Spies, Corruption, and Billions of Dollars 

America’s Sordid “Golden Visa” Scheme

Golden Visas have been in the news lately… unfortunately, for the wrong reasons. 

Countries like Ireland and Portugal have dialed back their long-term visa offerings. Ireland did it because demand outstripped their capacity to process new applications. Portugal did it because visa applications based on property purchases were wreaking havoc on the country’s housing market. 

But in the background, there was also a sense of discomfort amongst some in Europe that handing out residency rights in exchange for money was not something that “proper” countries should do. 

That’s ironic. Because the country that blazed the trail on residence by investment was the United States. And by all accounts, the U.S. program has been massively flawed… much more so than those in other countries. 

Back in 1990, Congress created the EB-5 visa program to “create jobs for U.S. workers and to infuse new capital into the U.S. economy.” The program was available to foreign investors who promised to invest between $500,000 and $1,000,000 in a new commercial enterprise that created at least 10 full-time jobs. The investor had to be actively involved in the management of the business.  

In 1993, the program was altered to make it easier for investors to meet the employment requirements. Approved investments were amended to include existing businesses or third-party investment vehicles. 

The original rationale for the EB-5 visa was to create jobs in places with high unemployment rates, known as Targeted Employment Areas (TEAs). But state and municipal governments and developers quickly learned how to manipulate the system.  

For example, in New York, the state government created gerrymandered TEAs so that wealthy areas with low unemployment could qualify for EB-5 investment. In Washington, D.C. during the mid-2010s, the city government engineered a TEA to use EB-5 funding to develop a Marriott Marquis hotel and other upscale developments. The city government bragged that hundreds of foreigners—mainly Chinese—had gained green cards in exchange for investing in them. 

By the early 2000s, demand for EB-5 visas was dominated by mainland Chinese. In 2011, they accounted for 70% of that demand. The proportion increased to 85% by 2014. This led Congress to ask the Trump administration in 2020 to investigate whether the Chinese Communist Party was exploiting the program for the purposes of espionage.  

In addition to these irregularities, the program prompted the emergence of commercial “advisory” services that solicited hefty fees in exchange for navigating the application process.  

Investigators discovered that many of these “advisers” were paying bribes to state and local officials to gain approval for specific applicants. Cases included individuals with ties to Chinese and Iranian intelligence and international fugitives using the program to launder money. 

By 2017, abuse had become so rampant that a rare bipartisan group in the Senate introduced a bill to terminate the program. Like the European Commission’s recent concerns about Golden Visas, senators worried that the program was an abuse of U.S. citizenship, and in a joint statement claimed that “The EB-5 program is inherently flawed. It says that U.S. citizenship is for sale. It is wrong to have a special pathway to citizenship for the wealthy while millions wait in line for visas.” 

In retrospect, the weakness and incoherence of the U.S. regulatory system turned the EB-5 program on its head. The original intention was to attract foreign investors to areas of economic underdevelopment. But it quickly morphed into a way for savvy private sector developers and municipal officials to raise money for specific projects, which usually had nothing to do with economic underdevelopment.  

Instead of foreign investors looking for projects in the U.S., projects went looking for foreign money, promising EB-5 visas in exchange. 

Two things made this possible. First, U.S. governance is fractured between federal, state, and local governments. Unlike in European countries, which have a more centralized approach, this made it easy for unscrupulous local officials to certify the need for EB-5 visas—even when alternative investor money was available.  

Second, chronic underfunding of federal government departments meant oversight was sporadic. Some cases of abuse involved Department of Homeland Security officials who colluded with state and local government officials to get EB-5s approved when they shouldn’t have been. 

Compared to the U.S. EB-5 system, abuse of visa and passport by investment schemes in Europe has been relatively minor. But that doesn’t stop the U.S. mainstream press from routinely criticizing those programs for their supposed impropriety. 

To paraphrase Matthew in the New Testament, critics of residency and citizenship by investment should beware of focusing on the mote in their brother’s eye… all the while ignoring the plank in their own. 

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Managing Editor’s Note: Ciaran Madden here, managing editor of Field Notes. Porter Stansberry is one of America’s foremost financial writers and investment analysts. He founded one of the world’s largest financial research firms… and has a well-deserved reputation for being brilliant, thought-provoking, and yes, controversial. 

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