When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.
– Frédéric Bastiat
I’ve written about the EB-5 visa program previously, something I consider a total racket that allows wealthy foreigners to buy their way into U.S. residency while funding real estate catering to, you guessed it, wealthy Americans. It’s more or less a system by which really rich people abuse a government program simply to help out other really rich people. What a country.
This wasn’t always the case. In fact the EB-5 visa program was originally meant to connect wealthy foreigners with projects to help the less fortunate here at home. Naturally, the entire thing has been completely corrupted.
As I noted in the 2015 post, More American Cronyism – U.S. Government Selling Visas to Fund Luxury Apartment Buildings:
Merging, on paper, the affluent midtown neighborhood and the struggling one uptown placed Hudson Yards in a community with an overall high unemployment rate, positioning developer Related Cos. to gain low-cost financing from foreigners seeking green cards.
The program through which that happens, known as EB-5, enables foreign nationals to obtain U.S. permanent-resident status by putting up money for new business ventures that create American jobs. It gives ventures in high-unemployment and rural areas a special status to encourage investment. But as the program’s popularity has soared in recent years, the bulk of immigrant investment is going to projects that are located, like $20 billion Hudson Yards, in prosperous urban neighborhoods.
At least 80% of EB-5 money is going to projects that wouldn’t qualify as being in Targeted Employment Areas without “some form of gerrymandering,” estimates Michael Gibson, managing director of USAdvisors.org, which evaluates projects for foreign investors.
Increasingly, the money appears to be flowing to the flashiest projects, which the investors often see as safest, EB-5 professionals say. Among those getting EB-5 money are an office building set to host Facebook Inc. near Amazon.com Inc.’s Seattle headquarters, a boutique hotel in high-end Miami Beach, and a slim Four Seasons condo-hotel in lower Manhattan that sports a penthouse with an asking price above $60 million. In all of them, geographic districts were crafted to include higher-unemployment areas.
The Kushner Companies have been taking advantage of this program for years, and continue to do so despite Donald Trump being the current U.S. President.
As reported by The Washington Post:
Over several hours of slide shows and presentations, representatives from the Kushner family business urged Chinese citizens gathered at a Ritz-Carlton hotel to consider investing hundreds of thousands of dollars in a New Jersey luxury apartment complex that would help them secure what’s known as an investor visa.
The tagline on a brochure for the event: “Invest $500,000 and immigrate to the United States.”
And the highlight of the afternoon was Meyer, a principal for the company, who was introduced in promotional materials as Jared’s sister.
The event underscores the extent to which Kushner’s private business interests have the potential to collide with his powerful role as a top official in his father-in-law’s White House, particularly when it comes to China, where Kushner has become a crucial diplomatic channel between Beijing and the new administration.
The EB-5 immigrant investor visa program that Meyer discussed Saturday allows rich foreign investors who are willing to plunk down large investments in U.S. projects that create jobs to apply to immigrate to the United States.
Bloomberg News reported in March 2016 that the program has been used to the benefit both the Trump and Kushner family businesses. Before joining the White House, as chief executive of his family’s real estate company, Jared Kushner raised $50 millionfrom Chinese EB-5 applicants for a Trump-branded apartment building in Jersey City, according to the report.
The EB-5 program has been criticized by members of Congress from both parties who have said the program in essence sells visas to the wealthiest foreigners.
The program has been extremely popular among rich Chinese, who call it the “golden visa” and are eager to get their families — and their wealth — out of the country. The fact that some use it to move their money out illegally, however, has made the program unpopular with the Chinese authorities.
The program was launched with the goal of securing investment and creating jobs. But instead, in recent years, many real estate developers have used the program as a source of cheap financing by using foreign investors, especially from China, for flashy projects in Manhattan and other city centers.
A Government Accountability Office report in 2015 found the EB-5 program carried a high risk of fraud, was rife with counterfeit documentation and had “no reliable method to verify the source of the funds of petitioners.”
The program, however, is especially popular in China, with estimates in recent years showing that more than 80 percent of EB-5 visas were issued to Chinese investors.
Saturday’s event in Beijing was hosted by the Chinese company Qiaowai, which connects U.S. companies with Chinese investors. Qiaowai is working with the Kushner company to secure funding for Kushner 1, the New Jersey project presented to investors, also known as One Journal Square. Promotional materials tout the buildings’ proximity to Manhattan and note that the project will create more than 6,000 jobs.
At Saturday’s event, attendee Wang Yun, a Chinese investor, said the Kushner family’s ties to Trump were an obvious part of the project’s appeal.
“Even though this is the project of the son-in-law’s family, of course it is still affiliated,” Wang said.
Although the event was publicly advertised in Beijing, the hosts were exceptionally anxious about the presence of reporters.
At one point, organizers grabbed a reporter’s phone and backpack to try to force that person to leave. Later, as investors started leaving the ballroom, organizers physically surrounded attendees to prevent them from giving interviews.
The day after the above described Beijing event, the Kushner Companies held another in Shanghai.
The New York Times reported:
Kushner Companies’ China roadshow, promoting $500,000 investments in New Jersey real estate as the path to a residency card in the United States, moved to Shanghai on Sunday after a similar pitch on Saturday in Beijing. Security was tighter in Shanghai than it had been in Beijing, where reporters for The New York Times and The Washington Post briefly attended the event before being kicked out.
At the event in Beijing, Mr. Kushner’s sister, Nicole Meyer, cited her brother’s service to the company, which he led as chief executive until January. She said the project in Jersey City “means a lot to me and my entire family.”
But some who attended described an investor pitch similar to the one in Beijing, and Mr. Trump’s political power was palpable at the Shanghai event even if his name went unsaid. As on Saturday in Beijing, one slide that was presented to the Shanghai audience, describing who will decide the future of the visa program for foreign investors, included a photograph of Mr. Trump, as shown by a snapshot taken by an audience member.
Although the program was created as a way to finance projects in economically troubled neighborhoods, it has instead turned into a form of cheap financing for luxury real estate developers. Applicants are primarily seeking the visa, so they typically do not seek a significant return on their investment.
The United States Government Accountability Office, the investigative branch of Congress, has criticized the visa program for its lax safeguards against illicit sources of money.
Many people in China worry that the window for obtaining an EB-5 visa may be closing. Although Mr. Trump has softened his language considerably in recent weeks, he was a vociferous critic of China during his presidential campaign. He has said he will take a tough line on immigration, although he did not take aim at investors in real estate projects.
The Kushner project promoted to Chinese investors, called Kushner 1, includes two towers and nearly 1,500 luxury apartments, with construction to begin early next year.
Like so much else in this fake economy, the EB-5 visa program is an unethical racket that uses a government program originally designed to help struggling communities to further help the already wealthy by funneling cheap financing to luxury property development. It’s just another example of how screwed up our incentives are as a nation, and how completely corrupt the American Banana Republic has become.
For more on the topic, see the following article published by Bloomberg earlier this year: Rich Chinese Race to Apply for a U.S. Golden Visa.