On Aug 02 2013 by H. Ronald Klasko

What We Have Learned about EB-5 from the Mayorkas Investigation

The EB-5 Reform and Integrity Act of 2022 brought many changes to the EB-5 program. For the latest information, please click here.

USCIS Director Alejandro Mayorkas is President Obama’s nominee to be promoted to the position of Deputy Secretary of the Department of Homeland Security.  Many, including this writer, believe that he has performed in an exemplary manner as Director of USCIS and has been responsible for significant improvements in the EB-5 program.

With the divisions in Washington, perhaps it is not surprising that his nomination has proven to be very controversial.  The controversy is rooted deeply in Washington and Virginia politics.

Unbeknownst to Mr. Mayorkas, he and other USCIS management personnel have been the subject of a DHS Office of Inspector General investigation since September 2012.  Mr. Mayorkas testified at his confirmation hearing that he was unaware of this investigation until a day or two before his confirmation hearing.  Apparently, he had never been questioned by the Inspector General, who himself is the subject of a long-standing investigation.  Despite Mr. Mayorkas’ agreement to undergo questioning at the hearing regarding an investigation that he had just learned about, the Republican members of the Committee all boycotted the confirmation hearing rather than ask questions.

The focus of the controversy revolves around the Gulf Coast Funds Management Regional Center.  Anthony Rodham, Hillary Clinton’s brother, is a principal of the regional center.  Terry McAuliffe, former chairman of the Democratic National Committee and the Democratic nominee for governor of Virginia in a hotly contested race, was the principal in the regional center project, Greentech Automotive.  The allegation, which Director Mayorkas denies, is that he succumbed to pressure from McAuliffe to expedite approval of an application relating to that project.  According to Director Mayorkas, McAuliffe and the regional center complained for well over a year about USCIS inaction to no avail.  Ultimately, the petition was denied both by the California Service Center and by the Administrative Appeals Office.  Although it is not clear, it appears that, subsequent to the AAO denial, USCIS management personnel, including Director Mayorkas, met on a discrete legal issue raised in the application involving the issue of a guaranteed redemption under Matter of Izummi.  Mr. Mayorkas testified that the meeting resulted in a CIS policy on guaranteed redemptions that appeared in the May 30, 2013 Policy Memorandum.  This policy decision may have resulted in a reversal of the AAO denial. The controversial subject of guaranteed redemptions and the USCIS misinterpretations of the “at risk” requirement will be the subject of a future blog.

Based on my experience, the Director has scrupulously adhered to a policy of not discussing individual cases but only policy and legal issues.  As such, I expect that the investigation will lead to nothing that will derail his nomination.  Assuming he is confirmed, advocates for the EB-5 program will miss his leadership at USCIS.  However, he will still have oversight over EB-5 and USCIS as Deputy Secretary.

The confirmation hearing was of interest for a number of reasons.  Who could have imagined a few weeks ago that the questions at a confirmation hearing for a Deputy DHS Secretary would involve mostly EB-5?  Many of the questions revealed that the Senators – even on the Committee with oversight over USCIS – have no knowledge whatsoever of EB-5 or even what a regional center is.  This virtually begs for a concerted public relations effort explaining the virtues of the EB-5 program, which are easy to espouse.  It was also very eye-opening to watch a USCIS Director with in-depth knowledge of EB-5 explaining what an “extraordinarily complex” program it is.

In anticipation of the confirmation process, Senator Charles Grassley of Iowa, who has led the charge for years against Director Mayorkas, requested significant amounts of documentation from Director Mayorkas regarding various EB-5 projects and actions.  While the issues raised by Senator Grassley do not appear to raise any concerns, various emails have been released that provide some information that is of interest to the EB-5 community.  These include:

  • The Office of Inspector General has conducted an ongoing audit of the EB-5 program since August 2012.  This is apparently separate from the investigation of Director Mayorkas.  Supposedly the audit is in its final stages.
  • The FBI has also requested information on all EB-5 regional center investments.
  • The immigration enforcement agency, Immigration and Customs Enforcement, recommended sunsetting the regional center program, increasing the investment level, increasing the focus on direct jobs and requiring investors to have active involvement in the business.  There is no indication that the ICE recommendations have been given any credence.
  • Investors in regional center projects undergo various levels of national security and intelligence reviews even at the I-526 stage.  These reviews are not circumvented even in the rare event of the grant of an expedited request.

We will follow all of these developments closely and report as events warrant.  In the meantime, the Mayorkas confirmation process will continue to be mired in Washington politics, coupled with an investigation seeking a story.