The deputy secretary of the Department of Homeland Security is embroiled in a scandal involving a program that hands out green cards to rich Chinese investors.
No, that's the legal part.
The scandalous part is the allegation, newly released in a DHS inspector general report, that when Deputy Secretary Alejandro Mayorkas was head of US Citizenship and Immigration Services, he inserted himself into the evaluation process for investor visas in a few different cases. In each of the four incidents the report looked at, Mayorkas did slightly different things to urge colleagues to reconsider decisions they'd made — after being in contact with powerful Democrats affiliated with the projects. The report names four men as beneficiaries of Mayorkas's attention, Pennsylvania Governor Ed Rendell; Senate Minority Leader Harry Reid; Hillary Clinton's brother, Anthony Rodham; and current Virginia Governor Terry McAuliffe.
Republicans are running with it — the first hearing about the scandal took place in the House Homeland Security Committee Thursday. Democrats, meanwhile, are defending Mayorkas because he never actually broke the law.
This scandal happened right before Mayorkas himself overhauled the way visa applications were considered in the name of making the process less arbitrary. In some ways, Mayorkas's alleged misconduct is an almost inevitable outcome of a program whose basic cash-for-visas structure has long been open to a range of sketchy dealings.
What is this EB-5 program, anyway?
The idea behind the EB-5 visa (which Congress created in 1990) is that if you are willing to invest a lot of money to create American jobs, you deserve a chance to move to the United States.
Anyone who's willing to put $1 million into any US business is eligible to apply for an EB-5 visa (although the government might not approve the investment plan). For investors willing to back a company in a rural area, or an area with high unemployment, the investment threshold for an EB-5 visa is lowered to $500,000.
Only 8,600 visas went out to investors from the program's invention between 1990 and 2012, with about twice that number issued to spouses and children. But it's growing rapidly, largely thanks to investment from China:
In 2014, for the first time, the EB-5 program gave out all 10,000 visas (for investors, spouses, and children) it's legally allowed to give.
Where does job creation enter the picture?
The initial EB-5 visa only lasts two years. At the end of that time, the government can give the investor (and family members) a green card — a much shorter wait than most immigrants have. But the investor can only get the green card if he or she can demonstrate that the investment resulted in the creation of at least 10 American jobs in those two years. No job creation, no green card.
When an investor puts the money directly into a project, he's on the hook for the number of jobs that particular project creates. That's a tremendous risk for the immigrants, so it wasn't appealing to too many people in the early 1990s. After a few years, to keep immigrant investors from flying completely blind, Congress let EB-5 investment money go through middlemen called "regional centers" — which are typically private companies, though they're sometimes nonprofits or state agencies.
An investor working through a regional center also gets credit for "indirect" job creation — other jobs created as a result of that money. As a result, a lot of money and visas end up coming down to the question of whether USCIS approves a regional center's business plan or economic model.
How easy is it for a sketchy, fly-by-night company to pull the wool over the immigration agency's eyes?
USCIS is an immigration agency, not a financial regulator. As the EB-5 program started expanding rapidly after the 2007–'08 financial crisis, its staffers didn't have the expertise to tell a good business plan from a sketchy one, and weren't getting enough information to figure out how legitimate the claims of "indirect job creation" really were. One analyst called the EB-5 program circa 2011 "the Wild West."
Ironically, it was USCIS director Mayorkas who ended up completely revamping the evaluation of EB-5s, to implement consistent standards and ensure that people understood what they were looking at. That restructuring happened in 2013. The incidents in the OIG report, though, took place in the couple of years before that.
Mayorkas has defended himself by saying that before he reformed the department, he needed to make sure cases were getting resolved efficiently. A less charitable take on his actions would be that he took advantage of a disorganized and unstandardized process to ensure the right projects got a second look.
For all three regional centers, according to the report, the applications would have gone differently if Mayorkas hadn't gotten involved. And in all three of them, his personal contacts with people who were lobbying to get the applications approved made it look like he was giving preferential treatment to certain well-connected people. One email from a staffer recounts a meeting during which "the director noted several times that these cases are affiliated with 'people of influence' and 'people with money' and that he has several more of these on his radar."
What did Mayorkas do wrong?
The inspector general report cites a few instances:
Mayorkas told the government to reopen an application after taking a call from Ed Rendell: The government was about to deny a bunch of investor visa requests for a film project based in the LA regional center, because the studio the immigrants were supposed to be investing in (Sony) hadn't actually committed to taking the money, and the government had been burned by a movie studio before. Mayorkas allowed the denial to go through, then took a phone call from Rendell (who was serving as a consultant to the company that runs the LA regional center in addition to others) and proceeded to ask the agency to reopen the application. After four months, Sony finally committed to taking the money, and the visas were approved.
USCIS ended up having to approve 239 visa petitions because it approved one by mistake: In another LA case, USCIS was set to deny a batch of 240 visa applications because the project they were associated with looked extremely sketchy. (One email described the denial as a "slam dunk.") But one visa accidentally got green-lit by a USCIS staffer — and that got the company running the regional center to complain to Mayorkas that it would be unfair if any of the applications got rejected. Mayorkas ended up putting together a "deference review board," which met once, didn't record the meeting or take any notes, and then told the USCIS staffers involved in the case to approve the other 239 applications.
Mayorkas helped pressure USCIS to move a Las Vegas project to the front of the line for applications: One hotel and casino project in Las Vegas asked USCIS to "expedite" its application — move it to the front of the line — because it had made a deal with the bank that if the visas hadn't been approved by a certain time, it would lose bank financing. The problem: the regional center had only started submitting the first visa applications a month before its own deadline. USCIS agents were worried about the precedent of expediting applications for problems that were the company's own fault, but Harry Reid and others were extremely interested in the success of the project.
USCIS employees told the inspector general that after talking to Harry Reid, Mayorkas personally told them to go ahead and expedite the application; according to the OIG report, Mayorkas then made sure that Reid's staff was briefed on the progress of the applications every week for several months. (Mayorkas denied this to the inspector general, saying it sounded "ridiculous"; the report countered by pointing out a June 2013 calendar appointment for a meeting between Reid and Mayorkas, where "expedition" of the Las Vegas project was one of the agenda items.)
Where do Terry McAuliffe and Hillary Clinton's brother fit into all this?
Clinton's brother, Anthony Rodham, was the CEO of a company that ran a regional center in Louisiana and Mississippi that wanted to invest in Terry McAuliffe's company Green Tech Auto, which was based in Virginia. The center applied to USCIS to get Virginia included in its "region," and to make some other changes to its regional plan. After USCIS denied the applications for a variety of reasons, the regional center appealed.
This is when McAuliffe started getting mad. The OIG report says McAuliffe (who is now governor of Virginia and is a longstanding player in national Democratic politics) complained to Mayorkas's boss, DHS Secretary Janet Napolitano, and left Mayorkas angry voicemails. Mayorkas's written response to the report adds, "The messages were caustic. I remember in particular one voice message that I played for [redacted], as it was laced with expletives at a high volume."
The agents looking over the appeal had already drafted a decision upholding the denial. Mayorkas had a meeting to go over it with them — that's the meeting where he talked about "people of influence" — and ultimately talked them into coming to the opposite decision. He even offered to write the ruling himself, but was ultimately talked out of it.
The OIG report doesn't make it look like Rodham himself had much contact with USCIS — there's only one mention of an email from him to Mayorkas, which Mayorkas didn't respond to. He did, however, forward it to staff with a "high importance" marker.
How did Mayorkas get promoted even after all of this happened?
A couple of days before Mayorkas's confirmation hearings in summer 2013, the inspector general's office leaked to Senator Chuck Grassley (the leading Republican on the committee that was about to vet Mayorkas) that he was the subject of an investigation regarding EB-5s. (That leak indicated Mayorkas was being investigated for his role in approving an application for a particular Chinese investor — which doesn't appear in this report.) The awkward result of the leak was that Mayorkas didn't know he was the subject of an investigation until he read about it in the papers, via Grassley.
Senate Republicans used the leak as a reason to oppose Mayorkas's nomination to the deputy secretary position. Senate Democrats, on the other hand, turned on the inspector general for leaking the news to Grassley. Meanwhile, the temporary inspector general, who leaked the report, turned out to have problems of his own: he was subsequently kicked out of the job, and a later report revealed he'd been lobbying so hard for a permanent appointment that he'd agreed to change or delay inspector general reports to help out senior officials of the department he was supposed to be overseeing.
Was anything Mayorkas did illegal?
Nothing in the new inspector general report is illegal. But it's extremely clear from the report that Mayorkas's staff felt he was pressuring them to make particular decisions, which is extremely inappropriate. At one point, as a meeting about the LA regional center was breaking up, staff overheard Mayorkas taking a phone call from the CEO of the company running the center — informing him of a decision Mayorkas had just made at the meeting.
Furthermore, when Mayorkas spoke to investigators, he severely low-balled the amount of contact he'd had with the high-profile people working on each of these projects — investigators proceeded to prove him wrong by tallying up personal cellphone calls, meeting records, and emails.
At one point, in fact, Mayorkas tried to explain taking several phone calls from the man who's now ambassador to Germany (who was asked by the LA regional center to lobby on its behalf) in one evening by saying that he was on a board with the now-ambassador's wife. One problem: Mayorkas swore when he entered the administration in 2009 that he'd "relinquished all his positions outside the federal government." So either Mayorkas was outright lying to investigators, or he's on very shaky ethical territory.
Does this discredit the reforms Mayorkas made in 2013?
Here's the thing: it appears from the report that after the reforms were made, Mayorkas really did become much more hands-off. Instead of replying to emails from applicants directly, for example, he'd say he couldn't comment on specific cases and forward them on to staff. Furthermore, in at least one case, the report says that if the 2013 reforms had been made earlier, Mayorkas wouldn't have been able to do what he did to intervene in the application.
Mayorkas, for what it's worth, paints the whistleblowers as people who weren't happy with his hands-on reformer approach or with the changes he made to the EB-5 system, and had it out for him. That's clearly only worth so much when he appears to have outright lied to investigators. But some of the things that ruffled feathers — involvement from the US Department of Commerce, for example, which led one staffer to email another saying, "We are entering a whole new phase of yuck" — were totally in line with Mayorkas's efforts to bring economic expertise into the process of checking out investor visa plans. In fact, the DHS inspector general itself recommended working more closely with Commerce in an earlier report.
Was anything the companies did illegal?
Nothing that's detailed in the report appears to be illegal. What the report shows is that the people running regional centers are trying to get the most out of the EB-5 program they possibly can. Sometimes that involves trying to expand a "region" to include four different states, like Anthony Rodham's company did; sometimes it involves incredibly sketchy business plans; and sometimes it involves lobbying local and federal officials.
For a program that hands out green cards for a few hundred thousand dollars, what's surprising about the EB-5 scandals — not just this one, but the South Dakota scandal that nearly upended the state's Senate race last year — is that they don't appear to involve outright bribery.
Instead, the program is so scandal-prone because it's supposed to do something everyone supports: create jobs. Mayorkas told USCIS staff, according to the report, that he was inclined to be generous with applications for visas that promised to create jobs, and harsher on applications for immigrants who might be taking jobs from Americans (like high-skilled employees of tech firms). That meant that when would-be influence peddlers came to the agency for favors, they were pushing on an open door.