P.J. Huffstutter, Los Angeles Times

September 3, 2011, 10:36 p.m.

 David Joyce marched his way to the front of the U.S. immigration line using his pocketbook, sinking half a million dollars into a Vermont ski resort.

The British citizen had spent years in a futile effort to secure green cards for himself, his wife and their 9-year-old son so they could relocate to sunny Florida. Then, a fellow emigre tipped him off to a little-known federal program that helps foreigners gain permanent U.S. residency by investing in American businesses.


"In six months, we had our green cards," said Joyce, 51. "Considering everything we've been through, this was easy."

Joyce is one of thousands of foreigners speeding through the U.S. immigration labyrinth — for a price.

Those who invest $500,000 in a U.S. enterprise that creates at least 10 jobs in a rural area or a community with a high unemployment rate are eligible for special visas that put them and their families on the fast track to becoming permanent residents.

For some wealthy immigrants lacking the family ties or special skills required for traditional U.S. visas, it's the fastest way to establish permanent residency apart from marrying a U.S. citizen. Investors aren't required to work in the business or participate in its management; some never even see the enterprises they buy into.

The federal program, known as EB-5, is relatively small, capped at 10,000 visas annually. But applications have skyrocketed since 2006 as entrepreneurs and cash-strapped towns have begun aggressively wooing wealthy foreigners as a low-cost source of capital.

In San Bernardino, the city is tapping EB-5 funds to redevelop its downtown theater district. In Jupiter, Fla., overseas money is fueling the construction of an outdoor amphitheater, marina slips and entertainment hub. In Philadelphia, it was used to expand a hospital complex and improve a school for disabled children.

Once the federal government gives preliminary approval to a project and conducts background checks, the would-be immigrant can invest in the deal and apply for the visa.

But the government's initial approval doesn't always lead to desired results.

Some immigrants have faced deportation when their investments failed to create enough jobs or otherwise didn't comply with program rules. Others have secured their green cards but lost their entire investments when projects foundered.

Yet the prospect of U.S. residency has proved so enticing that some are willing to take the chance. Once approved for the program, the investor can apply for a conditional green card, good for two years. If the investment creates 10 jobs during that time, he or she can apply to live in the U.S. permanently.

Applications from mainland China have soared in recent years, fueled by well-off parents eager to get their children into U.S. schools.

"They can afford to do this," said Zhang Runan, an immigration attorney in Washington.

Proponents laud the program as a way to boost struggling local economies while rewarding immigrant risk-takers.

In the hamlet of Jay, Vt., where Englishman Joyce was part of a $215-million investment pool, EB-5 money has helped finance luxury condos and a new ice hockey arena. Up next: an indoor water park, a golf complex and a hotel aimed at attracting more visitors to the ski town hit hard by the recession.

"We tried going to banks, but the lending environment was impossible," said Bill Stenger, chief executive of the Jay Peak Resort. "There is no way we could have done this without EB-5."

But some critics contend this is little more than a cash-for-visa program, one that is more beneficial to project promoters than the depressed communities it's supposed to help. A cottage industry of middlemen has emerged to introduce investors hungry for permanent U.S. residency to American developers and communities eager for money.

A flurry of EB-5-related websites has popped up with pitches written in Chinese, Korean, Spanish and Arabic. Promoters regularly offer seminars in hotel ballrooms in China, as well as in the U.S., proffering deals and collecting hefty fees.

U.S. Citizenship and Immigration Services, the federal agency that administers the program, can't say how many net new jobs have been created.

Under USCIS rules, the projects don't even have to hire 10 workers. Instead, an investor's money can be used to preserve 10 jobs that economic models show, and the government concludes, would otherwise disappear without such funding.

"Immigration visas should be precious," said David S. North, a research fellow with the Center for Immigration Studies, a conservative think tank in Washington, who has written extensively about EB-5. "The government is selling access to this country and what are we getting in return? Very little."

No city has encountered more strife with the program than recession-ravaged Victorville. Foreclosures sprouted on nearly every street. Unemployment soared past 16%.

So local leaders hired William Buck Johns, a prominent Orange County developer and Republican fundraiser, to help them set up an EB-5 regional center.

They traveled overseas seeking short-term funding to continue redevelopment work at the former George Air Force Base while the city secured permanent financing. Normally, such bridge loans carry high interest rates and are backed with collateral such as real estate.

Local EB-5 officials told foreign investors that Victorville would use their money to complete work on a power plant, a railway center, a wastewater treatment plant and other improvements to the former base, now called the Southern California Logistics Airport, according to interviews with city officials and documents obtained by The Times.

The USCIS green-lighted the plan. Investors flocked to the deal.

Last year, though, the USCIS said it received complaints about Victorville's regional center and began to investigate, uncovering a number of problems. A chief concern: Only the water treatment plant was viable, and it wouldn't create enough jobs to meet program rules.

The USCIS kicked Victorville out of the EB-5 program in October, the first time federal officials have decertified a regional center in the program's 21-year history. By then, 17 foreign investors had contributed $8.5 million.

As of June, the city had refunded a total of $2 million to four investors who demanded their money back. The status of the remaining funds isn't clear. Six immigrants applied for visas, and the USCIS granted one, according to federal court documents.

The USCIS and Victorville officials declined to say what happened to the rest of the investors. City officials said they did nothing wrong.

Victorville recently sued the USCIS and government officials, claiming that they had violated immigration law and exceeded their regulatory authority by decertifying the regional center. The city wants to be reinstated in the program.

Johns and his firm, Inland Group, were paid at least $850,000 for their role in the Victorville regional center, according to sources familiar with the deal.

Inland Group is now pitching the Victorville projects to potential investors under a new name: the High Desert Regional Center. A website registered to Inland Group calls the venture "the easiest and fastest way to live, work, study and play in the USA permanently!"

Johns did not return calls for comment.

The USCIS said the High Desert Regional Center isn't certified by the agency to be in the EB-5 program.

Congress created the program in 1990 to attract wealthy Hong Kong residents looking to flee the British colony before the 1997 transfer to communist China.

Australia, Canada and New Zealand were courting these emigres. To compete, U.S. lawmakers set aside 10,000 visas annually for immigrants, their spouses and unmarried dependents younger than 21 if they invested at least $1 million in a business that created 10 jobs. The amount was later reduced to $500,000.

Federal rules require that EB-5 applicants invest in projects operated by private businesses, public entities or private-public ventures, all known as regional centers. The USCIS vets both the regional centers and the projects they propose.

For years, EB-5 generated little interest, in part because the rules were complicated and the program proved vulnerable to fraud. Investor interest changed after Wall Street's 2008 meltdown. When bank financing dried up, business owners and real estate developers rediscovered the program and headed abroad looking for investors.

In 2007, just 11 U.S. groups were cleared by the federal government to offer visas in exchange for investment dollars. This year, as of mid-August, there were 171, and 48 are waiting for approval to launch or expand.

The agency has approved 43 regional centers to work on projects based in California, more than any other state.

One of the largest and oldest regional centers is CMB Export in Rock Island, Ill., which uses EB-5 money to revitalize mothballed military bases. In California, it has worked with city officials in San Bernardino, Loma Linda and Colton to redevelop the former Norton Air Force Base, now San Bernardino International Airport.

As of August, $96 million from foreign investors had been used to help improve the airport and surrounding area, including construction of a distribution and office complex for the Stater Bros. grocery chain.

Retailer Kohl's, toy maker Mattel and others also leased warehouse and manufacturing facilities in the area. More than 4,000 jobs have been created so far, according to San Bernardino city officials.

"When the meltdown happened, our unemployment shot up like a high temperature," said San Bernardino Mayor Patrick J. Morris. "That money helped us keep going.... EB-5 money is crucial to us, then and now."

Such stories have helped fuel interest in the program. But amid tales of success, problems can go relatively unnoticed. In Dallas, the North Texas EB-5 Regional Center is soliciting investors to build homes and a mall on land tied up in a federal civil lawsuit in Missouri.

In South Dakota, South Korean investors sank millions into dairy farms in the mid-2000s. They lost their investment a few years later when milk prices declined and several of the farms went out of business.

The USCIS, by its own admission, has failed to closely track the flow of EB-5 money, how the projects are being sold to investors or whether the projects were successful. Instead, its focus has been on making sure jobs are created — but not that the jobs will last.

The agency is in the process of overhauling EB-5, USCIS Director Alejandro Mayorkas said. It is rolling out new rules that would require greater scrutiny of projects, and it's hiring more people with economic and legal expertise to better vet the business plans flooding into the agency.

"We need to make changes for the program to reach its full potential," said Mayorkas, a former U.S. attorney in Los Angeles.

p.j.huffstutter@latimes.com

Times staff writers Shan Li and Victoria Kim contributed to this report.

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