Welcome to today’s edition of Bully the Messenger. First, I want to take you back to 2001. That’s when I first reported on a little-known cash-for-visas immigration racket known as the EB-5 program. As I wrote 12 years ago, this government racket has morphed into a crony cash cow:
This fraud-ridden scheme was created under an obscure section of the 1990 Immigration Act, signed by Bush’s father. Known as the EB-5 law, it allows wealthy foreigners to purchase green cards by investing between $500,000 and $1 million into new commercial enterprises or troubled businesses. After two years, foreign investors, their spouses, and children all receive permanent resident status – which allows them to contribute to U.S. political campaigns and provides a speedy gateway to citizenship.
Making political access and the privilege of citizenship available to the highest foreign bidder offends the very ideals Bush wants to promote. Arkansas Senator Dale Bumpers, a longtime critic of the program, noted: “All you need is green. You do not have to know anything about the poor and huddled masses that Emma Lazarus wrote about…How crassly we demean this precious blessing we call citizenship.”
Supporters of the program claimed it would attract substantial overseas investment to aid struggling American businesses. But the benefits of this economic development plan have gone mostly to former Immigration and Naturalization Service officials, who formed lucrative limited partnerships to cash in on their access.
Here’s how the racket worked: Immigrant investors paid token fees to these partnerships. The partnerships secured promissory notes for the remainder of the foreign investments, which were forgiven after investors received their permanent green cards. Former INS employees, working for these partnerships, aggressively lobbied their old colleagues to accept such bogus financial arrangements. As a result, according to an internal U.S. Justice Department investigative report, “aliens were paying $125K” instead of the required $500,000 to $1million minimum, and “almost all of the monies went to the General Partners and the companies who set up the limited partners.”
A Baltimore Sun investigation last year found “only a tiny fraction of the money ever made it to the companies seeking assistance.” Many of the distressed U.S. firms that the program intended to help have closed because they never received promised funding.
Steven Perlman, a New York City immigration lawyer who sued the government to disclose parts of the internal investigative report, told me last week that the EB-5 program became a “money-making machine.” That wouldn’t have been possible, Perlman notes, without political protection. One INS document indicates that officials worried about keeping “promises to the Hill.” When the agency finally moved to end fraud, “influential Members of Congress protested,” according to the New York Times.
This history lesson and context is important because a dozen years later, the program still exists largely un-policed and continues to set off alarm bells. The Franklin Center’s invaluable Watchdog.org reported earlier this month that an enviro start-up founded by Terry McAuliffe has raised the eyebrows of Virginia officials over its use of the EB-5 program. Documents from Virginia Economic Development Partnership authorities obtained by Watchdog.org and others expressed “grave doubts” about the company’s plan to raise capital through extension of the EB-5 program into their region.
“We are concerned that the financing plan does not fit the rules for the EB-5 program,” one official wrote. Investors would not receive the visas they thought they would receive, he noted, and this would give Virginia a “black eye.” He raised additional red flags about the financing and conflict-of-interest problems of the deal:
GreenTech Automotive Inc. is now suing Watchdog.org for an alleged $85-million loss after publication of two articles about the company. Full complaint is here (pdf).
“Specifically, as a direct and express result of the articles published by Defendants … investors are wavering in their commitment to provide $25 million in investments already promised to GTA,” the lawsuit said. “GTA…intended to raise $60 million in capital, (and) is now in significant danger as a direct result of the loss of investor confidence in GTA arising from the publication of Defendants’ articles.”
Question: Why isn’t GreenTech slapping Virginia officials with such an outlandish lawsuit? Hint: They work for the administration of liberal Democrat Gov. Tim Kaine.
Given the pre-existing concerns about financing expressed by the Virginia economic development officials, the idea that Watchdog.org’s articles are to blame for investors’ “wavering…commitment” smacks of desperation and demagoguery.
And yes, stark intimidation.
Jason Stverak, president of Watchdog’s parent company the Franklin Center for Government and Public Integrity, said the lawsuit is baseless.
“As Watchdog explained in clarifications and updated versions of the articles posted on April 5, these articles were not intended to – and did not – accuse GreenTech of fraud,” Stverak said. “We are confident that GreenTech’s claims are without merit and we will continue to report on this important story.”
GTA counts among its allies Hillary Clinton’s brother, Anthony Rodham, who shares an office with GTA and is CEO of Gulf Coast Funds Management, an EB-5 center that raises visa-investor money for GTA. McAuliffe also was chief fundraiser for Clinton’s presidential bid. Bill Clinton made a high-profile visit to the company last year.
The lawsuit, accusing Watchdog of defamation and interference with business relations, was filed Monday in Mississippi where GTA says it plans to build an auto plant. On April 1 and 3, Watchdog detailed the travails of McAuliffe’s car company funding and challenges to enter the marketplace by next year. The lawsuit also names two web sites that ran the Watchdog story, one in Chinese.
In response to McAuliffe’s 2009 request for public support of GreenTech Automotive in his home state of Virginia, then-Gov. Tim Kaine’s administration expressed “grave doubts” about the project’s viability, according to documents obtained by Watchdog.org, National Review and Washington Post.
Question: Does McAuliffe, who is running for governor in Virginia, really want to follow through on this crass bullying attempt? Legal discovery is a two-way street, pal.
Says Stverak: “They want to shut us up…They grossly miscalculated because we will not be silent and we will continue to report on this and any story that is important to the public. Are we scared? No, we have truth on our side and facts to back up our story.”
I stand with the Franklin Center. Every blogger, citizen journalist, and limited-government/new media activist should. When political operatives can’t stand the sunlight, they reach for the litigation duct tape.
Previous EB-5 columns/posts: