Million Dollar Visas


The investor visa program -- in effect the sale of immigrant visas to wealthy foreigners -- was created in 1990 to provide visas for foreign investors (and accompanying family members) who wanted to become involved in job-creation programs, with an emphasis on economically depressed areas in the United States. There was initially little interest among foreign investors in the program, and most of the 9,940 visas per year have gone unused.

Congress was sold on the idea of this visa program by immigration lawyers who saw it as an opportunity to attract fees from the prospective immigrants. They sold the idea as a boon to the U.S. economy -- that was depressed at the time -- and by arguing that we should compete with Canada, which has a similar program, in attracting wealthy Asian investors. At the time the provision was adopted, there were many wealthy Hong Kong residents who were looking to leave the colony before it reverted to Chinese government control.

Under the Immigration and Nationality Act (section 203(b)(5)) a visa may be authorized to an immigrant who seeks to enter the U.S. to establish a new commercial enterprise that will benefit the U.S. economy and provide full-time jobs for at least 10 U.S. workers. Although the statute generally requires the investor to invest $1 million, it allows the INS discretion to allow the investment to be as low as $500,000 for targeted employment areas, including rural areas or areas of high unemployment. A portion of the visas (3,000) were reserved for investments in these areas. In practice, until fiscal year (FY) 1996, a minority of the approved visas went to investors under the depressed areas provision.

The actual issuance of the visas disappointed the proponents of the program. In the first year, FY-92, there were only 24 investors and 35 accompanying family members who received visas. In FY-93 there were 196 investors and 387 family members. In the next two years the number of investors dropped to 157 and 174 before rising to 295 in FY-96. The share of investors who adjusted to immigrant status from within the United States, rather than being a new arrival, was over two out of five in each of those years. In the most recent data available (FY-00), of 226 admissions, 79 were by principals (the investor as opposed to accompanying family), and of those principals 56 (or 71%) adjusted status in the United States.

The majority of beneficiaries of this program who are already in the United States places in question the extent to which the program is attracting new investors -- as opposed to simply allowing persons already here to obtain an immigrant visa through monetary transactions. With foreign investors having billions of dollars already invested in the U.S. stock market and in U.S. securities, it is questionable to what extent "new" money is being attracted.

Admissions of Million Dollar Investors
(including family members)

1992 59
1993 583
1994 444
1995 540
1996 936
1997 1,361
1998 824
1999 286
2000 226

Gradually the proponents of the "million dollar" visas began to offer new inducements to prospective immigrant investors. To cut down on the amount of money committed to the new investment, they accepted promissory notes for a large share of the required investment. They also began setting up investment pools, such as limited partnerships, which offered the investor a diminished risk, because it is shared with others. In effect, opportunity to "buy" an investor visa has become available at less cost and less risk. The result has been an increase in applications for these visas and critical scrutiny of the program by the INS.

According to a Washington Post account in December 1997, the INS General Counsel's office instructed visa processing centers to more narrowly interpret what is a new investment and whether it meets the intent of the law. In an instruction to the field two months later, the General Counsel advised that "a number of serious issues have arisen regarding the legality of certain types of business arrangements which have been used to qualify aliens as immigrant investors." The General Counsel determined that the arrangements involving guaranteed interest payments, "buy and sell" options, and other mechanisms designed to limit risk, are incompatible with the statute and regulations governing the program. Most noteworthy about the legal opinion was the conclusion that it could be enforced retroactively to rescind investor visas that had already been issued.

But the immigration lawyers who have a stake in this program have friends in Congress. In a February 4, 1998 letter to INS Commissioner Meissner, Senators Abraham (R-MI), Kennedy (D-MA), Leahy (D-VT), Hollings (D-SC), and Inouye (D-HI) expressed concerns regarding the General Counsel's opinion. "We are particularly concerned about any effort to make these changes retroactive, which would result in the denial of pending investor visa petitions as well as the possible retroactive denial of all approved visa petitions." Rep. Lamar Smith (R-Tex.), the chair of the immigration subcommittee in the House of Representatives, wrote a similar letter. The INS relented and allowed many investor visa applications already in the pipeline to go forward.

Amendment to End the Investor Visa Program

Then, in May, 1998, Sen. Dale Bumpers (D-AR) attempted to abolish the investor visa category completely. He referred in Senate debate to the visa program as "...a terrible, shameful thing. It is downright vulgar." The amendment he offered was voted down on May 18 by a vote of 74 to 24 -- he was joined by 19 Democrats and 4 Republicans.

Sen. Bumpers has pursued a clear-cut position against the investor visa system since 1989, when he first spoke against it during its original consideration. In his May 18, 1998 floor debate speech, Sen. Bumpers noted the gradual erosions in the qualifying standards for the visas. As a result of the easing of the requirements, the numbers of visas issued in 1997 significantly increased to over 1,000, but still much less than the authorized level. The INS findings regarding the shortcuts offered to prospective investors suggest that the increase has been among persons who could not qualify under the original standards.

Sen. Bumpers cited the views of Harold Ezell, a former INS regional commissioner and former member of the U.S. Commission on Immigration Reform, as commenting on the investor visa program: "They were smoking something when they wrote it." "We've shot ourselves in the foot." The senator also complained that many of the foreign investors actually only want the U.S. residency status they gain with the immigrant visa, not the possibility to become U.S. citizens. He attributed this to the investor wanting to avoid U.S. income tax on income earned abroad. In other words, the investment in a visa is simply a convenience -- a hedging of bets -- that allows easy reentry into the United States for the investor and his family members.

The principal firm that has moved into the investor visa promotion business is American Immigration Services (AIS Inc.) which includes in its management a number of former senior State Department and Immigration Service officials. It claims to have obtained visa approvals for over 1,000 investors; for fees that Sen. Bumpers puts at $35,000 to $50,000 per investor.

Closing the Loophole

The controversy over the cut-rate schemes for awarding the EB-5 visas within the INS led to a GAO investigation and a recommendation that the rules be applied more strictly. That happened in 1999, and firms that had benefited from the lax guidelines sued the INS to return to the lucrative previous permissiveness. They lost their case in the court and appealed. On November 26, 2001 the 9th Federal Circuit Court in California upheld the INS decision, terming the earlier practice of awarding cut-rate visas a "perversion" of the system.

The 9th Circuit also noted that an issue that remains to be settled concerns retroactivity. The issue was not before the court, becuase neither the visa firms nor the INS had addressed that issue in the lawsuit. So the Court's raising the issue suggests that it would like to have been able to rule on that issue as well.

The issue of retroactivity is a sore point for the INS, because it has chosen to ignore it. It has taken the position that since the former General Counsel (Paul Virtue), who had approved the watered down standards, resigned, and the new standards ("precedents") were adopted, the problem was corrected and could be ignored. However, if the law was incorrectly applied previously, the visas that were approved during that period should be invalidated. Similarly, the cases that were in the pipeline at the time of the change of policy should have been decided on the basis of the correct standards, rather than the incorrect standards that were being applied at the time the applications were made. If the INS were to take this position and invalidate the improperly awarded immigrant visas, the immigrants would lose their green cards and would be able to sue the visa firms that they had paid for their services.

INS insiders say that the "cronyism" that exists between current senior INS officials and the former senior INS officials who are running the firms that perverted the visa process stands in the way of the INS acting on the retroactivity issue.

FAIR's Position

FAIR has long been on record in favor of reduced immigration and opposition to exceptionalism in administration of our immigration laws. FAIR's concern with the investor visa program is that it is one of dozens of special programs that have grown up around the nation's core immigration policy as a result of special interests. Besides the investor visas, other examples are the lottery visas, religious workers visas, Cuban Adjustment Act beneficiaries, former employees of international organizations, etc. They each have a small political constituency, but none would likely pass muster if the American public were consulted as to whether they approved of the program as a priority for the nation's immigration policy. Sen. Bumpers is undoubtedly right that the vast majority of his Arkansas constituents would be adamantly opposed to a program that in effect sold immigrant visas and an opportunity for U.S. citizenship.

The investor visa program also sends the message to the world that we think that we need more immigrants. Why else would we be selling immigrant visas to wealthy foreigners? Do we want to promote the view internationally that we still have unlimited space for new settlers? Do we want foreigners to think that the United States is immune from the population pressures being experienced by much of the world and that it is still a refuge from the crowding and environmental degradation that is being experienced elsewhere? In fact the United States already has a population that may be too large for long-term sustainability, especially in terms of our damage to the environment, and we need policies to stabilize our population, not fuel further growth.

What would happen if the United States now repealed the investor visa program, other than reducing the number of new immigrants? Probably nothing. Foreign investors looking for a safe investment climate would still be attracted to invest in this country. The same individuals would still probably spend as much time in the United States as they do now as business visitors. The one difference is that they would not be given legal permanent residence and the opportunity for citizenship in exchange for their investment.

Updated 8/02