Green cards for sale - $500,000

A little-known and sometimes controversial federal program that awards foreign investors and their families green cards in return for their money is making its mark on South Dakota.

EB-5 is an employment-based visa category, reserved for foreign investors who will create or save 10 full-time jobs by investing $500,000 or $1 million - based on the project's location - in a U.S. company. Currently, there are 12 projects in South Dakota that have benefited or are set to benefit from the foreign investments, including Veblen East Dairy, a project of MCC Dairy in Marshall County, and Northern Beef Packers processing plant, south of Aberdeen.

While officials point to the money coming into the state and the development of agriculture-based industry as positive aspects to the program, EB-5 is not without criticism.

In South Dakota, the investors are recruited through the South Dakota International Business Institute, a regional targeting center at Northern State University, which is run through the Governor's Office of Economic Development. If an investor contributes $500,000, the investor, spouse and any children younger than 21 who aren't married will be granted lawful residency in the United States in the form of a conditional green card. At the end of two years, the investors must prove they have maintained their investment and have created or saved 10 jobs before the conditional status is removed and they become regular green card holders. After five years, the investor and his or her family may obtain U.S. citizenship if they meet legal requirements.

While the program allows investors to gain sought-after green cards, their money goes to fund worthwhile projects that contribute to the state's economic growth, said Joop Bollen, director of the South Dakota International Business Institute.

“We only have one motivation and it's economic development,” Bollen said. “I'm very afraid this opportunity will be short-lived. All states are copying what we've done. We need to pick the fruit while it lasts.”

Investment needed: But because not a lot is known about EB-5 nationwide, it's often shrouded in secrecy. Bollen said he's reluctant to talk about the program because attention might scare away investors.

According to reports from Hanul Professional Law Corporation, an immigration firm that works closely with the program and some of the projects the program helps create, 27 Korean investors are investing $500,000 each in the Veblen dairy project. Another 70 investors, who are currently being recruited, are approved for the beef processing plant south of Aberdeen. The cost of the Veblen project is about $35 million, $13.5 million of which will be provided by foreign investors. The beef plant has a $52 million to $55 million budget. Seventy foreign investors at $500,000 each would equal $35 million.

And while Dennis Hellwig of Northern Beef Packers said he'd be glad to speak about it once investors are secured for his plant, Rick Millner of MCC Dairy in Veblen did not return phone calls to his office. The woman who answered the phone said she doubted Millner would grant an interview having to do with the EB-5 program.

And then there are the allegations that foreign investors are basically just buying their green cards.

Bollen said he understands them, and he doesn't deny that's happening.

“These people will drop the money here, but they won't live here,” he said, meaning South Dakota. “It's their ticket over here. Most of them don't care where the money is going. The average wealth of these people is quite high. I'd say, on average, it's about $10 million. They have substantial wealth.”

Still, the government isn't just letting everybody participate in the program, Bollen said. The background checks are extensive, investors must prove they came about the money legally, and the quality control is top notch. He points to an investor he worked with who had a DUI in 1989. Before the investor's application was approved, he had to see a psychologist.

The application process typically takes about nine to 10 months, Bollen said.

“This is federally approved,” said Bollen, who himself immigrated to this country from Holland. “We either take advantage of a federal program or we don't and we croak. If we don't do it, others will.”

Richard Benda, secretary for the Department of Tourism and State Development, defended the program.

“I haven't found (getting a green card) has been the overwhelming factor of people investing here,” he said. “... These are very prudent investors. They are looking for a return regardless of whether they can obtain a green card. The overwhelming principle all of them look at is the return on the project. They've got to answer the question: Is there a possibility down the road that I get my money back? It's got to be an investment; it's not a loan.”

Shaky past for program: While South Dakota was approved as a regional center of the EB-5 program in 2004, the EB-5 visa category was actually created in 1991 and regional centers, which are approved by the federal government, were first added in 1993. Forty-five counties in South Dakota - the eastern half of the state and Tripp and Gregory counties - compile one of more than 25 regional centers across the United States. Bollen said more continue to pop up every month.

When the EB-5 program and regional centers were created, several companies competed for investment capital from foreign investors. But in 1998, the regional center program was placed on hold after the Immigration and Naturalization Service uncovered abuses. Some companies weren't operating sound investments, the full investment capital wasn't being created and the number of required employees based on the number of investors wasn't being met, officials said.

The regional centers returned in 2002 with stricter laws on how applications would be managed. And in August 2003, INS began approving regional center petitions again.

EB-5 allots 10,000 visas per year for those investing at least $1 million in a U.S. company; 5,000 visas are set aside for immigrants who invest in designated regional centers - areas of high unemployment or rural areas. In rural or high employment areas, the investment has to be only $500,000.

Started with Europeans: South Dakota came on board with the program after Bollen sought a way to give more security to European farmers coming to South Dakota to live and work. Bollen, who began at the South Dakota International Business Institute in 1994, when it first started, had been asked by the state in 2000 to expand the SDIBI's responsibilities to include work on foreign investments.

Bollen started recruiting farmers from foreign lands, including Europe.

“I, being from Holland, knew the government was trying to push them out of the country and off their land,” Bollen said. “I thought they could make a good life with farming here in South Dakota.”

But problems arose a few years later. The immigrants were given nonimmigrant E-2 visas, which required them to return to their native country at some point.

“Converting to an immigrant visa in theory was easy. That would have let them stay here,” Bollen said. “But it wasn't easy. I wanted to be able to give them some security, so I started looking around.”

What Bollen found was EB-5, and specifically a pilot program that would work for the state and the investors. Approval for the program in South Dakota came in April 2004, and it started in June 2005. South Dakota had the first regional center to be run by state government.

“I wanted this for two reasons,” Bollen said. “One, I brought Europeans here and I wanted to assure them that they wouldn't be sent back. And two, I wanted to create a unique experience for South Dakota that Iowa, Minnesota and other states like them didn't have.”

Dairy dreams: Particularly in one industry, he said. Until recently, the EB-5 program in South Dakota had supported primarily the dairy industry.

“There was all this capital and we needed to find a way to use it,” Bollen said. “Now we have the opportunity to have our dairy producers compete on a worldwide level.”

And it seems to have worked. A report by the Congressional Research Service, prepared for Congress in January, said the state had attracted 60 foreign investors in the dairy industry with an additional 10 applications still pending. At that time, the foreign investors had brought in about $30 million into the South Dakota economy with an additional $6 million in matching funds coming from local farmers.

Projects started to pop up, investors got on board and new jobs were established. Bollen said so far 240 direct jobs and 640 indirect jobs have been created. Individual dairy farmers from European counties have also made a life for themselves and their families here in South Dakota.

Still, there's more room for growth, Bollen said.

“Last December, we started talking about how we can do it bigger,” he said. “It works better for our partners overseas if there are bigger projects. They are more likely to invest.”

Beef plant to benefit: Enter meat packing, and particularly the Northern Beef Packers meat packing plant south of Aberdeen, which is still being constructed.

Foreign investors are currently being recruited for that project as well as for four other meat packing projects in eastern South Dakota, Bollen said.

“The program has been certainly valuable as we've done a lot of projects,” Benda said. “It's been a big push in assistance to the dairy industry, and of course we're hoping it's going to help with projects like the beef plant in Aberdeen.”

And while meat packing might be new to the EB-5 program, it got a boost in December, when the U.S. Citizenship and Immigration Services approved the South Dakota International Business Institute's regional center amendments, allowing one direct employee hire to qualify as 3.49 indirect employees. What that means is that for 70 investors, for which the beef plant has been approved, 210 full-time jobs have to be created. Under the previous status, 700 jobs would have had to be created.

Hellwig of Northern Beef Packers said it's really too early for him to comment about anything having to do with investors and the EB-5 program. Foreign investors have been talked to, but none of them has signed any paperwork, he said.

“I don't even know for sure if it's going to materialize,” Hellwig said.

Still, Hellwig said he is familiar with EB-5 and the benefits it could bring to the beef plant, the state and the meat-packing industry.

“It's going to bring a lot of money to South Dakota,” he said. “... It's a big benefit for the state, and it's done a lot for the dairy industry, but until it does something for the meat packing industry, I'd rather not talk about it.”

There's no word on where the investors for the beef plant will come from for sure; however, a blog posting from Brian Su of Artisan Business Group in Springfield, Ill., said the business has entered an agreement with Hanul Professional Law Corporation, an immigration law firm in Los Angeles, Calif., to recruit “Chinese investors to participate as limited partners in EB-5 Meat Processing Plant for Northern Beef Packers Limited Partnership in South Dakota.” A brochure in an Asian language, promoting the virtues of the beef plant and South Dakota, can also be found on the Internet at www.midwestusachina.com/sd_info.pdf.

Underutilized: But while proponents of EB-5 point to all of the benefits of the program, the fact remains that it's been underutilized.

According to the Department of Homeland Security, there were 192,843 nonimmigrant investor visa arrivals in the United States in 2005. In the same year, there were 346 legal permanent resident visas - a product of EB-5. While nonimmigrant investors are required to return to their countries, legal permanent residents are not.

Bollen points to the period between 1998 and 2002, when activity was halted as one of the reasons the program hasn't taken off. There's also the fact that not all applications are approved due to the extensive background checks, he said. The most common reason an application isn't approved is because the investor can't prove the money was legally obtained or there are just too many unanswered questions.

South Dakota Sens. John Thune and Tim Johnson and Rep. Stephanie Herseth Sandlin all said they support the program.

“I share the goal of the EB-5 program of increasing access to foreign investment within South Dakota,” Johnson said. “Such investment brings money into South Dakota and creates jobs with far reaching economic effects that benefit the entire state.”

Herseth Sandlin agreed.

“The EB-5 program is a limited, employment-based visa program that encourages investment in economic development projects, including special targeting for rural areas like South Dakota,” she said. “It's a tool to attract investment and economic development in rural areas that often have trouble attracting sufficient capital, and I support that goal.”

While Thune sees the economic development as a positive to the program, he said it's still important that the laws and rules be regulated.

“The immigrant investor program is meant to spur economic growth and create new jobs. When immigration occurs within the proper channels set out by law, it clearly can have a positive economic effect, as seen by reports that the Immigrant Investor Pilot program has injected more than $30 million into the South Dakota economy and created several hundred jobs,” Thune said. “However, as we must do with all federal programs, it is important to maintain oversight of this program at a national level to ensure that it is free from abuse.”

Bollen is confident South Dakota is doing its part.

“I don't see anything morally wrong with it,” he said. “... What we're doing here is legal and it's federally approved. South Dakota is clean as a whistle.”

Reporter Emily Arthur-Richardt; (605) 622-2314 or 1-800-925-4100 ext. 314; earthur@aberdeennews.com

South Dakota EB-5 Projects

Van Winkle Dairy Limited Partnership in McCook County: 1,400 head of cattle; $7 million budget; four Korean investors

Global Dairy Limited Partnership in Brookings County: 1,400 head of cattle; $6.9 million budget; four Korean investors

Winter Dairy Limited Partnership in Clark County: 1,400 head of cattle; $6.8 million budget; four Korean investors

K&K Dairy Limited Partnership in Turner County: 350 head of cattle; $2.37 million budget; one Korean investor

Swier Dairy Limited Partnership in Lake County: 730 head of cattle; $3.42 million budget; two Korean investors

Drumgoon Dairy Limited Partnership in Hamlin County: 1,400 head of cattle; $6.8 million budget; four Korean investors

Vendrig Dairy Limited Partnership, county unknown: 1,800 head of cattle; budget unknown, project delayed

Moody County Dairy Limited Partnership in Lake County: 2,400 head of cattle; $20 million budget; four Korean investors

Veblen East Dairy Limited Partnership in Marshall County: 8,300 head of cattle; $40 million budget; 27 Korean investors

Wilma Farms USA Limited Partnership in Kingsbury County: 2,400 head of cattle; $12 million budget; seven Korean investors and one Netherlander-Canadian general partner

Jersey Dairy Limited Partnership in Union County: 6,300 head of cattle; $35,410,700 budget; 20 Chinese investors for dairy plant and 12 Chinese investors for cheese plant; recruiting in process

Northern Beef Packers Limited Partnership - PGA Beef Processing Plant in Aberdeen: $52 to $55 million budget; 70 investors (open to worldwide); 600 to 700 employees for labor requirement; recruiting in process

Source: Hanul Professional Law Corp.