South Dakota’s EB-5 visa program, now under federal investigation, followed “the industry model” in how it was structured and regulated, a top expert said Thursday.
The EB-5 visa program is a way for foreigners to get green cards in return for large investments in U.S. businesses. By making a $500,000 investment in a business that creates at least 10 jobs, that foreigner can qualify for permanent legal residence here. Hundreds of foreigners paid their half-million dollars into South Dakota projects over the past decade.
Michael Gibson, managing director of USAdvisors.org, said around 90 percent of all EB-5 efforts in the country use the loan model that helped fund Aberdeen’s Northern Beef Packers plant and nearly a dozen other South Dakota projects. In that model, foreign investors don’t put their money directly into a business. Instead, they invest in a limited partnership, which then makes a single loan to the business seeking investments.
"The sad part is that South Dakota is completely… standard operating practice in our industry," said Gibson, who works with EB-5 projects and monitors them through his website EB5news.com.
South Dakota was also normal in that a private company was handling EB-5 promotion. The Vermont Agency of Commerce and Community Development says it’s the only EB-5 “regional center” in the country that’s run directly by a state government. Almost all of the nearly 325 regional centers around the country are in some way private, Gibson said.
Some, like South Dakota’s, involve a private company running the EB-5 program on behalf of a city or state. A major regional center in Pennsylvania, for example, is operating under contract with the city of Philadelphia, Gibson said.
Others are completely private — a business seeking and receiving a regional center designation from the federal government for a purely private business project.
South Dakota used to manage its EB-5 program directly. In December 2009, it signed a contract with a private company, SDRC Inc., to manage and promote EB-5 instead.
SDRC was founded and run by Joop Bollen, who until the day of the contract had been the state official recruiting EB-5 investors. The contract let him continue doing that, just switching over to the private sector.
Stay with Argus Leader Media for more updates on the EB-5 and Northern Beef situation.