Caleb Kenna for The Boston Globe
Acontroversial federal program that gives immigration visas to investors in job-creating projects will probably be killed unless it’s overhauled by Congress, US Senator Patrick Leahy said Friday.
The Vermont Democrat issued the warning a day after the developers of the Jay Peak ski resort in his home state were accused by federal regulators of misusing millions of dollars they raised through the EB-5 visa system. Leahy, a longtime supporter of the program, has cosponsored legislation aimed at curbing abuses.
“If these reforms don’t go through, we will not have an EB-5 program,” Leahy said at a news conference. “I think it could be a very good program, to bring jobs in underserved areas, provided the rules are followed. Put the changes in the EB-5 program or kill it.”
On Thursday, the Securities and Exchange Commission filed civil fraud charges and froze the assets of the Jay Peak owner, Ariel Quiros of Miami, and its president, William Stenger of Newport, Vt., along with seven of their partnerships. Quiros and Stenger used the visa program to raise more than $350 million from 700 investors worldwide to build hotels, restaurants, and a water park in northern Vermont. But more than half of the money was misused, and more than $50 million was “systematically looted” for personal uses, according to the SEC complaint.
Regulators accuse Quiros of using investor money to pay his taxes, buy the Burke Mountain Resort, and to finance his luxury apartment in New York.
Stenger and Quiros did not respond to calls for comment.
Jay Peak had been a model for the visa program and held up by Leahy and other advocates as a way to revitalize struggling communities.
Congress created the immigrant investor program in 1990, but it received renewed interest after the 2008 financial crisis when businesses struggled to get loans. Under the visa program, foreigners who invest at least $500,000 in US projects that create jobs are provided green cards and a path to citizenship. The government sets aside 10,000 visas a year for these investors and their families.
Critics have argued that it provides wealthy foreigners a quick lane through the US immigration process, is dominated by development projects in big cities, and that it has been vulnerable to fraud because of the lack of oversight.
The SEC has brought civil fraud cases against the developers of projects in California, Washington, and Illinois in the past three years.
“This program is an absolute honeypot for crooks of one sort or another,” said David North, a senior fellow at the Center for Immigration Studies, a Washington, D.C.-based think tank that wants to curb immigration.
Still, the demand for these visas is strong and Congress is unlikely to end the investor program, North said.
“The chances for reform are better today than they were two days ago,” he said.
The legislation Leahy has proposed is aimed at extending the program, which is set to expire this fall, and to ensure that smaller, rural projects can also attract investors. The proposed legislation would require background checks for the principals involved in a project, establish a fund for the Department of Homeland Security to conduct audits, and require more disclosures to investors about the risks, according to Leahy’s office.
Leslie Holman, a Vermont immigration lawyer, said she supports strengthening the oversight and transparency of the program. But it shouldn’t end.
According to Invest in the USA, a New Jersey-based immigrant investor lobbying group, the program created nearly 30,000 jobs between 2010 to 2013, the latest data available from the group.
“There’s always that fear, every time something negative happens,” Holman said. “But there’s a lot of good that’s been created from this program.”
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