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Feds Crack Down on EB-5 Visa Fraud

September 23, 2019

The United States is becoming a cosmopolitan country. This is more true today than at any other point in history. We can find various pieces of evidence confirming this case. We can see this in the proportion of our foreign born population. Other evidence is the increasing number of foreign investors seeking U.S. residence. The U.S. has capitalized on this desire to reside in America through its EB-5 Visa program. The EB-5 Visa program provides an avenue toward permanent residency status (or a “green card”) for those who invest in U.S. businesses. Not surprisingly, this avenue to permanent residency has given rise to increased cases of EB-5 Visa fraud.

In this post, we will discuss the federal crackdown on EB-5 fraud. We’ll see numerous instances of serious EB-5 Visa fraud in recent years. This issue of EB-5 fraud is something our readers should be aware of. Some readers may currently be in the EB-5 program. It’s important that they be aware of the signs of fraud so that they can avoid them. Let’s first look at the basics of the EB-5 program. We’ll then discuss in detail the federal clamp down on one prominent example of EB-5 Visa fraud.

Basic Overview of the EB-5 Investor Program

The EB-5 Visa program provides foreign investors with a path toward permanent residency status in the U.S. The term “EB-5” refers to the fact that this program is an “employment-based 5th preference” Visa. In other words, it is one, among other, routes to attain a green card.

Job Stimulation

The U.S. Congress created the EB-5 investor program back in the early 1990s. It did so in an effort to stimulate job creation throough investment opportunities. The program gained popularity following the 2008 financial crisis. At that time, U.S. businesses, particularly real estate developers, were searching for new ways to generate cash. These businesses looked to foreign investors with increased energy in order to collect more capital. Chinese nationals have always figured prominently among EB-5 investors but, in recent years, they’ve made up the bulk of this group. In 2015, for example, the U.S. granted about 10,000 EB-5 Visas. Of those, Chinese nationals comprised roughly 85% of the grantees.

New Rules Coming

On November 21, 2019, a new rule will update the EB-5 program. The program will undergo a number of changes, including a change to its minimum investment requirements. On November 21, 2019, the standard minimum EB-5 investment is increasing to $1.8 million. At the same time, the minimum investment in a Targeted Employment Area (or TEA) will be $900,000. The investment must be in a U.S. domestic company which plans to create at least 10 permanent full-time jobs for U.S. workers.

Examples of EB-5 Visa Fraud

Because it’s a relatively arcane area of law, the EB-5 program has always been at a high level of risk for exploitation and outright investment scams. Since its inception, there have been numerous cases involving EB-5 Visa fraud. These cases have resulted in millions of dollars lost for foreign investors. In May of 2017, the Justice Department initiated a series of lawsuits against a particularly reprehensible offender based in California.

California Investment Immigration Fund, LLC

The offending company was the California Investment Immigration Fund, LLC (CIIF). It was operated by Victoria Chan and her father, Tat Chan. The fund began operations in 2008. Altogether, the fund extracted nearly $50 million from at least 100 Chinese investors. Some of those Chinese investors were fugitives wanted by the Chinese government. CIIF made promises that the investors would receive green cards for their investment, but these promises were never kept. CIIF failed to follow through. It never funded any of the business ventures it claimed to be funding with the EB-5 investor funds. Some of the money has been returned to investors, but many are still seeking redress for the fiasco.

Forcible Seizure

Instead, Victoria Chan and her father purchased several luxury homes with the investor funds. Those homes were later forcibly taken by the Justice Department in an asset seizure. The seizures of property were part of the series of lawsuits against the company. The case has become one of the largest examples of EB-5 Visa fraud.

Contact MC&C for Additional Information

The lawsuits initiated against CIIF show the level of seriousness that the U.S. government takes in its stance against EB-5 Visa fraud. At Mackay, Caswell & Callahan, P.C., we make an effort to stay on top of developments in tax law and tax enforcement because it makes us more effective counselors. We work hard to give our clients the best possible tax counsel. In our practice, we’ve consulted with foreign persons subject to U.S. taxation.

We can help foreign persons who have U.S. tax debt resolve their debt burden and move forward with their financial lives. It’s important that foreign persons involved with the EB-5 investor program closely monitor their investment and be certain that there’s no indication of fraud. If you needtax counsel, reach out and we can help. Give one of our top New York City tax attorneys a call and we can assist right away.

Image credit: Paul Davidsonal

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