The EB-5 Program Fraud Rate is Not What You Think

By | September 28, 2016

The EB-5 Program has been referred to as:

“riddled with corruption and national security vulnerabilities” 1

“exploited by criminals, spies, and possibly even terrorists” 2  and

“wasting taxpayer money” 3

Statements like this are prevalent all over the Internet, however are these actually reflective of the program’s fraud rate or are they amplified by the media?

Based on publicly available data, the fraud rate of the EB-5 Program is about 8.8%. Since the program’s inception in 1990, $2.08 billion of investors’ capital was found to be involved in fraudulent EB-5 projects.  $1.35 billion, however, was ultimately recovered and returned to these investors, leaving only $729.3 million left in unrecovered losses.  To place this figure in context, II-USA, the EB-5 Regional Center industry association, calculates that over $15 billion of EB-5 capital was invested in the U.S. from 2005 to 2015, alone.

rc-stats

Currently, USCIS has approved 800 regional centers around the country to operate in the EB-5 industry. 12 of them [1.5% of total RCs] have been accused of fraud. This seems to indicate that the “bad apples” in our industry likely reflect a small number of large-scale fraud cases rather than an industry “riddled with fraud.

The EB-5 Program appears even more favorable when compared to the fraud rates of other government programs. It is also important to note that the EB-5 program is one that does not rely on taxpayer dollars.

estimate-fraud-and-error

Despite frequent fraud allegations, the EB-5 Program’s fraud rate is much lower than some may expect. Fraud in the EB-5 Program appears to be a result of a low number of scandals, rather than an industry-wide trend. Aside from a few scattered scandals, the EB-5 Program has actually had an impressive impact on the United States economy that is sometimes overshadowed by fraud cases. Visit lcrcapital.com to learn more about the EB-5 Program and stay tuned for the next blog post, which will dive deeper into the economic contributions from the EB-5 Program.

 

 

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1 New York Times

2 ABC News

3 The Daily Republic

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