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Overseas dreams exposed to investment pitfalls

 Last month, Canada scrapped a controversial federal immigrant investor program which many in the country say allowed wealthy foreigners to purchase citizenship. The scheme in question opened the door to permanent residency to foreign investors who lent C$800,000 ($726,700) to one of Canada's provincial governments; a sum which would be repaid, without interest, over a five-year period. Over its decades-long existence, many complained that participating investors continued to work and pay taxes overseas after obtaining citizenship. There were also lingering questions about the program's efficacy in promoting domestic economic growth and job creation.

The end of this program - which, according to Canadian media reports, has been replaced by two pilot schemes: a venture capital fund and a business skills program - has disappointed many wealthy people from China, who have historically been among its most enthusiastic participants. 

Meanwhile, south of the Canadian border, the US is still busily promoting its own immigrant investment program (known as EB-5) to wealthy Chinese. Indeed, representatives from more than 50 regional investment centers in the US were on hand in Shanghai last weekend to showcase EB-5 opportunities. But here as well, the controversies and risks facing investors are quite serious, as evidenced by a recent string of scandals and fraud cases.

The US EB-5 program creates a potential pathway to citizenship for foreigners and their immediate family members who invest $1 million - or $500,000 in designated areas with high unemployment levels - in businesses or projects which create at least 10 full-time jobs for no less than two years. According to a report by The Wall Street Journal which cited figures from the US Department of State, just over 80 percent of the 7,641 EB-5 visas issued in 2012 were given to Chinese nationals. This represents a substantial increase from 2008, when 24.9 percent of the 1,443 EB-5 visas dispensed that year went to people from China.

Looking into the future, Chinese applicants will likely account for the vast bulk of EB-5 recipients for some time to come - although reports warn that "retrogression" could hit China as early as July, when the country is expected to exhaust its quota of EB-5 visa applications. 

Of course, the US education, health and welfare systems still hold strong appeal for many wealthy Chinese families. And compared to other types of green-card categories, the EB-5 program reportedly provides a faster and easier track toward US citizenship. At the same time, China already has a well-developed infrastructure in place to assist EB-5 hopefuls - scores of agencies exist across urban China to guide investors and their relatives through the often confusing and complicated process.

Amid this obvious enthusiasm, Chinese investors need to realize that all investments - even those made through regional investment centers approved by US federal authorities - are inherently risky. A spat of fraud cases involving Chinese EB-5 applicants drives home this fact. 

Perhaps the most well-known example of fraud came to light in February of 2013, when the US Securities and Exchange Commission (SEC) announced charges and an asset freeze on an individual and two companies involved in bilking foreign immigrant investors. According to details from the SEC, Anshoo Sethi used false claims to defraud some 250 investors - most of whom were from China - out of $145 million in securities and $11 million in administrative fees. Later, in October, a couple in Texas was charged with fraudulently raising some $5 million which they claimed would be invested in an EB-5 project. Scratching deeper, recent reports by The Washington Times based on internal government documents, suggest that hundreds of millions of dollars may have been misappropriated over the past two decades thanks to lack of government oversight and limited resources to investigate possible abuses of the foreign investor program.

It's essential for investors to conduct due diligence when participating in any overseas investment project. Investors should carefully familiarize themselves not only with the details of projects, but also with the claims, interests and backgrounds of their developers. For example, as the SEC has itself warned, investors should always seek independent confirmation of information presented by project promoters. Similarly, investors should ask whether promoters are being paid to recommend a particular project. And, as is always the case with any investment, claims of guaranteed financial returns or too-good-to-be-true benefits should be viewed with extreme skepticism.


Автор

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Principal Attorney at Rahbaran & Associates, an EB-5 Law Firm

Reza Rahbaran

Фирма: Rahbaran & Associates, PLLC
Сферы юридической практики: Бизнес-иммиграция, Иммиграция Через Инвестиции, EB-5 Региональный центр подачи заявления поставщика, Связи с правительствами, Альтернативное разрешение споров, Административное право
Языки: Английский, Персидский, Испанский, Китайский (мандарин), Французский, Русский, Португальский, Арабский
Электронный адрес: reza@rahbaranllc.com

With offices in both Miami, Florida and Washington D.C., Rahbaran & Associates is focused exclusively on EB-5 law and OFAC applications and com... Читать дальше »  


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