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Homeland Security’s fast-tracked checks of foreign investors may put U.S. at risk

Light shined on McAuliffe case

- The Washington Times - Sunday, October 27, 2013

A Homeland Security Department whistleblower says one of its agencies is skimping on background checks of U.S. companies seeking to participate in a program that gives green cards to high-dollar foreign investors — potentially compromising national security.

The federal EB-5 visa program came under scrutiny this summer after reports that the head of Homeland Security's U.S. Citizenship and Immigration Services agency personally intervened to expedite applications from a company affiliated with Virginia Democratic gubernatorial nominee Terry McAuliffe.

But the whistleblower's complaints provide insight into how U.S. corporations — such as Mr. McAuliffe's underperforming electric car company that is heavily reliant on foreign investment — can win approval despite shaky business models and limited chances of success.

The whistleblower, an analyst with the citizenship services agency, said he tracked more than 30 applications from U.S. companies seeking to participate in the program and calculated an average approval time of 4.3 days per case for reviews that ideally should take weeks, if not months.

"I'm trained to study financial corruption and corruption networks," he said. "There were a huge number of files, and many factors to consider. Is there a semblance of an idea? Do they know their operating margins? Do they have a plan for revenue growth? What about a marketing plan? It never dawned on the Department of Homeland Security that they needed any of this."

Security risks

The analyst, who also has conducted internal audits for several other Cabinet-level federal agencies and Fortune 500 companies, was hired in March 2012. The Washington Times is withholding his name because he fears that publicly coming out as a whistleblower might harm his employment prospects.

He laid out his concerns in a complaint to the Department of Homeland Security inspector general in May 2012, warning of the dangers of EB-5 approval for investors who have not been vetted.

"The current mindset of pushing cases with little regard for anything other than production timelines has made it into a national security threat," he wrote. "A 24-48 hour production time ensures a lack of due diligence and oversight."

The analyst resigned a month later.

A spokesman for U.S. Citizenship and Immigration Services declined to comment on specific cases but said the agency made "a concerted effort to strengthen national security and our antifraud programs" across all its visa programs by establishing a Fraud and National Security Directorate.

The agency "takes seriously the responsibility to safeguard the integrity of America's immigration system," said the spokesman, Christopher S. Bentley

Officials say the EB-5 program, created by Congress in 1990, is designed to attract investors willing to risk capital in ventures that will create at least 10 jobs in the United States. Would-be entrepreneurs who invest at least $500,000 in a new U.S. business can apply.

The citizenship services agency says the goal of the program is to "stimulate the U.S. economy through job creation and capital investment by foreign investors."

Almost all foreign investments in the EB-5 program are channeled through special companies called "regional centers." Once their business plan is approved by immigration officials, the companies bundle investments into qualifying new businesses. Investors then can apply for an EB-5 visa, and, if approved, can claim a conditional green card immediately upon entry to the United States. After two years, the conditions are removed if the investment has created the jobs or looks likely to.

More than three-quarters of all the 7,641 EB-5 visas issued in fiscal 2012 went to Chinese investors and their immediate families, according to government figures. The use of the program by Chinese entrepreneurs, some linked to state-controlled businesses and possibly to Beijing's intelligence services, has raised security concerns in Congress and in the Obama administration.

"This is an extremely complicated and vulnerable way to get foreigners to invest in the United States," said policy analyst David North of the Center for Immigration Studies, a think tank that favors a hard line against illegal immigrants and stricter limits on the numbers of legal ones.

Mr. North, who has studied the EB-5 program for several years, called it a "green-cards-for-sale program," noting that the citizenship agency until recently had no economic or business expertise and "no history of working on business development or entrepreneurship issues."

The whistleblower said he saw applications from real estate developers, high-tech startups, solar panel companies and numerous casinos, and that there was no time for a proper assessment of the virtues of any particular business plan.

"If I said I'm going to build paperweights that look like a bong, they'd approve it," he said.

GreenTech Automotive

Shortly after losing the Democratic nomination for Virginia governor in 2009, Mr. McAuliffe helped found a company that would produce small, short-range environmentally friendly vehicles.

But from the start, there were questions about the company, its capabilities and its projections.

Founded in 2009, Mississippi-based GreenTech Automotive Inc. lined up 81 foreign investors, most of them Chinese nationals, through a sister company called Gulf Coast Funds Management LLC. The sole function of Gulf Coast is to manage EB-5 investments for GreenTech, and it is run by Anthony Rodham, the brother of former Secretary of State Hillary Rodham Clinton.

GreenTech shares a McLean address with Gulf Coast, and the company's website formerly listed GreenTech as "our current project."

But the car company has fallen woefully short of its original forecasted job creation and production levels. According to its 2009 projections, company officials called for producing nearly double the predicted worldwide demand for such electric vehicles.

A Virginia economic development official in the Democratic administration of Gov. Tim Kaine also expressed concern in a 2009 email about the company's "(lack of) management expertise, (lack of) market preparation, etc."

"[I] still can't get my head around this being anything other than a visa-for-sale scheme with potential national security implications that we have no way to confirm or discount," wrote Liz Povar, vice president of the Virginia Economic Development Partnership.

With regard to its sluggish start, the company told The Washington Post in an e-mailed statement last month that "market and financial conditions and other current events have led GTA to reexamine our original target market and, therefore, our initial projected capacity needs."

Mr. McAuliffe, who revealed in April that he had resigned from his role as GreenTech chairman at the beginning of December, has said the company's struggles are typical for any startup.

The fast track

The whistleblower said the GreenTech business plan arrived at the citizenship agency for economic review on a fast track but was soon flagged for its connection to Mr. Rodham and Mr. McAuliffe.

The whistleblower and a fellow analyst concluded that the business plan was unreasonable and told the agency adjudicator assigned to the case, who nonetheless conveyed orders to approve it on an expedited basis.

Such situations were commonplace with politically connected enterprises, the whistleblower said.

Supervisors at the agency jumped to fast-track applications if asked about them by agency Director Alejandro Mayorkas or other senior officials, the analyst said.

"They'd come to me and say, 'Ali needs this fast.' If a politician was involved, it got fast-tracked," he said.

At a hearing over the summer on his nomination to become deputy homeland security secretary, Mr. Mayorkas denied wrongdoing in overturning an EB-5 visa refusal for an investor in the McAuliffe-Rodham venture. Congressional staff said at the time that a GreenTech investor had been flagged as a possible national security risk.

Members of Congress were told that the homeland security inspector general in September 2012 had launched a criminal investigation into Mr. Mayorkas' approval of the application.

A November 2012 email to citizenship agency staff obtained by The Times directed them not to respond directly to the inspector general if contacted, but to send draft responses to a supervisor who will then "coordinate our responses before we can send them to the [inspector general]."

Agency officials declined to comment on the investigation, but Mr. Bentley, the press secretary, said "leadership has consistently reinforced a culture of quality and integrity to ensure that every case is decided on the facts and the law, and nothing else."

The inspector general finally contacted the whistleblower about his complaint in August, after the Mayorkas hearing revelations made national news.

Congressional staff told The Times that other whistleblowers, after learning of the investigation from reports of Mr. Mayorkas' hearing, also had come forward.

The EB-5 program has since captured the attention of Congress, as well.

"I have serious concerns about national security and criminal threats associated with the EB-5 program," said Sen. Tom Coburn, Oklahoma Republican and ranking member of the Homeland Security and Governmental Affairs Committee. "The program is vulnerable to fraud, and we are not doing nearly enough to ensure that program participants are not a security threat. The administration needs to have a candid conversation with Congress and the American people regarding the program's problems."

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