United States Government Accountability Office

Report to Congressional Requesters

August 2015
IMMIGRANT
INVESTOR
PROGRAM

Additional Actions
Needed to Better
Assess Fraud Risks
and Report Economic
Benefits

GAO-15-696
 August 2015

IMMIGRANT INVESTOR PROGRAM

Additional Actions Needed to Better Assess Fraud
Risks and Report Economic Benefits
Highlights of GAO-15-696, a report to
congressional requesters

Why GAO Did This Study What GAO Found

Congress created the EB-5 visa The Department of Homeland Security’s (DHS) U.S. Citizenship and Immigration
category to promote job creation by Services (USCIS) administers the Employment-Based Fifth Preference
immigrant investors in exchange for Immigrant Investor Program (EB-5 Program) and collaborated with its
visas providing lawful permanent interagency partners to assess fraud and national security risks in the program in
residency. Participants are required to fiscal years 2012 and 2015. Unique fraud risks identified in the program included
invest $1 million in a business that is to uncertainties in verifying that the funds invested were obtained lawfully and
create at least 10 jobs—or $500,000 various investment-related schemes to defraud investors. These assessments
for businesses located in an area that were onetime efforts; however, USCIS officials noted that fraud risks in the EB-5
is rural or has experienced
Program are constantly evolving, and they continually identify new fraud
unemployment of at least 150 percent
schemes. USCIS does not have documented plans to conduct regular future risk
of the national average rate. Upon
meeting program requirements,
assessments, in accordance with fraud prevention practices, which could help
immigrant investors are eligible for inform efforts to identify and address evolving program risks.
conditional status to live and work in USCIS has taken steps to address the fraud risks it identified by enhancing its
the United States and can apply to fraud risk management efforts, including establishing a dedicated entity to
remove the conditions for lawful oversee these efforts. However, USCIS’s information systems and processes
permanent residency after 2 years. limit its ability to collect and use data on EB-5 Program participants to address
GAO was asked to review fraud risks fraud risks in the program. For example, USCIS does not consistently enter some
and economic benefits for the EB-5 information it collects on participants in its information systems, such as name
Program. This report examines USCIS and date of birth, a fact that presents barriers to conducting basic electronic
efforts under the EB-5 Program to (1) searches that could be analyzed for potential fraud, such as schemes to defraud
work with interagency partners to investors. USCIS plans to collect and maintain more complete data in its new
assess fraud and other related risks, information system; however, GAO reported in May 2015 that the new system is
(2) address any identified fraud risks, nearly 4 years delayed. In the meantime, USCIS does not have a strategy for
and (3) increase its capacity to verify collecting additional information, including some information on businesses
job creation and use a valid and supported by EB-5 Program investments, that officials noted could help mitigate
reliable methodology to report fraud, such as misrepresentation of new businesses. Given that information
economic benefits. GAO reviewed risk system improvements with the potential to expand USCIS’s fraud mitigation
assessments and processes to
efforts will not take effect until 2017 at the earliest and that gaps exist in USCIS’s
address fraud risks, verify job creation,
other information collection efforts, developing a strategy for collecting such
and report economic benefits.
information would better position USCIS to identify and mitigate potential fraud.
What GAO Recommends USCIS increased its capacity to verify job creation by increasing the size and
GAO recommends that, among other expertise of its workforce and providing clarifying guidance and training, among
things, USCIS conduct regular future other actions. However, USCIS’s methodology for reporting program outcomes
risk assessments, develop a strategy and overall economic benefits is not valid and reliable because it may understate
to expand information collection, and or overstate program benefits in certain instances as it is based on the minimum
analyze the data collected on program program requirements of 10 jobs and a $500,000 investment per investor instead
forms to reliably report on economic of the number of jobs and investment amounts collected by USCIS on individual
benefits. DHS concurred with our four EB-5 Program forms. For example, USCIS reported 4,500 jobs for 450 investors
recommendations. on one project using its methodology instead of 10,500 jobs reported on EB-5
Program forms for that project. Further, investment amounts are not adjusted for
investors who do not complete the program or invest $1 million instead of
View GAO-15-696. For more information, $500,000. USCIS officials said they are not statutorily required to develop a more
contact Rebecca Gambler at (202) 512-8777
or [email protected], or Seto Bagdoyan at comprehensive assessment. However, tracking and analyzing data on jobs and
(202) 512-6722 or [email protected]. investments reported on program forms would better position USCIS to more
reliably assess and report on the EB-5 Program economic benefits.

United States Government Accountability Office

Contents

Letter 1
Background 12
USCIS and Others Have Identified Unique Fraud Risks to the EB-
5 Program and Could Benefit from Planning and Conducting
Regular Future Risk Assessments 15
USCIS Has Taken Some Steps to Address Fraud Risks, but
Additional Controls Could Improve Fraud Prevention and
Detection 23
USCIS Has Increased Its Capacity for Verifying Job Creation but
Does Not Use a Valid and Reliable Methodology for Reporting
Program Outcomes and Economic Benefits 34
Conclusions 45
Recommendations for Executive Action 46
Agency Comments and our Evaluation 46

Appendix I Comments from the Department of Homeland Security 50

Appendix II GAO Contacts and Staff Acknowledgments 52

Figure
Figure 1: U.S. Citizenship and Immigration Services’ (USCIS)
Immigrant Investor Program Investor Petition and
Application Process 14

Page i GAO-15-696 Immigrant Investor Program

Abbreviations:

CLAIMS Computer Linked Application Information

Management System
Commerce Department of Commerce
DHS Department of Homeland Security
DOJ Department of Justice
EB-5 Employment-Based Fifth Preference
EB-5 Program Employment-Based Fifth Preference Immigrant
Investor Program
ESA Economics and Statistics Administration
FBI Federal Bureau of Investigation
FDNS Fraud Detection and National Security
FinCEN Financial Crimes Enforcement Network
green card lawful permanent residency
HSI Homeland Security Investigations
ICE U.S. Immigration and Customs Enforcement
iCLAIMS Intranet Computer Linked Application Information
Management System
IIUSA Association to Invest in USA
IMPLAN Impact Analysis for Planning
INA Immigration and Nationality Act
INS Immigration and Naturalization Service
IPO Immigrant Investor Program Office
OIG Office of Inspector General
OMB Office of Management and Budget
preference benefit employment-based immigrant visa category
REDYN Regional Dynamic Models
REMI Regional Economic Models, Inc.
RIMS II Regional Input-Output Modeling System
SEC U.S. Securities and Exchange Commission
State Department of State
USCIS U.S. Citizenship and Immigration Services
USCIS ELIS U.S. Citizenship and Immigration Services
Electronic Immigration System

Page ii GAO-15-696 Immigrant Investor Program

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Page iii GAO-15-696 Immigrant Investor Program

 Letter

441 G St. N.W.

Washington, DC 20548

August 12, 2015

Congressional Requesters

Congress created an additional employment-based immigrant visa

category (preference benefit) as part of the Immigration Act of 1990 to
promote job creation and encourage capital investment in the United
States by foreign investors in exchange for lawful permanent residency
(green card) and a path to citizenship. 1 This category, commonly referred
to as Employment-Based Fifth Preference (EB-5), is for employment
creation by qualified immigrants seeking to enter the United States to
engage in a new commercial enterprise. 2 Upon meeting certain EB-5
Immigrant Investor Program (EB-5 Program) requirements—including
investing $1 million (or $500,000 in targeted employment areas) in a new
commercial enterprise that will result in the creation of at least 10 full-time
jobs—immigrant investors and their eligible dependents are eligible to
receive 2-year conditional green cards to live and work in the United

1
Pub. L. No. 101-649, tit. I, subtit. B, pt. 2, § 121, 104 Stat. 4978, 4989-94 (codified as
amended at 8 U.S.C. §§ 1153(b)(5), 1186b). The accompanying report of the Senate
Judiciary Committee states that the EB-5 visa category “is intended to create new
employment for U.S. workers and to infuse new capital into the country.” See S. Rep. No.
101-55, at 21 (1989).
2
See 8 U.S.C. § 1153(b)(5)(A). A commercial enterprise is any for-profit activity formed for
the ongoing conduct of lawful business. Examples of a commercial enterprise include a
sole proprietorship, partnership (whether limited or general), holding company, joint
venture, corporation, business trust, or other entity that may be publicly or privately
owned. See 8 C.F.R. § 204.6(e). Pursuant to the 21st Century Department of Justice
Appropriations Authorization Act of 2002, the term “commercial enterprise” specifically
includes a limited partnership. See Pub. L. No. 107-273, div. C, tit. I, subtit. B, ch. 2, §
11036(a)(1)(A), (b)(3), 116 Stat. 1758, 1846-47 (codified at 8 U.S.C. §§ 1153(b)(5)(A),
1186b(f)(3)).

Page 1 GAO-15-696 Immigrant Investor Program

States. 3 Within the 90-day period prior to the second anniversary of the
date on which an immigrant investor obtained conditional status, he or
she can apply to remove the conditional basis of his or her green card. 4
Approximately 10,000 EB-5 visas per fiscal year are made available to
qualified immigrant investors and their families seeking to immigrate to
the United States through the EB-5 Program. 5

3
See 8 U.S.C. §§ 1153(b)(5)(A) (general EB-5 requirements), (C) (amount of capital
required), (D) (full-time employment defined), 1186b(a)(1) (alien entrepreneur receives
conditional lawful permanent resident status), 1255(a) (adjustment of status), 1201
(issuance of visas); 8 C.F.R. § 204.6(e) (definitions), (f) (required amounts of capital), (h)
(establishment of a new commercial enterprise), (j)(4)(ii) (To show that the new
commercial enterprise established through a capital investment in a troubled business
meets the statutory employment creation requirement, the petition must be accompanied
by evidence that the number of existing employees is being or will be maintained at no
less than the preinvestment level for a period of at least 2 years). After initial EB-5
Program requirements are met, approval of the adjustment of status application or
admission to the United States with an EB-5 visa must occur for immigrant investors and
their eligible dependents to obtain conditional permanent resident status. Eligible
dependents (or derivative family members) are the immigrant investor’s spouse and
unmarried children under the age of 21. See 8 U.S.C. §§ 1153(d), (h), 1186b(a), (f). Under
8 U.S.C. § 1186b(f)(1), an immigrant investor who obtains permanent resident status
(conditional or otherwise) is considered an alien entrepreneur. For the purpose of this
report, we use the term “immigrant investor” to refer to an immigrant investor or alien
entrepreneur.
4
See 8 U.S.C. § 1186b(c)(1) (requirements for removal of permanent resident conditions
for an alien entrepreneur, alien spouse, or alien child), (d)(2) (period for filing petition).
Where an alien entrepreneur’s Form I-829 petition for removal of permanent resident
conditions is denied, the U.S. Citizenship and Immigration Services (USCIS) will terminate
the status of the alien and his or her spouse and any children, and initiate removal
proceedings. See 8 C.F.R. § 216.6(d)(2). If an alien entrepreneur fails to file for removal of
conditions within the 90-day period prior to the second anniversary of the date on which
conditional status was obtained, such status will automatically terminate and removal
proceedings will be initiated. See 8 C.F.R. § 216.6(a)(5).
5
See 8 U.S.C. §§ 1151(d) (worldwide level for employment-based immigrants),
1153(b)(5)(A) (no more than 7.1 percent of employment-based visas are to be made
available to qualified immigrants seeking to enter the United States for the purpose of
engaging in a new commercial enterprise).

Page 2 GAO-15-696 Immigrant Investor Program

Under the EB-5 Regional Center Program, first enacted as a pilot in 1992
and reauthorized seven times since, 6 a certain number of the EB-5 visas
are set aside annually for immigrant investors in economic units called
regional centers, which are established to promote economic growth. 7
Most recently, the Regional Center Program was extended until
September 30, 2015, and the term “pilot” was removed from the name of
the program. 8 Under the Regional Center Program, immigrant investors
can pool their investments with those of other foreign and U.S. investors
to fund a new commercial enterprise within a regional center. An
immigrant investor in any new commercial enterprise, including under the
Regional Center Program, can meet the requirement that he or she be
engaged in the management of that enterprise, as opposed to
maintaining a purely passive role, 9 if he or she is, for example, a limited
partner of a limited partnership. 10 Immigrant investors must demonstrate

6
See Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies
Appropriations Act, 1998, Pub. L. No. 105-119, tit. I, § 116(a), (b), 111 Stat. 2440, 2467
(1997); Visa Waiver Permanent Program Act, Pub. L. No. 106-396, tit. IV, § 402(a), 114
Stat. 1637, 1647 (2000); Basic Pilot Program Extension and Expansion Act of 2003, Pub.
L. No. 108-156, § 4(b), 117 Stat. 1944, 1945; Consolidated Security, Disaster Assistance,
and Continuing Appropriations Act, 2009, Pub. L. No. 110-329, div. A, §§ 106(3), 144, 122
Stat. 3574, 3575, 3581 (2008); Omnibus Appropriations Act, 2009, Pub. L. No. 111-8, div.
J, § 101, 123 Stat. 524, 988; Department of Homeland Security Appropriations Act, 2010,
Pub. L. No. 111-83, tit. V, § 548, 123 Stat. 2142, 2177 (2009); Reauthorization of EB-5
Regional Center Program, Pub. L. No. 112-176, § 1(1), (2), 126 Stat. 1325 (2012).
7
See Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies
Appropriations Act, 1993, Pub. L. No. 102-395, tit. VI, § 610, 106 Stat. 1828, 1874 (1992)
(codified as amended as a note under 8 U.S.C. § 1153). Under 8 C.F.R. § 204.6(e), a
regional center is defined as any economic unit, public or private, that is involved with the
promotion of economic growth, including increased export sales, improved regional
productivity, job creation, and increased domestic capital investment. See also 8 C.F.R. §
204.6(m)(3), (6).
8
See Pub. L. No. 112-176, § 1(1), (2), 126 Stat. 1325 (2012).
9
See 8 C.F.R. § 204.6(j)(5). In the final rule implementing section 121 of the Immigration
Act of 1990, legacy Immigration and Naturalization Service (INS) noted that “[t]he Senate
Committee on the Judiciary specifically endorsed a requirement of some degree of
participation on the part of the alien entrepreneur beyond mere passive investment.” See
Employment-Based Immigrants, 56 Fed. Reg. 60,897, 60,904 (Nov. 29, 1991) (codified at
8 C.F.R. pts. 103, 204); S. Rep. No. 101-55, at 21.
10
Under 8 C.F.R. § 204.6(j)(5)(iii), if the petitioner is a limited partner and the limited
partnership agreement provides the petitioner with certain rights, powers, and duties
normally granted to limited partners under the Uniform Limited Partnership Act, the
petitioner will be considered sufficiently engaged in the management of the new
commercial enterprise.

Page 3 GAO-15-696 Immigrant Investor Program

that their investment in a new commercial enterprise will result in the
creation or, in the case of a troubled business, preservation or creation
(or some combination of the two), of at least 10 full-time positions for
qualifying employees. 11 Immigrant investors in a regional center
commercial enterprise may meet the statutory employment creation
requirement by providing evidence of creating or preserving, either
directly or indirectly, 10 full-time positions. 12 In recent years, the Regional
Center Program has increased in popularity as a viable source of low-
interest funding for major real estate development projects, such as the
Barclays Center—a multipurpose indoor arena in Brooklyn, New York—
and the Marriott Convention Center Hotel in Washington, D.C. In fiscal
year 2014, the maximum number of visas available were allocated for the
EB-5 Program—approximately 10,000 annually, with about 95 percent of
the investments in regional center projects.

11
8 U.S.C. § 1153(b)(5)(A)(ii) (statutory employment creation requirement). In the initial
petition stage, an immigrant investor must provide documentation of requisite job creation,
or a comprehensive business plan showing that the need for not fewer than 10 qualifying
employees will result within the 2-year period commencing 6 months after the adjudication
of the Form I-526 petition. See 8 C.F.R. § 204.6(j)(4)(i). For an investment in a troubled
business, the petitioner must provide evidence that the number of existing employees is
being or will be maintained at no less than the preinvestment level for a period of at least 2
years, and that the statutory numeric requirement is met. See 8 C.F.R. § 204.6(j)(4)(ii). In
the final I-829 stage, an immigrant investor must show that he or she created or can be
expected to create within a reasonable time (defined as within a year of the 2-year
anniversary of the alien’s admission as, or adjustment to conditional permanent resident)
10 full-time jobs for qualifying employees, and investors in troubled businesses must
submit evidence that the commercial enterprise maintained the number of existing
employees at no less than the preinvestment level for the previous 2 years and that the
statutory numeric requirement is met. See 8 C.F.R. § 216.6(a)(4)(iv), (c)(1)(iv).
12
See Pub. L. No. 102-395, tit. VI, § 610(c), 106 Stat. at 1874 (codified as amended as a
noted under 8 U.S.C. § 1153). Under U.S. Citizenship and Immigration Services (USCIS)
policy, indirect jobs are those held outside of the new commercial enterprise but created
as a result of the investment made by an immigrant investor in such commercial
enterprise, which then makes the capital available to a separate job-creating entity. In
other words, indirect jobs are any jobs created by the investment but not occupied by
individuals with an employee-employer relationship with the new commercial enterprise.
Regional center investors are permitted to claim credit for both direct and indirect jobs
estimated to have been created through revenues generated from increased exports
resulting from the new commercial enterprise, as demonstrated using reasonable
methodologies such as multiplier tables, feasibility studies, analyses of foreign and
domestic markets for the goods or services to be exported, and other economically or
statistically valid forecasting devices that indicate the likelihood that the business will
result in increased employment. See Pub. L. No. 102-395, § 610, 106 Stat. at 1874; 8
C.F.R. § 204.6(j)(4)(iii), (m)(3), (7).

Page 4 GAO-15-696 Immigrant Investor Program

Several federal and state agencies are involved to varying degrees in
ensuring the integrity of the EB-5 Program. The Immigrant Investor
Program Office (IPO), within the Department of Homeland Security’s
(DHS) U.S. Citizenship and Immigration Services (USCIS), administers
the EB-5 Program—adjudicating applications and petitions while striving
to ensure that program participants, including immigrant investors and
principals operating U.S. regional centers, comply with program
requirements. USCIS also has a Fraud Detection and National Security
(FDNS) unit charged with preventing, detecting, and responding to
allegations of fraud in the program. States contribute to the EB-5
process—in relation to investors seeking a reduced investment of
$500,000 in a targeted employment area—by certifying through the state
government’s authorized body that the geographic or political subdivision
in which the enterprise is, or will be principally doing business, has been
designated a high-unemployment area. 13 After USCIS approves initial
petitions for immigrant investors to participate in the program, the
Department of State (State) adjudicates the immigrant visa applications,
conducting background checks and other activities to help ensure
investors and their families comply with national security and other
requirements for admission to the United States. 14 FDNS refers cases of
fraud related to immigrant investors to DHS’s U.S. Immigration and
Customs Enforcement (ICE), Homeland Security Investigations (HSI) for
investigation. The U.S. Securities and Exchange Commission (SEC)
investigates allegations of fraud or other misconduct in connection with
securities offerings related to EB-5 projects by U.S. principals operating
regional centers, or others. The Department of Justice’s (DOJ) Federal
Bureau of Investigation (FBI), as the lead federal agency for combating
terrorism, investigates any activity by investors or regional centers that
may pose a risk to national security as well as other criminal activities.

13
See 8 C.F.R. § 204.6(i), (j)(6)(ii)(B). A targeted employment area is an area that, at the
time of the investment, is either a rural area or an area that has experienced
unemployment of at least 150 percent of the national average rate. See 8 U.S.C. §
1153(b)(5)(B)(ii); 8 C.F.R. § 204.6(e).
14
USCIS adjudicates Form I-485 for EB-5 immigrant investors who are already in the
United States under other lawful immigration status, and who are seeking to adjust status
to conditional permanent residency. Aliens who are deemed inadmissible under 8 U.S.C.
§ 1182 are generally ineligible to receive visas, ineligible to be admitted to the United
States, and ineligible for adjustment of status. See 8 U.S.C. §§ 1182(a), 1201(h), 1255(a).

Page 5 GAO-15-696 Immigrant Investor Program

In 2005, we reported that, among other things, USCIS had not issued
implementing regulations to adjudicate hundreds of pending EB-5
petitions and applications. 15 Specifically, we reported that USCIS
suspended about 900 EB-5 applications in 1998 because the financial
arrangements in the applications did not comport with the statute and
program regulations, and that guidance to adjudicators was unclear on
how to determine the type and value of benefit to the U.S. economy for
different types of investments. DHS concurred with our recommendation
to finalize and issue regulations, publishing a proposed rule in the Federal
Register in 2011. 16 However, as of June 2015, USCIS officials said that
they had not finalized these regulations because of competing priorities.

The DHS Office of Inspector General (OIG) has also issued two reports
on the EB-5 Program. 17 Specifically, in December 2013, the DHS OIG
reported that several conditions had prevented USCIS from administering
and managing the EB-5 Program effectively. These conditions, as cited
by the report, included, among other things, laws and regulations that do
not give USCIS the authority to prevent a regional center’s participation in

15
GAO, Immigrant Investors: Small Number of Participants Attributed to Pending
Regulations and Other Factors, GAO-05-256 (Washington, D.C.: Apr. 1, 2005). The 21st
Century Department of Justice Appropriations Authorization Act of 2002 required
promulgation of regulations in order to implement statutory directives related to two
categories of immigrant investors whose initial EB-5 petitions were approved after January
1, 1995, and before August 31, 1998, and for whom a decision was pending on either (1)
a petition for removal of permanent residence conditions, or (2) an application for
adjustment of status or an EB-5 immigrant visa. See Pub. L. No. 107-273, §§ 11031-33,
116 Stat. at 1837-46.
16
See Treatment of Aliens whose Employment Creation Immigrant (EB-5) Petitions were
Approved After January 1, 1995 and Before August 31, 1998, 76 Fed. Reg. 59,927 (Sept.
28, 2011) (to be codified at 8 C.F.R. pts. 216, 245).
17
DHS OIG, United States Citizenship and Immigration Services’ Employment-Based Fifth
Preference (EB-5) Regional Center Program. OIG-14-19 (Washington, D.C.: Dec. 12,
2013); DHS OIG, Investigation into Employee Complaints about Management of U.S.
Citizenship and Immigration Services’ EB-5 Program, (Washington, D.C.: Mar. 24. 2015).

Page 6 GAO-15-696 Immigrant Investor Program

the program on the basis of fraud or national security concerns. 18 The
report concluded that because of difficulties ensuring the integrity of the
Regional Center Program, USCIS was limited in its ability to prevent fraud
or national security threats and could not demonstrate that the program
was benefiting the U.S. economy and creating full-time employment as
required by law. Further, in March 2015, the DHS OIG conducted an
investigation of employee complaints about the EB-5 Program and
reported that the former director’s communication with external
stakeholders on specific matters outside the normal procedures, coupled
with favorable action that deviated from the regulatory scheme, had
created an appearance of favoritism and special access. 19 The DHS
Secretary, in response to the OIG findings, acknowledged the popularity
of the program as an economic development tool but also expressed
concerns about the program and asked Congress for help in
strengthening the program’s integrity. 20 He noted that in the past, DHS
had unsuccessfully sought a number of statutory enhancements to the
program’s integrity and urged Congress to work with the department to
strengthen the security and integrity of the program.

You asked us to review the fraud risks and economic benefits for the EB-
5 Program. This report addresses the following questions:

• To what extent have USCIS and its interagency partners assessed

fraud risks and other related risks in the EB-5 Program and what risks
did they identify?

18
In comments on this OIG report, USCIS stated that it already has authority to deny or
terminate a regional center based on fraud or misrepresentation, but the statutory
framework leaves other significant gaps in USCIS authorities, especially with regard to
national security. USCIS agreed with OIG in that explicit authority under 8 C.F.R. § 205.2
(revocation on notice) to terminate a regional center based upon fraud and national
security concerns is needed. However, USCIS asserted that it lacked authority to
promulgate such regulations, and pointed out that it designates regional centers pursuant
to Public Law 102-395, § 610 (codified as amended as a note under 8 U.S.C. § 1153), and
not under INA § 204, 8 U.S.C. § 1154.
19
DHS OIG, Investigation into Employee Complaints about Management of U.S.
Citizenship and Immigration Services’ EB-5 Program, (Washington, D.C.: Mar. 24. 2015).
20
Jeh C. Johnson, “Statement by Secretary Jeh C. Johnson about the DHS Inspector
General’s Report Concerning Deputy Secretary Mayorkas”, accessed August 3, 2015,
http://www.dhs.gov/news/2015/03/24/statement-secretary-jeh-c-johnson-about-dhs-
inspector-generals-report-concerning-0.

Page 7 GAO-15-696 Immigrant Investor Program

• To what extent has USCIS implemented efforts to address any
identified fraud risks in the EB-5 Program?
• To what extent has USCIS increased its capacity to verify job creation
and used valid and reliable methodologies for reporting program
outcomes and overall economic benefits?
To determine the extent to which USCIS and its interagency partners
have assessed fraud risks in the EB-5 Program and what risks they have
identified, we examined past audit findings by GAO and DHS OIG, and
reviewed fraud risk assessments conducted by DHS, USCIS, State, SEC,
FBI, and ICE HSI. 21 We interviewed USCIS, SEC, FBI, and ICE HSI
headquarters officials and analyzed USCIS processes, procedures, and
training for detecting, preventing, and investigating fraud and compared
them against standards in Standards for Internal Control in the Federal
Government, GAO’s Fraud Risk Management Framework, and GAO’s
Strategies to Manage Improper Payments. 22 To gain the perspective of
Regional Center Program participants on the types and prevalence of
fraud in the program, we also interviewed the principals of two regional
centers located in proximity to USCIS headquarters and the USCIS
California Service Center, which we visited because it was primarily
responsible for administering the EB-5 Program prior to the program’s
transfer to USCIS headquarters’ new Immigrant Investor Program Office.
We also interviewed officials about fraud risks in the EB-5 Program from a
national industry association representing EB-5 Program regional centers
and a national immigration lawyers association in Washington, D.C., as
well as SEC and ICE officials in California during our site visit to the
USCIS California Service Center. Although the information from these
interviews and the site visit is not representative of all EB-5 industry
stakeholders’ perspectives, they provided insights into the fraud risks and
vulnerabilities of the program. We also reviewed a nonprobability sample
of 28 EB-5 Program files for immigrant investors and regional centers
USCIS approved to participate in the program to identify any potential

21
GAO-05-256 and OIG-14-19.
22
GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1
(Washington, D.C.: November 1999); Individual Disaster Assistance Programs;
Framework for Fraud Prevention, Detection, and Prosecution, GAO-06-954T (Washington,
D.C.: July 12, 2006); and Strategies to Manage Improper Payments: Learning from Public
and Private Sector Organizations, GAO-02-69G (Washington, D.C.: Oct. 1, 2001). As
stated in GAO-02-69G, while the guide focuses on internal controls as they relate to
reducing improper payments, the internal control components discussed are applicable to
the entirety of an organization’s operations, including efforts to manage fraud risks.

Page 8 GAO-15-696 Immigrant Investor Program

fraud indicators and review internal controls. While the files we reviewed
are not representative of all completed and approved applications and
petitions, they did provide us with information about different immigrant
investor and regional center circumstances.

To determine the extent to which USCIS has implemented efforts to

address any identified fraud risks in the EB-5 Program, we examined
agency action to address past DHS OIG and ICE HSI risk assessment
findings and evaluated the information systems and standard operating
procedures that USCIS adjudicators use for evaluating EB-5 petitions and
applications and that FDNS officials use for identifying, preventing, and
addressing fraud risks. We also evaluated USCIS’s internal quality
assurance capabilities as well as its records management and data
storage capabilities. To gain perspective on how EB-5 Program
processes have changed over time to address fraud risks, during our site
visit to the USCIS California Service Center, we interviewed six officials
who formerly adjudicated EB-5 Program petitions and applications. We
also interviewed a nonprobability sample of 16 current adjudicators and 8
economists in IPO to identify efforts taken to identify and address fraud in
the program. We selected the adjudicators and economists based on
factors such as length of employment with USCIS, grade level, and the
type of EB-5 Program forms they adjudicate. While the adjudicators and
economists we interviewed are not representative of all EB-5 adjudicators
and economists, from the interviews we were able to gain insights into
USCIS’s efforts to identify and address fraud, among other aspects of EB-
5 Program adjudication. We also interviewed FDNS and IPO supervisory
officials to identify specific corrective actions USCIS has taken or plans to
take to address fraud risks in the program. We compared the results with
standards identified in Standards for Internal Controls in the Federal
Government and GAO’s Fraud Framework, which have established
requirements and identified leading practices for addressing fraud risks. 23

To determine the extent to which USCIS has increased its capacity to

verify job creation and uses valid and reliable methodologies to report
program outcomes and overall economic benefit, (1) we assessed the
changes in USCIS workforce, guidance, training, and the petition
adjudication process to address past audit findings reported by GAO and
the DHS OIG; (2) reviewed the methodology used by USCIS to report the

23
GAO/AIMD-00-21.3.1 and GAO-06-954T.

Page 9 GAO-15-696 Immigrant Investor Program

total amount of investment and number of jobs created through the
program; and (3) reviewed the statement of work for a contracted study
on the program’s economic impact. We interviewed IPO management as
well as a nonprobability sample of 24 adjudicators, including 8
economists chosen for the reasons previously discussed, about their
views on the adequacy of the guidance and training provided by USCIS,
and their access to the data and information they needed to verify job
creation reported by immigrant investor petitioners and regional center
applicants. The views of these adjudicators and economists cannot be
generalized to all USCIS adjudicators and economists, but provided us
with insights into the quality of the guidance and training on verifying job
creation estimates. For the process USCIS used to adjudicate immigrant
investor petitions associated with regional center projects, we also
reviewed economic models used by immigrant investors and USCIS to
estimate the number of jobs to be created by the project when petitioning
to participate in the program as well as other methods for verifying the
number of jobs created when a petitioner seeks to remove the conditional
basis of his or her green card. To assess the models, we reviewed the
underlying economic assumptions and data as well as past studies and
audits identifying limitations in use of the models for the EB-5 Program. 24
We also interviewed subject matter experts to include academic
researchers in urban and economic development, a policy research think
tank, a state economic development agency, and Department of
Commerce (Commerce) officials responsible for administering the
Regional Input-Output Modeling System (RIMS II model). This system is
widely used across the private and public sectors, including USCIS, and
is considered to be among those valid for verifying job creation estimates
reported by program participants within regional centers. 25 We selected
these experts to interview because they have reviewed various aspects of

24
ICF International, Study of the United States Immigrant Investor Pilot Program (EB-5)
(May 18, 2010). IIUSA (Association to Invest in USA), Economic Impact of the EB-5
Immigrant Program 2012 (January 27, 2014). Bureau of Economic Analysis (Department
of Commerce), RIMS II: An Essential Tool for Regional Developers and Planners
(December 2013). Dan S Rickman and R Keith Schwer, “A Comparison of the Multipliers
of IMPLAN, REMI, and RIMS II: Benchmarking Ready-Made Models for Comparison,” The
Annals of Regional Science, vol. 29 (1995), 363-374. We reviewed the reports’
methodologies and discussed the reports with USCIS. We determined that the
conclusions in these reports were reasonable for use in our report, and we discuss
limitations of these reports later in our report.
25
RIMS II is used to estimate the impact of changes in spending, such as increased
investment, on economic activity (including job creation) in a region of the country.

Page 10 GAO-15-696 Immigrant Investor Program

the program, written published articles, or have a role in the EB-5
Program.

To determine the extent to which USCIS’s methodology for reporting

program outcomes is valid and reliable, we compared how USCIS
compiles numbers for total jobs created by the EB-5 Program and the
dollar amount of EB-5 Program investments against the information
included in EB-5 Program petitions and verified by USCIS throughout the
adjudication process. We compared USCIS’s methodology against
guidance in GAO’s Standards for Internal Control in the Federal
Government and requirements in the Project Management Institute’s The
Standard for Program Management for programs to establish monitoring
and controlling activities to report on program performance. 26 In regard to
USCIS’s plans to fund a contracted study reporting on the overall
economic impact of the EB-5 Program, we also interviewed USCIS
officials as well as officials at Commerce with whom USCIS has
established a memorandum of agreement to study the program’s
economic impact, to identify the study methodology and data inputs. We
compared the planned methodology for this study against Office of
Management and Budget (OMB) Circular A-94, Guidelines and Discount
Rates for Benefit-Cost Analysis of Federal Programs, which applies to all
analyses used to support government decisions to initiate, renew, or
expand programs or projects that would result in a series of measurable
benefits or cost. 27

We conducted this performance audit from October 2014 through August

2015 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.

26
Project Management Institute, The Standard for Program Management, third edition
(Newtown Square, Pa.: 2013).
27
OMB Circular No. A-94 Revised, Guidelines and Discount Rates for Benefit-Cost
Analysis of Federal Programs (Oct. 29, 1992).

Page 11 GAO-15-696 Immigrant Investor Program

 Individuals seeking to establish a regional center under the EB-5 Program
Background must submit an initial application and supporting documentation as well
as an update for each fiscal year (or as otherwise requested by USCIS)
showing that the regional center continues to meet the program
requirements to maintain its regional center designation. 28 Prospective
regional center sponsors apply to the program by submitting Form I-924,
Application for Regional Center under the Immigrant Investor Pilot
Program. On this form, applicants are to provide a proposal, supported by
economically or statistically valid forecasting tools, that describes, among
other things, how the regional center (1) focuses on a geographic area of
the United States; (2) will promote economic growth through increased
export sales and improved regional productivity, job creation, and
increased domestic capital investment; and (3) investors will create jobs
directly or indirectly. Applicants must also include a detailed statement
regarding the amount and source of capital committed to the regional
center, as well as a description of the promotional efforts they have taken
and planned. Once a regional center has been approved to participate in
the program, a designated representative of the regional center must file
a Form I-924A, Supplement to Form I-924, for each fiscal year, to provide
USCIS with updated information demonstrating that the regional center
continues to promote economic growth, improved regional productivity,
job creation, or increased domestic capital investment in the approved
geographic area. USCIS is to issue a notice of intent to terminate the
participation of a regional center if it fails to submit the required
information or upon a determination that the regional center no longer
serves the purpose of promoting economic growth. 29 As of July 2015,
USCIS had approved approximately 689 regional centers spread across
49 states, the District of Columbia, and 4 U.S. territories; and USCIS
terminated the participation of 34 regional centers for not filing a Form I-
924A or not promoting economic growth.

Prospective immigrant investors seeking to participate in the EB-5

Program must complete three forms and provide supporting
documentation that USCIS or State officials, as appropriate, assess to
ensure that they have met (1) the terms of participation for the program,
(2) conditions for lawful admission for permanent residence on a

28
See 8 C.F.R. § 204.6(m)(3) (Requirements for regional centers), (6) (Termination of
participation of regional centers).
29
See 8 C.F.R. § 204.6(m)(6).

Page 12 GAO-15-696 Immigrant Investor Program

conditional basis either through adjustment of status if already in the
United States under other lawful immigration status or the immigrant visa
process if abroad, and (3) requirements of the program to have lawful
permanent resident conditions removed. (See fig. 1.)

Page 13 GAO-15-696 Immigrant Investor Program

Figure 1: U.S. Citizenship and Immigration Services’ (USCIS) Immigrant Investor Program Investor Petition and Application
Process

a
USCIS adjudicators may request additional supporting documents, if needed. See 8 C.F.R. §
103.2(b)(8).
b
If the immigrant investor’s Form I-526 petition is denied, the investor may appeal, or file a motion to
reopen or reconsider the unfavorable decision by filing Form I-290B, Notice of Appeal or Motion, in
accordance with Form I-290B filing instructions. See 8 C.F.R. §§ 103.3, 103.5. The appeal of an

Page 14 GAO-15-696 Immigrant Investor Program

 unfavorable decision on a Form I-526 petition is forwarded to the Administrative Appeals Office at
USCIS headquarters for review. Administrative Appeals Office adjudicators use the same criteria
when reviewing immigrant investor petitions as those used by Immigrant Investor Program Office
(IPO) adjudicators. The Administrative Appeals Office unit may approve, deny, or remand the case to
the IPO, or reject the appeal as filed improperly, for example, where the appeal is untimely. If the
appeal is denied, there are no further administrative appeal rights within USCIS. The only remaining
appeal option for the immigrant investor is through the U.S. court system. If the appeal is remanded,
the Administrative Appeals Office directs the IPO to review the case again consistent with its
decision. The remanded case would be reviewed again following the same procedures as if it had
been initially received.
c
If an alien entrepreneur does not timely file a petition to remove the conditional basis of permanent
residence, his or her conditional permanent resident status automatically terminates and removal
proceedings are to be initiated. See 8 C.F.R. § 216.6(a)(5).
d
Consular officers may return the I-526 petition to USCIS, in which case USCIS may commence
revocation proceedings pursuant to 8 U.S.C. § 1155; 8 C.F.R. § 205.2; and where approval of the
petition is revoked, the immigrant investor may appeal to the Administrative Appeals Office. With
respect to USCIS’s denial of a Form I-485 application, the immigrant investor may file a motion to
reopen or reconsider the decision. See 8 C.F.R. § 103.5.
e
According to 8 C.F.R. § 216.6(d)(2), denial of a Form I-829 petition may not be appealed; however,
the alien may file a motion to reopen or reconsider the decision by filing a Form I-290B, Notice of
Appeal or Motion, or seek review of the decision in removal proceedings. See 8 C.F.R. §§ 103.5,
216.6(d)(2).

USCIS has identified fraud and national security risks in the EB-5
USCIS and Others Program in various assessments it conducted over time and in
Have Identified collaboration with its interagency partners. For example, in 2012, USCIS
met with its interagency partners and National Security Staff to assess
Unique Fraud Risks fraud and national security risks in the EB-5 Program. 30 An internal memo
to the EB-5 Program discussing this effort also highlighted steps that USCIS was undertaking
to mitigate fraud risks to the program, such as improving collaboration
and Could Benefit with law enforcement agencies such as SEC and FBI. In response to this
from Planning and assessment, later in 2012, USCIS worked with FBI and the Department of
the Treasury’s Financial Crimes Enforcement Network (FinCEN), 31
Conducting Regular among others, to better understand the scope of EB-5 Program fraud
Future Risk risks and to assess the benefits of incorporating enhanced security
screenings to improve its vetting of EB-5 Program petitioners. FDNS
Assessments officials told us that one key determination of the study was the need to

30
The stakeholders included DHS components such as ICE; U.S. Customs and Border
Protection; the Office of Intelligence and Analysis; and DHS Office of Policy; the
Departments of Justice, the Treasury, State, and Commerce; the Office of Director of
National Intelligence; and SEC. On February 10, 2014, the National Security Staff name
was changed to the National Security Council staff by executive order. See Exec. Order
No. 13657, 79 Fed. Reg. 8823 (Feb. 10, 2014).
31
FinCEN is a bureau within the Department of the Treasury that, among other things, is
tasked with safeguarding the U.S. financial system from money laundering, terrorist
financing, and other abuses.

Page 15 GAO-15-696 Immigrant Investor Program

provide dedicated fraud personnel to the EB-5 Program, which, as
discussed later, USCIS implemented. Most recently, in early 2015, DHS’s
Office of Intelligence and Analysis prepared a classified report updating
the program’s 2012 risk assessment, in response to congressional and
USCIS requests, which assessed the fraud risks to the EB-5 Program.

In addition to conducting these risk assessments, USCIS officials told us

that they identify potential fraud stemming from the EB-5 Program
through regular oversight work such as producing reports on investors’
sources of funds. Additionally, law enforcement agencies such as ICE
HSI, SEC, and FBI may also uncover fraud through their own
investigative efforts and, as appropriate, will share this information with
USCIS.

FDNS officials noted that fraud risks and schemes in the EB-5 Program
were constantly evolving, and that updating their 2015 risk assessment
helped them better understand the nature and scope of fraud risks to the
program. Further, FDNS officials stated that the office constantly identifies
new fraud schemes, and that they must work to stay on top of emerging
issues. SEC training materials for EB-5 Program staff on securities fraud
also stated that fraud scams are creative and constantly changing, and
may make use of new distribution channels such as social media.
Moreover, as noted previously, the program has grown substantially over
time—the total number of EB-5 visas issued increased from almost 3,000
in fiscal year 2011 to over 9,000 in fiscal year 2014, according to State
data; this creates additional opportunities for fraud.

Although the risk assessments conducted by USCIS and other agencies

have helped provide information to USCIS to better understand and
manage risks to the EB-5 Program, these assessments were onetime
exercises, and USCIS does not have documented plans to conduct
regular future risk assessments of the program because, according to
USCIS officials, the agency would perform them on an “as needed” basis.
Standards for Internal Control in the Federal Government provides
guidance on the importance of identifying and analyzing risks, and using
that information to make decisions. 32 These standards address various
aspects of internal control that should be continuous, built-in components
of organizational operations. One internal control standard, risk

32
GAO/AIMD-00-21.3.1.

Page 16 GAO-15-696 Immigrant Investor Program

assessment, calls for identifying and analyzing risks that agencies face
from internal and external sources and deciding what actions should be
taken to manage these risks. The standards indicate that conditions
governing risk continually change and mechanisms are required to
ensure that risk information, such as vulnerabilities in the program,
remains current and relevant. Such mechanisms could include periodic
risk assessment updates. Moreover, our executive guide for helping
agencies identify effective strategies to manage improper payments notes
the importance of periodically updating risk assessments because of
constant changes in governmental, economic, industry, regulatory, and
operating conditions that can affect program risks in their programs. 33
Information collected through periodic reviews, as well as daily
operations, can inform the analysis and assessment of risk. Furthermore,
DHS’s Risk Management Fundamentals states that DHS and its
component agencies should use a risk-based approach when managing
programs that includes, among other things, identifying potential risks,
assessing and analyzing identified risks, and using risk information and
analysis to inform decision making. 34 Planned regular or updated future
risk assessments could help better position USCIS to identify, evaluate,
and address fraud risks given the potential for changing conditions.

The risk assessments conducted by USCIS and others, as well as our

interviews with USCIS, ICE HSI, FBI, and SEC officials, identified ongoing
and changing fraud risks to the EB-5 Program. According to the risk
assessments and FDNS officials, the EB-5 Program possesses several
unique risks that are generally not present in other types of immigration
programs. Specifically, a senior FDNS official noted that while
adjudication of petitions in the EB-5 Program, like other immigration
programs, centers on the eligibility of the petitioner, the EB-5 Program
also has an investment component that creates increased program
complexity and the potential for fraud risks. The program’s risk
assessments, FDNS officials, and stakeholders from agencies that play a

33
GAO-02-69G. While Strategies to Manage Improper Payments focuses on internal
controls as they relate to reducing improper payments, the guide states that the internal
control components discussed are applicable to the entirety of an organization’s
operations, including efforts to manage fraud risks.
34
Department of Homeland Security, Risk Management Fundamentals: Homeland
Security Risk Management Doctrine (Washington, D.C.: April 2011).

Page 17 GAO-15-696 Immigrant Investor Program

 role in addressing potential fraud identified unique fraud risks that involve
the following aspects of the EB-5 Program: 35

Unlawful Source of Petitioner Funds Uncertain source of immigrant investor funds. USCIS’s 2012 risk
As one example, Fraud Detection and assessment identified the source of EB-5 petitioner funds as an area at
National Security (FDNS) Directorate officials risk for fraud. To be eligible for the EB-5 Program, immigrant investors
told us about a case in which a petitioner did
not report potential financial ties to a number
must invest a minimum of $1 million, or $500,000 in a targeted
of brothels in China, which would have raised employment area, in a new commercial enterprise, and must provide
questions about the legitimacy of the documentation showing that these funds come from a lawful source. 36
petitioner’s source of funds. FDNS’s fraud
detection efforts ultimately identified this This investment is not a feature in most other immigration programs and,
connection and the U.S. Citizenship and as a consequence, it creates unique risks in the EB-5 Program. 37 When
Immigration Services (USCIS) denied the
petition. submitting their petitions, immigrant investors are required to submit
Source: FDNS officials. | GAO-15-696 evidence that the investment funds were obtained through lawful means
such as foreign business registration records or tax returns. As part of its
adjudication process, and as required by regulation, program staff review
the evidence submitted by immigrant investors to make a determination
on the lawfulness of their source of funds. However, according to USCIS
officials, it can be difficult to verify the sources of immigrant investors’
funds and such verification difficulties could pose fraud risks to the
program. For example, USCIS officials told us that some petitioners may
have strong incentives to report inaccurate information about the source
of their funds on their applications in instances when the funds come from
illicit—and thus ineligible—sources, such as funds obtained through drug
trade, human trafficking, or other criminal activities. Moreover, FDNS
selected a targeted sample of about 150 high-risk petitions referred by

35
Because of the sensitive nature of this information, we do not discuss national security
concerns such as threats from terrorism or espionage in this report.
36
See 8 C.F.R. § 204.6(e), (f), (g)(1), (j); 8 C.F.R. § 216.6(c)(2). In the Senate Judiciary
Committee report accompanying the Immigration Act of 1990, it is stated that “the
committee intends that processing of an individual visa not continue under this section if it
becomes known to the Government that the money invested was obtained by the alien
through other than legal means (such as money received through the sale of illegal
drugs).” S. Rep. No. 101-55, at 21. This committee report was cited as a basis for
changing the definition of capital to exclude assets directly or indirectly acquired by
unlawful means. See 56 Fed. Reg. at 60,902.
37
EB-5 is not the only immigration program with an investment feature. The nonimmigrant
treaty investor (E-2) visa category also has an investment feature. See 8 U.S.C. §
1101(a)(15)(E); 8 C.F.R. § 214.2(e).

Page 18 GAO-15-696 Immigrant Investor Program

 EB-5 Program adjudicators to FDNS for fraud concerns. 38 As of May
2015, on the basis of detailed reviews by FDNS staff located in
headquarters and overseas, FDNS determined that the sources of funds
in many of these petitions contained a high risk for fraud. In addition, ICE
HSI headquarters officials provided us with cases of immigrant investors
using overseas preparers to submit counterfeit documentation to
fraudulently show that funds were lawfully obtained, which can make
determining the legitimacy of the source of funds challenging. Further,
ICE HSI officials stated that they are concerned that overseas document
preparers and recruiters may try to use increasingly sophisticated
methods to circumvent program controls. USCIS officials said that IPO
and FDNS did not have a means to verify self-reported immigrant
financial information with many foreign banks. In addition, both USCIS
and State officials noted that they did not have authority to verify banking
information with many foreign countries. For example, State officials said
that because the U.S. government lacks access to many foreign financial
systems, there is no reliable method to verify the source of the funds of
petitioners.

Securities Fraud in the EB-5 Program Legitimacy of investment entity. The amount of investment required to
In 2014, various companies associated with participate in the EB-5 Program, coupled with the fact that EB-5 investors
the construction of the Chicago Convention
Center were found liable for the fraudulent are making an investment in order to obtain an immigration benefit, can
sale of over $145 million in securities to create fraud risks tied to unscrupulous regional center operators and
Chinese investors seeking a pathway to
citizenship in the United States. Using the
intermediaries. According to SEC officials, they have identified instances
Regional Center Model, each investor was of fraudulent investment schemes, including securities fraud, related to
told to wire a minimum of $500,000, along EB-5 investments. From January 2013 through January 2015, SEC
with an administrative fee of $41,500, to a
U.S. bank account in exchange for a officials reported receiving over 100 tips, complaints, and referrals related
provisional visa obtained by providing falsified to possible securities fraud violations and the EB-5 Program. Just over
documents to the U.S. Citizenship and
Immigration Services (USCIS). Defendants
collected over $11 million in administrative
fees, which were spent despite knowledge
that the project would not be completed.
According to another 2013 Securities and
Exchange Commission (SEC) complaint, a
couple created a regional center and solicited
immigrant investors with promises of
investing in a local energy company. Instead
of investing in that project, the couple used
investor funds to (1) buy cars for themselves
and regional center employees, (2) make
Ponzi payments to an existing investor, (3)
38
settle an existing lawsuit, and (4) invest in a According to FDNS officials, FDNS EB-5 randomly sampled all immigrant investor I-526
financially troubled restaurant. filings in its pending inventory from a subset of preparers known to have submitted
Source: GAO analysis of SEC documents. | GAO-15-696 fraudulent documents related to the source of funds for the petitioners. The sampling
methodology included an expected response distribution of 50 percent, a confidence level
of 80 percent, and an acceptable margin of error of 5 percent.

Page 19 GAO-15-696 Immigrant Investor Program

half of these tips, complaints, and referrals resulted in further investigation
by SEC staff or were referred to other state, local, or federal law
enforcement agencies for further review. 39 According to an SEC official,
as of July 2015, SEC has initiated four civil enforcement actions alleging
securities law violations by EB-5 Program participants. 40 Moreover,
according to FDNS documentation, as of May 2015, over half (35) of the
59 open investigations tracked by the program primarily involved
securities fraud issues. 41 In addition, SEC officials noted that immigrant
investors may be vulnerable to fraud schemes because they may be
primarily focused on obtaining their visas. SEC officials noted that,
anecdotally, immigrant investors often accepted lower rates of return on
their investment relative to other non-EB-5 Program investors in the same
project as well as non-EB-5 Program investment opportunities. A 2015
academic study reported that EB-5 Program loans bear a lower overall
interest rate than conventional loans because the immigrant investors are

39
According to SEC officials, all EB-5 tips, complaints, and referrals are preserved in an
SEC database for future consideration in conjunction with any additional information or
related materials that may be received by SEC.
40
See SEC v. A Chicago Convention Center, LLC, Case No. 1:13-cv-982 (N.D. Ill. Filed
Feb. 6, 2013) (Intercontinental Regional Center Trust of Chicago); SEC v. Ramirez, Case
No. 7:13-cv-00531 (S.D. Tx. Filed Sept. 30, 2013) (USA Now Regional Center); SEC v.
Lee, Case No. 2:14-cv-06865 (C.D. Cal. Filed Sept. 3, 2014) (Kansas Biofuel Regional
Center LLC). All three complaints alleged violations of 15 U.S.C. §§ 77q(a) (use of
interstate commerce for purpose of fraud or deceit), 78j(b) (use of manipulative or
deceptive device or contrivance in violation of SEC rules and regulations); and Rule 10b-
5, 17 C.F.R. § 240.10b-5 (employment of manipulative and deceptive devices). According
to USCIS’s public list of terminated regional centers, USCIS has terminated the
participation of the regional centers involved in the above-mentioned SEC civil
enforcement actions. In July 2015, SEC initiated another EB-5-related civil enforcement
action alleging that defendants ran a Ponzi-like scheme and affinity fraud targeting, among
others, Chinese citizens seeking to obtain permanent residence under the EB-5 Program.
See SEC v. Luca Int’l Group, LLC, et al., Case No. 3:15-cv-03101 (N.D. Cal. Filed July 6,
2015). Additionally, in June 2015, SEC instituted administrative and cease-and-desist
proceedings and imposed sanctions on respondents who, according to SEC, acted as
unregistered broker-dealers in connection with the sales of securities involving the EB-5
Program. See In the Matter of Ireeco, LLC & Ireeco Ltd., Release No. 75268, Admin.
Proceeding File No. 3-16647 (SEC June 23, 2015).
41
The investigations include those performed by law enforcement agencies such as SEC,
FBI, and ICE. The remaining investigations related to other criminal activities such as
money laundering as well as national security concerns and immigration fraud.

Page 20 GAO-15-696 Immigrant Investor Program

motivated by the visa rather than the maximization of financial returns. 42
SEC officials said that investors sometimes did not exercise due diligence
about their investment decisions, thus increasing the likelihood that
immigrant investors could be taken advantage of by unscrupulous
regional centers through fraud schemes or by being steered toward poor
investments. Moreover, SEC officials told us that the U.S. government is
limited in its ability to investigate foreign-based sales and marketing
practices of EB-5 Program investment opportunities and that unrealistic or
patently false promises are sometimes made to investors. For example,
SEC cases have uncovered incidents of regional center principals
defrauding prospective immigrant investors by misrepresenting the
business investment. Additionally, USCIS and ICE HSI officials all
reported that it can be difficult to verify whether funds are being invested
in projects and commercial enterprises as reported in immigrant investor
petitions and regional center applications and immigrant investors may
also be involved in schemes to fraudulently portray job creation or
economic activity. For example, ICE HSI officials reported on a 2014
investigation related to a business enterprise that did not provide
employees any work and told the employees to sit in an office during
business hours. In another example cited by ICE HSI, in 2013, an alleged
future EB-5 Program hotel project site was actually a vacant lot; the
owner of the location was not aware of any plans to build a hotel there.

Appearance of favoritism and special access. The DHS OIG reported

in March 2015 that a previous USCIS director had created an appearance
of favoritism by providing certain petitioners and stakeholders with special
access to DHS leadership and preferential treatment for their EB-5
Program applications or petitions. 43 The OIG report also stated that
according to USCIS whistleblower allegations, which the OIG
corroborated in some cases, the former director created special
processes and revised existing policies in the EB-5 Program to
accommodate specific parties. According to the OIG, if not for the
intervention of the then director, the career staff at USCIS would have
decided adjudication matters differently. According to the OIG report,

42
Professor Jeanne Calderon and Guest Lecturer Gary Friedland, Esq., A Roadmap to the
Use of EB-5 Capital: An Alternative Financing Tool for Commercial Real Estate Projects
(New York University: Stern School for Business Center for Real Estate Finance
Research. May 22, 2015).
43
DHS OIG, Investigation into Employee Complaints about Management of U.S.
Citizenship and Immigration Services’ EB-5 Program.

Page 21 GAO-15-696 Immigrant Investor Program

some USCIS employees felt uncomfortable and pressured to comply with
managers’ instructions that appeared to have come from the former
director or those working directly for him. Not consistently following
standard processes designed to identify potential fraud and other risks in
adjudicating applications can increase the likelihood that those with
criminal ties or those making fraudulent investments will go unnoticed. It
may also create a control environment tolerant of not adhering to risk
mitigation processes and could reduce trust and transparency in the
overall adjudication process. Although the OIG report did not make
specific recommendations, following its issuance, the DHS Secretary
expressed further concerns about the program and asked Congress for
help to strengthen the security and integrity of the program, stating that
the EB-5 Program was frequently contacted by outsiders on behalf of
those with an interest in the outcome of a particular EB-5 Program case.
The DHS Secretary also announced the creation of a new protocol to help
prevent the reality or perception of improper outside influence in the EB-5
Program. As of June 2015, USCIS officials had developed the protocol
and anticipate that it will be fully implemented by August 2015.

Given these identified fraud risks, and the constantly evolving nature of
risks to the program, planning and conducting regular fraud risk
assessments of the EB-5 Program could better position USCIS to identify
and evaluate emerging fraud risks to the program and address and
mitigate these risks.

Page 22 GAO-15-696 Immigrant Investor Program

USCIS Has Taken
Some Steps to
Address Fraud Risks,
but Additional
Controls Could
Improve Fraud
Prevention and
Detection
USCIS Has Taken Some USCIS has taken some steps to enhance its fraud risk management
Steps to Enhance Its efforts, including creating an organizational structure conducive to fraud
risk management, establishing a dedicated entity to design and oversee
Fraud Risk Management
its fraud risk management activities, conducting fraud awareness training,
Efforts and establishing collaborative relationships with external stakeholders,
including law enforcement agencies.

USCIS established an organizational structure to better address

fraud risks. In 2013, USCIS restructured the organization of its EB-5
Program operations to help better detect fraud, moving EB-5 Program
activities from its California Service Center office and centralizing these
operations in USCIS headquarters’ new Immigrant Investor Program
Office in Washington, D.C. As of June 2015, nearly all EB-5 adjudication
operations are now colocated in Washington, D.C., with the exception of
adjudication for Form I-485 applications from immigrant investors who are
already in the United States under other lawful immigration status and
who are applying to adjust their status to conditional permanent residency
under the EB-5 visa category. USCIS officials indicated they plan to move
adjudication of the Form I-485 applications from the California Service
Center to the National Benefits Center in Lee’s Summit, Missouri, by the
end of 2015. These officials stated that because USCIS is primarily
paper-driven, colocation also allows for relatively more efficient handling
and examination of files for fraud and other risks. In November 2013,
USCIS also established a fraud specialist unit for the EB-5 Program
within FDNS. FDNS officials said that they increased the number of fraud
specialists and hired individuals with specialized skill sets in areas that
they consider critical to fraud prevention, including economics, finance,
immigration, and national security, as well as relevant language skills. As
of May 2015, FDNS was in the process of hiring an additional 8 dedicated
staff with specialized fraud expertise to enhance its EB-5 Program fraud

Page 23 GAO-15-696 Immigrant Investor Program

detection capabilities and oversight, which will bring the total authorized
FDNS EB-5 staff from 13 to 21.

USCIS established fraud awareness training. GAO’s fraud control

framework states that providing training on fraud awareness and potential
fraud schemes to all key government staff is important in stopping fraud. 44
FDNS’s training of its employees includes specialized fraud training. For
instance, as of May 2015, FDNS had sent 8 of its 12 staff to Federal Law
Enforcement Training Centers for specific training on detecting money
laundering following an introductory course provided in headquarters in
May 2014. 45 FDNS has also developed an “EB-5 University” to provide
staff with monthly presentations on specific fraud-related topics believed
to be immediately relevant to adjudication of EB-5 Program petitions and
applications. USCIS held six sessions from August 2014 through January
2015, each of which addressed a different issue, including an overview of
FinCEN and the use of external agency data for investigating potential
fraud.

USCIS took steps to improve law enforcement collaboration. USCIS

took steps to improve its level of coordination related to EB-5 fraud risk
with SEC, ICE HSI, and FBI. USCIS does not generally conduct
enforcement actions and therefore coordinates with, and also makes
referrals to, law enforcement when it detects potential fraud, criminal
activity, or national security threats. According to SEC, ICE HSI, FBI, and
USCIS officials, USCIS has increased its level of coordination with law
enforcement agencies to cross-train staff with additional expertise. For
example, in September 2014 USCIS held an interagency symposium to
encourage collaboration among the government partners that have a
stake in the EB-5 Program. These officials also said that USCIS has
established more reliable avenues of communication among the
agencies, which has led to increased communication and collaboration on
referrals, investigations, and enforcement actions that can be taken when
potential threats and fraud are detected in the EB-5 Program. As of May
2015, USCIS was also finalizing a memorandum of understanding with
the Department of the Treasury’s FinCEN to improve USCIS’s ease of
access to information related to financial fraud and related criminal

44
GAO-06-954T.
45
FDNS currently has 21 authorized positions; the office had 12 employees onboard as of
May 2015.

Page 24 GAO-15-696 Immigrant Investor Program

 activity. Moreover, since consolidating operations in Washington, D.C.,
USCIS officials stated that they have expanded the scope of their
background checks to include a greater number of individuals associated
with EB-5 investments and have increased the number of databases used
to examine individuals considered high risk. 46 These officials said that
they are currently working with stakeholders to further enhance and
automate checks across law enforcement databases.

Limitations in USCIS’s USCIS faces significant challenges in its efforts to detect and mitigate
Information Collection and fraud risks. Specifically, USCIS’s information systems and processes limit
its ability to collect and use data on the EB-5 Program to identify fraud
Use Hamper Its Ability to
related to individual investors or investments or to determine any fraud
Detect and Mitigate Fraud trends across the program. While improvements to USCIS information
Risks systems are delayed, USCIS has taken alternative steps to gather
information to mitigate fraud risk, such as expanding its site visits
program to include random checks of the operation of EB-5 Program
projects. However, opportunities remain to expand information collection
through interviews with immigrant investors and expanded EB-5 Program
petition and application forms.

Limitations in electronic data on EB-5 Program regional center

applicants and immigrant investors. USCIS relies heavily on paper-
based documentation. While USCIS contractors and employees are to
enter certain information from these paper documents into various
electronic databases, these databases have limitations that reduce their
usefulness for conducting fraud-mitigating activities. For example,
information that could be useful in identifying program participants linked
to potential fraud is not required to be entered into USCIS’s database,
such as the applicant’s name, address, and date of birth on the Form I-

46
USCIS conducts checks primarily using the TECS system, which is a database owned
and operated by U.S. Customs and Border Protection that includes information such as
temporary and permanent enforcement, inspection, and operational records relevant to
the antiterrorism and law enforcement mission of the federal agencies that the TECS
system supports. USCIS also uses several commercial databases managed by
companies such as Dun and Bradstreet and LexisNexis, which contain global information
about individuals and entities used for screening.

Page 25 GAO-15-696 Immigrant Investor Program

924 used to apply for regional center participation in the EB-5 Program. 47
Moreover, FDNS officials told us that some data fields are also not
standardized, a fact that presents significant barriers to conducting basic
fraud-related searches. For example, the “geographic location” field,
which USCIS personnel use to record where a regional center intends to
operate, variously contains counties, parishes, cities, states, ZIP codes,
census tracts, and other abbreviations. USCIS’s rules guiding data entry
leave many form fields “optional” in USCIS data-systems because,
according to USCIS officials, the adjudication is completed from the paper
application forms, so USCIS considers entering these data unnecessary.
However, including such information in USCIS databases could better
position USCIS to use information on investors to assess whether any
potential fraud may exist with individual investors or across the program
and initiate appropriate mitigating actions. For example, including in
USCIS databases information on regional center principals and other
Regional Center Program participants that is not consistently recorded in
those databases, such as name and date of birth, could help USCIS
better identify specific individuals who may be targeted for or are under
investigation. Further, more standardized information in USCIS
databases, such as for the geographic locations of regional centers, could
help the agency better identify and assess any potential regional center
fraud trends, for example, within and across geographic areas.

USCIS officials stated that the agency will be able to collect and maintain
more readily available data on EB-5 Program petitioners and applicants
through the deployment of electronic forms in its new system, the
Electronic Immigration System (USCIS ELIS). USCIS officials told us in
May 2015 that they expect USCIS ELIS capabilities for the EB-5 Program
to become functional in 2017. However, USCIS has faced long-standing
challenges in implementing USCIS ELIS, a fact that raises questions
about its eventual deployment and thus the extent to which it will position
USCIS to collect and maintain more readily available data. As we
reported in May 2015, USCIS ELIS is nearly 4 years delayed and
program costs increased by over $1 billion. 48 In March 2012, USCIS

47
Organizations use data for many different forms of fraud-related prevention and
detection techniques, the nature of which is dictated by specific questions or concerns
identified by managers as presenting the most significant concerns. For example, data
sharing can be particularly useful in confirming initial or continuing eligibility of participants
in benefit programs. See GAO-02-69G.
48
GAO, Immigration Benefits System: Better Informed Decision Making Needed on
Transformation Program, GAO-15-415 (Washington, D.C.: May 18, 2015).

Page 26 GAO-15-696 Immigrant Investor Program

began to significantly change its acquisition strategy to address various
technical challenges with the system, and these changes have
significantly delayed the program’s planned schedule. 49 Changes made to
the program’s acquisition strategy were intended to help mitigate past
technical and programmatic challenges; however, at the time of our
review, the plans had not yet been approved and USCIS was operating
without a current and approved acquisition program baseline. USCIS
subsequently approved the plans for an acquisition program re-baseline
in May 2015. 50 However, as we reported in May 2015, USCIS’s ability to
effectively monitor USCIS ELIS program performance and make informed
decisions about its implementation has been limited because department-
level governance and oversight bodies were not using reliable program
information to inform their program evaluations. 51 While USCIS ELIS is
under development, other actions could help USCIS mitigate fraud, as
discussed below.

FDNS’s project site visits are limited in number and scope, but
FDNS has taken steps to expand them. FDNS presently conducts EB-5
Program site visits when IPO staff have identified a material concern such
as indicators that a project is behind schedule or nonexistent and that
cannot be verified through other means such as database searches or

49
USCIS disagreed that changes to the acquisition strategy delayed the program and
added $1 billion to the overall cost, citing changes in the time period covered by each
program cost estimate. In our response, we maintained that the acquisition program
baseline approved in May 2015 reflects delays of nearly 4 years and approximately $1
billion in additional cost when compared against the program’s July 2011 program
baseline. Our report also documented that cost increases and delays in achieving full
operational capability were due, in part, to unexpected or greater than expected
challenges in implementing the program’s new approach. See GAO-15-415.
50
We recommended that USCIS re-baseline cost, schedule, and performance
expectations for the remainder of the program. DHS fully implemented this
recommendation. See GAO-15-415.
51
We recommended, among other things, that to improve governance of its technology
transformation program (which includes USCIS ELIS), DHS should ensure that its
Acquisition Review Board and Executive Steering Committee are effectively monitoring
the program’s performance and progress toward a predefined cost and schedule and
relying on complete and accurate program data to review the performance of the program
against stated expectations. DHS concurred with these recommendations and identified
planned actions to address them, including steps to ensure that cost and schedule data
are presented and evaluated against its Acquisition Program Baseline. See GAO-15-415.

Page 27 GAO-15-696 Immigrant Investor Program

requests for evidence from the petitioner or applicant. 52 FDNS officials
told us that during a site visit, they typically look for evidence to
corroborate petitioner and applicant information such as loan
documentation and invoices showing that a business project’s
management staff use of investment funds is consistent with the
approved business plan. USCIS, SEC, and ICE HSI officials and
members of the national industry association representing regional
centers said that additional site visits could enhance program integrity. In
one example, USCIS officials stated that an EB-5 Program site visit was
conducted because three stand-alone businesses claimed they were
operating at the same address on their EB-5 petition materials. The
businesses had placards on the door, but the owner of the property did
not know the petitioners were using the space to run businesses. As a
result, USCIS rejected these EB-5 Program petitions. GAO’s fraud control
framework states that inspections and physical validations are important
tools to help mitigate fraud. 53 Further, according to SEC and ICE HSI
officials, even relatively simple site examinations, limited to a physical
visit of the investment site, may catch indicators of fraud risk when the
site is obviously unsuitable for the stated business purpose or when the
petition or application includes falsified information. According to these
officials, more comprehensive site examinations are staff intensive but
sometimes necessary for detecting fraud. ICE HSI officials said that this
includes cases when a business has not invested in physical property or
is inactive even though the EB-5 documents show that spending is taking
place. These more comprehensive examinations include gathering

52
FDNS standard operating procedures state that during the course of its work, FDNS
may uncover evidence of criminal misconduct, public safety threats, or national security
concerns. In those instances, FDNS refers the case to ICE or notifies other government
agencies as appropriate. If a case is referred to another organization for criminal
investigation or prosecution and it is declined, FDNS may pursue an administrative
investigation that may lead to the denial or revocation of a benefit and initiation of removal
proceedings. An administrative investigation may include additional systems checks,
telephone inquiries, overseas verifications, field site visits, interviews of witnesses, or
other research necessary to validate or invalidate the suspicion of fraud. According to this
document, “the objective of an administrative investigation is to produce information that
USCIS Adjudications can use to determine an individual’s eligibility for an immigration
benefit. FDNS performs administrative investigations that are narrowly tailored to verify
relationships that are the basis for the transmission of an immigration benefit as well as to
identify violations of section 212(a)(6)(C)(i) of the INA and/or other grounds of admissibility
or removability.”
53
GAO-06-954T.

Page 28 GAO-15-696 Immigrant Investor Program

sources of information related to the project site such as mortgage
documents and local city records.

Recognizing the potential benefits of site visits, USCIS plans to expand

the EB-5 Program site visits, which could enhance fraud detection and
deterrence. FDNS officials stated that they would like to conduct
additional scrutiny of cases based on indications of fraud risk, which may
include site visits; however, because of the EB-5 Program data limitations
described above, FDNS has been unable to develop risk indicators and
therefore cannot conduct risk-targeted site visits. However, officials plan
to pilot random site visits, which may also help to identify and deter fraud.
According to FDNS officials, USCIS approved their request for EB-5
Program random site visits in 2015, but they were not granted the staff
positions required to administer these site visits. As of May 2015, FDNS
had received authorization to hire 8 additional EB-5 Program staff, a level
that FDNS officials stated is sufficient to begin administering a random
site visit program. FDNS requested an expanded site visit budget for
fiscal year 2016, which is now pending approval. FDNS officials stated
that if the request is approved, a pilot random site visit program will begin
sometime in fiscal year 2016. While improvements to USCIS information
systems are delayed, piloting a random site visit program is a step that
could provide USCIS valuable information in its efforts to mitigate fraud.

USCIS does not interview immigrant investors seeking removal of

permanent residency conditions. USCIS is statutorily required to
conduct interviews of immigrant investors within 90 days after they submit
the Form I-829 petition to remove conditions on their permanent
residency. 54 However, USCIS also has the statutory authority to waive the
requirement for such interviews. 55 As of April 2015, USCIS officials stated
that USCIS IPO has not conducted an interview at the I-829 stage.
Conducting interviews at this stage to gather additional corroborating or
contextual information could help establish whether an immigrant investor
is a victim of or complicit in fraud—a concern shared by both ICE HSI and
SEC officials, who noted that gathering additional information and context
about individual investors could help to inform investigative work. For
example, interviews could present an opportunity to gather additional

54
See 8 U.S.C. § 1186b(c)(1)(B) (INA interview requirement), (d)(3) (period for conducting
interview); 8 C.F.R. § 216.6(a)(3).
55
See 8 U.S.C. § 1186b(d)(3) (discretionary waiver authority); 8 C.F.R. § 216.6(b)(1).

Page 29 GAO-15-696 Immigrant Investor Program

information on the extent to which the initial investment proposal offered
to potential immigrant investors differed from the actual investments
made and interest returned on investments. Further, these interviews
could gather additional information from immigrant investors in cases
where their associated regional center or commercial enterprise is
suspected of fraud, such as whether investors were asked to recruit other
investors as a condition of receiving a return on their investment. Thus,
USCIS’s use of its authority to conduct interviews under the program
could help collect information that would otherwise be difficult to obtain
from investors. USCIS officials agreed that conducting interviews at this
stage could be a source of relevant information and said they anticipate
conducting these interviews in the near future. However, USCIS officials
explained that they have not developed plans or a strategy for conducting
interviews at this stage primarily because IPO is relatively new and began
adjudicating I-829 petitions in September 2014. These officials added that
IPO is in the process of determining whether or not to schedule an
interview with a current immigrant investor but does not have a general
strategy for conducting these interviews. While we recognize the
establishment of IPO is relatively new, developing a strategy for
conducting interviews on investors at the I-829 stage could, for example,
help corroborate information those investors originally submitted to
demonstrate that the investors have met program requirements before
having their conditions for lawful permanent residency removed. Given
that IPO is relatively new, this strategy could include an approach to focus
on those investors at the I-829 stage who may be at higher risk for fraud.

USCIS does not collect certain applicant information that could help
mitigate fraud. In fiscal year 2011, USCIS expanded reporting
requirements to gather information about ongoing regional center
activities such as information on the active projects managed by each
regional center. According to USCIS and SEC officials, this information
has helped identify potential incidents of fraud. However, USCIS does not
require information on the Form I-924 about the businesses supported by
the regional center and program investments coordinated by the regional
center, such as the names of principals or key officers associated with the
business, or information on advisers to investors such as foreign brokers,
marketers, attorneys, and other advisers receiving fees from investors.
According to USCIS officials, USCIS is drafting revised Forms I-924 and
I-924A that will seek to address many of these concerns. However, as
these revisions have not been completed, it is too early to tell the extent
to which they will position USCIS to collect additional applicant
information. SEC and FDNS stakeholders with whom we spoke
emphasized that collecting additional information could be useful for

Page 30 GAO-15-696 Immigrant Investor Program

 USCIS to combat fraud. For example, according to these officials, the
absence of information about businesses supported by regional centers
limits USCIS’s ability to identify potential fraud such as misrepresentation
of a new commercial enterprise. USCIS officials agreed that some
additional information collection would enhance program integrity but
have not done so because the process to add questions to application
forms to capture information requires USCIS to document the rationale for
such changes by directly connecting new questions to statutory eligibility
criteria, and USCIS has dedicated its regulatory group to other priorities
pending potential new legislation or expiration of the Regional Center
Program in September 2015. We recognize these competing priorities
currently exist; while these priorities are being addressed by USCIS’s
regulatory group, the agency could also develop a strategy for identifying
and collecting additional information on its petition and application forms
to help mitigate fraud risks to the program, such as information on the
businesses supported by regional centers.

GAO’s fraud control framework states that fraud prevention can be

achieved by requiring registrants to provide information that is sufficient to
provide reasonable assurance against fraud risks. 56 Further, Standards
for Internal Control in the Federal Government states that identified
program risks, including fraud risk, should guide management’s planning
and development of internal controls. 57 Given that information system
improvements with the potential to expand USCIS’s fraud mitigation
efforts will not take effect until 2017 at the earliest and that gaps exist in
USCIS’s other information collection efforts, developing a strategy to
capitalize on existing opportunities for collecting additional information
would better position USCIS to identify and mitigate potential fraud.

USCIS Has Made Efforts USCIS has recognized that the connection between national security
to Enhance Its Statutory concerns and specific EB-5 Program eligibility criteria may, at times, be
tenuous. Specifically, USCIS has determined that it cannot terminate
Authority to Help Mitigate
participation of regional centers, or deny immigrant investor petitions or
Risks Associated with the regional center applications solely on the basis of national security
EB-5 Program concerns, unless such concerns lead an adjudicator to determine that the
petitioner or applicant does not meet one or more EB-5 Program eligibility

56
GAO-06-954T.
57
GAO/AIMD-00-21.3.1.

Page 31 GAO-15-696 Immigrant Investor Program

criteria by a preponderance of evidence. 58 The preponderance of
evidence standard requires petitioners or applicants to establish eligibility
by demonstrating that it is more likely than not that they meet all EB-5
Program requirements. 59 USCIS’s authority with respect to fraud or
misrepresentation identified by an adjudicator in the petition or application
process is less uncertain than that for national security concerns in that
petitioners or applicants must show that their claims for EB-5 Program
eligibility are more likely true than not (i.e., probably true), and potential
fraud would generally bear on the truthfulness of petitioner or applicant
claims. USCIS officials noted that USCIS has authority to deny a Form I-
485 application based on fraud, misrepresentation, and national security
concerns as these constitute grounds of inadmissibility that would render
an immigrant investor ineligible for adjustment to conditional permanent
residency. 60

According to FDNS officials, some regional centers continue to operate

despite concerns of fraud or associations with criminal activity. For
example, FDNS officials cited a case involving a regional center principal
against whom a federal grand jury returned a multiple count wire fraud
indictment, and who was, at the time, in custody in a foreign country.

58
Under 8 C.F.R. § 103.2(b)(18), USCIS has the authority to withhold adjudication of a
visa petition or other application if it determines that there is an ongoing investigation
involving eligibility, in connection with the benefit request, and disclosure of information to
the applicant or petitioner concerning the adjudication would prejudice the investigation.
59
In administrative immigration proceedings (including visa petition proceedings), the
petitioner or applicant bears the burden of establishing that he or she is eligible for the
benefit sought based on a preponderance of the evidence, except where a different
standard is specified by law. Matter of Chawathe, 25 I. & N. Dec. 369, 375-76 (A.A.O.
2010); Matter of Martinez-Gonzalez, 21 I. & N. Dec. 3329, 1997 WL 602544, at *1 (B.I.A.
1997); Matter of Soo Hoo, 11 I. & N. Dec. 151, 152 (B.I.A. 1965). The “preponderance of
the evidence” standard requires that the applicant demonstrate his or her eligibility claims
to be more likely than not, or probably true. See Matter of Chawathe, 25 I. & N. Dec. at
376. “The ‘preponderance of the evidence’ standard requires that the evidence
demonstrate that the applicant’s claim is ‘probably true,’ where the determination of ‘truth’
is made based on the factual circumstances of each individual case.” Id. (citing Matter of
E-M-, 20 I. & N. Dec. 77, 79-80 (B.I.A. 1989)). The statute and regulations governing the
EB-5 Program do not specify a different standard; therefore, EB-5 petitioners or applicants
must establish eligibility for participation in the EB-5 Program based on a preponderance
of evidence.
60
For grounds of inadmissibility based on fraud, misrepresentation, and national security
concerns, see 8 U.S.C. § 1182(a)(3), (6)(C)(i). Under 8 U.S.C. § 1255(a), an alien is
eligible for adjustment of status where, among other things, he or she is eligible to receive
an immigrant visa and is admissible to the United States.

Page 32 GAO-15-696 Immigrant Investor Program

According to FDNS officials, USCIS terminated this regional center
because the principal failed to file the Form I-924A application
supplement as required by regulation rather than, for example, on
grounds related to the charges upon which the regional center principal
was indicted.

USCIS officials noted that if fraud or national security concerns either

alone or in combination with other factors lead an adjudicator to
determine, based on a preponderance of the evidence, that a regional
center is failing to fulfill the statutory requirement of promoting economic
growth, adjudicators can under those circumstances terminate the
regional center or deny an application for regional center designation.
However, USCIS believes that unless a connection can be made that the
regional center is failing to promote economic growth, it does not have the
authority to terminate a regional center. 61 According to USCIS officials,
the lack of authority to terminate a regional center or deny an immigrant
investor petition or regional center application based solely on national
security or fraud concerns is a major challenge and requires a significant
amount of time to link findings to the statutory criteria.

In June 2012, USCIS provided technical assistance to congressional

committees concerning legislation that would make changes to the EB-5
Program statute. This technical assistance proposed, among other things,
giving the Secretary of Homeland Security discretionary authority to deny
or revoke EB-5 Program petitions, regional center applications, and other
petitions or benefits flowing from those petitions or benefits, when
deemed necessary in the national interest or for other good cause.
USCIS also provided technical assistance on the American Job Creation
and Investment Promotion Reform Act of 2015, S.1501, which was
introduced in the Senate in June 2015. 62 This bill would provide a 5-year
reauthorization of the Regional Center Program through September 30,
2020, and would make substantial changes to the EB-5 Program statutory
framework. For example, the proposed bill brings the Regional Center
Program under the Immigration and Nationality Act (INA), as amended;

61
Under 8 C.F.R. § 204.6(m)(6), a regional center may also be terminated where it fails to
submit required information.
62
In addition to S.1501, in January 2015 the American Entrepreneurship and Investment
Act of 2015, H.R.616, was introduced in the House of Representatives, and would provide
a permanent authorization of the regional center program.

Page 33 GAO-15-696 Immigrant Investor Program

 explicitly requires that fraud, misrepresentation, criminal misuse, and
threats to public safety or national security be considered in establishing
eligibility criteria for regional centers; and states that the Secretary of
DHS shall deny or revoke approval of a regional center business plan
application with any particular investment or business arrangement that,
in his or her unreviewable discretion, presents a public safety or national
security threat or significant risk of criminal misuse, fraud, or abuse.

USCIS Has Increased

Its Capacity for
Verifying Job Creation
but Does Not Use a
Valid and Reliable
Methodology for
Reporting Program
Outcomes and
Economic Benefits
USCIS Strengthened Its USCIS has taken action to increase its capacity to verify job creation in
Workforce, Guidance, response to past GAO and DHS OIG reports that found that USCIS did
not have staff with the expertise to verify job creation estimates and that
Training, and Process for
the agencies’ methodologies for verifying such estimates were not
Verifying Job Creation rigorous. 63 Specifically, in April 2005, GAO reported that USCIS
adjudicators lacked the expertise to adjudicate EB-5 Program petitions,
and were not sufficiently trained to properly adjudicate EB-5 Program
petitions because of the complex business and tax issues involved. 64
More recently, in December 2013, the DHS OIG reported that USCIS
lacked meaningful economic expertise to conduct independent and
thorough reviews of economic models used by investors to estimate

63
OIG-14-19 and GAO-05-256.
64
USCIS officials subsequently changed the EB-5 training curriculum to provide
adjudicators with training that addressed the complexities of EB-5 applications and helped
to ensure that appropriate decisions would be rendered in accordance with applicable
statutes, regulations, and agency policy.

Page 34 GAO-15-696 Immigrant Investor Program

indirect job creation for regional center projects, and recommended that
USCIS coordinate with other federal agencies to provide expertise in the
adjudication process.

USCIS took action over time to increase the size and expertise of its
workforce, provide clarifying guidance and training, and revise its process
for assigning petitions and applications for adjudication. For example, in
2014, USCIS began increasing its staffing from 9 adjudicators to 58
adjudicator officers and 22 economists as of June 2015, and in May 2013,
issued a policy memorandum clarifying existing guidance to help ensure
consistency in the adjudication of petitions and to provide greater
transparency for the EB-5 Program stakeholder community, according to
IPO officials. In addition, USCIS improved its training curriculum to better
ensure consistency and compliance with applicable statutes, regulations,
and agency policy, including an update in 2014 of the new employee EB-
5 training program and the establishment of an ongoing training focusing
on recurring issues and petition cases that are novel in nature. IPO
program managers stated that USCIS revised its application assignment
process in 2015 to help improve the consistency and efficiency of its
adjudication of large-scale, multi-investor regional center projects. Under
the new approach, the same economist is assigned to review the
business plan, economic analysis, and organizational documents for each
project involving multiple regional center investors. We interviewed 8 EB-
5 Program economists who reported that they were satisfied with the
guidance and that the training provided them with a high degree of
confidence in adjudicating EB-5 petitions and applications. 65

Further, IPO program managers reported that USCIS has provided its
economists with access to data from the RIMS II economic model since
fiscal year 2013 that increased their capacity to verify job creation
estimates reported by immigrant investors for investments in regional
center projects. IPO program managers estimated that as of fiscal year
2015, about 95 percent of EB-5 Program petitioners used economic
models to estimate job creation, with about 90 percent of those petitioners

65
In regard to guidance, we asked “What is your level of satisfaction with guidance and
standard operating procedures/checklist USCIS provided?” The 8 economists we
interviewed responded “very satisfied” (5), “somewhat satisfied” (2), and “neither satisfied
nor dissatisfied” (1). In regard to training, we asked “To what degree has the training you
received sufficiently provided you with all the information and resources you need to
adjudicate EB-5 applications?” The 8 economists we interviewed responded “to a very
high degree” (5) and “to a high degree” (3).

Page 35 GAO-15-696 Immigrant Investor Program

using RIMS II. 66 The RIMS II model is widely used across the public and
private sectors and is considered to be valid to verify estimates of indirect
and induced jobs reported for investments in regional center projects,
according to USCIS and Commerce economists, as well as industry and
academic experts. 67 Indirect jobs include jobs that are not directly created
by the new commercial enterprise, but may result from increased
employment in other businesses that supply goods and services to the
regional center business as well as induced jobs created from workers’
spending of increased earnings on consumer goods and services. 68
Under the law establishing the Regional Center Program, regional center
investors are permitted to meet the job creation requirement using
reasonable methodologies to estimate the number of jobs created,
including jobs estimated to have been created indirectly through revenues
generated from increased exports, improved regional productivity, job
creation, or increased domestic capital investment. 69 Further, the EB-5
Program regulation permits regional center investors to estimate direct
and indirect jobs for regional center projects using reasonable
methodologies, including multiplier tables that are based on input-output
economic models—coefficients that when used in conjunction with inputs

66
The remaining 10 percent of program applicants who used economic models used other
standard commercially developed input-output models such as Impact Analysis for
Planning (IMPLAN), Regional Dynamic Models (REDYN), and Regional Economic
Models, Inc. (REMI).
67
In the public sector, for example, the Department of Defense uses RIMS II to estimate
the regional impacts of military base closings, and state departments of transportation use
RIMS II to estimate the regional impacts of airport construction and expansion. In the
private sector, analysts, consultants, and economic development practitioners use RIMS II
to estimate the regional impacts of a variety of projects, such as the development of
theme parks and shopping malls.
68
IPO officials stated that the sum of the indirect and induced jobs from an input-output
model is defined as “indirect jobs”.
69
See Pub. L. No. 102-395, tit. VI, § 610(c), 106 Stat. at 1874 (codified as amended as a
note under 8 U.S.C. § 1153). Under 8 C.F.R. § 204.6(m)(7), an alien seeking an immigrant
visa as an alien entrepreneur under the regional center program must demonstrate that
his or her qualifying investment is within an approved regional center and that such
investment will create jobs indirectly through revenues generated from increased exports
resulting from the new commercial enterprise. To show that 10 or more jobs are actually
created indirectly by the business, reasonable methodologies may be used, such as
multiplier tables, feasibility studies, analyses of foreign and domestic markets for the
goods or services to be exported, and other economically or statistically valid forecasting
devices that indicate the likelihood that the business will result in increased employment.
See 8 C.F.R. § 204.6(m)(7)(ii).

Page 36 GAO-15-696 Immigrant Investor Program

such as a specified investment amount, can estimate economic outputs,
such as job creation. 70 USCIS economists said that the use of the RIMS II
multipliers in combination with other information, including the eligible
project investment amount, the code that identifies the project industry,
and project location, has provided them with the necessary capacity to
better ensure investors meet program requirements for job creation. We
conducted a technical review of articles and other documents on the
model as well as interviewed subject matter experts, including industry
and academic researchers who published studies of the EB-5 Program
structure, Commerce officials with the Bureau of Economic Analysis who
administer the RIMS II model, and USCIS IPO officials who review the
various economic models used by EB-5 investors. On the basis of our
reviews and interviews, we determined that IPO’s use of RIMSII data is a
reasonable methodology to verify job creation as permitted in law and
program regulation.

However, use of RIMS II data alone does not provide USCIS with the
capacity to determine the location of jobs created, such as the number of
jobs created in targeted employment areas 71 that most immigrant
investors use to qualify for a lower investment amount. 72 USCIS’s May
2013 policy memorandum notes that Congress expressly provided for a
reduced investment amount in a rural area or an area of high
unemployment in order to spur immigrants to invest in new commercial
enterprises that are principally doing business in—and creating jobs in—
areas of greatest need. IPO program managers stated that approximately
90 percent of immigrant investors qualify for a reduced investment

70
See 8 C.F.R. § 204.6(j)(4)(iii), (m)(3)(v).
71
A targeted employment area is defined as a rural area or an area that has experienced
unemployment of at least 150 percent of the national average rate. A rural area is defined
as any area not within either a metropolitan statistical area (as defined by the Office of
Management and Budget) or the outer boundary of any city or town having a population of
20,000 or more (based on the most recent decennial census of the United States). See 8
U.S.C. § 1153(b)(5)(B)(ii), (iii); 8 C.F.R. § 204.6(e), (j)(6)(ii). A technical limitation of input-
output models as a whole is that they cannot predict when and where indirect jobs will be
created.
72
8 U.S.C. § 1153(b)(5)(B)(i) (a certain number of the EB-5 visas made available each
fiscal year are reserved for qualified immigrants who invest in a new commercial
enterprise that will create employment in a targeted employment area), (C)(ii) (a reduced
capital requirement may be set for investments made in targeted employment areas); 8
C.F.R. § 204.6(f) (amount of capital necessary to make a qualifying investment in a
targeted employment area is $500,000).

Page 37 GAO-15-696 Immigrant Investor Program

 amount—$500,000 instead of $1 million—to participate in the EB-5
Program because they are claiming investment in a commercial
enterprise that will create employment in a targeted employment area. 73
The remaining 10 percent of immigrant investors pay twice that amount to
participate in projects that are not limited to these locations. The IPO
Economics Division Chief said that USCIS has not identified a need to
verify the creation of jobs in a targeted employment area because the law
permits regional center investors to use reasonable methodologies such
as input-output models that do not have this capacity, and because
program regulation and policy address the issue by requiring that capital
be invested in a job-creating enterprise that is principally doing business
in a targeted employment area. 74 IPO economists we interviewed also
said that given the relative ease of proving job creation through economic
modeling compared with documentation requirements to prove creation of
direct jobs, immigrant investors generally claim indirect jobs, rather than
direct jobs, to qualify for the program.

USCIS’s Methodology for USCIS’s methodology for reporting EB-5 Program outcomes and
Reporting Program economic benefits is not valid and reliable because it may overstate or
understate results in certain instances as it is based on the minimum
Outcomes Is Not Valid and
program requirements for job creation and investment instead of the
Reliable in Certain number of jobs and actual investment amounts investors report on EB-5
Instances Program forms. To estimate job creation, USCIS multiplies the number of
immigrant investors who have successfully completed the program with
an approved Form I-829, by 10—the minimum job creation requirement
per immigrant investor. To estimate overall investment in the economy,
the agency multiplies the number of immigrant investors approved to
participate in the program with an approved Form I-526, by $500,000—
the minimum investment amount, assuming all investments were made
for projects in a targeted employment area. Accordingly, USCIS reported
that from program inception in fiscal year 1990 through fiscal year 2014,
the EB-5 Program has created a minimum of 73,730 jobs and more than
$11.2 billion in investments.

73
See 8 U.S.C. § 1153(b)(5)(B)(i), (C)(ii); 8 C.F.R. § 204.6(f).
74
USCIS’s May 30, 2013, policy memorandum states that for the purpose of the EB-5
Program, a new commercial enterprise is “principally doing business” in the location where
it regularly, systematically, and continuously provides goods or services that support job
creation.

Page 38 GAO-15-696 Immigrant Investor Program

Our review and past GAO and DHS OIG audits of the program have
pointed out the limitations of this methodology to report reliable program
outcomes in that the data can be understated or overstated in certain
instances. 75 For example, USCIS officials stated that the majority of
immigrant investors reported creating more than the 10-job minimum, and
10 percent of immigrant investors pay $1 million instead of $500,000
because they invest in projects outside of a targeted employment area.
Estimating economic outcomes using the minimum program requirements
in these circumstances would lead to an underestimate of the program’s
benefits. For example, we reviewed one project with about 450 immigrant
investors that created over 10,500 jobs, or about 23 jobs per immigrant
investor, while USCIS counted only the 10-job minimum per immigrant
investor (totaling 4,500), a difference of 6,000 jobs. Additionally,
according to DHS’s 2013 Yearbook of Immigration Statistics, about 32
immigrant investors paid $1 million instead of $500,000 into the EB-5
Program in fiscal year 2013, a total difference of $16 million not counted
by USCIS. 76

Conversely, USCIS’s methodology may, in certain instances, overstate

some economic benefits derived from the EB-5 Program. For example,
the methodology assumes that all immigrant investors approved for the
program will invest the required amount of funds, and that these funds will
be fully spent on the project. According to our analysis of EB-5 Program
data, there are fewer immigrant investors who successfully complete the
program than were approved for program participation, and the actual
amount invested and spent in these circumstances is unknown. For
example, our analysis showed that approximately 26 percent of all EB-5
Program immigrant investors who entered the program from its inception

75
The DHS OIG reported in 2013 that USCIS officials estimated the benefits of the EB-5
Program assuming the minimum requirements of the program had been met, and could
therefore only speculate about how foreign investments affect the U.S. economy. See
OIG-14-19. We reported in 2005 that USCIS officials “did not have reliable data indicating
the total number of jobs created solely as a result of investments by EB-5 participants”.
See GAO-05-256.
76
These immigration data are published in the Yearbook of Immigration Statistics by the
Office of Immigration Statistics in the Policy Directorate of the Department of Homeland
Security. According to the yearbook, statistical data on immigration have been published
annually by the U.S. government since the 1890s. Data on immigrant investors is included
under the lawful permanent resident section of the yearbook. These data were obtained
from USCIS’s Computer Linked Application Information Management System (CLAIMS)
and USCIS ELIS.

Page 39 GAO-15-696 Immigrant Investor Program

year through fiscal year 2011 may not have completed the process to
show funds spent and jobs created with an approved I-829 as of the fiscal
year ending in 2014. 77

USCIS collects more complete information on EB-5 Program forms, but

does not track or analyze this information to more accurately report
program outcomes. Specifically, immigrant investors are required to
report (and USCIS staff are to verify) the amount of their initial investment
on the Form I-526, and to report the number of new jobs created (or
expected to be created within a reasonable time) by their investment on
the Form I-829. However, USCIS officials said that they report EB-5
Program outcomes using minimum program requirements because these
are the required economic benefits stated in law, and that they are not
statutorily required to develop a more comprehensive assessment of
overall program benefits.

The Project Management Institute’s The Standard for Program

Management states that programs need to establish monitoring and
controlling activities to report on program performance. 78 This includes
collecting, measuring, and disseminating performance information so
program management has the data necessary to report on the program’s
state and identify areas in need of improvement. Additionally, GAO’s
Standards for Internal Control in the Federal Government states that
activities need to be established to monitor performance, managers need

77
Specifically, we compared the number of immigrant investors who filed an approved
Form I-526 to participate in the program from program inception through fiscal year 2011
(approximately 10,000), with the number of immigrant investors who filed an approved
Form I-829 through fiscal year 2014 to report successful completion of the program
requirements (approximately 7,400). The remaining immigrant investors fall into an
aggregated category made up of investors who chose not to file a Form I-829, had their
petition denied, or a decision on their petition was pending (approximately 2,600).
Additionally, according to USCIS officials, this category could include immigrant investors
who are not yet eligible to file a Form I-829 because investors are eligible to file only within
90 days of the end of the 2-year period of their conditional resident status, which begins
only after they adjust status or are admitted to the United States with an EB-5 visa, and
not upon approval of an initial I-526 petition. We counted approved Form I-526 petitions
through the end of fiscal year 2011 to account for (1) Form I-485 (adjustment of status)
and DS-260 (immigrant visa) application processing times, (2) the fact that an immigrant
investor does not become eligible to file a Form I-829 petition until 90 days before the
expiration of his or her 2-year conditional residency period, and (3) Form I-829 petition-
processing time.
78
Project Management Institute, The Standard for Program Management.

Page 40 GAO-15-696 Immigrant Investor Program

to compare actual performance against planned or expected results, and
controls should aim at validating the propriety and integrity of
performance measures. 79 Further, transactions should be promptly
recorded to maintain their relevance and value to management in
controlling operations and making decisions throughout the entire process
of an event from initiation through final classification. Tracking and
reporting the investment and job creation data it collects on the Forms I-
526 and I-829 would better position USCIS to more accurately assess
and report on the EB-5 Program’s outcomes, in line with the program’s
mission to bring new investment capital and jobs into the country and to
help Congress and others better evaluate the benefits of the program.

Views differ on whether USCIS methodology, as defined in EB-5 Program

regulations, should allow immigrant investors to claim all jobs created by
projects with EB-5 and non-EB-5 investors. 80 We and the DHS OIG have
previously raised questions about this practice because immigrant
investors are to create 10 jobs based on their investment in the new
commercial enterprise, and therefore including non-EB-5 Program
investments in the enterprise can inflate the job creation benefit of the
immigrant investment. 81 The IPO Economics Division Chief and IPO
program managers said that while they do not have resources to verify
this fact for each project, it is possible that a regional center project would
not occur or be viable without EB-5 Program investment funds, which
provide an alternative source of capital for projects that might not be able
to attract or afford investments from other foreign or U.S. sources. In the
final rule implementing section 121 of the Immigration Act of 1990, legacy
Immigration and Naturalization Service (INS) contemplated multiple
investor scenarios in promulgating EB-5 regulations, and on the basis of

79
GAO/AIMD-00-21.3.1.
80
Under 8 C.F.R. § 204.6(g)(1), the establishment of a new commercial enterprise may be
used as the basis of a petition for classification as an alien entrepreneur even though
there are several owners of the enterprise, including persons not seeking classification
under INA § 203(b)(5), 8 U.S.C. § 1153(b)(5). The total number of full-time positions
created for qualifying employees shall be allocated solely to those alien entrepreneurs
who have used the establishment of the new commercial enterprise as the basis of a
petition on Form I-526. No allocation need be made among persons not seeking
classification under INA § 203(b)(5) or among non-natural persons (e.g., corporations),
either foreign or domestic. See 8 C.F.R. § 204.6(g)(2).
81
The DHS OIG (14-19) and GAO-05-256 reported that allowing investors to take credit
for jobs created with non-EB-5 funds makes it impossible for USCIS to determine whether
the funds actually created U.S. jobs.

Page 41 GAO-15-696 Immigrant Investor Program

comments in response to the proposed rule, permitted the practice of
allocating only to immigrant investors the jobs created as a result of the
establishment of a new commercial enterprise by multiple investors, some
of whom may not be seeking EB-5 visas. 82

Additionally, according to the IPO Economic Division Chief, his analysis

showed that projects in many industries could not generate the required
number of jobs based on the minimum EB-5 investment alone, and
otherwise would not be able to use and benefit from the EB-5 Program. 83
Specifically, his analysis showed that about 160 industries, including
manufacturing, are unable to create the required 10 jobs per investor
based solely on the EB-5 Program minimum investment of $500,000. 84
According to IPO officials, without the practice of allowing immigrant
investors to claim jobs generated by investments from other sources, a
higher investment amount would be required for investors to meet the job
creation requirements in these industries and qualify for removal of their
permanent residency conditions.

Our review of IPO documentation for one regional center project showed
that many immigrant investors would not have qualified to remove
conditions for lawful permanent residency without the practice of allowing
them to claim jobs created by all investments in the commercial
enterprise. In one case, about 450 immigrant investors contributed 30
percent (approximately $225 million) of the capital toward a nearly $750
million total investment in a regional center project, and all 450 immigrant
investors were able to achieve lawful permanent residency by claiming
100 percent of the nearly 10,500 jobs created. 85 However, if the jobs were
distributed on a pro rata basis, only 315 of the 450 investors would have

82
56 Fed. Reg. at 60,903.
83
GAO did not independently corroborate the outcomes of this analysis.
84
For example, IPO’s Economics Division Chief said that an investment of $500,000 in the
pharmaceutical industry yields about 5 jobs per investor, compared with 10 to 12 jobs per
investor in larger-scale construction projects.
85
Economic modeling for the project showed that 10,500 jobs were created by the total
project spending. All 10,500 jobs were distributed on a pro rata basis such that each of the
450 investors was allocated 23 jobs each. This represents a “job cushion” of
approximately 130 percent over the USCIS-required 10 jobs per investor. According to an
IPO economist we interviewed, most projects build in a job cushion to ensure that all
investors meet the job creation requirements and to increase the likelihood that investors
achieve approval for lawful permanent residency.

Page 42 GAO-15-696 Immigrant Investor Program

 met the job creation criteria necessary to achieve lawful permanent
residency. 86

USCIS-Commissioned USCIS has commissioned Commerce’s Economics and Statistics

Study to Assess Overall Administration (ESA) to conduct a study of the economic impact of the
EB-5 Program. According to the IPO Economics Division Chief, USCIS
Program Benefits
undertook this action in response to a December 2013 DHS OIG
Addresses Some Past recommendation that USCIS conduct a comprehensive review of the EB-
Limitations, but Not the 5 Program to demonstrate how investor funds have stimulated the U.S.
Costs, of the EB-5 economy. As of June 2015, USCIS and ESA had not yet finalized the
Program methodology for the new study; however, ESA and USCIS approved a
statement of work in November 2014 that outlines a preliminary
methodology and study steps that would address some, but not all,
shortcomings of prior studies of the overall EB-5 Program benefits. Past
studies, for example, included small sample sizes that were not
representative of the total population and may have overstated economic
impact because of the use of national, instead of regional, multipliers in
the analysis. ESA’s study is to assess the value of the EB-5 Program
beginning at the EB-5 project level for all projects completed (or at least
lasting 2 years) for fiscal years 2012 and 2013. According to Commerce
officials, the study findings will include (1) the immigrant investor
investments as well as the non EB-5 investments used in each job
creation estimate; (2) the number of jobs created as well as the value of
the jobs from each project, citing the geographic area for which the job
creation was claimed in the economic impact assessment; and (3) the
likely household spending of immigrant investor families while living in the
United States. Commerce officials indicated that for the study, all projects
within a state will be added to derive a state total and then the state totals
will be aggregated to determine a national total. ESA will review a
majority of the economic impact assessments that led to the job creation
estimates for each of the projects to determine whether the models used
for estimating job creation were applied correctly. ESA also plans to use
information submitted by immigrant investors on EB-5 Program forms and

86
Our analysis is based on the assumption that the 30 percent of EB-5 investments out of
total project funding contributed to only 30 percent of the total jobs created. Therefore, the
investors would receive credit for creating 3,150, which would not meet the job creation
requirements for all 450 investors that contributed to the project. Instead, only 315
investors would qualify for permanent residency (3,150 jobs divided by 10 jobs required
for each investor).

Page 43 GAO-15-696 Immigrant Investor Program

entered into the Intranet Computer Linked Application Information
Management System (iCLAIMS) to more specifically and reliably report
program benefits. USCIS has provided ESA with data from the iCLAIMS
database, including information from forms immigrant investors and
regional centers use to meet program participation requirements—Forms
I-526, I-829, I-924, and I-924A—which, according to an ESA official, ESA
is beginning to examine in greater detail. 87 ESA will review DHS’s data
collection and reporting system prior to using the iCLAIMS data to
determine the value of the program. USCIS officials said that ESA plans
to finalize the study methodology once it completes a review of the
program data submitted by IPO, and to issue a final report in November
2015.

However, the ESA study is not intended to address the program’s costs,
which are important for assessing a program’s net economic impact. Both
USCIS and ESA officials confirmed the study will be an economic
valuation, which, unlike an evaluation, considers only the benefits of
economic activity and does not assess or discuss the program costs. The
IPO Economic Division Chief said that he consulted with ESA about
including program costs in the study, and decided that the study will not
include the program’s costs primarily for two reasons. First, academic
research suggests that such high-income/net worth individuals who
USCIS assumes participate in the EB-5 Program generally contribute far
more in taxes (income and consumption) than they receive in social
benefits funded from those taxes. 88 Second, on an aggregate level, the
costs of a maximum 10,000 EB-5 visas in a population of 316 million
persons would be relatively insignificant, difficult—if not impossible—to
aggregate on an individual level—and would be subject to the variability
in that individual’s place of residence, tax structure, and the level and
mechanisms of social support that person would be likely (and eligible) to
receive, all of which are far beyond the abilities of the data that IPO

87
According to USCIS, iCLAIMS is its dedicated EB-5 database. IPO’s data entry group
inputs data from Forms I-924 and I-924A into iCLAIMS, which are then linked to related
Forms I-526 and I-829. iCLAIMS data are also reviewed by EB-5 adjudicators to ensure
accuracy.
88
Additionally, the level and mechanisms of the most prevalent forms of social support
(the transfers made through Social Security payments and various forms of income
assistance) in the United States are inversely related to income, and since incomes for an
accredited investor are in, at minimum, the top 5 percent of incomes in the United States,
it is unlikely that they receive any form of social assistance.

Page 44 GAO-15-696 Immigrant Investor Program

 currently collects to support. USCIS officials said that for these reasons,
the costs to gather the information may not justify the investment.

The Office of Management and Budget Circular A-94 Revised, Guidelines

and Discount Rates for Benefit-Cost Analysis of Federal Programs, which
applies to all analyses used to support government decisions to initiate,
renew, or expand programs or projects that would result in a series of
measurable benefits or costs extending for 3 or more years into the
future, identifies actions agencies can take in cases where costs cannot
be quantified when measuring the impact of a program. 89 Specifically,
OMB Circular A-94 provides that in analyses where not all benefits or
costs can be assigned a monetary value, a comprehensive enumeration
of the different types of benefits and costs can help identify the full range
of program effects. For example, DHS costs to track and remove
immigrant investors (and their families) from the United States who do not
successfully complete the program, and costs to social programs such as
Medicaid, Medicare, and Social Security may be associated with the
program but difficult to quantify. Ensuring that the ESA study includes a
discussion of costs that should be considered but cannot be quantified for
the program would provide Congress and other stakeholders with more
information on the overall value of the program.

The EB-5 Program seeks to stimulate the economy by promoting job

Conclusions creation and encouraging capital investment by foreign investors in the
United States. However, these features of the program that can provide
economic benefit to the United States can also create unique fraud and
national security risks that must be identified and addressed. Planning to
conduct risk assessments on a more regular basis would better position
USCIS to identify, evaluate, and address future and changing risks to the
program. This may be of particular importance as USCIS is unable to
comprehensively identify and address fraud trends across the program
because of its reliance on paper-based documentation and because it
faces certain limitations with using available data and with collecting
additional data on EB-5 immigrant investors or investments. Developing a
strategy to expand its data collection efforts, such as interviewing
investors who apply to remove conditions on their permanent resident

89
OMB Circular No. A-94 Revised, at PAGE 4.

Page 45 GAO-15-696 Immigrant Investor Program

 status and requesting additional information on applicant and petitioner
forms, could better position USCIS to address these limitations.

USCIS’s ability to apply a valid and reliable methodology for reporting EB-
5 Program outcomes and economic benefits is important for program
accountability and to provide the public and Congress with more complete
information to evaluate the program and make reauthorization decisions.
Tracking and using more comprehensive information it collects on project
investments and job creation on the Forms I-526 and I-829 submitted by
immigrant investors and verified by USCIS would enable USCIS to more
reliably report on EB-5 Program outcomes and economic benefits.
Additionally, taking steps to ensure that the valuation it commissioned
Commerce to conduct includes a discussion of the types of costs that
should be considered, but could not be quantified by the study, would
provide Congress and other stakeholders with more comprehensive
information on the overall economic benefits of the program.

To strengthen USCIS’s EB-5 Program fraud prevention, detection, and

Recommendations for mitigation capabilities, and to more accurately and comprehensively
Executive Action assess and report program outcomes and the overall economic benefits
of the program, we recommend that the Director of USCIS take the
following four actions:

• plan and conduct regular future fraud risk assessments of the EB-5
Program;
• develop a strategy to expand information collection, including
considering the increased use of interviews at the I-829 phase as well
as requiring the additional reporting of information in applicant and
petitioner forms;
• track and report data that immigrant investors report, and the agency
verifies on its program forms for total investments and jobs created
through the EB-5 Program; and
• include a discussion of the types and reasons any relevant program
costs were excluded from the Commerce study of the EB-5 Program.

We provided a draft of this report to Commerce, DHS, DOJ, SEC, and

Agency Comments State for their review and comment. DHS provided written comments,
and our Evaluation which are reproduced in appendix I, and Commerce, DOJ, SEC, and
State did not provide written comments. In its comments, DHS concurred
with the four recommendations and described actions under way or
planned to address them. Commerce and DHS provided technical
comments, which we incorporated as appropriate.

Page 46 GAO-15-696 Immigrant Investor Program

With regard to the first recommendation, that USCIS plan and conduct
regular future fraud risk assessments of the EB-5 Program, DHS
concurred, stating that the EB-5 Branch of USCIS’s FDNS will continue to
conduct a minimum of one fraud, national security, or intelligence
assessment on an aspect of the program annually, as it has done since
2012. DHS further requested that GAO consider this recommendation
resolved and closed. While we believe that planning to continue
conducting a minimum of one assessment on an aspect of the program
annually is a positive step, to fully address the intent of our
recommendation, USCIS needs to conduct at least one review, as
planned. Thus, we continue to consider this recommendation open.

With regard to the second recommendation, that USCIS develop a

strategy to expand information collection, including considering the
increased use of interviews at the I-829 phase as well as requiring the
additional reporting of information in applicant and petitioner forms, DHS
concurred and estimated that actions to develop such a strategy would be
completed by September 30, 2016. Upon completion of the strategy,
these actions should address the intent of the recommendation to
strengthen USCIS’s ability to prevent, detect, and mitigate fraud in the
EB-5 Program.

With regard to the third recommendation, that USCIS track and report
data that immigrant investors report, and the agency verifies on its
program forms for total investments and jobs created through the EB-5
Program, DHS concurred and estimated that a plan to collect and
aggregate additional data, including revisions to USCIS data systems and
processes, would be completed by September 30, 2016. When USCIS
implements this plan, this action should address the intent of the
recommendation to more comprehensively assess and report program
outcomes of the EB-5 Program.

With regard to the fourth recommendation, that USCIS include a

discussion of the types and reasons any relevant program costs were
excluded from the Commerce study of the EB-5 Program, DHS concurred
and said that USCIS IPO will recommend to Commerce that a description
of potential costs not assessed as a part of the study be included when
the study is published later this year. Should Commerce include such a
discussion of relevant program costs in its study that USCIS estimates
will be completed November 30, 2015, this action should address the
intent of our recommendation to more comprehensively assess and report
the overall economic benefits of the EB-5 Program.

Page 47 GAO-15-696 Immigrant Investor Program

We are sending copies of this report to interested congressional
committees; the Secretaries of Commerce, Homeland Security, and
State; the Attorney General of the United States; as well as the U.S.
Securities and Exchange Commission Chair. In addition, the report is
available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact
Rebecca Gambler at (202) 512-8777 or [email protected] or Seto
Bagdoyan at (202) 512-6722 or [email protected]. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. Key contributors to this report are listed in
appendix II.

Rebecca Gambler
Director, Homeland Security and Justice

Seto J. Bagdoyan
Director, Forensic Audits and Investigative Service

Page 48 GAO-15-696 Immigrant Investor Program

List of Requesters

The Honorable Charles E. Grassley

Chairman
The Honorable Patrick J. Leahy
Ranking Member
Committee on the Judiciary
United States Senate

The Honorable Bob Corker

Chairman
Committee on Foreign Relations
United States Senate

The Honorable Ron Johnson

Chairman
The Honorable Thomas R. Carper
Ranking Member
Committee on Homeland Security
and Governmental Affairs
United States Senate

The Honorable Rob Portman

Chairman
Permanent Subcommittee on Investigations
Committee on Homeland Security
and Governmental Affairs
United States Senate

The Honorable Charles E. Schumer

Ranking Member
Subcommittee on Immigration and the National Interest
Committee on the Judiciary
United States Senate

Page 49 GAO-15-696 Immigrant Investor Program

Appendix I: Comments from the Department
Appendix I: Comments from the Department of
Homeland Security

of Homeland Security

Page 50 GAO-15-696 Immigrant Investor Program

Appendix I: Comments from the Department of
Homeland Security

Page 51 GAO-15-696 Immigrant Investor Program

Appendix II: GAO Contacts and Staff
Appendix II: GAO Contacts and Staff
Acknowledgments

Acknowledgments

Rebecca Gambler at (202) 512-8777 or [email protected], or Seto

GAO Contacts Bagdoyan at (202) 512-6722 or [email protected].

In addition to the contacts named above, Cindy Ayers, Joah Iannotta,

Staff David Alexander, Christopher Hayes, John Karikari, Andrew Kurtzman,
Acknowledgments Natalie Maddox, Jan Montgomery, Jon Najmi, Brynn Rovito, Edith Sohna,
and Nick Weeks made key contributions to this report.

(441262)
Page 52 GAO-15-696 Immigrant Investor Program
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