Newly-Discovered EB-5 Scam Highlights Fraud, National Security Weaknesses, Need for Long-Term Reform

WASHINGTON – Recent news reports of an elaborate EB-5 investor visa scheme are raising fresh concerns of the program’s national security vulnerabilities as a bipartisan, bicameral coalition of lawmakers continues to press for reforms. Senate Judiciary Committee Chairman Chuck Grassley is raising questions about a scheme that allowed fraudsters to pocket $50 million from Chinese investors that should have gone to U.S. job-creating development projects. While the projects never materialized, more than 100 Chinese investors, including several Chinese fugitives, obtained visas.

 

The EB-5 program, which is scheduled to expire at the end of April absent Congressional action, issues work visas and a pathway to citizenship for foreign nationals who invest in certain U.S. development projects. The program was designed to foster U.S. job creation, particularly in rural and distressed urban areas, but has been mired by fraud, abuse and integrity issues. In this latest case, a trio of fraudsters spent roughly $15 million in funds collected from investors on high-priced cars and several multi-million dollar homes. Meanwhile, nearly three years after U.S. Citizenship and Immigration Services approved the development project, no construction has taken place. Both the FBI and Department of Homeland Security raised concerns about several of the investors, including investors who are on a Chinese government list of most-wanted fugitives.

 

 

Grassley is seeking details on the fraudulent regional center as well as the investors who funded it. Specifically, he is seeking government documents related to the project as well as information on each of the investors. Further, he is asking whether USCIS ever audited the project and why it has not filed charges against the three fraudsters.

 

Grassley has long advocated for reforms to EB-5 that address widespread fraud and national security vulnerabilities. He has called for an end to abusive gerrymandering practices that funnel investment dollars away from rural and economically distressed areas, which the program was designed to prioritize. In a recent letter to congressional leadership, Grassley and Judiciary leaders advocated for letting the program expire at the end of the month, absent meaningful reforms.

 

Full text of Grassley’s letter to Secretary Kelly follows:

 

April 20, 2017

 

 

The Honorable John Kelly

Secretary

U.S. Department of Homeland Security

Washington, D.C. 20528

 

Dear Secretary Kelly:

 

I write today to request information about an Employment-Based Fifth Preference Immigrant Investor (EB-5) regional center linked to an immigration scam that allowed more than 100 Chinese nationals to improperly obtain U.S. citizenship, including several Chinese fugitives and criminals.

 

According to the LA Times, the California Investment Immigration Fund was established in 2008 by a father-daughter duo and a friend—Tat Chan, Victoria Chan, and Fang Zen.^[1] It is alleged that from 2009 to 2016 the Chans and Zeng collected more than $50 million from Chinese nationals, who were granted conditional residency in exchange for investing money in development projects that never occurred. The trio spent about $15 million on high-priced cars and several multi-million dollar homes for personal use, as well several business properties in California, such as a $2.25 million for a vacant lot in Indio, CA in 2012 and $5.25 million in 2015 for vacant land in Rancho Cucamonga. These sites were never used to develop the proposed EB-5 project. In fact, no construction ever occurred and photos taken in 2016 indicate that the lots are still vacant, nearly 3 years after the U.S. Citizenship and Immigration Services (USCIS) approved the project. It is not clear if the investors knew that the projects did not exist; however, about 30 of the investors received some or all of the investment back—amounting to about $10 million.

 

Apparently, although Chan and Zeng have managed to conceal the information from U.S. officials, they have yet to be arrested or charged in the investigation. Investigators determined that the some investors who received refunds have continued to pursue legal permanent residency in the United States, despite not meeting the visa program’s requirements.

 

Most of the money involved in the scam originated from accounts in mainland China or Hong Kong, and approximately $50 million was wired or deposited into one of 72 bank accounts linked to the investment fund or one of many affiliated holding companies. According to the FBI and a Homeland Security Investigations (HSI) affidavit filed in the case, several of the regional center investors have raised suspicion, including investors who are on a “Chinese government list of most-wanted fugitives, accused of bribery, and other crimes.”^[2] It’s alarming that this information was not discovered before these individuals were permitted to enter the United States.

 

Unfortunately, this is not the first time criminals have been discovered using the EB-5 program to enter the United States. In 2013, Iranian operatives used the EB-5 program to facilitate terrorism and were involved in an illegal procurement network that exported items to Iran for use by ‘secret’ Iranian government agencies. More recently in 2017, the ex-wife of China’s third-most-wanted government official pled guilty to committing EB-5 fraud by submitting false source funds documents “as part of a scheme to escape to the U.S. with stolen Chinese public funds.”^[3] Shilan Zhao, ex-wife of former Chinese government official Jianjun Qiao, accepted a plea deal to forfeit property that was worth millions of dollars in San Gabriel Valley. According to an internal memo, ICE identified seven main areas of program vulnerability with the EB-5 visa program, including use by foreign government agents/espionage, use by terrorist, investment fraud by regional center and investors. Years later, it’s evident that these program vulnerabilities still exist and have not been effectively addressed.

 

To better understand the circumstances surrounding the California Investment Immigration Fund and the principals and investors involved, please provide responses to the following requests no later than May 04, 2017, numbering your answers accordingly. Please also have knowledgeable staff brief my staff as soon as possible.

 

1.      Please provide the Committee the California Investment Immigration Fund’s Form I-924, business plan, and related Form I-924As, I-526s, and I-820s. Please also provide all documentation and supporting evidence related to the approval of the regional center application, including copies of written correspondence (including emails) or records/logs of telephone conversations between the Chans, Zeng, representatives of the regional center, or entities or person otherwise advocating on behalf of the California Investment Immigration Fund and USCIS or Department of Homeland Security headquarters officials.

 

2.      Of the Form I-526s affiliated with the California Investment Immigration Fund, how many petitions resulted in the issuance of an EB-5 visa? Of those denied, what was the reason for denial?

 

3.      What was the total capital investment generated for the California Investment Immigration Fund through the EB-5 program?

 

4.      How many direct and indirect jobs were created as a result of the EB-5 investments affiliated with the California Investment Immigration Fund? How many were created as a result of investments in affiliate companies? What evidence was provided to corroborate this information?

 

5.      How many investors filed the form I-829 to remove conditions? Of these, how many have been approved? How many are pending?

 

6.      Has USCIS issued a notice of intent to terminate to the regional center? If not, why not?

 

a.      Of the pending Form I-526s, does USCIS plan to deny the petitions if the regional center is terminated? If not, why not?

 

b.      Of the Form I-526s that were approved, how many petitioners will be unable to remove the conditions on permanent residence if the California Investment Immigration Fund is terminated? Has USCIS informed petitioners about the investigation? If so, when and how?

 

7.      For each foreign investor associated with the principals of the California Immigration Investment Fund regional center, please indicate whether or not the individual has entered the United States in the past or is currently in the United States, as well as what type of visa each individual used to enter the United States.

 

8.      Did USCIS conduct a regional center compliance audit of the California Immigration Investment Fund?

a.      Did the audit include a site visit?

 

b.      What were the results of this audit?

9.      Please provide detailed information on the status of the investigation of the California Investment Immigration Fund principals, investors, and its affiliates.

 

10.  Please explain the decision not to arrest or file charges against Victoria Chan, Tat Chan, Fang Zeng and others who are associated with the fraudulent scheme.

 

a.      Does ICE plan to revoke their U.S. immigration benefits? If not, why not?

 

11.  How many petitioners did ICE determine were on the Chinese government most-wanted fugitive list?

 

a.      Does ICE know the location of these foreign investors? If so, please provide a status report.

 

b.      What is the current immigration status of these individuals?

 

c.       Does ICE have plans to initiative removal proceedings? If not, why not?

 

12.  It is alleged that many of the foreign investors improperly obtained U.S. citizenship through the fraudulent EB-5 scheme. Does ICE plan to revoke their green cards? It not, why not?

 

I anticipate that your written reply and any responsive documents will be unclassified. Please send all unclassified material directly to the Committee. In keeping with the requirements of Executive Order 13526, if any of the responsive documents do contain classified information, please segregate all unclassified material within the classified documents, provide all unclassified information directly to the Committee, and provide a classified addendum to the Office of Senate Security. Although the Committee complies with all laws and regulations governing the handling of classified information, it is not bound, absent its prior agreement, by any handling restrictions or instructions on unclassified information unilaterally asserted by the Executive Branch.

 

Thank you in advance for your cooperation with this request. Please number your responses according to their corresponding questions. If you have questions, please contact Katherine Nikas of my Committee staff at (202) 224-5225.

 

 

Sincerely,

 

 

Charles E. Grassley

Chairman

Senate Committee on the Judiciary

cc:

 

The Honorable Dianne Feinstein

Ranking Member

Senate Committee on the Judiciary

 

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