Thread: SD: "Investors trade millions for visas"

Peter Harriman
pharrima@argusleader.com

When Rodney Elliott and his 20 employees milk the 1,700 cows at Drumgoon Dairy near Lake Norden, they complete a unique international financial hookup.

It worked like this: Four South Korean investors each put up $500,000 for the right to gain permanent residency in the United States for themselves and their families. That investment helped finance the Drumgoon Dairy and gave Elliott of Northern Ireland the chance to milk cows in South Dakota.

Elliott and his Korean partners were linked under a federal program designed to encourage investments in rural areas and other regions with high unemployment.

South Dakota was one of the first states to take advantage of the revised U.S. Citizenship and Immigration Services EB-5 program that provides 10,000 visas annually for foreign investors.

Half are reserved for those who put at least $500,000 into rural areas such as South Dakota to create at least five jobs. Since 2005, the EB-5 investment/visa program has directly contributed $30 million that leveraged a $90 million expansion of the South Dakota dairy industry, according to Joop Bollen, head of the South Dakota International Business Institute that oversees the state's effort to recruit foreign investment.

The gravy train is ending, Bollen says, because more states are becoming aware of the opportunity.

"Competition today is fierce as approximately 20 regional centers are active and many more are applying," Bollen said.

Before that happens, he wants to see U.S. Citizenship and Immigration Services expand the South Dakota regional center from East River counties to the whole state, except cities of more than 20,000, and use it to develop industries other than agriculture. His great dream is to draw EB-5 investors to renewable fuels and wind energy projects.

With immigration policy an explosive issue in the U.S., the EB-5 program seems a natural target for criticism that it allows rich foreigners to buy their way into the country.

Except it's not.

EB-5 might be so obscure it fails to draw much notice. But about the most contentious thing said about it is Kathryn Fennelly's assessment.

"I wouldn't have a problem with it if we had a larger immigration system that was equitable," she said.

The immigration and public policy professor at the University of Minnesota Hubert Humphrey Institute of Public Affairs says EB-5 looks unfair only when compared to an immigration program "that essentially doesn't issue visas to lower-skilled workers. If we had a system overall that was equitable, that looked at needs and humanitarian goals, then I think encouraging people who can invest in the economy is a good thing."

Living elsewhere in U.S. but investing in S.D.

None of Elliott's Korean partners lives in South Dakota or has a role in managing the dairy.

"They are in the true sense of the word silent partners," he says. They already had homes in the U.S., and the chance to gain a green card - permanent residency status - is what attracted them to the EB-5 program.

This is a typical profile of EB-5 investors, according to Bollen. So far in South Dakota, the investors have been Korean and Chinese. "They tend to live in Boston and California, but their money is invested in South Dakota," he says. State officials originally targeted European dairy farmers as EB-5 investors. "We did not expect the interest from Asia."

EB-5 was established by Congress in the early 1990s largely as a way to counter efforts by Canada in the 1980s to attract foreign investors, especially from Hong Kong where as much as $1 trillion left the country after Britain returned it to China, according to U.S. Rep. Zoe Lofgren, D-Cal.

The program was suspended in the late 1990s. Congress retooled it to clarify investment goals and to ensure investors followed through on investment commitments and job creation. It was resumed in 2003.

"From all accounts, what I'm hearing now, is the system is being properly administered," Lofgren says.

Bollen leaves ethical considerations to others.

"The U.S. federal government implemented the program after considering the ethical issues," he says. "Was the U.S. going to miss out on the opportunity to create jobs for our own citizens and legal immigrants?" Bollen asks. "South Dakota could rehash the ethical issue, which the feds already felt comfortable with, while other states would walk away with the bacon."

'Whether it is fair or not, it benefits America'

Lofgren, chairman of the House Judiciary Committee's subcommittee on immigration, says when the EB-5 program was established, "Some people said, 'Is this really fair where people with a lot of money could obtain (permanent residency) status?' But the decision was made. Whether it is fair or not, it benefits America, and the point of the immigration system is to benefit the U.S."

Sens. Tim Johnson and John Thune also support EB-5.

"When immigration occurs within the proper channels set out by law, it clearly can have a positive economic effect," Thune says.

"However ... it is important to maintain oversight of this program at a national level to ensure it is free from abuse."

Johnson adds: "I share the goal of the EB-5 program of increasing access to foreign investment within South Dakota. Such investment brings money into South Dakota and creates jobs with far-reaching economic effects that benefit the entire state."

EB-5 investors must prove to immigration officials their money has been legally obtained, they are not a threat to public health and they have no criminal record. Bollen says "we get the cream of the crop." One investor had a 15-year-old DUI, "and the feds forced him to see a psychiatrist to ensure there was nothing else, and this was a one-time event."

Elliott, who qualified for a visa because his wife is a U.S. citizen, says his own experience with U.S. Citizenship and Immigration Services suggests all immigrants, including EB-5 investors, are carefully vetted before they gain permanent residency.

Opportunity for expansion less likely without EB-5

What EB-5 allowed him to do was start a dairy on a scale that otherwise would have been out of reach. Drumgoon Dairy began in Northern Ireland in 1982 with 25 cows. It had expanded to a 150-cow herd by 2005, but the chance to increase beyond that was unlikely.

"We had committed to the idea of relocating to an area in South Dakota," Elliott says. "EB-5 gave us the opportunity to build a larger business." He began milking 1,000 cows in South Dakota in December 2006.

"We are currently milking 1,700, and we are at maximum capacity," he says.

"I know a lot of the small dairies here resent the larger dairies. But that's natural progression. It's been happening all over the world.

"We can't pick up this dairy and cart it away. Whether people think a dairy is a good thing or not, it adds to the overall economy of the area. We have to buy feed. We employ local people."

The influx of investment capital associated with the EB-5 program spurs the advance of megadairies in South Dakota that threaten small producers and attract large taxpayer subsidies, according to Bill DuBois, of Marshall, Minn., a spokesman for I-29ers for Quality of Life and a critic of industrial dairies.

Impossible without subsidy from taxpayers, critic says

DuBois said the big dairies require public subsidies for roads, infrastructure and other needs. Manure-handling operations for the big dairies are underwritten by as much as 90 percent public money, he said.

"Basically, they've got a way of doing business that isn't economically competitive unless the taxpayers chip in," he says.

Industrial dairies also have less liability for environmental damage they cause than do their smaller counterparts, DuBois says.

"A farmer who is not incorporated and who is acting as a sole proprietor is liable if he screws up your water or anything like that," he says. "The independent farmer and small- to medium-class farmer doesn't get these benefits, and they have to compete with these megafarms. It's not fair to compete when they are getting all this stuff and the average farmer isn't."

South Dakota already has 12 projects using EB-5 investment. Two undisclosed projects are under development, according to Bollen, and the cheap U.S. dollar might make foreign investment especially attractive now.

The latest project the state acknowledges is the Northern Beef Packers Limited Partnership in Aberdeen. With a total budget as high as $55 million, it seeks 70 foreign investors. Aberdeen Mayor Mike Levsen calls the EB-5 money "a substantial amount of capital for a needed program that may or may not have been available otherwise. We welcome money from anywhere to invest in Aberdeen."

As South Dakota seeks to broaden its use of EB-5, Bollen does not fear a large group of foreign investors could form a consortium and try to corner an economic sector such as wind energy.

Besides the surge in competing regional centers, "The biggest thing that worries me is I already see some economic models that make me wonder if the intent of Congress is being addressed properly in terms of job creation. This testing of the gray areas of the law could potentially pollute the opportunity for others," he says.

Lofgren would like to talk to him about such concerns. "We want this thing to work right," she says. "We don't want to throw out the baby with the bath. We want to dry the baby off."

From her perspective, the future of tying foreign investment to visas lies in expanding the notion of what constitutes investment. Money and visas are not being fully utilized, Lofgren says.

While EB-5 has worked well in South Dakota targeting agriculture, "I don't think it has worked really well in the tech sector," she says. "The issue in tech is not money, it's ideas.

"There are some interesting discussions taking place that for the tech sector rather than looking at money, we should be looking at patents, ideas, whether people are creating a company."

Google founder Sergey Brin was born in Russia, she notes.

"I live in San Jose. The success of Google has such positive impact for my constituents in terms of employment. Everybody wants to work there. They are hiring like mad."

Reach reporter Peter Harriman at 575-3615.

http://m.argusleader.com/apps/pbcs.dll/ ... ate=wapart

This is very interesting:

The program was suspended in the late 1990s. Congress retooled it to clarify investment goals and to ensure investors followed through on investment commitments and job creation. It was resumed in 2003.

"From all accounts, what I'm hearing now, is the system is being properly administered," Lofgren says.

...it's a tacit admission that rampant fraud had evolved and people that had agreed contractually to do certain things about such investment weren't doing so.

And Ms. Lofgren seems confident that no such mismanagement or corruption is going on now... you mean, as our highly effective entry-EXIT system, or about managing our skilled professional temporary worker visa programs, and... about that border fence...???

Also, the case of Canada and Hong Kong ex-pats circa 1997-1998 came up as well. The Canadians also have a program to allow non-nationals to gain PR status-but, the last time I heard, the up front dollar requirements were higher and universal. Many Hong Kong-ers that decided to leave before the PRC 'changeover' simply bought their way into Canada, with a majority ending up in BC - especially Vancouver.

I'd like to see an audit done of these operations just to find out how many illegals are being employed.

I hardly feel every immigrant working under these programs is a "true immigrant". I'll bet someone will find a number of illegals.

Interesting how this article and the one that was found on legislative action occurred in the approximate time-frame. Her's came from the ABC affiliate, I believe, KSFY in Sioux Falls.

I know for a fact that all immigrants licenses and id's expire on the day their permission expires here and that verification has taken place for several years IF THEY APPLY FOR A STATE ID OR DRIVER'S LICENSE.

Any program that rep. Lofgren has anything to do with, look out! Big OBList and you can bet their are alot of illegals working on these farms, another happy amnesty congresswoman.

Originally Posted by SOSADFORUS

Any program that rep. Lofgren has anything to do with, look out! Big OBList and you can bet their are alot of illegals working on these farms, another happy amnesty congresswoman.

"Amen!" to that SOSAD, and for everyone else's benefit here - you wanna guess what her background is....? Immigration Attorney