```

[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]

 
 THE DEPARTMENT OF HOMELAND SECURITY'S PROPOSED REGULATIONS REFORMING 
                                  THE 
                         INVESTOR VISA PROGRAM

=======================================================================

                                HEARING

                               before the
                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 8, 2017

                               __________

                            Serial No. 115-4

                               __________

         Printed for the use of the Committee on the Judiciary
         
         
         
         
         
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]         
         
         
         

      Available via the World Wide Web: http://judiciary.house.gov
      
      
      
                             ________

                U.S. GOVERNMENT PUBLISHING OFFICE
                   
 24-970                  WASHINGTON : 2017       
____________________________________________________________________
 For sale by the Superintendent of Documents, U.S. Government Publishing Office,
Internet:bookstore.gpo.gov. Phone:toll free (866)512-1800;DC area (202)512-1800
  Fax:(202) 512-2104 Mail:Stop IDCC,Washington,DC 20402-001   
     
      
      
      
      
      
                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman

F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        JERROLD NADLER, New York
LAMAR SMITH, Texas                   ZOE LOFGREN, California
STEVE CHABOT, Ohio                   SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California          STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr., 
TRENT FRANKS, Arizona                    Georgia
LOUIE GOHMERT, Texas                 THEODORE E. DEUTCH, Florida
JIM JORDAN, Ohio                     LUIS V. GUTIERREZ, Illinois
TED POE, Texas                       KAREN BASS, California
JASON CHAFFETZ, Utah                 CEDRIC L. RICHMOND, Louisiana
TOM MARINO, Pennsylvania             HAKEEM S. JEFFRIES, New York
TREY GOWDY, South Carolina           DAVID CICILLINE, Rhode Island
RAUL LABRADOR, Idaho                 ERIC SWALWELL, California
BLAKE FARENTHOLD, Texas              TED LIEU, California
DOUG COLLINS, Georgia                JAMIE RASKIN, Maryland
RON DeSANTIS, Florida                PRAMILA JAYAPAL, Washington
KEN BUCK, Colorado                   BRAD SCHNEIDER, Illinois
JOHN RATCLIFFE, Texas
MARTHA ROBY, Alabama
MATT GAETZ, Florida
MIKE JOHNSON, Louisiana
ANDY BIGGS, Arizona

          Shelley Husband, Chief of Staff and General Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel
       
       
                            C O N T E N T S

                              ----------                              

                             MARCH 8, 2017
                           OPENING STATEMENTS

                                                                   Page
The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the 
  Judiciary......................................................     5
The Honorable John Conyers, Jr., Michigan, Ranking Member, 
  Committee on the Judiciary.....................................     7
The Honorable F. James Sensenbrenner, Wisconsin, Chairman, 
  Subcommittee on Immigration and Border Security, Committee on 
  the Judiciary..................................................     8
The Honorable Zoe Lofgren, California, Ranking Member, 
  Subcommittee on Immigration and Border Security, Committee on 
  the Judiciary..................................................     9

                               WITNESSES

The Honorable Chuck Grassley, Iowa, United States Senate
  Oral Statement.................................................     2
The Honorable Patrick J. Leahy, Vermont, United States Senate
  Oral Statement.................................................     3
Rebecca Gambler, Director, Homeland Security and Justice Team, 
  U.S. Government Accountability Office
  Oral Statement.................................................    13
Sam Walls III, Managing Director, Pine State Regional Center
  Oral Statement.................................................    14
Angelique Brunner, Founder and President, EB5 Capital
  Oral Statement.................................................    16
Dekonti Mends-Cole, Director of Policy, Center for Community 
  Progress
  Oral Statement.................................................    18
David North, Fellow, Center for Immigration Studies
  Oral Statement.................................................    20

                        OFFICIAL HEARING RECORD

                   Material Submitted for the Record

Statement submitted by the Honorable Sheila Jackson Lee, Texas, 
    Committee on the Judiciary. This material is available at the 
    Committee and can be accessed on the committee repository at:

    http://docs.house.gov/meetings/JU/JU00/20170308/105660/HHRG-115-
JU00-20170308-SD002.pdf.

                   THE DEPARTMENT OF HOMELAND SECURI-
                  TY'S PROPOSED REGULATIONS REFORMING 
                       THE INVESTOR VISA PROGRAM

                              ----------                              

                        WEDNESDAY, MARCH 8, 2017

                       House of Representatives,

                      Committee on the Judiciary,

                            Washington, DC.

    The committee met, pursuant to call, at 10:10 a.m., in Room 
2141, Rayburn House Office Building, Hon. Bob Goodlatte 
(chairman of the committee) presiding.
    Present: Representatives Goodlatte, Sensenbrenner, Chabot, 
Issa, King, Gohmert, Jordan, Poe, Marino, Gowdy, Labrador, 
Buck, Gaetz, Johnson of Louisiana, Biggs, Conyers, Nadler, 
Lofgren, Jackson Lee, Deutch, Cicilline, Lieu, Jayapal, and 
Schneider.
    Staff Present: Shelley Husband, Staff Director; Branden 
Ritchie, Deputy Staff Director; Zach Somers, Parliamentarian 
and General Counsel; George Fishman, Counsel, Subcommittee on 
Immigration and Border Security; Danielle Brown, Minority 
Parliamentarian and Chief Legislative Counsel; David 
Shahoulian, Minority Chief Counsel, Subcommittee on Immigration 
and Border Security; Veronica Eligan, Minority Professional 
Staff Member; and Joseph Ehrenkrantz, Minority Legislative 
Aide.
    Chairman Goodlatte. We welcome everyone to this morning's 
hearing on ``The Department of Homeland Security's Proposed 
Regulations Reforming the Investor Visa Program.''
    We will begin today by recognizing our first panel of 
witnesses for their statements. After they have concluded, I 
will recognize myself and the ranking member for our opening 
statements.
    The Honorable Chuck Grassley is a United States Senator 
from Iowa, where he has been a leader in shaping legislation to 
expand the economic opportunities for individuals, families, 
and communities. Senator Grassley serves as chairman of the 
Senate Committee on the Judiciary. He also serves as a senior 
member of the Senate Committee on the Budget and on the Senate 
Committee on Agriculture. Senator Grassley was previously 
chairman of the Committee on Finance.
    The Honorable Patrick Leahy is ranked first in seniority in 
the United States Senate. Senator Leahy is the vice chair of 
the Senate Appropriations Committee. He is the senior-most 
member of the Senate Judiciary Committee and of the Senate 
Agriculture Committee. Senator Leahy is the ranking member of 
the Appropriations Subcommittee on State Department, Foreign 
Operations, and Related Programs.
    I would ask each witness to summarize his or her testimony 
in 5 minutes or less. To help you stay within that time, there 
is timing light on your table. When the light switches from 
green to yellow--well, you guys know how this works, even 
though you are in the Senate.
    We welcome both of you. We welcome both of you, and we will 
begin by recognizing Chairman Grassley. Welcome.

 STATEMENT OF THE HON. CHUCK GRASSLEY, A UNITED STATES SENATOR 
                     FROM THE STATE OF IOWA

    Senator Grassley. Chairman Goodlatte, Ranking Member 
Conyers, and all the members of this very good committee, thank 
you very much for inviting me to testify about the EB-5 
investor visa program. Senator Leahy and I have longstanding 
concerns with the regional center program. We have worked 
together for years to address this program's rampant waste, 
fraud, and abuse.
    In 1990, Congress created the EB-5 program. The goal was to 
create new employment opportunities for American workers. A 
mere 2 years later, Congress established a pilot program which 
allowed investors to pool their investments in regional 
centers. The theory was simple: by allocating investors to pool 
their funds, greater investment would occur, and jobs for 
American workers would flourish.
    Twenty-five years later, this pilot program still exists, 
but it is deeply flawed and has strayed very much from its 
original intent. There are many problems with the regional 
center program, but let me mention just a few of the worst.
    Jobs created are not direct and verifiable jobs. They, 
instead, are indirect and based on vague estimates and economic 
modeling. A foreign national is allowed to count all jobs 
created by a project when obtaining their green card. This is 
even if EB-5 money is only a mere fraction of total investment. 
Investment funds are not adequately vetted, and there are no 
prohibitions against foreign governments owning or operating 
regional centers. Even more concerning, background checks 
aren't required for anyone associated with regional centers. 
This raises serious questions about whether foreign governments 
are selling U.S. green cards to their citizens. Regional 
centers gerrymander targeted employment areas and the 
boundaries therein to encompass economically distressed areas 
in order to come in at a lower investment level.
    This is an issue because the jobs created aren't actually 
created in those areas, and the projects aren't actually in 
those areas. The problem is made worse by the fact that every 
targeted employment area designation is just simply rubber 
stamped.
    Finally, and perhaps the most frustrating, the minimum 
investment level hasn't been raised in 25 years. I could keep 
going on about many abuses. With this in mind, I believe that 
either the regional center program should be completely 
overhauled and reformed, or it should expire. The American 
people deserve better than what we are getting out of this 
program.
    Senator Leahy and I have tried to work in a bicameral and 
bipartisan way to enact real EB reforms. Last year, the Senate 
Judiciary Committee held two hearings alone on this subject, 
and this committee we are before now held another. We heard 
from local leaders and associations representing workers in 
regional centers. We listened to the academics and government 
officials. We received feedback from many industries as well as 
immigration and security attorneys. After painstaking 
negotiations and concessions by almost every stakeholder, some 
of us more than others, we reached consensus and would 
reauthorize that program for 6 years. Unfortunately, this 
wasn't acceptable to all parties. Instead of addressing the 
program's waste, fraud, and abuse, Congress merely 
reauthorized, as you know.
    Nothing better supports the need for serious reform than 
the work that Chairman Chaffetz and I have done to draw 
attention to the program's very real national concerns. We have 
sent several letters and conducted transcribed interviews with 
key players of an interagency working group to assess just how 
rampant fraud and abuse are in the program.
    This working group made several recommendations, the most 
compelling of which was to sunset the regional center model due 
to crippling fraud, national security vulnerabilities.
    I also want to take a moment to address the reforms 
proposed by the Obama administration. Earlier this year, former 
Homeland Security Secretary Johnson published proposed rule 
changes to the regional center, the program, that would stop 
gerrymandering and increase investment levels. I strongly 
support these changes. They are a vital first step--but just a 
first step--to returning the program to its original intent, 
creating new employment for American workers and infusing 
capital into the distressed rural areas.
    When I met Secretary Kelly before his confirmation, I 
emphasized the importance of those rules, and he seemed 
favorable to them. I want to continue working with my 
colleagues of both Chambers and both parties to reform the 
program. I look forward especially to working with you, 
Chairman Goodlatte and Ranking Member Conyers, and hopefully 
the Trump administration in the coming months on legislation 
that is serious and substantial.
    Thank you for receiving my testimony.
    [Senator Grassley's written statement is available at the 
Committee or on the committee repository at: http://
docs.house.gov/meetings/JU/JU00/20170308/105660/HHRG-115-JU00-
Wstate-GrassleyC-20170308.pdf]
    Chairman Goodlatte. Thank you, Senator Grassley. Senator 
Leahy, welcome.

STATEMENT OF THE HON. PATRICK J. LEAHY, A UNITED STATES SENATOR 
                   FROM THE STATE OF VERMONT

    Senator Leahy. Thank you, Mr. Chairman and Ranking Member 
Conyers. I appreciate being here with my good friend Chairman 
Grassley.
    You know, the last several years, as Senator Grassley said, 
we worked together across the aisle. We got to work across the 
Capitol, as you know, to try to bring overdue reforms to the 
EB-5 regional center program. The EB-5 program that I once 
championed seems like a distant memory. That program was 
designed to bring jobs to underserved rural and urban 
communities. And for some time, it did just that, but the 
program has strayed from these goals, and it is a magnet for 
fraud. Security violations are common, and the incentives that 
Congress created to promote investment in distressed areas have 
become obsolete due to economic gerrymandering. Only 3 percent 
of EB-5 investors now invest in rural areas, 3 percent. I am 
representing a State that has a lot of rural areas. I note that 
number.
    Less than 10 percent invest in true high-unemployment 
areas. Almost every EB-5 project uses gerrymandering to qualify 
as distressed. I will give you an example: a luxury hotel in 
Beverly Hills uses gerrymandering to claim it is located in a 
distressed community, one of the wealthiest communities in 
America. But the fact that this type of abuse represents almost 
90 percent of the entire EB-5 program is appalling. I am told a 
number of these luxury developments would be pursued whether 
they had EB-5 financing or not. So it casts real doubt on 
whether this is creating any jobs at all.
    In my home State of Vermont, EB-5 has been used in areas it 
would not otherwise have been able to attract significant 
investment. But even in Vermont, experience has clearly shown 
the need for the reforms and the transparency--transparency, 
which is so important--that we are trying to achieve.
    In our State, the news organization Vermont Digger has dug 
deeply, if you will excuse the pun, to reveal the need for 
broad reforms. Yet, for some developers, any change to the 
status quo is a threat to their bottom line. And, 
unfortunately, some in our leadership have allowed a couple of 
powerful developers who exploit this program's flaws to derail 
critical reform. That is unacceptable. The worst abusers of a 
government program should not be given veto power over its 
reform.
    Now, the Department of Homeland Security's proposed rules 
represent a significant step forward. I agree with Senator 
Grassley. When we asked then Secretary Jeh Johnson over a year 
ago to do all he could do to improve the EB-5 program, he 
worked at that, and I commend him for that. By increasing 
investment amounts, reining in abusive gerrymandering 
practices, these changes will end some of the most egregious 
abuses. Investors will be afforded greater flexibility when 
circumstances changed through no fault of their own, which is 
going to bring additional fairness to the program. But the 
Trump administration is going to have to make sure these are 
implemented and improved.
    And, Chairman Goodlatte and my friend Chairman Grassley, I 
thank you for shining a spotlight on this issue. You can't let 
these proposed rules be diluted or discarded, because this 
thing will just spin out of control. I still believe, as did 
Secretary Johnson, the EB-5's many problems ultimately demand a 
legislative solution. I think we need that. I remain committed 
to doing more to protect investors to root out fraud within the 
program, increasing fraud investigations, requiring additional 
oversight.
    Chairman Grassley and I will soon reintroduce our 
legislation that would do just that. It is my hope that serious 
reforms proposed in new rules would lead to these broader 
improvements. But I look forward to working with all of you on 
this committee as well as on ours to make sure the EB-5 
program, again, serves the rural and poor urban communities 
that Congress intended.
    Thank you very much.
    [Senator Leahy's written statement is available at the 
Committee or on the committee repository at: http://
docs.house.gov/meetings/JU/JU00/20170308/105660/HHRG-115-JU00-
Wstate-LeahyP-20170308.pdf]
    Chairman Goodlatte. Thank you, Senator Leahy.
    I want to thank both of you for your insights into this 
program and these important regulatory reforms. And as is our 
custom, we will not have a round of questioning for you. And I 
know you have other matters to attend to. So thank you very 
much, and we will at this time excuse both of you.
    Senator Leahy. Thank you. Good to see you.
    Chairman Goodlatte. I will now recognize myself for an 
opening statement.
    In 1990, Congress created the investment visa program in 
order to bring entrepreneurial talent to the United States, 
create new jobs, and infuse new capital into our economy, 
especially in hard-hit rural and depressed areas. 
Unfortunately, over the years, the program has strayed further 
and further from Congress' intent and has seen its reputation 
repeatedly tarnished by scandal.
    For the past year and a half, I have worked collaboratively 
with Ranking Member Conyers, Representative Issa, and Senators 
Grassley and Leahy to reform the program and set it on a solid 
foundation.
    Currently, aliens must invest $1 million unless they invest 
in projects in rural or high-unemployment areas, in which case 
they can invest half of this amount. These levels have remained 
untouched since 1990, a quarter century ago, never adjusted for 
inflation or any other factor. As a result, the real value of 
each investment has fallen by half. Almost all visas now go to 
aliens investing at the lower level, meant for rural and poor 
areas, even when the resulting projects are built in prosperous 
areas. Regional centers have discovered that they can duct tape 
together ritzy, high-rent districts with distant depressed 
zones in order that the combined area magically meets the high-
unemployment test. The Government Accountability Office found 
that 12 percent of projects qualifying as high-unemployment 
TEAs, in fact, taped together over 100 disparate census tracts. 
The GAO also found that more than three-quarters of projects in 
supposedly high-unemployment areas are actually physically 
located in places with unemployment rates from zero to 6 
percent.
    This gerrymandering takes place to access cheap capital. 
Aliens don't care about their rate of return as much as they do 
procuring green cards. Real estate experts at New York 
University have concluded that, quote: ``Projects in even the 
most affluent areas are able to routinely qualify for the 
discounted investment. This gerrymandering renders the two-
level investment threshold meaningless, and foreign investors 
flock to invest in luxury projects,'' end quote.
    For example, here is Hudson Yards, a Manhattan mega 
development that purchased a 4-page spread in the 800-page 
September issue of Vogue. Based on Vogue's rack rate, the ad 
cost Hudson Yards about $800,000. It boasts that Hudson Yards 
will include some of the tallest and grandest towers in the 
city. Inside, soaring ceilings, walls of glass, and ingenious 
details reflect the highest standards in the residential 
market. Boasting a collection of restaurants curated by world-
renowned chef Thomas Keller, Hudson Yards is poised to become 
the city's most unique and exciting dining destination. A 
unique combination of luxury retailers and independent 
boutiques is being curated. You can rejuvenate in the 
innovative luxury spa, and on and on.
    At the Yard's first condominium project, condos will start 
at around $1.9 million for 843 square feet and rise to $32 
million for the two penthouses. Perhaps in recognition of the 
huge success of HGTV's show, Tiny Houses, the real deal, a New 
York real estate journal states that 200 of the total 285 
market-rate condos are priced at 7 million--at below $7 
million. The move is reflective of a general drift in the 
market toward smaller homes at less ostentatious prices. Things 
must be tough all over.
    Of course, Hudson Yards is marketing investor visas for 
$500,000.
    Projects in affluent areas will always be able to compete 
for foreign investors. Even if aliens have to invest more, they 
prefer the lower risk of the investments and their prestigious 
ZIP Codes. However, if Congress is going to be granting a path 
to citizenship, we have every right to ensure that a healthy 
percentage of investments be in rural and depressed areas, as 
Congress originally intended.
    I have been one of the most vocal opponents of the Obama 
administration's executive overreach. However, for the past 
quarter century, both Democratic and Republican administrations 
have engaged in executive underreach when it comes to the 
investor visa program. Congress gave the administration 
explicit statutory authority to raise the minimum investment 
amounts. Congress gave the administration the power to 
determine for itself which areas qualify as depressed rather 
than simply delegating away this authority. And, yet, no 
administration acted until January.
    In one of his last acts, Secretary of Homeland Security Jeh 
Johnson commendably issued proposed regulations that deliver 
long overdue reform. The regulations proposed to raise the 
minimum investment amount to $1.8 million. While this is higher 
than what I was willing to accept last year, in the spirit of 
compromise, it is eminently justifiable, merely accounting for 
inflation over the past quarter century and far lower than the 
investment amount required by our international competitors. 
The regulations would also raise the minimum investment amount 
for rural and high-unemployment areas to $1.35 million and 
effectively end gerrymandering by defining a high-unemployment 
area as the census tract or tracts in which a project is 
principally doing business and, at the discretion of the 
regional center, any or all census tracts directly adjacent to 
the project tract, a concept I proposed 2 years ago. These 
regulations deserve to be issued in final form, and I urge the 
Trump administration to do so. They will enable the investor 
visa program to become a turbo-charged engine for economic 
growth. If, however, the regulations are not finalized and the 
program remains in disrepair, I am not sure that it deserves to 
continue.
    I look forward to hearing from today's further witnesses. 
And I am now pleased to recognize the ranking member, the 
gentleman from Michigan, Mr. Conyers, for his opening 
statement.
    Mr. Conyers. Thank you, Chairman Goodlatte, for what I 
agree is a very comprehensive statement.
    Members of the committee, last Congress, I had the honor of 
working with Chairman Grassley and Senator Leahy in an effort 
to reform the EB-5 investor visa program. While the proposed 
Department of Homeland Security regulations would go a long way 
toward addressing many of our longstanding and serious concerns 
with the program, there is no substitute to a meaningful 
legislative solution.
    I remain confident that we can accomplish these important 
legislative reforms this Congress, and I look forward to 
working with you on this, Chairman Goodlatte.
    I have taken a particular interest in the EB-5 investor 
visa program because I believe it has drifted far from the 
program initially envisioned by Congress. As a result, the 
communities that need investment the most, specifically rural 
and distressed urban areas, struggle to benefit from the 
program and are unfairly placed in direct competition with the 
developed, affluent areas. We have already heard some examples 
of that.
    When Congress established the EB-5 investor visa program in 
1990, the intention was to create jobs for American citizens 
and to bring new investment capital to the United States. To 
help encourage investment in job creation in rural or high-
unemployment areas, the EB-5 program offered a reduced 
investment level of $500,000 for projects in designated target 
employment areas.
    However, as reported by the GAO, academics, Wall Street 
Journal, and other news sources, the vast majority of the EB-5 
investment funds are going to projects in some of America's 
wealthiest corridors. They qualify as TEAs, or economically 
distressed, only by aggregating census tracts across many 
miles, sometimes across State lines, and often across natural 
boundaries, such as rivers.
    I call it economic gerrymandering. This practice has been 
criticized by the Leadership Conference on Civil Rights, noting 
that the EB-5 regional center program has dramatically deviated 
from its original purpose to spur job creation and development 
in rural and high-unemployment areas.
    Steering investments to projects in our cities' well-to-do 
neighborhoods comes at the expense of EB-5 funds for urban and 
rural communities. According to the Center for American 
Progress, the congressional district that I represent, for 
instance, I am sorry to say, is the second most impoverished 
district in the United States. I am pleased to say that, under 
the Obama administration, our economic environment began to 
improve. It is slow, and we have a long way to go, but for 
those Americans living in my city of Detroit and in many other 
cities across the country, manipulation of targeted employment 
areas has diverted a potential source of jobs and neighborhood 
improvement away from those that it was originally intended to 
help.
    The Department of Homeland Security's proposed rules make a 
number of important reforms. First, the rules would raise the 
higher investment level to adjust for inflation from $1 million 
to $1.8 million and would raise the lower investment amount 
from $500,000 to $1.35 million.
    Secondly, the rules would reduce the difference between the 
statutory and targeted employment area investment levels and 
would allow for conforming adjustments based on inflation 
beginning 5 years from the effective date.
    And, lastly, the rules would significantly rein in 
manipulation of targeted employment areas. I am encouraged by 
this development from the Department of Homeland Security and 
consider the proposed rulemakings as movement in the right 
direction. But I must reiterate: to achieve the necessary 
reforms to the EB-5 program, there is no substitute to a 
meaningful legislative solution. And absent significant reform, 
either regulatory or legislative, I will not be able to support 
continued authorization of this program.
    And so, in closing, I want to thank the witnesses for their 
willingness to appear before our committee. I look forward to 
an open debate about the proposed regulations and the future of 
this valuable program, the EB-5 program.
    Thank you, Mr. Chairman. I yield back.
    Chairman Goodlatte. Thank you, Mr. Conyers.
    It is now my pleasure to recognize the chairman of the 
Immigration and Border Security Subcommittee, the gentleman 
from Wisconsin, Mr. Sensenbrenner, for his opening statement.
    Mr. Sensenbrenner. Thank you very much, Mr. Chairman.
    For anyone looking for CliffsNotes on today's hearings, I 
can summarize it at the onset into two major points that you 
will hear over and over again.
    First, the EB-5 investor visa program brings sustained 
foreign investment and quality jobs to the U.S. And, second, 
the program is out of date and has been subject to waste, fraud 
and abuse. Any time you have a valuable government program that 
isn't working as well as it should, it is time for reform.
    The days of last-minute extensions and continuing 
resolutions are over. Let me repeat that: no more extensions 
and CRs. It is time for all parties to come together to the 
table so that Congress can do the often dirty job of 
legislating.
    The immigrant investor program has made great contributions 
to our economy. We should not look at its problems today and 
dismiss it as a failure. Its value was recognized as far back 
as 1981 by the Select Commission on Immigration and Refugee 
Policy. The committee concluded that admitting investors into 
the United States is in the national interest and recommended 
the creation of a small numerically limited visa program for 
immigrants who would contribute a substantial amount of 
investment.
    Congress listened and created the EB-5 investor program. 
Customs and immigration service has reported that since--from 
its inception in 1990 through 2014, the EB-5 program has 
created at least 73,730 jobs and generated more than $11.2 
billion in investment. We want that capital, and we need those 
jobs.
    But even if I don't like to admit it, the world has changed 
since we created the program in 1990. The price of a stamp has 
doubled; so has the price of milk. The number of millionaires 
in the United States has more than tripled. And the minimum 
investment in the EB-5 program has not increased by even a 
nickel.
    Other nations with investor visa programs require much 
larger investments. Australia's investor program requires up to 
11 million U.S. dollars. Canada's program requires at least 1.5 
million U.S. dollars, in addition to a required personal net 
worth of over 7 million or more U.S. dollars. And the United 
Kingdom's investor program requires at least 2.5 million U.S. 
dollars and millions more for expedited citizenship. There are, 
of course, some countries that offer cut-rate prices for 
investment visas, but I for one believe that the value of U.S. 
citizenship is that higher than any other country in the world, 
and I think the cost of becoming a U.S. citizen should be 
fairly valued at way over $500,000.
    Demand supports my patriotism because we currently have a 
7- to 8-year backlog for the roughly 10,000 investor green 
cards available each year. I am not an economist, but when 
demand is that high, it means that the price is too low. An 
increase in investment amounts would cause considerably more 
capital to flow into the United States.
    Making matters worse, not only are the required investment 
levels 25 years out of date, but the system has been abused to 
require even less capital than Congress intended. Congress 
intended the minimum investment for an EB-5 visa to be $1 
million. We then specifically sought to incentivize investments 
in rural and depressed areas by carving out an exception. In 
so-called targeted employment areas, Congress lowered the 
minimum investment amount to $500,000.
    These incentives completely failed, however. The targeted 
boundaries were gerrymandered, and the million-dollar 
investment level was almost completely ignored. The exception 
swallowed the rule, and all EB-5 visas are now set at the 
$500,000 level, even though the majority of capital flows to 
affluent areas.
    Last year, the Department of Homeland Security attempted to 
address these and other concerns through its rulemaking 
process. I agree with the intent of DHS' proposed regulations, 
but Congress, not the administration, is suited to weigh the 
policy considerations necessary to properly reform the investor 
visa program.
    I thank the chairman for holding this hearing, and I thank 
Senators Grassley and Leahy for crossing over to the wrong side 
of the tracks to testify here today.
    The four of us, along with Ranking Member Conyers and many 
other members of this committee, have worked to solve a lot of 
intractable problems over the years, and I look forward to 
working with you all to reform the EB-5 program. Thank you.
    Chairman Goodlatte. Thank you, Mr. Sensenbrenner.
    The chair is now pleased to recognize the ranking member of 
the Immigration and Border Security Subcommittee, the 
gentlewoman from California, Ms. Lofgren, for her opening 
statement.
    Ms. Lofgren. Thank you, Mr. Chairman.
    Created 27 years ago, this EB-5 program is an important 
investment and job-creation program. It got a slow start, but 
after the Great Recession in 2008, the program really picked 
up. When traditional bank lending dried up during the economic 
crisis, developers turned to the EB-5 program to keep funding 
projects, and the use of the program has really skyrocketed 
since then.
    Now, I saw a 2017 report from the U.S. Department of 
Commerce that says in fiscal years 2012 and 2013 alone, the EB-
5 program brought in $5.8 billion in capital financing to the 
United States and was expected to create more than 174,000 
jobs. The benefits of this program are on display in the bay 
area, where I am from. The program has funded a new hotel in 
the revitalizing San Jose Airport corridor in the 19th 
Congressional District I represent as well as development in 
revitalizing Treasure Island. According to investors, these 
projects would not have happened without EB-5 financing. For 
example, the hotel in my district was the first one built near 
the airport in 20 years. And the Treasure Island project 
includes the island's World's Fair site, which is a California 
historical landmark and a former military base, which has 
required significant remediation and redevelopment.
    At the same time, there is growing recognition that the 
program is in need of modernization and reform. As has been 
mentioned by others, the minimum investment level of 1 million 
or 500,000 hasn't been updated since the program was created in 
1990. And considering the high demand for the program 
demonstrated by the long and growing backlog of EB-5 petitions, 
it shows that the U.S. is leaving investment capital on the 
table by not increasing the investment level.
    The program has also come under consideration--criticism 
with respect to the provisions designed to ensure that EB-5 
investments are shared among rural areas and distressed areas. 
As has been mentioned, my colleagues, the gerrymandering issue 
is of concern to many. Others worry, however, that excessive 
tightening of the current conditions would prevent funding of 
many projects that, although situated in relatively prosperous 
areas, nonetheless create jobs for workers in nearby distressed 
areas.
    And in the midst of the program's exploding popularity, 
there is increasing concern about fraud within the program. We 
have seen reports concerning alleged investment scams, SEC 
civil violations, and even criminal indictments related to EB-5 
projects.
    And I will say this, although there has been not yet full 
consensus on the investment amount and the so-called 
gerrymandering issue, I do think there is broad consensus on 
the antifraud provisions no matter what the opinion is on the 
investment amount.
    We do need to reform this program. And as we know, the 
Department of Homeland Security proposed some changes to reform 
the program, increasing the threshold amounts and reforming the 
targeted areas. Whether these proposed changes should be 
adopted in the final rule--of course, is what we are here to 
discuss today--or whether the rule should be replaced by 
legislation, I support increasing the investment threshold to 
ensure that we are maximizing foreign investments and creating 
the maximum number of U.S. jobs for workers. But we must also 
be careful to avoid changes that would reduce the overall 
investment and, thus, the number of jobs created by the 
program.
    I think we need to look at how we can incent additional 
development in depressed and rural areas. I do think that we 
have fallen short there although our intent was clear. But we 
need to be careful, as we move in that direction, not to impose 
restrictions that would effectively close off the EB-5 program 
in large swaths of the country.
    These are difficult issues that require careful balancing, 
and I look forward to hearing from the witnesses today on the 
right balance.
    I would note that, along with this hearing, EB-5 
stakeholders are currently submitting comments on the proposed 
rule for consideration by DHS, which is exactly the way this 
system should work. By airing proposals and gathering feedback 
and other data, both the Congress and the Department can weigh 
competing priorities and hopefully reach the right balance for 
the good of the country.
    I would be remiss if I did not mention that, while this EB-
5 hearing is important and a subject deserving of review, I 
would hope that the committee might also find time to work on 
the topic of comprehensive immigration reform, something that 
our country desperately needs.
    And, with that, Mr. Chairman, I would yield back the 
balance of my time.
    Chairman Goodlatte. The chair thanks the gentlewoman.
    And I would now invite our second panel members to come 
forward and take their seats at the witness table.
    Thank you. You might want to remain standing since the 
first thing I am going to do is swear you in.
    Welcome to all of you. If you would, please raise your 
right hand.
    Do you each of you solemnly swear that the testimony that 
you are about to give shall be the truth, the whole truth, and 
nothing but the truth so help you God?
    Thank you.
    Let the record reflect that all five witnesses answered in 
the affirmative.
    And you may be seated. Thank you.
    Ms. Rebecca Gambler is a Director in the U.S. Government 
Accountability Office's Homeland Security and Justice Team, 
where she leads GAO's work on border security, immigration, and 
elections issues. Ms. Gambler joined GAO in 2002 and has worked 
on a wide range of issues related to Homeland Security and 
Justice. Prior to joining the GAO, Ms. Gambler worked at the 
National Endowment for Democracy's International Forum for 
Democratic Studies. Ms. Gambler has an M.A. in national 
security and strategic studies from the United States Naval War 
College, an M.A. in international relations from Syracuse 
University, and an M.A. in political science from the 
University of Toronto. She is a Fulbright fellow to Canada. Ms. 
Gambler has a B.A. in political science from Messiah College.
    Mr. Sam Walls is the president and chief operating officer 
of Arkansas Capital Corporation, having joined the company in 
2003. ACC is a private, nonprofit, economic development company 
that provides capital to businesses starting or expanding in 
Arkansas.
    In 2012, State leaders approached ACC and asked ACC to 
consider creating an EB-5 regional center that would serve 
Arkansas. Consequently, Pine State Regional Center was born. 
PSRC was approved in 2014, and Mr. Walls serves as its managing 
director. He has a B.A. from Southern Methodist University in 
Dallas, Texas, and a J.D. from the William H. Bowen School of 
Law in Little Rock, Arkansas.
    Ms. Angelique Brunner established EB5 Capital in 2007. She 
splits her time between the company's Washington, D.C., and San 
Francisco offices providing strategic direction and oversight 
to EB5 Capital's real estate, marketing, and legal team.
    Ms. Brunner serves on the board of directors for Invest In 
The USA, the national EB-5 industry trade association, and was 
the inaugural chair of the II USA Policy Committee, which 
guides the industry's communications with the USCIS and other 
governmental agencies. Ms. Brunner received her bachelor's 
degree in public policy from Brown University. She also holds a 
master's degree in public affairs and a certificate in urban 
planning from Princeton University's Woodrow Wilson School.
    Ms. Dekonti Mends-Cole serves as a director of policy for 
the Center for Community Progress, which is a nonprofit solely 
dedicated to transforming blighted and vacant properties into 
asset-supporting neighborhood vitality. Prior to joining Center 
for Community Progress in September 2015, Ms. Mends-Cole worked 
as the deputy director of dispositions for the Detroit Land 
Bank Authority overseeing disposition, property management, and 
compliance program.
    In addition, she served as a fellow with the White House 
Strong Cities, Strong Communities initiative embedded in the 
city of Detroit's law department. Ms. Mends-Cole holds an M.S. 
from the London School of Economics in urban regeneration and 
affordable housing, a juris doctor from Georgetown Law Center, 
and a B.A. from the University of Miami in international 
studies and economics.
    Mr. David North, a fellow of the Center for Immigration 
Studies, is an authority on immigration policy, specializing on 
the interaction between immigration and domestic systems, such 
as education and labor markets. He served in the United States 
Labor Department as the Assistant for Farm Labor to the U.S. 
Secretary of Labor and as the Executive Director of President 
Lyndon Johnson's Cabinet Committee on Mexican-American Affairs. 
Mr. North received a Fulbright scholarship to attend Victoria 
University in Wellington, New Zealand, where he earned an M.A. 
He is also a magna cum laude graduate from Princeton 
University.
    Welcome to all of you. Your timing device is right there in 
front of you. You have 5 minutes. When it reaches 1 minute 
remaining, it will turn to yellow. We ask that you summarize 
and conclude before the red light comes on. Your entire 
statement will be made a part of the record.
    And we will begin with Ms. Gambler.

 TESTIMONY OF REBECCA GAMBLER, DIRECTOR, HOMELAND SECURITY AND 
JUSTICE TEAM, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; SAM WALLS 
 III, MANAGING DIRECTOR, PINE STATE REGIONAL CENTER; ANGELIQUE 
  BRUNNER, FOUNDER AND PRESIDENT, EB5 CAPITAL; DEKONTI MENDS-
 COLE, DIRECTOR OF POLICY, CENTER FOR COMMUNITY PROGRESS; AND 
      DAVID NORTH, FELLOW, CENTER FOR IMMIGRATION STUDIES

                  TESTIMONY OF REBECCA GAMBLER

    Ms. Gambler. Good morning, Chairman Goodlatte, Ranking 
Member Conyers, and members of the committee. I appreciate the 
opportunity to testify at today's hearing to discuss GAO's work 
reviewing the immigrant investor or EB-5 program.
    The EB-5 program was established to promote job creation 
and encourage capital investment in the United States by 
foreign investors in exchange for a lawful permanent residency 
and a path to citizenship.
    Currently, under the program, immigrant investors are to 
invest $1 million in a commercial enterprise, or $500,000 if 
the business is in a targeted employment area, or TEA. A TEA is 
defined as an area that at the time of investment is either 
rural or has experienced unemployment of at least 150 percent 
of the national average rate.
    Investments are to result in the creation of at least 10 
full-time jobs. Immigrant investors and their eligible 
dependents receive 2-year conditional green cards. If they meet 
program requirements, including their investments resulting in 
at least 10 full-time jobs, they can apply to remove the 
conditional basis of their green cards. About 10,000 EB-5 visas 
are made available to qualified applicants each fiscal year.
    My remarks today summarize a report GAO issued last fall to 
this committee providing information on proposed EB-5 
investments in TEAs. For that report, we selected and reviewed 
a random sample of 200 of the approximately 6,600 investor 
petitions submitted during the fourth quarter of fiscal year 
2015.
    Based on our review of those petitions, we provided 
information on the proportion of petitioners that did or did 
not elect to invest in TEA, the proportion of petitioners 
basing a high-employment TEA on various types of geographic 
areas, and EB-5 investment as a proportion of the total 
investment in projects.
    With regard to the first area, we estimated that 99 percent 
of the EB-5 petitioners who filed a petition in the fourth 
quarter of fiscal year 2015 elected to invest in a project 
located in a TEA, most within a high-unemployment TEA that is 
qualifying for a reduced investment threshold of $500,000.
    In particular, just under 97 percent elected to invest in a 
high-unemployment TEA and just under 3 percent in a rural TEA. 
The remaining petitioners elected to invest at least $1 million 
in a project that was not located in a TEA.
    Second, we estimated that 90 percent of petitioners 
electing to invest in a high-unemployment TEA based that on the 
average unemployment rate for a combination of census areas 
while the remaining 10 percent based the TEA on the employment 
rate of a single census tract, block group, or a county. Most 
of these petitioners combined from 2 to 10 census areas, but 
others combined more than 100 census areas, as allowed under 
the program as currently structured.
    With regard to the third area, we estimated that EB-5 
investment by one or more immigrant investors who invested in 
projects located in a TEA was generally less than the nonEB-5 
investment by other U.S. or foreign investors relative to the 
total estimated project cost. We also estimated that nearly 
three-fourths of petitioners who elected to invest in a TEA 
invested or plan to invest in various types of real estate 
projects, such as hotels and resorts, commercial and 
residential developments.
    In closing, in addition to our September 2016 report 
regarding proposed investments in TEAs, we have also issued 
reports related to USCIS' efforts to assess and address fraud 
within the EB-5 program and to report the economic benefits of 
the program. We have made recommendations in these areas, which 
USCIS is working to address, and we will continue to monitor 
USCIS' efforts and progress.
    This concludes my oral statement, and I would be pleased to 
answer questions members may have.
    [Ms. Gambler's written statement is available at the 
Committee or on the committee repository at: http://
docs.house.gov/meetings/JU/JU00/20170308/105660/HHRG-11-JU00-
Wstate-GambLerR-20170308.pdf]
    Chairman Goodlatte. Thank you, Ms. Gambler.
    Mr. Walls, welcome.

                   TESTIMONY OF SAM WALLS III

    Mr. Walls. Thank you, Chairman.
    Chairman Goodlatte, Ranking Member Conyers, and members of 
the committee, thank you for the opportunity today to appear 
today to discuss the EB-5 foreign investor program.
    My name is Sam Walls, and I am the president and chief 
operating officer of Arkansas Capital Corporation. Arkansas 
Capital Corporation is a private, nonprofit, economic 
development company that was formed in 1957 by State business 
leaders that included the late Governor Winthrop Rockefeller. 
We partner with banks and other sources to provide capital to 
businesses starting or expanding in our State.
    In 2012, State leadership requested Arkansas Capital to 
create an EB-5 regional center that would serve Arkansas. This 
request was made of Arkansas Capital because of our impeccable 
reputation and history of partnering with the State to promote 
economic development. Pine State Regional Center was approved 
in 2014.
    In September of 2015, Pine State filed its first EB-5 
exemplar petition to raise up to $200 million for a $1.67 
billion steel manufacturer in Osceola, Arkansas, a rural 
community with high unemployment, persistent high poverty 
levels, and a low level of college degrees. State and local 
leaders have described this steel production facility as a game 
changer and a godsend. This facility is the largest industrial 
project in the history of the State of Arkansas. The project 
creates 9,600 construction direct and indirect jobs. The 
employees of this facility will earn wages with benefits that 
far exceed the average salary in that community and what most 
would ever have dreamt possible.
    But to be clear, although we are proud of our involvement 
in this project, our support for the reforms in the USCIS 
proposed regulations and in past legislative efforts are not 
merely because they may provide some benefit to our current 
project. As a now 60-year-old economic development entity 
serving Arkansas, we see these reforms as an opportunity for 
rural and distressed urban communities to realistically use 
this program to assist in economic development. Our current 
project is an example of how rural communities will utilize 
this program if given the opportunity.
    Before I make some remarks about the USCIS proposed EB-5 
regulations, I wanted to express my thanks to you, Mr. 
Chairman, Ranking Member Conyers, Senator Grassley, and Senator 
Leahy, for your efforts to enact EB-5 reform legislation. We 
strongly support your legislation introduced in the last 
Congress and encourage you to continue to push your EB-5 
reforms that will help rural and underserved communities.
    I applaud USCIS for its proposed regulations on EB-5. 
Today, the adjective ``controversial'' almost invariably seems 
to be used when this program is discussed in public forums. The 
USCIS is clearly attempting to take whatever steps it can 
within its authority to reform the program and address these 
concerns. While we share the view of many in the industry about 
the rates of increase to the current investment levels, we 
still welcome the proposed rules for several reasons.
    The rules' reform of the targeted employment area 
destination would return the use of this designation to the 
original intent of Congress. Currently, some of the most 
affluent areas of the country have been able to attain the TEA 
designation by creatively streaming together dozens of 
disparate census tracts. The TEA designation was intended for 
rural and highly distressed urban areas and was anticipated to 
be exception, not the rule. According to the Government 
Accountability Office, we know that, today, more than 90 
percent of investors have gone into projects that are in urban 
TEAs comprised of many, sometimes dozens, of census tracts, and 
only 3 percent of EB-5 investments have gone into rural areas.
    We agree with the chairman in his observation that this 
practice has made a mockery of what Congress intended.
    The proposed regulations essentially maintain the current 
statutory differential between the TEA and non-TEA investment 
levels of 500,000. From our perspective, this is a key 
component to the TEA reform because a more restrictive process 
to qualify for TEA status is only half of the equation. There 
must be a meaningful difference in the investment amounts. Past 
suggestions of a $50,000 difference, for example, will amount 
to a continuation of the status quo. The program's legislative 
history is clear on this point: the discounted investment rate 
was intended to drive investment to areas of the country that 
are traditionally undercapitalized. A meaningful investment 
differential is essential to achieve that goal.
    The proposed rule is important for another reason. Over the 
past 2 years, we have seen a small segment of the EB-5 industry 
essentially veto proposed reforms. Most recently, this past 
December, these stakeholders rejected a very fair reform 
compromise. Like any compromise, they were asked to accept 
things that we didn't like, but taken as a whole, it was fair, 
and we support it with an eye toward the long-term health and 
viability of the program.
    If finalized, these proposed regulations will finally make 
this ongoing strategy of delay untenable for these parties and 
force them to participate in good faith in the legislative 
process.
    All of you have heard arguments against making changes to 
the EB-5 program. Some have claimed that proposed legislative 
reforms are picking winners and losers. We believe that efforts 
to restore congressional intent to the EB-5 TEA incentive is 
not picking winners and losers. It is an effort to fix a broken 
program.
    Some claim that the EB-5 program is just a job creation 
program, and so it should not matter where investments are 
going as long as jobs are being created somewhere. Some argue 
that the TEA policy is being honored if people commute from 
poor areas to prospering areas where an EB-5 project is. This 
argument completely ignores the fact that Congress enacted the 
TEA incentive for a very specific purpose: to boost economic 
activity in communities that are traditionally 
undercapitalized. Congress would not have debated and enacted 
the TEA provision on the assumption it would apply everywhere. 
Congress has every right to insist that public policy work as 
it was intended.
    If the recent Presidential election showed us anything, it 
demonstrated that there are numerous rural and distressed urban 
communities that feel the government has forgotten about them. 
The clear intent of the TEA designation was an effort by 
Congress to help induce more job-creating economic investment 
in those areas, a result that has not been realized yet.
    The reforms contained in the USCIS proposed regulations and 
recent legislative efforts is a reaffirmation to the people in 
those areas of the country that Congress has not forgotten 
about them and is working to help those communities restore 
vital sources of employment.
    Thank you, and I look forward to your questions.
    [Mr. Walls' written statement is available at the Committee 
or on the committee repository at: http://docs.house.gov/
meetings/JU/JU00/20170308/105660/HHRG-115-JU00-Wstate-WallsS-
20170308.pdf]
    Chairman Goodlatte. Thank you, Mr. Walls.
    Ms. Brunner, welcome.

                 TESTIMONY OF ANGELIQUE BRUNNER

    Ms. Brunner. Chairman Goodlatte, Ranking Member Conyers, 
and distinguished members of the committee, thank you for the 
opportunity to testify today.
    My name is Angelique Brunner, and I am founder and 
president of EB5 Capital, a regional center operator based in 
Maryland. I founded the company in 2007 in the District of 
Columbia to utilize foreign capital in disadvantaged 
communities and support living-wage job creation. Founding the 
company during the economic downturn gave me a unique 
perspective on capital markets, their lack of resilience, and 
the importance of a flexible, independent source of capital.
    Today, EB5 Capital is a leading regional center operator. 
We manage more than $400 million of investment capital that 
represents more than 20 projects in five States and the 
District of Columbia on behalf of clients from 50 countries.
    Our investments have anchored more than $2.4 billion of 
total development that has created thousands of jobs. The 
company's initial focus was Washington, D.C., where we have 
committed over $250 million of investment in transitioning 
communities in the Convention Center corridor, the ballpark and 
Capitol Riverfront area, and most recently in NOMA, where Uline 
Arena is reshaping the entire neighborhood with REI's flagship 
store and the District's first creative class A offices.
    Our expansion outside of the District includes projects 
throughout California and the entire State of Michigan, where 
we believe that we can bring $100 million a year for qualified 
EB-5 projects under the current TEA definitions.
    I am here today to comment on proposed regulations that, if 
enacted, will jeopardize the ability of the program to continue 
to draw foreign direct investment to the United States. I urge 
Congress to complete the legislative reform of the EB-5 program 
that your committee has been working on with stakeholders for 
the past 2 years. Regulatory changes in support of new 
legislation could then be revisited after congressional action.
    The most problematic proposed changes that I will focus on 
are the changes to the targeted employment area definition and 
the increases in investment amounts. On their face, both may 
seem grounded in principled arguments, but with further 
examination, the economic basis of both are subjective and far 
from a best-practices approach to the reform each is meant to 
foster.
    My first area of concern is that the proposed TEA 
definition does not incorporate preexisting government 
criteria. DHS is proposing to continue the single variable 
criteria of a targeted employment area. I was hopeful that DHS 
would propose new criteria practiced elsewhere in Federal 
Government, like those used to define the new market tax credit 
qualifying geography, or eliminate the TEA entirely.
    Additionally, proposed limitations based on number of 
census tracts are biased against densely populated urban areas 
that have significantly more census tracts per square mile than 
suburban and rural areas. The suggested doughnut approach that 
measures economic development as a circle of adjacent census 
tracts rather than commuting distance does not reflect the 
reality of economic development in cities which follow a block-
by-block path and/or occur along public transit lines. To 
illustrate this bias, I offer an anecdote from my commute to 
the hearing from my office this morning, an 8.3-mile drive. If 
I take a suburban route, I travel only 10 census tracts. But if 
I travel through the District of Columbia, I cover 21 census 
tracts.
    My second area of concern is that the market will not 
support the proposed increase in investment levels. At this 
time, the EB-5 program is effectively operated as a one-tier 
level of investment, with 95 percent of investments occurring 
at the $500,000 level, which DHS proposes raising to $1.35 
million. Such an increase will shock the marketplace and, in my 
opinion, decimate the EB-5 program.
    U.S. competes for investors with about 40 countries. Our 
ability to attract investors is already compromised because of 
our complex immigration requirements, visa capacity issues, and 
processing backlogs. An increase in investment amount at the 
magnitude proposed.
    While the investment tiers of $501 million date back to the 
beginning of the program, the higher investment amount has 
never been competitive.
    Success and reform can be aligned. Incentives for rural and 
distressed urban areas through visa set-asides will achieve the 
investments expressed by many stakeholders. Reform efforts 
should shift away from the arbitrary single variable TEA to a 
single investment amount. Given the program's backlog, 
investors want their visas quicker. A single investment amount, 
eliminating the TEA, coupled with set-asides will incent 
increased investment in needed areas.
    In conclusion, Mr. Chairman, Ranking Member Conyers, and 
distinguished members of the committee, I strongly urge you to 
advise the current administration to cancel the regulations 
proposed by the previous administration. I ask that you instead 
support Congress to complete its work on legislative reform of 
the EB-5 program. Regulatory changes in support of new 
legislation could then be revisited after congressional action.
    Thank you. This concludes my statement, and I would be 
pleased to answer questions.
    [Ms. Brunner's written statement is available at the 
Committee or on the committee repository at: http://
docs.house.gov/meetings/JU/JU00/20170308/105660/HHRG-115-JU00-
Wstate-BrunnerA-20170308.pdf]
    Chairman Goodlatte. Thank you, Ms. Brunner.
    Ms. Mends-Cole, welcome.

                TESTIMONY OF DEKONTI MENDS-COLE

    Ms. Mends-Cole. Thank you, Chairman Goodlatte, Ranking 
Member Conyers, and distinguished members of the committee. 
Thank you for inviting me to testify today. As stated, my name 
is Dekonti Mends-Cole and I serve as the director of policy for 
Center for Community Progress based in Washington, D.C.
    The Center for Community Progress is a national nonprofit 
focused on addressing vacancy and abandonment to revitalize 
distressed communities in urban, suburban, and rural areas. 
Headquartered in Flint, Michigan, with staff in Detroit, 
upstate New York, New Orleans, Chicago, and Atlanta, our 
organization supports the revitalization of America's older 
industrial regions and places, as well as communities that for 
decades have experienced an exodus of population and industry. 
We believe that a reformed EB-5 program that presents an 
opportunity to revitalize places experiencing economic distress 
and in the greatest need of at-risk capital to spur growth, 
such as Detroit, Michigan; Cincinnati, Ohio; and Scranton, 
Pennsylvania, would provide the greatest benefit.
    The EB-5 program introduced in 1990 was intended to be an 
innovative financing tool that encouraged job growth, 
incentivized investment, and recruited at-risk capital to 
disinvested communities. The program was largely dormant until 
the 2010s when increased immigrant interests, largely from 
China, coupled with increased demand for low cost mezzanine 
finance drove take-up.
    At the same time EB-5's use began to increase 
exponentially, a widening disparity began to emerge between 
recovering markets and those that are currently on a downward 
trajectory. From 2010 to 2013, the most prosperous 10 percent 
of ZIP Codes saw unemployment climb by 22 percent, and the 
number of businesses rise by 11 percent, while the most 
distressed 10 percent of ZIP Codes lost 13 percent of their 
jobs and saw a business closure rate of 1 in 10. Fifty million 
Americans live in the country's most distressed communities, 
characterized by low job growth, high vacancy, and out of work 
adults as high as 55 percent.
    The program has become disconnected from its original 
purpose. Immigrant investor capital, rather than serving as a 
catalyst for growth in communities serving job and industry 
loss, has sought the safe havens of high-return and low-risk 
projects in the country's most prosperous census tracts. This 
has been made possible by the gerrymandering of EB-5 investment 
areas. It is not a coincidence that EB-5 capital is heavily 
concentrated in the States and ZIP Codes with the highest 
populations living in prosperous census tracts: California, New 
York, Texas, New Jersey, and Illinois. I hope to shift the EB-5 
conversation beyond high density, high growth, largely coastal 
cities, and support the Department of Homeland Security's 
efforts to better target EB-5 capital and stimulate economic 
growth in America's distressed communities.
    I would like to specifically talk about the narrowing 
definition of TEAs that was focused on in the proposed 
regulations. A February 2017 article by EB-5 experts and 
scholars, Professor Friedland and Calderon at Stern's business 
school, applied the following proposed regulation TEA 
definitions to a sample of 52 projects that were largely from 
what is known as gateway cities. Based on this application, 52 
of the sample qualified projects, only two would apply under a 
single census tract and only four would qualify under the 
contiguous census tract definition. This demonstrates that a 
narrower TEA definition would prohibit projects from continuing 
to include high unemployment areas that are in close proximity 
but are not receiving any direct investment from the project. 
It also would better align with similarly targeted programs 
such as new market tax credits.
    The proposed regulations would more effectively target 
credits to hard to recruit capital areas than also two other 
models that have been proposed: The California 12-tract model 
or the commuting pattern model. Both of these models will 
continue to permit investors to enter at a lowered investment 
level and high growth census tracts. It's applied nationally 
and are less likely to recruit capital for distressed 
communities than what is outlined in the proposed regulation.
    Lastly, I'd like to briefly comment on the deferential 
between TEAs and non-TEAs. The current legislation has proven 
to be a valuable incentive for both investors and regional 
centers. EB-5 investment is completely at risk and investors 
seeking to minimize their risk have favored lower cost of entry 
projects in TEA designated areas. A sizable differential is 
necessary to attract capital to the most economically 
distressed areas. Ensuring that the spread is continued and 
adequately incentivizes immigrant investors to support 
difficult-to-finance projects is necessary.
    Thank you for the opportunity to present, and I would be 
happy to take any questions.
    [Ms. Mends-Cole's written statement is available at the 
Committee or on the committee repository at: http://
docs.house.gov/meetings/JU/JU00/20170308/105660/HHRG-115-JU00-
Wstate-Mends-ColeD-20170308.pdf]
    Chairman Goodlatte. Thank you, Ms. Mends-Cole.
    Mr. North, welcome.

                    TESTIMONY OF DAVID NORTH

    Mr. North. Good morning, Mr. Chairman, Mr. Ranking Member, 
members. I'm grateful for a chance to discuss the proposed 
changes in the regs of the EB-5 program. I speak for the Center 
for Immigration Studies. It is a downtown agency, nonpartisan 
research organization here in Washington, D.C.
    Frankly, we have no need for an immigrant investor program. 
EB-5 brings in only 1 or 2 percent of the flood of new foreign 
money that is invested in the United States every year, and it 
brings it in through a convoluted way that almost invites 
corruption and theft. It is lodged in an agency that does not 
deal in high finance, involves the sale of visas to aliens who 
could not become U.S. immigrants in any other way. The Center 
has moral objections to selling green cards.
    That said, realistically, the chances are that the big 
urban monied interests that profit from the EB-5 program, 
heavily in Manhattan I might add, it never places--the program 
never places investments in the Appalachias--will prevail. The 
big money people will as they usually do. But if the 
termination battle is lost, perhaps we can make some modest and 
sensible changes in the program. I have four specific 
suggestions, two echoing what the Department suggests, and two 
that don't appear to be in the Department's proposals.
    As far as the basic investment is concerned, moving it up 
to $1.35 million makes a lot of sense to me. Bring in more 
money without spending more visas in the process. I also 
disagree with one of my colleagues here at this table about the 
prospective market. There is a whole lot of fear among a whole 
lot of very rich people, primarily in China, and I think that 
the market for visas at $1.35 million will be quite brisk. 
Besides, we have a backlog to take care of anyway.
    The question of the location of the investments is 
interesting. This is a TEA. Currently, the half million dollar 
investments must be used in what the agency calls targeted 
employment areas. I would like to illustrate how this 
definition can be manipulated in terms of this place. We are in 
Rayburn House Office Building and the Rayburn House Office 
Building, as you can see on the screen, is in that kind of 
upside down U shape form, the red form there. That is a TEA 
that could be created--I am not saying it has been--it could be 
created under the current rules, and includes the White House, 
which is one of the more expensive residences in the country, 
and this wonderful building. And it is a depressed area as far 
as DHS is concerned. If you can put the White House in a TEA, 
you can put a TEA anywhere in the country.
    I want to stress something that I am not sure is in the 
regulation package, and that is the question of integrity. 
There are numerous, multimillion dollar scandals in this 
program, in South Dakota, in Vermont, in Chicago, in Florida, 
in the State of Washington, and lots and lots of them in 
California. There needs to be a different focus in the 
administration on these things. And let me give you one example 
of a particular fraud.
    I decided to see--this is regarding one of the California 
frauds--what I could find out about the proposers of what turns 
out to be fraudulent activity by using the internet. I am not 
skilled with the internet. I had no particular law enforcement 
connections. I just went on the internet and I looked. And what 
did I find? Well, the first thing I found, that the main broker 
was a lawyer who had been to a for-profit law school, which is 
worrisome to me. He had a debt counseling firm attached to his 
law firm. That sounds worrying. He had been twice sanctioned by 
the California bar, and when once was suspended from the 
practice of law for 7 months.
    Now, do you want to invest in a program that is led by 
somebody like that? I would think not. But none of the 100 or 
so investors did what I had just done in a few minutes, nor had 
the managers of the EB-5 program. There needs to be a rather 
more careful approach to who gets to run these programs and who 
the middlemen are.
    There is one other thing that I didn't see in the regs, 
which I think should be there, and that should be a provision 
that there be jobs for residents only. There was a failed 
project in South Dakota where Korean workers were brought in, I 
think H-2Bs, to build a beef slaughterhouse, and there were 
Germans working on tourist visas on a German-connected EB-5 
lumber mill in Florida. Now, these matters are deplorable, and 
I think that if any jobs were to be created by this program, 
they should go to full-time legal residents of this country, 
including green card holders.
    In closing, I would like to point out an irony. This is a 
program which has been defended stoutly by the leadership, the 
Republican leadership of the House and the Senate through the 
continuing resolution that Mr. Sensenbrenner talked about. They 
have done so despite the fact that two-thirds of the money in 
this program goes into States that supported Ms. Clinton in the 
last election. So it may be an act of generosity on the part of 
the Republican Party to continue a program that is so nice to 
the blue States.
    And on that note, I end.
    [Mr. North's written statement is available at the 
Committee or on the committee repository at: http://
docs.house.gov/meetings/JU/JU00/20170308/105660/HHRG-115-JU00-
Wstate-NorthD-20170308.pdf]
    Chairman Goodlatte. Thank you, Mr. North.
    We will now begin questioning by the members of the 
committee. And I will recognize myself for 5 minutes.
    Ms. Gambler, let me start with you. I find it interesting 
that the General Accounting Office found that three-quarters of 
all alien investors in TEAs invest in real estate projects, and 
yet real estate construction accounts for about 6 percent of 
the U.S. economy. So why does 75 percent of these investments 
go into what is only 6 percent of the economy?
    Ms. Gambler. Congressman, that is not something we looked 
at specifically as part of our review. It may be due to the 
universe of projects that are available for investors to seek 
to invest in. So it could be a product of just the types of 
projects that are available to investors and that that is more 
predominantly in certain industries than others.
    Chairman Goodlatte. Is it possible that under the current 
law and regulation, where gerrymandering can allow you to 
figure development in highly attractive areas like the Hudson 
Yards example that we used earlier, that the money would 
gravitate toward what would be considered to be easier 
investments than it would be to invest the money in a rural 
area or in a high unemployment area?
    Ms. Gambler. I think it is reasonable that the types of 
projects that are available for investors to invest in are 
probably driven by a number of factors, including what is 
currently allowed under law and regulation in terms of how 
projects and regional centers can designate TEAs or can have--
use TEAs that have been designated.
    Chairman Goodlatte. Thank you.
    Mr. Walls, I read your testimony. It is easy to imagine 
that projects such as the Big River Steel in Osceola, Arkansas, 
are the exact type of projects that Congress wanted to 
facilitate in creating the investor visa program and the 
regional center program. Isn't it disappointing that so few 
such projects get funded through this program?
    Mr. Walls. It is. I think, you know, when we were asked to 
do this and you got into the program without any previous 
experience, you look at the regs and you say, well, there is 
TEAs and there is non-TEAs. Clearly, a project like that would 
fall onto a TEA. And intuitively you would say, well, this 
clearly looks like a good job creator. And so when you get more 
immersed into it and you discover that you are competing with 
very impressive projects in very affluent areas of the country, 
it is--it is disappointing, it is frustrating, it has been.
    Chairman Goodlatte. And it is highlighted by the fact that, 
well, this would be considered a less attractive area for the 
most part for investments, Big River Steel is going to pay its 
mostly noncollege educated workers in rural Arkansas $75,000 a 
year or more. How do you think this compares with the wages 
that noncollege educated workers will make at the high end 
hotels and condos that are being built with EB-5 funds?
    Mr. Walls. I would hesitate to speculate to an exact 
number, but I would assume that it would be much higher.
    Chairman Goodlatte. Ms. Brunner, you state in your 
testimony that the administration should cancel the proposed 
regulations and allow Congress to complete the legislative 
reform of the EB-5 program that your committee has been working 
on with stakeholders for the past 2 years. Now you mention your 
involvement with a number of industry groups who, in my 
experience, have been incredibly resistant to any real reforms 
and who have, in fact, stymied reform over the past 2 years. 
These groups like the investor visa program the way it is. They 
want the investment level to remain low and they want to be 
able to qualify luxury condo projects as being in depressed 
areas. If the regulations are canceled, why would they have any 
more incentive to engage in substantive negotiations than they 
have over the last 2 years?
    Ms. Brunner. Mr. Chair, one thing that has happened in the 
past year is I have become the membership chair and 
spokesperson for the EB-5 Investment Coalition. Since that 
time, the statements in my testimony actually reflect the 
alignment of those groups and that we are prepared to eliminate 
the TEA, go to a single investment model. And my understanding 
is that we are very excited to cooperate with your committee 
and the Senate committee and achieve reform this calendar year.
    Chairman Goodlatte. Well, good. I am definitely glad to 
hear that.
    One of your statements caught my ear, and did Mr. North as 
well, and that is that current markets will not support the 
investment amounts that are provided for in these regulations. 
And yet for a program that for most of its existence never hit 
the 10,000 green card cap until just 3 years ago when it 
suddenly mushroomed into not just hitting the cap, but now 
having a 7- or 8-year waiting list, meaning that there is a 
backlog of 70,000 to 80,000 green cards that are committed for 
and in demand right now, this disturbs me for a couple of 
reasons.
    First of all, I think, like Mr. Sensenbrenner, it makes it 
very clear that this program can justify much higher payments 
for green cards than investments for green cards, if you will, 
than is currently provided for. But secondly, it bothers me 
that this program has been sold like that to people primarily 
in China, who I don't think have a clue that this program isn't 
even authorized beyond April of this year. There is no 
authorization whatsoever for any green card beyond the 
expiration of the current continuing resolution in April. And 
yet this industry, if you will, is busy selling green cards in 
China to people who, you know, I don't think even have any idea 
that if the program were allowed to expire in April, would have 
nothing except for a 70,000 to 80,000 green card backlog.
    What would happen if that were to occur? And how--what can 
you tell me about how the people who promote this program in 
places like China make full disclosure to these people who are 
making these investments?
    Ms. Brunner. I can tell you how my company makes full 
disclosure. We make sure that all of our investors are aware of 
the pending expiration or the pending reform of the program, is 
what we are hopeful for.
    Chairman Goodlatte. But you still think it is appropriate 
to have them go ahead and make investments without the 
knowledge that the program is even going to continue?
    Ms. Brunner. No, they do not make investments without that 
knowledge. That is not a true statement for our investors. They 
are all aware of the April 28 deadline for Congress and for the 
industry. And the market has slowed significantly. It slowed 
because of the expiration and it slowed because of the 
significant backlog.
    I would like to address one of your earlier comments in 
your statement about the increase demand that we have seen 
recently. So we are all well aware here that demand really 
started in 2008. I would argue that that is when the price 
matched the demand, which allowed the supply of the visas to be 
utilized. So it wasn't until 2008 that $500,000 was actually 
the right price for the market demand.
    Now, it seems that $500,000 is a bit low for the market 
demand, and that it would be better served with an increase in 
the price. We support that. I support that as a company and as 
a stakeholder in the industry. What I support, though, is a 
single investment amount that would drive more investment to 
distressed areas in a set-aside program instead of forcing them 
into a reduced investment amount below what the higher 
qualified areas could receive.
    Chairman Goodlatte. I am way over my time here. I just want 
to make one more point. I agree with your assessment that a lot 
of this got started following the financial crisis in 2008, 
because there was a severe shortage of capital at the time and 
this became attractive, but it didn't shoot through the roof 
until you get to about 2013 or 2014. That is the first time we 
ever hit the cap. And now, in the 3 years since then, when 
capital has been far more abundant and it has been noted far 
more capital flows into the United States for other reasons 
than this reason that we have this huge backlog, and now as we 
are trying to reform this program, we see tremendous resistance 
from people who don't want to see greater investments or who 
don't want to see the reforms take place until this entire 
investment backlog now 7 or 8 years is worked down. I find that 
intolerable given the problems the program has.
    I am now happy to yield to the gentleman from Michigan, Mr. 
Conyers, and I will be generous with his time as well.
    Mr. Conyers. Thank you, Mr. Chairman.
    Let me start with Ms. Mends-Cole. In your testimony, you 
mention that your organization works in areas experiencing 
economic distress. What kinds of EB-5 finance projects can be 
made in this area, in your view?
    Ms. Mends-Cole. There is a lot of opportunity for EB-5. And 
examples of existing projects that are on the pipeline are the 
Hardesty Federal Complex in Kansas City. It is an 18-acre 
brownfield site in which a nonprofit regional center is looking 
to secure capital. It is working with Northwest Missouri State 
University. And the purpose of this project is both the 
educational facility as well as addressing the needs of a food 
desert.
    Another example is the George Washington bus station 
restoration which is in a distressed census tract in upper 
Manhattan. This is a 15,000 square feet development and it is 
projected to create 250 jobs and has leveraged $5 million worth 
of tax credits.
    Mr. Conyers. Now, let me follow up on the idea, what kind 
of revitalizing impact could these projects have on distressed 
urban areas?
    Ms. Mends-Cole. Both examples in Hardesty Federal Complex 
and also in your home city of Detroit, Michigan, where Bedrock 
Ventures is looking at investing utilizing EB-5, specifically 
looks at vacant properties. Properties--for example, the 
Hardesty Federal Complex has been abandoned since 2002, and 
Bedrock's looking at some of the most distressed census tracts 
in neighborhoods in terms of the abandonment and vacancy in the 
country.
    Mr. Conyers. Good.
    Let me ask Mr. Sam Walls. We have heard testimony today 
from others in the EB-5 industry that targeted employment areas 
should take into account commuter patterns, that is whether 
those working in projects from distressed areas. What are your 
thoughts about this kind of an approach?
    Mr. Walls. I disagree. The problem with--I look at 
congressional intent. And if you look at congressional intent, 
clearly, it wasn't a function of we want to just create jobs 
and then people that live in those poor areas can commute to 
those good jobs in better areas of their cities or from rural 
communities into larger areas around them. Clearly, the 
congressional intent was looking for investment within those 
census tracts.
    We are an economic development entity so we have a saying 
around our shop; it is activity begets activity. And so, 
clearly, what the intent was to see investments physically--
actually end those census tracts and then the subsequent 
advantages that come with that investment. We do a lot with new 
market tax credits with one of our other entities. And it is 
the same thought process: Catalytic investment.
    And that is clearly what the TEA intent was. And so to 
modify that to say TEA now as if they can drive somewhere 
closely, I think is inconsistent with what the intent was to 
begin with.
    Mr. Conyers. Thank you.
    Ms. Brunner, you raise in your testimony concerns that EB-5 
program has to compete with about 40 other countries that also 
have investor programs, and that raising the U.S. investment 
threshold to over $1 million could make EB-5 noncompetitive. 
But that doesn't seem to be the case. For example, the United 
Kingdom offers temporary visas for investments of $2.5 million 
in effect. Australia has three programs requiring $5 million, 
$15 million, and $1.5--these are in Australian dollars--and 
$1.5 million in Australian dollars.
    Is there reason to believe that a U.S. investor program 
cannot compete with these other programs if the investment 
threshold is raised beyond $565,000 as you propose in your 
testimony?
    Ms. Brunner. The demand for the U.K. program and the 
Australian program in the markets that the U.S. is competitive 
in, primarily China, is much less than the demand for the U.S. 
program. To adjust the amount up, I think the market can 
accommodate some adjustment, but to approach those levels, I 
think you have to ask yourself, is this an economic development 
program or is it something else? If it is going to be an 
economic development program, then we want to maximize the 
demand at the right price threshold. That is a delicate--that 
is a delicate task that I think warrants continued 
conversation, and it certainly is worthy of our effort. But we 
have to strike that balance if we want to continue funding.
    For example, I funded food deserts; I have put 70,000 
square feet of retail back into commission in Washington, D.C. 
My pipeline includes the Greyhound bus station in Washington, 
D.C. I hope to put hundreds of millions of dollars into the 
State of Michigan, and I hope to start with the city of 
Detroit. All of these things are economic development for me. 
They won't be possible if we raise the investment amount too 
high.
    Mr. Conyers. Thank you so much.
    Mr. Chairman, I yield back.
    Mr. King [presiding]. The gentleman from Michigan yields 
back the balance of his time.
    I now recognize myself for 5 minutes. And I would turn 
first to Ms. Brunner. I think I heard Mr. North mention that he 
expects that the Chinese would come up with 1.35 million in 
lieu of the half million that we are discussing here. What is 
your estimation of how that might affect their investment in 
this country should that number be increased to 1.35?
    Ms. Brunner. Sure. Well, it is one of the reasons why I 
advocate for the elimination of TEAs. I do not want the market 
to have an option of a lower investment amount. I want to 
eliminate that option.
    Mr. King. And do you think if we raised it, then it would 
affect the flow of capital coming from China into the United 
States?
    Ms. Brunner. I think it will. In any supply and demand 
model you have three variables: You have the supply, you have 
the demand, and you have the price. The only thing that we can 
change is the supply of the visas. I understand that is not 
really--Congress really isn't inclined to do that, so the thing 
that we can change is price. There seems to be some agreement 
on that. So we need to figure out the right price to maintain 
this as an economic development program.
    Mr. King. In listening to Mr. Conyers, did you reflect that 
other countries are selling access to a path to citizenship at 
a much higher price than the United States is?
    Ms. Brunner. Well, no other country in the world uses it 
for economic development. We are the only country in the world 
with a job creation requirement.
    Mr. King. You heard the quotes from Mr. Conyers that it was 
substantially higher than half a million dollars, I think up to 
$2.5 million in one case. That is what I reflected.
    And so if we repeal EB-5, what does that do to the flow of 
capital into some of the investments that you are promoting?
    Ms. Brunner. It will stop it.
    Mr. King. And what would be the next source of capital for 
those investments?
    Ms. Brunner. Well, I have been in economic development in 
Washington, D.C. since 1999, and when I came here, the city was 
selling houses for $1. And I asked why and they said because of 
the riots. And I said, what riots? And they said the Martin 
Luther King riots. So I imagined the development would stop.
    Mr. King. I have a bit of a different estimate, but I 
appreciate your testimony.
    I turn to Ms. Gambler, and I just ask you this, when I 
think about some countries that are not emerging as our 
friends, China to a degree, Russia to an increasing degree, 
especially in the last couple of months, if you were Saudi 
investors and you wanted to infiltrate people who were 
sympathetic to the cause of some of the people who flew planes 
into the building, what method would you use to bring those 
folks into the United States?
    Ms. Gambler. Well, sir, I think there are a couple of 
comments in response to that. We do have some ongoing work 
right now looking at the vetting and background check process 
for individuals who are coming to the U.S. on visas. And we 
would be happy to come up and talk with you about that as well, 
about what that work is.
    With regard to the EB-5 program, we have identified through 
our work some concerns with fraud in the program. We have 
talked about that a little bit this morning. And that is why it 
is important, as it relates this program, for USCIS to do the 
fraud risk assessments that we have been calling for them to do 
to include identifying what the inherent risks are in the 
program.
    Mr. King. Let's just say you are a drug cartel in Mexico 
and you want to get some of your people into the United States. 
They are the masters at laundering money. And so to be able to 
trace that back to them, but the dollars and identify whether 
or not those people are affiliated, it seems to be to be a very 
difficult task. Second thing would be, from a national security 
standpoint, although I always hear vetting, better vetting, 
extreme vetting. But I am not one who is convinced we can 
actually vet people when their children become radicalized. And 
so I will submit that if you are strategizing against the 
interest of the United States and you want your people into 
America and you had money and you wanted a return on that 
investment, you would look at the EB-5 program as the perfect 
tool for access into the American society and, by the way, to 
be able to maneuver and operate throughout the business circles 
in the United States.
    I was on a plane not that long ago, a man sat next to me 
and I ask him what he did. We had that little conversation. He 
was putting together an EB-5 hotel, a $30 million hotel that 
had 60 Chinese investors. And I wonder, would that hotel be 
built if it weren't for EB-5. But I am going to turn to Mr. 
North with that question, would that hotel be built if it 
weren't for EB-5?
    Mr. North. In many cases, the EB-5 program is an income 
transfer program from rich Chinese to rich Americans. What 
happens is there is something called mezzanine financing, which 
is the financing that goes into real estate developments where 
you do not have either ownership or a mortgage, and so it is 
kind of risky. And mezzanine financing typically produces--
again I am not an economist, I don't do this sort of thing--but 
produces a fairly substantial interest rate because there is no 
guarantees.
    However, if you bring in EB-5 money, not looking for 
guarantees particularly, they can get their mezzanine financing 
for about 1 percent. So there is--I am sure there are hotels 
that would not have been--or projects that would not have 
happened without the EB-5. In most cases, it is just simply a 
question of making it easier and more profitable for the U.S. 
developers.
    Mr. King. Does anybody on the panel know how much U.S. 
capital is stranded overseas because of our current tax policy? 
That number would be in the trillions. Does anybody have that 
number?
    Mr. North. It is a big number, but it is--I think it is 
beyond my expertise.
    Mr. King. I would submit that repatriating U.S. capital 
would be a far better thing to do than to open our doors up for 
these kind of nefarious activities that appear to me to be 
taking place.
    I thank you, all the witnesses, and I yield back the 
balance of my time.
    I now recognize the gentlelady from California, Ms. 
Lofgren.
    Ms. Lofgren. Thank you, Mr. Chairman.
    I don't know if anyone can answer this question, but this 
is obviously something that is program of interest both to the 
Congress but also to the executive branch. In the newspapers it 
has been reported that a key adviser to President Trump, his 
son-in-law, Jared Kushner, has used the EB-5 program to build 
hotels and other investments in New York City. Is that true? 
And if that is true, I wonder whether we might ask the 
administration to take steps to guard against being influenced 
by the financial benefit to that key adviser.
    Mr. North. If I may, I sense that the Kushner family has 
heavily invested with EB-5 money in Jersey City, which is right 
across the river from midtown Manhattan. I do not know if there 
are--and the enterprise is a Trump center--Trump Plaza, excuse 
me--I do not know whether there are any EB-5 projects in New 
York City that are funded for the Trump family from EB-5. I 
don't know about that, but there is one right across the River.
    Ms. Lofgren. Does anyone else know about this? Perhaps it 
is unfair, you wouldn't necessarily know. But I think some 
research ought to be done on that, Mr. Chairman, to make sure 
that we are getting unbiased participation by the executive.
    Just a word on the investment level. I come from Silicon 
Valley where recently a double wide was put up--double-wide 
trailer was put up for sale for almost $400,000. So a $500,000 
investment seems incredible. You know, this has got to be 
updated. In looking at the investments required by other 
countries, I think a substantial increase is required. I will 
just put that out there.
    One of the questions I have is whether, in addition to 
looking at the dollar amount, whether we ought to--and the 
gerrymandering, whether we ought to look at the nature of the 
investments themselves. You know, recently, somebody who is 
doing a project said that the funding through EB-5 was being 
used for the basic infrastructure. Well, you can't get a bank 
loan to do the sewers and the infrastructure that then allows 
development on top of that. Would it make sense for us to 
direct these funds to something that then creates a platform 
for investment from other sources to be successful? Does 
anybody have a thought on that?
    Apparently not. But at a later date, I mean, I think that 
that is--we ought to take a look at what promotes development 
and growth and job structure best. And right now, this is 
primarily used as funding for hotel construction. I am 
certainly not against hotel construction if it makes sense, but 
that is certainly not the only economic need, and some might 
argue, not the most important economic need in the United 
States.
    You know, I was wondering, Mr. North, you mentioned the 
reform that was necessary. I am thinking about, if we do a 
reform package, when that reform should be put into place. 
There is a backlog I think of nearly--well, it is over 20,000 
petitions, and some have argued that the--whatever reform that 
we do, assuming we get there, should be instituted only after 
the backlog is cleared. Others have said if you do that, we 
might as well not do the reform, because there is such a 
backlog in hand.
    I am wondering if anybody has an observation on the timing 
of reform question.
    Mr. North. I do. I think that to postpone it until all the 
backlog is used is kicking the can down the road squared, and I 
don't think it should be done that way. There may be a problem 
about changing the dollar value. I don't think you can change 
the dollar value of the minimum investment retroactively, but I 
think you certainly can immediately----
    Ms. Lofgren. Well, I think certainly you can. I don't think 
the people have a vested actionable interest in a law that 
could be changed by the Congress.
    Mr. North. But I think that the administrative reforms that 
I have been suggesting and also the TEA reform should be done 
right away.
    Ms. Lofgren. I know my time is close to running out. Ms. 
Gambler, you had important testimony last year about the 
immigrant investors who were vulnerable to fraud schemes. And I 
am wondering, in addition to all of the investor alerts that 
were done, what further steps USCIS should take to protect 
innocent investors from being defrauded.
    Ms. Gambler. There are a couple of key issues there, 
Congresswoman. One, as I mentioned, they have made progress on 
doing fraud risk assessments identified the inherent risks in 
the program. They need to continue to do that. I think they 
also need to continue to look at the fraud prevention and 
assessment tools that they do have, including things like 
random site visits to some of these projects, doing interviews 
and proving the data and information they are collecting from 
investors and regional centers. So they have made some progress 
in these areas, but there is additional work they could do.
    Ms. Lofgren. Just one final question. It is--some have 
suggested that the middlemen that are essentially charging very 
high fees to investors outside the United States for kind of 
act as the broker have not really been scrutinized adequately 
by our government. Do you have insight into that allegation?
    Ms. Gambler. That is part of some of the unique fraud risks 
that our report from 2015 identified. And we would say that is 
part of assessing the risk in the program. That could be one of 
the inherent risks that should be looked at.
    Ms. Lofgren. Okay. My time has expired, Mr. Chairman. Thank 
you very much.
    Mr. King [presiding]. The gentlelady's time has expired.
    The chair now recognizes the gentleman from California, Mr. 
Issa.
    Mr. Issa. Thank you, Mr. Chairman.
    Mr. North. Senator Feinstein has called EB-5 selling 
citizenship. Some might say renting for citizenship. But is 
there any reason to say that if this is a good program, we 
should cap it at 10,000? If we're going to sell citizenship and 
earn $1.5 billion a year of loaned money for a total of about 
$7.5 billion in investment, in this $18 trillion, $19 trillion 
economy, we have 1.2 million people who receive green cards, 
why not sell them all? Why not make it 100,000 and be getting 
$15 billion a year if it is a good thing? So the question is 
are we selling citizenship?
    Mr. North. Well, first of all, to be narrow, we are selling 
green cards rather than citizenship.
    Mr. Issa. Yes. Green cards lead to the ability to have 
citizenship.
    Mr. North. I understand that.
    Mr. Issa. So we are selling the ability to permanently be 
here. Maybe I will phrase it to you another way. Why is it we 
see sell for a temporary loan, a temporary investment, a 
permanent right to be here? Why wouldn't we have temporary 
visas for temporary investment?
    Mr. North. I don't think renting or selling visas is a good 
idea. I think it is amoral; if not immoral. I would be opposed 
to it, but--and that is our basic position.
    Mr. Issa. Okay. Well, it is not my basic position, but I 
could get there if we can't reform it.
    Mr. Walls, regional centers by definition, by testimony, 
essentially get--are part of giving us, whether gerrymandered 
or not, virtually 100 percent of the investments are made at 
500,000 per investor. That is right. So if we assume for a 
moment under current rules--we will forget about whether they 
are gerrymandered or not--that all the investment is going to 
underserved areas, why wouldn't we simply eliminate any 
investment except in underserved areas? In other words, since 
desirable areas shouldn't have a problem getting money, and I 
would say that Beverly Hills is pretty desirable, but assuming 
that we are only talking undesirable, for such a small program 
that is so oversubscribed, why wouldn't we go to 1.8 or 2 
million per investment and have them only in underserved areas? 
Why would we have two tiers at all? Why wouldn't we just 
mandate that the only way you get in and get what Mr. Walls, 
Mr. North and I might consider to be selling residency, why 
wouldn't we require that you invest in underserved areas?
    Mr. Walls. Well, I think there are two questions there. 
One, you know, what is the dollar amount? And I actually agree 
with the industry and Ms. Brunner that, you know, I think there 
needs to be additional conversation as to what the true market 
for what we should charge, though. So setting that aside.
    Mr. Issa. But you know the true market is a lot higher than 
what we are currently charging?
    Mr. Walls. Absolutely.
    Mr. Issa. The oversubscription tells us that.
    Mr. Walls. We agree to that. We agree. It is just what that 
number is.
    As far as--again, you go to congressional, what do you want 
this program to do? Clearly, it appears to me that the intent 
was to--you know, this two tiered of, hey, if it is a good 
project and creates jobs regardless where it is, we are 
prepared to accept that, but, you know, there is less risk 
there, real or perceived. And we as a country are prepared to 
put a certain amount, a dollar amount. But if you want to--we 
want to encourage economic development in these areas, we will 
give it a break and try to mitigate that risk.
    Mr. Issa. What is interesting is I have looked at the 
history of it, and, of course, two things that were assumed: 
One is that the investors and the entrepreneurs would come 
together, that somehow there would be a connection. But in 
fact, in almost every case, the investor--the green card holder 
goes one place and the money goes another, and there is no 
participation almost always. So we failed in that presumption.
    We also set aside about 3,000 of 10,000 slots for 
underserved. That was to assume that it would still be hard to 
get them into underserved.
    Mr. Walls. Right.
    Mr. Issa. So if eventually we live up to what Senator 
Grassley and the chairman had been working on so long and hard 
with members on the other side also, maybe what we need is a 
set-aside without a discount, because ultimately, then you 
would get that amount in underserved areas and you could be 
stringent about it, but you wouldn't necessarily be selling 
anything for less, because right now, the incentive has been 
get to the lower price. But the incentive does not seem to be 
get to the true underserved area.
    Ms. Brunner, you are shaking your head in a way that I 
really want to know your answer.
    Ms. Brunner. Well, thank you, Congressman. I am extremely 
in favor of a single price because I don't think that it is 
fair that if you are designated a set-aside area, distressed 
area, or rural area, that means then that you have to 
compromise and receive less capital.
    Mr. Issa. The----
    Mr. Walls. If I may answer the question as well.
    Mr. Issa. Go ahead.
    Mr. Walls. I just--respectfully, if you are going to 
drive--again, the intent behind it was those underserved areas 
have challenges. Congress deals with those challenges in a 
number--new market tax credits; USDA guarantees; in my area, 
Delta Regional Authority. Saying there is one tier, and the 
set---aside is a short-term answer to that, but involvement in 
the market, without a true meaningful difference in that, you 
are not going to ultimately accomplish what you say----
    Mr. Issa. Let me just ask a closing question for the entire 
panel, with your indulgence, Chairman. Is it fair to say that 
if we were doing an overall today, and if we set the price 
where we knew 10,000 slots, and all 10,000 would be sold, 
whatever that price is, is if fair to say that we look at 
original intent and the best and the highest use for this 
investment, that really all of it should go to underserved 
areas? Whatever that definition is. We don't think it is 
Manhattan or Beverly Hills, but just a general yes, would you 
say if we were starting over from scratch and assuming we are 
not killing the program, we are setting at a price at some 
level, and because so many agree to a single rate, isn't the 
best part of what this program could do is get investment where 
it otherwise wouldn't go, which is underserved areas? Please, 
if I could get a yes or no from each of you.
    Mr. North. I would say yes. Yes.
    Ms. Mends-Cole. I would also say yes.
    Ms. Brunner. I would say yes, but the goal is to create the 
highest wage living--living wage jobs.
    Mr. Issa. Good point.
    Mr. Walls. Yes.
    Ms. Gambler. Yes.
    Mr. Issa. Thank you. I will quit on yes.
    Mr. King. The gentleman's time has expired.
    And the chair now recognizes the gentlelady from Texas, Ms. 
Jackson Lee.
    Ms. Jackson Lee. First, I would like to thank the witnesses 
for I think a very thoughtful discussion. And I believe that 
there is value to the EB-5, but let me be very clear. As we 
have listened to some of the reforms, I just wonder why we sell 
ourselves so cheap, putting aside present governmental 
challenges. This is a great country to come to, a great country 
to invest in. And from recent international trips, one that 
many people are eager to come to.
    So let me ask Ms. Brunner the first question. And let me 
thank you for your work and Ms. Mends-Cole's work. What is the 
amount that you would think would be viable? And you are 
supporting the one tier as opposed to--and that would be how 
much?
    Ms. Brunner. I am going to have to lean heavily on my 
Princeton economics background on this.
    Mr. Issa. Go Tigers.
    Ms. Brunner. Go Tigers.
    I would have to say that that can be modeled, and I would 
look to the GAO's work and I would look to the committee's work 
that we should be able to actually mathematically find that 
price. And that is the price that I would support. I agree that 
it is above $500,000. I believe, from my experience in the 
market, with almost a 1,000 investors, that that amount is less 
than $1 million.
    Ms. Jackson Lee. So I would probably--and I appreciate both 
the cautiousness, but also the intellectual assessment which is 
that you look at the economic modeling. But I would immediately 
go to $1 million to $2 million. And I think we are, in essence, 
undermining the competition here in the United States. We are 
undermining the viability of projects, if we would be at that 
level. I don't even know we can do it with $500,000. I guess it 
is used as a leverage, or $750,000.
    So I would argue against modeling--well, I wouldn't argue 
against modeling, but I would argue against anything below $1 
million, and I would argue for $2 million. But I think the EB-5 
program has a great deal of merit, but let me ask--and so thank 
you.
    Let me ask Ms. Gambler, if I could, to indicate in your 
review, in your reform--or in your suggested reform or reforms, 
does the regional centers go away?
    Ms. Gambler. So it is not our proposed reform----
    Ms. Jackson Lee. DHS.
    Ms. Gambler. I am with GAO. I am so sorry.
    Ms. Jackson Lee. I understand. Does DHS go away? Does the 
regional centers go away?
    Ms. Gambler. Under DHS's current proposals and the 
regulation, no, there is no proposal to eliminate the regional 
centers.
    Ms. Jackson Lee. And what is your assessment of the 
regional centers?
    Ms. Gambler. Based on the work that we have done, I think 
there are some questions about them, particularly as it relates 
to EB-5 investors being able to take credit for all of the jobs 
created by the total investment in projects that are funded 
through regional centers and other projects as well. So I think 
there are some open questions that stakeholders and Congress 
has raised about the program.
    Ms. Jackson Lee. And do see the reforms helping with the 
gerrymandering aspect so that you don't draw in Beverly Hills 
along with maybe one or two blocks that are distressed?
    Ms. Gambler. The proposed rulemaking on the TEA seems to be 
a reasonable step forward to addressing some of the concerns 
that have been raised by the TEAs. And I think USCIS seeking 
comments from the public and from stakeholders and industry 
will be helpful to inform that rulemaking process as well, 
including asking for feedback and input on the potential 
effects of changes to the TEAs.
    Ms. Jackson Lee. And let me give three questions and then 
you all can answer them. To you, Ms. Gambler, what about the 
ability of the Immigration Services to vet the whole project 
and economic aspect of it; in your review, what did you see in 
that?
    Let me ask questions to Mr. Walls. How do you respond to 
arguments that the current system operates as a one-tier level 
investment?
    And then to Ms. Mends-Cole, the cited projects that you had 
in distressed areas, if these projects are already happening, 
why do you think the program needs reform?
    So, Ms. Gambler, on the review by the Immigration Services, 
do they have the wherewithal to do so? Should we set up a 
certain--another entity to do that?
    Ms. Gambler. So I don't know for certain that they would 
have the staff with the right skills and abilities. But what I 
would say is, in the past, both we and the DHS IG have reported 
in other areas related to the EB-5 program on the need for 
USCIS to increase staff in both numbers and skills. And USCIS 
has been taking steps to do that over the course of the past 
few years.
    Ms. Jackson Lee. Mr. Walls.
    Mr. Walls. I agree that it has been operating as a one-tier 
investment system, but it was contrary to the intent of 
congressional intent. It was intended to be a two tier. It just 
has operated a one tier because of misuse of the TEA 
designation.
    Ms. Jackson Lee. And Ms. Mends-Cole.
    Ms. Mends-Cole. These projects have largely been happening 
not because of but despite of the current status quo. I believe 
that a reform would allow for greater geographic distribution 
both at a national level, but also within a State level. So 
some of the projects that were discussed are largely heavily in 
New York, upstate New York. Places like Utica that desperately 
need these dollars have been overlooked because of the 
attraction for at-risk capital to very low risk investments.
    Ms. Jackson Lee. Thank you.
    Mr. Chairman, I would just like to conclude by saying I 
think it is very important that this committee looks to 
improving distressed areas and creating jobs in all areas, both 
urban and rural, and I hope we can do this together. With that, 
I yield back.
    Mr. King. The chair thanks the gentlelady from Texas.
    And now recognizes the gentleman from Idaho, Mr. Labrador.
    Mr. Labrador. Thank you, Mr. Chairman. And thank you to all 
the witnesses for being here today.
    As you know, Senator Grassley testified that the original 
intent of the investor visa program was to create new 
employment for American workers and infuse capital into 
distressed or rural areas.
    Ms. Gambler, is the program accomplishing those goals?
    Ms. Gambler. Based on the sample of files that we looked at 
for the report we issued to this committee last year, we found 
that the majority of projects within our sample were going to 
areas or were located in census tracts, census areas that had 
unemployment rates of 6 percent or less. So the majority of 
projects in the sample we looked at, they were located in areas 
that had an unemployment rate of 6 percent or less.
    Mr. Labrador. Okay. Mr. Walls, in the past I have expressed 
concerns about how gerrymandered districts have led to so many 
urban projects in low unemployment areas, while the rural 
communities and the true high end unemployment urban centers 
have been largely forgotten. Do you think the proposed 
regulatory changes stopped the gerrymandering that has been 
occurring?
    Mr. Walls. Yes. Sorry, the microphone comes in and out.
    Mr. Labrador. That is okay.
    Mr. Walls. Yes. As proposed, it does address the 
gerrymandering issue.
    Mr. Labrador. Okay. Mr. North, same question. Are the 
proposed changes to the TEA definition sufficient to end the 
gerrymandering that has been occurring in the program?
    Mr. North. I think it helps. I would rather do it the way 
the--some of you may recall in this room--the Appalachian 
regional development commission was done. You would have to put 
your investment in a previously defined depressed county, which 
was the minority of the United States, the minority of the 
geography of the United States. If you do it that way, then 
Congress has some control over it. Otherwise, various creative 
people do as they are currently doing, and I don't like that.
    Mr. Labrador. Okay. Mr. Walls, my State Idaho like Arkansas 
is a rural State and I am concerned about the lack of 
investment going to those areas. Will the proposed changes lead 
to more investment in those areas?
    Mr. Walls. Well, I think, again, our motivation is the 
changes are a step towards that. We agree with--ultimately, 
legislation is the best answer for this thing. This is a step 
towards it as an incentive to--in the markets that we are 
having to go to for these investors for them to, I think, more 
realistically or more honestly or openly want to look at 
investments in those areas outside the gateway cities in the 
major States.
    Mr. Labrador. So you mention it needs to be done through 
legislation, and we have been working on legislation to improve 
the program. What more can be done to ensure that these rural 
and true high unemployment areas are able to attract investors?
    Mr. Walls. I think I mentioned in my statement, I think our 
concern has been there had a been a small group that--again, 
sorry, the microphone goes in and out--have a vested interest 
in the status quo. And, you know, when you talk about market, 
you are talking about--there is two markets you are talking 
about: There is the 10,000 visa market. And right now that is 
oversubscribed, that has been mentioned. And I think the issues 
that we are all concerned about is what pricing and how does 
that effect the overall market.
    But you also have, certain parties, they are looking at the 
market is defined as the market that they have enjoyed for the 
history of the program. We understand that to be over 90 
percent of investors are going a very select market, or very 
affluent, nondistressed area. And so invariably, whatever 
reforms happen, it is going to affect that market, and they 
certainly are vested to keep that from happening. We as a rural 
State admittedly would like to see more of that dispersed in 
other areas of the country, like Arkansas and Idaho.
    Mr. Labrador. Okay. Thank you.
    Mr. North, if we are going--so let's assume we are going to 
continue the investor program, and I understand you don't want 
to continue it, but if we do, what other changes would you 
recommend to actually accomplish the goal of attracting capital 
to rural and high unemployment areas?
    Mr. North. I would change the definition of where the money 
should be spent. And I am not happy with the thought that 
developers are going to figure this out and create, you know, 
their own maps as they have done. So I would make it a 
different definition, and I would make it--I would try to get 
something that would really push investment into rural and 
genuinely distressed areas, such as downtown Detroit.
    Mr. Labrador. Okay. Ms. Brunner, you stated that both the 
proposed increasing investment amounts and the proposed changes 
to the definitions will have a negative impact on your ability 
to attract investors. Is it the combination of both changes 
that will impact investment or is the one change more likely 
than the other to have the negative impact?
    Ms. Brunner. They will a work in concert, Congressman. The 
increased numbers don't seem to--well, they are tied to a CPI 
calculation going back to 1990. They don't seem to be tied to a 
supply-and-demand model where you would try and figure out at 
what price can you achieve the same demand, which is the 
question I would like this committee to ask and get answered. 
So that is a very serious concern. That will impact demand.
    The second thing that will impact demand is the ability of 
projects to qualify. The arbitrary and capricious nature of the 
TEA--of the existing TEA definition and the proposed TEA 
definition do a disservice to the program. At minimum, I would 
invite the committee to explore what other definitions are used 
within the Federal Government. And in the absence of that, our 
preference is that you eliminate the TEA, allow identical 
investments in distressed and rural areas and other areas, 
create set-aside programs that properly incent the investors.
    The only variable that investors seem to care about right 
now is time. And so what I would invite the committee to do is 
to explore what they can do to manipulate the time factor for 
investors. If you manipulate that factor, you can drive 
investment anywhere you want it to go.
    Mr. Labrador. Okay. Thank you, I yield back.
    Mr. King. The gentleman from Idaho yields back his time.
    And the chair would now recognize the gentleman from New 
York, Mr. Nadler.
    Mr. Nadler. Thank you, Mr. Chairman.
    Mr. Chairman, in less than 2 months in office, President 
Trump has issued two unconstitutional and immoral executive 
orders attempting to enact the Muslim and refugee ban, is 
reportedly considering ordering women separated from their 
children, has threatened to punish so-called sanctuary cities 
even though doing so will likely make those communities less 
safe, and has embarked on building an unnecessary and fiscally 
irresponsible wall across the southern border. In short, he has 
fundamentally reoriented our immigration policy toward one of 
exclusion based on fear and ignorance rather than adhering to 
our historic commitment of being a place of refuge based on the 
belief we are stronger as a nation because of those who come to 
our shores.
    In light of this radical departure in Federal policy, it 
seems a bit incongruous for our first immigration hearing since 
the Trump administration began to be focused on the EB-5 
investor visa program, a useful but relatively minor program 
that offers visas in exchange for significant economic 
investment in the United States.
    I hope we will soon conduct oversight into President 
Trump's cruel and shortsighted immigration policies. In the 
meantime, since we have the opportunity to consider the EB-5 
program today, I want to ask a few questions about that 
program.
    Now, Ms. Brunner, some critics of the EB-5 program argue 
that certain regional centers are in effect gerrymandering 
census tracts in order to create targeted employment areas and 
take advantage of the lower investment criteria for TEAs. Do 
you believe that the proposed regulations and other proposed 
reforms account for the unique circumstances of major urban 
centers where a census tract may only consist of a block or 
two?
    Ms. Brunner. No, I do not, Congressman.
    Mr. Nadler. Could you elaborate?
    Ms. Brunner. Sure. Urban areas--first of all, census tracts 
are designated by density of population. So, in a rural area, 
you may have a single census tract in Wyoming or another rural 
State that covers 20-plus miles, single census tract. In an 
urban area, you may have a census tract that covers maybe four, 
six blocks.
    Mr. Nadler. In my area, you have a census tract that covers 
half a block.
    Ms. Brunner. There you go. Exactly. Exactly to my point. 
So, when you use census tracts as a basis of designation, 
either it be 12 in California or the doughnut approach that is 
used in the current proposed regulations, you completely ignore 
any principle of economic development. It is completely 
unrelated, actually, to the purpose of the TEA designation, 
which is to determine unemployment. You really have to look at 
the area in a whole different light.
    Now, the Federal Government does an excellent job of that. 
There has been a lot of thought through a number of agencies, 
USDA, HUD, a number of agencies, not to mention the State-level 
work that is done on--that has been done on enterprise zones in 
the past or the current designations or the rural designations 
that exist.
    I would invite the committee to not reinvent the wheel and 
either lean on the work that has already been done so 
diligently by other agencies in the Federal Government or to 
eliminate the conversation.
    As much as the conversation of TEA designation and 
gerrymandering has hijacked this committee and the entire 
reform conversation, I think the most responsible thing we can 
do is to eliminate the conversation and eliminate TEAs.
    Mr. Nadler. What do you mean by ``eliminate the 
conversation''?
    Ms. Brunner. We need to go to a single investment tier, and 
we need to use set-asides.
    Mr. Nadler. And let me just elaborate for a moment. Also, 
if the purpose of this is to generate employment in under--in 
low-income areas, basically, in high-unemployment areas, not 
only do you have the distortion here where a census tract can 
be half a block or a block or two, but does it also ignore the 
fact that, in an area like an urban area, like in New York, you 
may have Hudson Yard, very upscale development, half a mile 
away from a very depressed neighborhood where the workers live?
    Ms. Brunner. Well, I am actually in favor of commuting 
patterns because I think that they demonstrate the actual 
reality of economic development in the United States, that 
people--the variable that Bureau of Labor Statistics and a 
number of other Federal agencies use is, what is the commute 
that people would endure to go to work? That is why high 
speed----
    Mr. Nadler. What I am saying is that, if you are looking, 
you are saying, as the chairman implied when he was reading 
that ad--that ad from that development, Hudson Yards, he was 
implying that this is a very rich area; you are not going to 
help low-income people, unemployed people. But that area, that 
high-end development area, is half a mile from Harlem and less 
than a mile from the South Bronx, which are very depressed, 
low-income areas where workers live.
    Ms. Brunner. That is right.
    Mr. Nadler. In other words, by looking at this and not 
taking that into account, you are distorting the reality of the 
effect of the economic development here, which is to help, 
arguably, to help low-income workers who live nearby, albeit in 
a different census tract and, therefore, to gerrymander the 
census tracts to--not to master reality but to show the reality 
that the low-income workers are living--who are being aided are 
living near the development, that is not wrong.
    Ms. Brunner. That is correct.
    Mr. Nadler. You agree with that?
    Ms. Brunner. I do.
    Mr. Nadler. Okay. I see that my time has expired.
    I yield back, thank you.
    Mr. King. I thank the gentleman from New York.
    Now I recognize the gentleman from Texas, Mr. Gohmert.
    Mr. Gohmert. Thank you, Mr. Chair.
    I appreciate the witnesses being here today.
    Director Gambler, I understood you had commented about the 
vetting that occurs with those who want to invest in this EB-5 
program. What kind of vetting goes on?
    Ms. Gambler. So, as part of our work, Congressman, we did 
not get into a lot of details on the background check process. 
However, sir, I would be happy to get some followup information 
and get back to you and your office with much more detail.
    Mr. Gohmert. Well, obviously, from the comments here, the 
focus is in the EB-5 program, you know, getting financial 
investments in the United States. And that seems to be the 
focus of the State Department as well. Much more important that 
we get the price we have named for prostituting our own visas 
than it is to figure out whether these people are going to be 
good, moral, upstanding folks here in the United States. And 
although a colleague may call two executive orders 
unconstitutional and immoral, it doesn't make them so any more 
than the Supreme Court saying the Dred Scott decision was 
constitutional. It was constitutional. Calling it so one way or 
another does not make it so. And there is nothing immoral about 
a President trying to protect people.
    It really is astounding. As I sit and listen--I was 
listening in the back as well. I mean, it really is like that 
story, you know, we are just haggling over price. We have 
established what you are. The United States is willing to sell 
its soul. How much are we going to get for the price of selling 
our souls?
    I wasn't even aware of the EB-5 program until my sheriff 
let us know.
    But here is part of the story: A former Mexican Government 
official wanted for embezzling millions was arrested in Texas 
this month, then promptly ordered released by the State 
Department. A day after pulling rank on Smith County law 
enforcement officials, the State Department rescinded the 
order, but Hector Hernandez Javier Villarreal was gone by then. 
Villarreal, the former Secretary Executive of the Tax 
Administration Service of Coahuila, Mexico, was arrested on 
charges in Mexico relating to an alleged scheme involving 
embezzling millions of dollars from the Mexican Government. He 
posted a $1 million cash bond, then got himself a U.S. visa and 
skipped town. Villarreal surfaced in Tyler, Texas, when he, his 
wife, Maria Botello, and another man were pulled over for a 
routine stop. ``All we did was make a traffic stop; they didn't 
have a front license plate,'' Smith County sheriff, J.B. Smith 
told FOX News. Police were given permission to search the 
vehicle. They found $67,000 in cash and a shotgun. Anyway, he 
said Homeland Security officials had told his department 
Villarreal was a high-profile and wanted fugitive. ``We placed 
them in jail on money-laundering charges, seized the vehicle 
and the money; ICE came, picked him up from our jail, took him 
to Dallas, and that is the last we have seen.'' Villarreal and 
Botello posted bond on February 6, were released in the custody 
of Homeland Security Immigration and Customs. They were taken 
to a Dallas detention center for deportation. That is when 
State Department intervened. Homeland Security officials called 
to tell him the Federal diplomatic agency had ordered 
Villarreal and his wife released.
    And so, anyway, I don't know that they have ever been 
found, but it seemed pretty clear the focus was getting the 
money. And, once again, like has been talked about, this guy 
offered 500,000 to invest, and he got a visa very immediately. 
And what comes to mind is, how many people in the world have 
massive amount of money that was obtained from immoral or 
illegal purposes, and we in America seem to say, ``we don't 
care how you obtained your money; you could have swindled it 
from the Mexican people, but we want you in America if you will 
put some of that cash where we tell you to put it, and we won't 
even be that particular about where we tell you to put it''?
    So I am appalled at this program. You know, America has 
degenerated to the point that, you know, our soul is for sale, 
and now we have got to negotiate about how high of a price we 
want. Give us your tired, your energetic. We don't care. Give 
us your immoral, your degenerate. As long as they have got 
money, the message is we want them in America, and we will give 
them a visa to get their money. I think it is an immoral 
message to send to the world. It feeds the hatred that some 
have for America that we don't care about being moral and 
upright in America; we care about the all mighty dollar. I for 
one would like to see it stop.
    I yield back.
    Mr. King. The gentleman from Texas has yielded back.
    The chair now recognizes the gentleman from Louisiana, Mr. 
Johnson.
    Mr. Johnson of Louisiana. Thank you, Mr. Chairman.
    Director Gambler, this is a couple for you. We are all 
committed to rooting out fraud, waste, and abuse, and I thank 
you for your commitment to that and your important work on it, 
all of you, for helping on that.
    Just three quick questions on that topic. When the GAO was 
conducting its review to the proposed project investments in 
the targeted employment areas, was the information you were 
seeking easily accessible when you were trying to understand 
how the EB-5 recipients were actually investing this money?
    Ms. Gambler. We specifically looked at files that were 
submitted in the fourth quarter of fiscal year 2015. That was a 
sample that was readily available for our review. It did 
require us to go through paper files for the 200 sample files 
that we looked at.
    Mr. Johnson of Louisiana. So, of the sample files, did you 
find that it was clear and concise? I mean, it was easily 
understood where the money went and how they created jobs?
    Ms. Gambler. We were able to get the data for our review 
out of the files. I would add, though, that some of the files 
can be thousands of pages long. And one of the key challenges 
with the program that we have pointed out in our work is the 
lack of data being readily available in an electronic format 
that allows for the agency to do things like identify fraud 
risks, look at trends in the program, that kind of thing.
    Mr. Johnson of Louisiana. So is the need for additional 
information, or just is it a formatting issue to make it more 
readily accessible?
    Ms. Gambler. In part, it is having the information 
available in such a way that it can be searched and utilized 
more easily for the purposes of like risk assessment and other 
things. USCIS is working toward a case management system, and 
so they are making some progress there, and that is a good and 
important step.
    Mr. Johnson of Louisiana. So do we know when the case 
management system will be completed or released? Is there a 
target date for that?
    Ms. Gambler. USCIS, I believe, was hoping to get something 
underway this fiscal year. We would be happy to follow up with 
them and get back to your office if that time frame has 
changed.
    Mr. Johnson of Louisiana. I am just curious. I mean, we are 
all interested in increasing transparency, and the more that we 
can make it readily available and accessible, understandable 
for, you know, just taxpayers, the better, I think because we 
want to know, really, where all this money is going and how it 
is being spent, obviously.
    Is the completion of the case management system, is that 
a--do you think it is a funding issue, or is it just timing; it 
is on their things-to-do list?
    Ms. Gambler. At the point in time that we were doing our 
work last year, I think they were figuring out, kind of, what 
the parameters would be for that, what the requirements would 
be. So I think it is more just that they have to go through the 
process of determining what their requirements are and what 
type of system will meet their needs.
    Mr. Johnson of Louisiana. Have you given them feedback or 
ideas on what will make it easier for you when you went through 
this process?
    Ms. Gambler. Not specifically as it involves to a case 
management system related to the EB-5 program. But, more 
broadly, I think, as you are probably aware, USCIS relies on a 
paper-based process for adjudicating immigration benefit 
applications, and they are working through their transformation 
program to move to a more electronic system. And we have made a 
host of recommendations to the USCIS on that broader 
transformation effort designed to help them implement that 
program on a more effective basis.
    Mr. Johnson of Louisiana. All right. Thank you.
    I appreciate all of you being here.
    Thank you.
    Mr. King. The gentleman from Louisiana returns his time.
    And this concludes today's hearing. I want to thank all of 
our witnesses for your testimony here today and your response 
to all the questions of the panel.
    Without objection, all members will have 5 legislative days 
to submit additional written questions for the witnesses or 
additional materials for the record.
    This hearing is now adjourned.
```