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December 20, 2011

Psst, you want to buy a green card? It’ll cost you $500,000

KPCC/Southern California Public Radio

A federal program, known as EB-5, was created by Congress during the recession of 1990 to offer foreigners a way to earn a green card by investing in American construction projects.

The program is so successful that applications have quadrupled in the last two years. The minimum investment in the program was set at $1 million, but if the project is in a rural area or a place where the unemployment rate is fifty percent above the national average, the minimum investment is $500,000. The program is intended to encourage more development and job growth in poor areas, but some evidence suggests that, through selective use of census statistics, state officials are using gerrymandering techniques to designate development zones as having high unemployment in areas that are actually economically flourishing.

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Related coverage...

Atlantic Yards Report, EB-5 controversy makes CA public radio show; CA rep says state doesn't bend rules

Yesterday, the Patt Morrison Show, on KPCC/Southern California Public Radio featured a segment taking off from the New York Times's coverage of how EB-5 projects in New York City stretch the rules.

The first guest on Psst, you want to buy a green card? It’ll cost you $500,000 was Times reporter Patrick McGeehan, who gave a basic summary of his article, explaining of state officials "string together census tracks" to claim projects are located in high-unemployment areas, thus allowing a more attractive minimum investment to those seeking green cards: %500,000 versus $1 million.

McGeehan used the term "little private investment banks" to describe the middlemen, formally known as regional centers, who earn both fees and the spread between the low interest the borrower is paying and the no-interest paid by those seeking green cards.

He also noted that the EB-5 program is dependent on "theoretical" job creation, based on a formula.

The program, he said, "was used quite effectively in Vermont, to build ski resorts... Now the problem is these big shiny projects... like a pro basketball arena in Brooklyn [are] stealing away the oxygen."

Actually, though the Atlantic Yards EB-5 project was pitched as an investment into the arena, does not involve a piece of the arena.

NY Observer, New York [Hearts] EB-5 Visas

The Farragut Houses, which like many city housing projects suffers from especially high unemployment, is actually included in three different EB-5 zones, including Atlantic Yards. Whether anyone in the houses is actually benefiting from the jobs is unknown. Whatever the ethics of the program, it should at the very least be helping them.

NoLandGrab: And who wants to bet that it's not?

Forbes, Job Creation Program Stretches Claims About Low-Income Neighborhoods

One example: the huge $4.9 billion Atlantic Yards project in Brooklyn. To attract financing under the EB-5 program, the developer, Forest City Ratner, has claimed the project is going up in an oddly-shaped zone that stretches more than two miles from the site and includes low-income parts of Crown Heights and Bedford-Stuyvesant. Longtime journalist and Atlantic Yards watchdog Norman Oder, author of the Atlantic Yards Report blog, has used Freedom of Information Act requests and translators to comb through piles of documents. Oder has described the developers’ supposed project area as “the Bed-Stuy boomerang,” akin to a gerrymandered political district.

Oder has written more than 100 articles on the EB-5 program and he tells me the gerrymandered districts only scratch the surface of EB-5’s many problems.

Curbed, Green Cards Go For Real Estate Cash in Visa Deals

In a bid to finance real estate projects, developers have been ferreting out the hungry, tired, and poor already in NYC to qualify for the creation of special development zones, so they can sell visas to wealthy foreign investors.

Posted by eric at December 20, 2011 12:37 PM