about the EB-5 program is that the U.S. government is giving out the green cards, but the entrepreneur who puts together the investment gets the money. This scheme seems inefficient and open to corruption. If our government really believes that it is a good idea to sell green cards, maybe we should drop the pretense that this is a job creation program. It might be more efficient to have the money go directly to the U.S. Treasury and reduce the deficit by billions of dollars a year. In fact, the U.S. government could auction off these green cards and perhaps raise even more money.