New Florida Law a Blow to the Program

For this devoted Democrat who is dubious about the EB-5 (immigrant investor) program, the latest Florida law was a delightful development.

While GOP-dominated legislatures routinely cozy up to big business, this one, egged on by Governor DeSantis, has just passed legislation that may prove to be highly detrimental to the EB-5 program, just as other legislation there has dented the Disney interests. The local segments of the EB-5 industry are deeply disturbed.

The legislature has passed and the governor has signed SB 264, which makes sales of land, or ownership of it, illegal for residents of “countries of concern” should the property be within 10 miles of “any military installation or critical infrastructure … such as a seaport or airport”, according a recent report by EB-5 Investors.

The text of that article indicates that the “countries of concern include Cuba, Russia, Iran, North Korea, Venezuela and Syria. However, China is mentioned the most, as the language specifically explains how the legislation applies to the Chinese government and those connected with it and comes with stricter restrictions and penalties.”

It so happens that the law has singled out the five countries that provided 60.5 percent of all the EB-5 visas in the U.S. in 2022, as the table below shows:

The other three excluded nations, Cuba, North Korea, and Syria, play only limited, if any, roles in the EB-5 program; none is among the top 25 providers of these migrants.

As usual, the devil is in the definitions. How do you define a “seaport”? Is it just major shipping points or does it cover fishing operations and marinas? If that definition is broad enough, then residents of those countries could not buy much within 10 miles of the ocean. Further, how do you define a “resident”? Is a Russian illegal alien living in Miami a “resident”. And, crucially to the EB-5 program, is part ownership of a piece of land via a pooled investment regarded as ownership?

Further, must a Chinese resident, for example, sell all of her property if the 10-mile limit cuts the real estate in half? Suppose the house is outside the limit, but the front yard and the access to the street is inside the limit? Would she have to sell the front yard?

EB-5 lawyers should have a lot of fun in court with this one, but for the industry it is just another setback, if one delivered from an unexpected source.

One industry lawyer, Tammy Fox-Isicoff, told EB-5 Investors “As a Chinese, Venezuelan, or Russian would I want to acquire an interest in any business located in a state that clearly doesn’t want my business?”

Good question.

Meanwhile, more than 1,000 miles north of sunny Florida, but in Florida courts, a tiny echo of the extensive Vermont ski resorts/EB-5 scandals of recent years has emerged in New Hampshire. While the Vermont scandals brought down major politicians and involved scores of millions of dollars and at least three related jail sentences, this one, in the neighboring state, so far involves only one would-be EB-5 investor and a single project.

According to a Law360 account:

Anna Radzinskaia had filed suit against the New Hampshire EB-5 Regional Center LLC — which pools and facilitates investments from EB-5 visa seekers — NH Mountain LP and Douglas Anderson in April. The regional center and other entities behind the Ragged Mountain Ski Resort development played a part in a racketeering scheme that left her unable to recoup a $545,000 investment when she decided to withdraw her EB-5 visa application, she alleged.

Radzinskaia, in another court document, identifies herself as a resident of Florida, presumably there on something other than an EB-5 visa. In that same document, she states that she withdrew her EB-5 petition for reasons unrelated to the project. My sense is that she may have secured a green card through marriage and then wanted her EB-5 money back. In any case, she did not get a refund and sued in Florida’s federal courts. She says that the proposed resort has only been partially built, and that her money was switched (without her permission) to fund something else.

It will interesting to see if this suit expands beyond its current boundaries.

Story originally seen here