EB-5 reforms stall in Congress
MONTPELIER >> Proposed EB-5 reform measures didn't get very far before stalling in Congress.
The reform package provides for increased financial oversight of projects as well as some relief for investors, like those who put money into Northeast Kingdom developments that ended in state and federal fraud allegations leveled against the developers.
A "markup" session on the reform legislation had been set for last Wednesday in the U.S. House Judiciary Committee. However, that session was canceled and no new date is available.
The delay is expected to give more time to reform supporters on the committee to persuade other members who want to let the troubled foreign investor visa program expire, or continue without reforms.
The program's current authorization runs through the end of the month.
Rep. Bob Goodlatte, R-Va., and House Judiciary Committee chairman, introduced the reform legislation, officially known as The American Job Creation and Investment Protection Reform Act of 2016. Goodlatte could not reached Monday for comment.
Sen. Patrick Leahy, the Vermont Democrat who represents the state where the biggest alleged fraud case in the history of the EB-5 program was exposed in April, is also pushing for reforms to clean up what he has described as "rampant" fraud.
"We've got a strong bipartisan coalition, both in the House and the Senate," Leahy, speaking briefly Monday with reporters after an event in Burlington, said of the proposed EB-5 reform legislation. "We've made it very clear we will not vote to continue unless it's in there."
It was in April that state and federal lawsuits were brought against Miami businessman Ariel Quiros, owner of Q Resorts, a holding company that includes Jay Peak, and Bill Stenger, one-time CEO and president of Jay Peak.
The lawsuits accuse the pair of misusing $200 million in EB-5 funds as part of a series of development projects in northern Vermont.
Leahy, who had close ties to Stenger and was a booster of the Jay Peak projects, has said if the allegations in the U.S. Securities and Exchange Commission case were proven true, he would feel betrayed.
Stenger reached a settlement in the SEC case earlier this month, agreeing to cooperate with investigators. He faces a possible civil penalty, depending on his level of cooperation and ability to pay. The state lawsuit is still pending.
Quiros is contesting the state and federal lawsuits.
EB-5 reform legislation has strong support from party leaders across the aisle despite those who want to see the program expire or advance with no reforms.
In addition to Goodlatte, Rep. John Conyers, D-Mich., ranking Democrat on the committee, supports the reform effort.
Rep. Charles Grassley, R-Iowa, the Senate Judiciary Committee chairman, as well as Leahy, the committee's ranking Democrat, also support reforming the EB-5 program.
For a $500,000 investment in a qualified project, plus a $50,000 administrative fee, investors in the EB-5 program become eligible for permanent U.S. residency, provided the investment creates 10 jobs.
The provision regarding job creation has left some investors in projects headed by Stenger and Quiros in limbo as they seek permanent residency in the United States.
For example, a proposed biomedical center in Newport has been called "nearly a complete fraud" and was never built, meaning jobs created through its construction and work taking place once it opened never materialized.
The reform legislation would allow defrauded investors the opportunity to reinvest in amended or new projects. Provided the new investment still produce the required 10 jobs, the investor would be eligible for permanent U.S. residency.
In addition to providing some relief to aid investors in cases of fraud, the legislation introduced in the House calls for a creation of an EB-5 "integrity fund," paid for by the program's participants.
The funding would allow the U.S. Department of Homeland Security to step up project audits, site visits and fraud investigations.
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