EB-5 Related Report Issued by DHS Inspector General

In Announcements, EB-5 News, Regional Centers by EB-5 Blog Staff

Earlier this week, the Department of Homeland Security’s (DHS) Inspector General issued his report of the investigation on allegations made against Deputy Secretary Alejandro Mayorkas.

The report found that in three separate EB-5 related matters, “Mr. Mayorkas communicated with stakeholders on substantive issues, outside of the normal adjudicatory process, and intervened with the career USCIS staff in ways that benefited the stakeholders. In each of these three instances, but for Mr. Mayorkas’ intervention, the matter would have been decided differently.” Additionally, the report found that the “juxtaposition of Mr. Mayorkas’ communication with external stakeholders on specific matters outside the normal procedures, coupled with favorable action that deviated from the regulatory scheme designed to ensure fairness and evenhandedness in adjudicating benefits, created an appearance of favoritism and special access.”

The three cases in question involved major Democrats – former Pennsylvania Governor Edward Rendell, Senator Harry Reid, Virginia Governor Terry McAuliffe and Anthony Rodham, brother of former Secretary of State Hillary Rodham Clinton – who each made personal appeals to Mr. Mayorkas for better treatment. The report states that Mr. Mayorkas intervened “in unprecedented ways,” and “created a perception … that certain individuals had special access and would receive special consideration.” If it were not for Mr. Mayorkas, the applications would have been decided differently.

The following is excerpted directly from the DHS Inspector General Report and details the special consideration given by Mr. Mayorkas to the three cases in question:

LA Films Regional Center: Mr. Mayorkas ordered that a USCIS decision to deny a proposal to fund a series of Sony movie projects in Los Angeles be reversed after he was in contact with politically prominent stakeholders associated with the venture. Mr. Mayorkas later created a “deference review board,” staffed with individuals he handpicked, to review a separate series of Time Warner movie projects. This board did not previously exist and was never used again after it voted to reverse the adjudicators’ proposed denials. Remarkably, there is no record of the proceedings of this board.

Las Vegas Regional Center: At the request of Senate Majority Leader Harry Reid, Mr. Mayorkas intervened to allow expedited review of investor petitions involved in funding a Las Vegas hotel and casino, notwithstanding the career staff’s original decision not to do so. The career staff noted that the purported urgency was of the applicant’s own making and that the decision to expedite fell outside EB-5 program guidelines. Nevertheless, Mr. Mayorkas pressured staff to expedite the review. He also took the extraordinary step of requiring staff to brief Senator Reid’s staff on a weekly basis for several months.

Gulf Coast Funds Management Regional Center: Mr. Mayorkas intervened in an administrative appeal related to the denial of a regional center’s application to receive EB-5 funding to manufacture electric cars through investments in a company in which Terry McAuliffe was the board chairman. This intervention was unprecedented and, because of the political prominence of the individuals involved, as well as USCIS’ traditional deference to its administrative appeals process, staff perceived it as politically motivated.

The Wall Street Journal has reported that DHS Secretary Jeh Johnson claims to have continued confidence in his Deputy Secretary [Mr. Mayorkas], but noted concerns about the EB-5 program, saying officials are constantly contacted by outsiders, including members of Congress of both parties, on behalf of those with an interest in the outcome of EB-5 cases. Secretary Johnson has stated he is asking the department’s general counsel to develop a new protocol for EB-5 evaluations to help ensure they are not influenced by outsiders, and said Congress should make changes to prevent meddling.

While this report is troubling to EB-5 stakeholders without access to such high level political figures, it is important to note that any potential reforms should be limited only to preventing future preferential treatment. The report does not reach the conclusion that the EB-5 program itself is at fault, simply that Mr. Mayorkas seems to have allowed preferential treatment of certain projects with high levels of Democratic political support.

We greatly welcome any reforms aimed at ending preferential treatment and urge politicians to exercise restraint in directly attacking the EB-5 program. The EB-5 program has brought billions in foreign investment to the United States and has helped create hundreds of thousands of jobs for the US economy.

Contact us today if you have any questions that go beyond the scope of this article. We look forward to hearing from you.

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