Thursday, April 30, 2015

Atlantic Yards, Pacific Park, and the Culture of Cheating

I offer a framework to analyze and evaluate Atlantic Yards (in August 2014 rebranded as Pacific Park Brooklyn) and the Barclays Center: Atlantic Yards, Pacific Park, and the Culture of Cheating.

Note: this post is post-dated to remain at the top of the page. Please send tips to the email address above, rather than posting a comment here.

model shown to potential immigrant investors in China in 2014,
though not shown publicly in Brooklyn.

Tuesday, April 21, 2015

Never mind: despite declarative notice of overnight work (that didn't happen), ESD says not to take such notices as definitive

So, I asked last Friday, what happened to the plan to close Sixth Avenue near Atlantic Avenue for noisy overnight work the night before?

It did not happen, nor was a notice circulated explaining why.

"Notices are based on the work we anticipate will occur – they are not definitive projections," was the response I got from Empire State Development. "When a new date is selected, an updated notice is circulated."

That's questionable on two counts. First, it's true that the language of the two-week Construction Update is conditional, citing "anticipated upcoming construction activities."

But this work was also announced in a separate Community Notice (below), circulated just a few days before it was to happen, which used much more definitive language, as in "the contractor will be trenching..."

Also, while it's obviously appropriate to send a notice when a new date is selected, shouldn't the public--especially the neighbors--should be told immediately that the planned work didn't happen, and why? Otherwise the level of trust in such communication will drop.

The SEC, GAO, and Department of Commerce are looking into EB-5

I'm catching up on a lot of news related to the EB-5 program, which has helped the developers of Atlantic Yards/Pacific Park raise $477 million in cheap capital, with another $100 million to go. Perhaps the clearest summary of the lure and sketchiness of the program came in a February 2012 quote from an EB-5 fundraiser to The Daily:“It’s just a way of being able to get free money, basically, to build all sorts of projects.”

A blistering report up the report by the Department of Homeland Security's Inspector General is hardly the only evaluation planned of the EB-5 immigrant investor program, which provides green cards for investors and their families if they park $500,000 in an investment that purportedly creates ten jobs.

The regional center component of EB-5--the opportunity to make pooled investments rather than directly into a project--is set to expire on September 30, 2015, and before any vote on reauthorization, expect some more spotlight on EB-5.

The regional center component--enormously popular, because investors can count indirect jobs--has been officially a pilot program, renewed every three years. Advocates want to make it permanent, with minor reforms. Others seek more significant reforms. And others may want to abolish it.

As I wrote in January 2014, in December 2013, Sen. Charles Grassley (R-IA) released an internal memo from Homeland Security Investigations (HSI), the investigative arm of U.S. Immigration and Customs Enforcement. The latter is an agency within the Department of Homeland Security, which also houses United States Citizenship and Immigration Services (USCIS), which oversees the EB-5 program.

HSI proposed "the Regional Center Model be allowed to sunset, as HSI maintains there are no safeguards that can be put in place that will ensure the integrity of the RC model.”

SEC crackdown coming

Bloomberg reported 2/13/15 SEC to Target Deals Giving Visas to Rich Foreign Investors
The SEC is preparing sanctions against as many as two dozen immigration lawyers, people familiar with the matter said, for collecting deal fees from foreign investors trying to access the EB-5 visa program, which grants U.S. residency for $500,000 investments that create 10 jobs.
The lawyers were prohibited from earning transaction fees because they weren’t registered as brokers, according to the people, who asked not to be named because the investigations aren’t public.
And instead of quoting an industry cheerleader, which is typical with most reporting, Bloomberg found a skeptic:
“It’s not been demonstrated that it does much to create jobs, it’s given rise to a lot of questionable schemes, and it’s very complicated,” said David Martin, a law professor at the University of Virginia who has served as general counsel to the Immigration and Naturalization Service.
An investor alert

The SEC on 10/913 issued Investor Alert: Investment Scams Exploit Immigrant Investor Program
The U.S. Securities and Exchange Commission's ("SEC") Office of Investor Education and Advocacy and U.S. Citizenship and Immigration Services ("USCIS") are aware of investment scams targeting foreign nationals who seek to become permanent lawful U.S. residents through the Immigrant Investor Program ("EB-5"). In close coordination with USCIS, which administers the EB-5 program, the SEC has taken emergency enforcement action to stop allegedly fraudulent securities offerings made through EB-5.
The announcement stated:
The SEC and USCIS are aware of attempts to misuse the EB-5 program as a means to carry out fraudulent securities offerings. In a recent case, SEC v. Marco A. Ramirez, et al., the SEC and USCIS worked together to stop an alleged investment scam in which the SEC claims that the defendants, including the USA Now regional center, falsely promised investors a 5% return on their investment and an opportunity to obtain an EB-5 visa.
In another case, SEC v. A Chicago Convention Center, et al., the SEC and USCIS coordinated to halt an alleged $156 million investment fraud. The SEC alleged that an individual and his companies used false and misleading information to solicit investors in the "World's First Zero Carbon Emission Platinum LEED certified" hotel and conference center in Chicago, including falsely claiming that the business had acquired all necessary building permits and that the project was backed by several major hotel chains. 
The GAO audit

Also coming is an audit from the Government Accountability Office (GAO), which in November 2014 began reviewing EB-5 at the request of three Republican Senators, including Grassley.

The Seattle Times reported 12/10/14 that the audit will not only look at episodes of fraud, but two two significant vulnerabilities, at least to EB-5 critics: the economic models used to estimate job creation, as well as program’s overall economic impact.

EB-5 has been big in Seattle, and reporter Sanjay Bhatt got a typical self-serving quote from someone who has done very well by EB-5. “This is the only government program that doesn’t cost the taxpayer anything,” said Henry Liebman, CEO of American Life.

That of course ignores the notion of opportunity cost--that a different structure, in which the profits from selling visas went to the public instead of entrepreneurs who can get rely on fuzzy job creation statistics, might be a much better bang for the buck.

Liebman, interestingly enough, said EB-5 funds speculative development. If EB-5 money were truly seed money to get projects off the ground, maybe. But in the case of Atlantic Yards, it's margin for the developer.

The Department of Commerce

It's odd that EB-5, which is more about economic development than immigration in some ways, is under the supervision of USCIS.

In a February 2014 report, the Brookings Institution recommended that the Department of Commerce "supervise the adjudication of regional centers, standardize data and methodology, and better monitor program impact."

The Seattle Times also noted that the  Department of Commerce is studying the economic impact of EB-5. So another report will emerge before the regional center component of the EB-5 will be up for reauthorization.

Some advice

The SEC offers a list of steps potential investors should take, which aren't necessarily easy for people in another country who don't read or speak English well. In fact, the questions are so at odds with EB-5 marketing--as shown in the Atlantic Yards example--that the SEC could and should have a field day cracking down on such marketing.

Some excerpts:
Obtain copies of documents provided to USCIS.
Request investment information in writing. Ask for a copy of the investment offering memorandum or private placement memorandum from the issuer. Examine it carefully and research similar projects in evaluating the proposal.
Ask if promoters are being paid. If there are supposedly unaffiliated consultants, lawyers, or agencies recommending or endorsing the investment, ask how much money or what type of benefits they expect to receive in connection with recommending the investment.
Seek independent verification. Confirm whether claims made about the investment are true. For example, if the investment involves construction of commercial real estate, check county records to see if the issuer has obtained the proper permits and whether state and local property tax assessments correspond with the values the regional center attributes to the property.
Look for warning signs of fraud. Beware if you spot any of these hallmarks of fraud:
Promises of a visa or becoming a lawful permanent resident. Investing through EB-5 makes you eligible to apply for a conditional visa, but there is no guarantee that USCIS will grant you a conditional visa or subsequently remove the conditions on your lawful permanent residency. USCIS carefully reviews each case and denies cases where eligibility rules are not met. Guarantees of the receipt or timing of a visa or green card are warning signs of fraud.
Guaranteed investment returns or no investment risk. Money invested through EB-5 must be at risk for the purpose of generating a return. If you are guaranteed investment returns or told you will get back a portion of the money you invested, be suspicious.
Unregistered investments. Even though a regional center may be designated as a regional center by USCIS, most new commercial enterprise investment opportunities offered through regional centers are not registered with the SEC or any state regulator. When an offering is unregistered, the issuer may not provide investors with access to key information about the company's management, products, services, and finances that registration requires. In such circumstances, investors should obtain additional information about the company to help ensure that the investment opportunity is bona fide.
Unlicensed sellers. Federal and state securities laws require investment professionals and their firms who offer and sell investments to be licensed or registered. Designation as a regional center does not satisfy this requirement. Many fraudulent investment schemes involve unlicensed individuals or unregistered firms.
(Emphases added)

As I reported in December 2010, a promoter of the first Atlantic Yards EB-5 investment, on video, claimed that "all of the immigration risk [was] out of the process."

Post: Greenland wouldn't sign Atlantic Yards deal without meeting Bloomberg (hence the photo)

There's an interesting nugget in Lois Weiss's New York Post article today, REBNY, set, go: The Most Ingenious Deal of the Year nominees, regarding the nomination of the Forest City Ratner deal with the Greenland Group for 70% of Atlantic Yards (excepting the arena and B2 tower), later renamed Pacific Park.

It's not exactly news that the CBRE brokerage team used the Kowloon section of Hong Kong to explain Brooklyn to the Chinese buyers, since that was explained in a Real Estate Weekly interview with CBRE's Marcella Fasulo in March.

“We only took the asset out to a very limited audience," Fasulo said. "We approached Greenland, and within a couple of days they were planning a trip to New York City.”

It is news that, as Weiss writes, "[w]ith no word for 'joint venture' in Mandarin, the brokers also had to devise an alternate, corporate-like deal structure with a board of directors."

Meeting with Bloomberg

And this is news:
Greenland’s top US executive and later its head of global development visited and approved. But Zhang Yuliang, Greenland’s chairman and president, would not sign the “Memorandum of Understanding” without meeting then Mayor Michael Bloomberg. The CBRE team arranged a City Hall meeting in 2014 and the MOU was signed.
That explains the photo at right taken in October 2013, posted on Greenland's web page for news releases but not by the mayor's office, as I wrote last June.

Nine days before Forest City and Greenland announced the memorandum of understanding, the mayor met in his office with Zhang, as well as Deputy Mayor Robert Steel and Borough President Marty Markowitz.

According to a crude Google translation of the 10/11/13 news release, Bloomberg "pointed out that New York City will be their help to solve the various problems encountered in the Green Group in the United States investment process, coordinating parties to provide more convenient conditions and quality service for Greenland Group, strive for the early realization of cooperation expected results."

As noted in coverage of the EB-5 immigrant investor program, Chinese investors like to be reassured by the role of government in a project, however spurious. In this case, the role of government is significant.

Bloomberg, of course, could not guarantee government assistance to the project over the term of its buildout. However, he could stress the importance of cooperation. And the photo with Bloomberg--he's somber, Zhang looks enthused--certainly added to Greenland's cachet in its effort to grow globally.

Monday, April 20, 2015

Next Atlantic Yards Community Update Meeting postponed to May 12

The ESD Atlantic Yards Team sent a message confirming that, with all of two days' notice, the  next Atlantic Yards Community Update Meeting is being postponed three weeks "to ensure the most up to date information is share [sic] with the community." (I cited the likelihood last Friday.)

(If they want to share the most up-to-date information, a first step would be to explain now why the night work promised for last Thursday didn't happen, and when it will be done. I just requested info.)

The message:
The April 22nd Atlantic Yards Community Update Meeting (formerly known as Quality of Life) is being rescheduled for Tuesday, May 12th. We are rescheduling the Community meeting to ensure the most up to date information is share with the community. Just as a reminder all meetings will take place at: Just as a reminder all meetings will take place at:
@ 6:00 PM
Shirley Chisholm State Office Building
55 Hanson Place, 1st Floor Conference Room
Brooklyn NY 11217

The EB-5 scandals bubble up, from Nightline to Inspector General; fed official claimed "nothing is more important" than job creation (sure)

I'm catching up on a lot of news related to the EB-5 program, which has helped the developers of Atlantic Yards/Pacific Park raise $477 million in cheap capital, with another $100 million to go. Perhaps the clearest summary of the lure and sketchiness of the program came in a February 2012 quote from an EB-5 fundraiser to The Daily:“It’s just a way of being able to get free money, basically, to build all sorts of projects.”

ABC's Brian Ross and Matthew Mosk have been breaking news about EB-5, the immigrant investor program, and has found numerous examples of sketchy operations, raising questions about crime and national national security.

And their investigation has since been backed up by a blistering report from the Inspector General (IG) of the Department of Homeland Security (DHS), which houses the United States Citizenship and Immigration Services (USCIS), the agency that oversees EB-5, in which immigrant investors can get green cards for themselves and their families by investing $500,000 in a purportedly job-creating investment.

The IG concluded--after interviewing numerous whistleblowers inside USCIS--that Alejandro Mayorkas, then-Director of USCIS and current Deputy Secretary of the DHS--intervened in three cases involving politically prominent promoters of EB-5 investments and steered a favorable outcome.

What was missing

Neither the ABC reporting nor the IG's report, however, challenge the routine evasion of the law's intent, which (in part) is to stimulate jobs in areas of high unemployment (or rural areas).

That means developers can get state agencies to gerrymander maps--like the Bed-Stuy Boomerang I've described regarding the Atlantic Yards EB-5 project--to ensure that an EB-5 investment qualifies for a Targeted Employment Area (TEA).

And it means that the economists hired to calculate job creation can base that figure not merely on the sum invested by immigrant investors but on the whole pot of money in the project, which can include taxpayer subsidies.

That might make sense if the contribution by immigrant investors truly serves as seed money. But in cases, as in the Atlantic Yards example, it simply substitutes for a higher-interest loan.

The investigation

A package ABC produced in February, The $500,000 Green Card, suggested that the EB-5 program was "one being aggressively marketed to wealthy foreigners, and one that whistleblowers say is being exploited by criminals, spies, and possibly even terrorists."

Notably, ABC found numerous governmental sources to express dismay:
The federal official who oversaw the growth of the program, Deputy Homeland Security Secretary Alejandro Mayorkas, told lawmakers last year that any weaknesses in the program have been tightened. But whistleblowers told ABC News that little has changed since concerns were raised about visa applicants being approved despite being suspected of fraud, money laundering, and in one instance, possible involvement in selling child pornography.

Mayorkas declined requests for an interview for this report, and when ABC News caught up with him, he ignored the cameras and questions altogether.
....Documents obtained by ABC News show that U.S officials had undertaken an investigation of a southern California shipping company, American Logistics International, and its Iranian-born owner, Alireza Mahdavi, for possible illegal shipments to Iran. Even as the investigation was underway, the company was re-certified by U.S. immigration officials as an EB-5 regional center, which entitles it to recruit foreign investors with the promise of a visa, and potentially, a Green Card. The company has raised millions of dollars from foreign investors, many from Iran.
Senator Charles Grassley (R-IA), the chairman of the Senate Judiciary Committee, expressed concern about the national security aspects of the program. ABC reviewed a report that indicated that more than 30 EB-5 "projects had at some point become the subject of a criminal investigation."

Advocates, however, point to a few bad apples. ABC reported on the positive side:
Investment from EB-5 applicants has helped finance the construction of a New York sports arena and a Vermont ski resort and water park, help provide financing for a Hollywood movie studio, and even finance the construction of the FBI office building in San Diego.
Actually, that part about the arena isn't true. (The video here actually showed the arena.) So ABC offered backhanded endorsement of the EB-5 investment in Atlantic Yards, which is hugely dubious.

(Elements of this story were broken by the Washington Times in November 2013, as far as I can tell, and was based at least in part by revelations by Sen. Charles Grassley (R-IA), the ranking Republican on the Judiciary Committee.)

Bi-partisan support

A 2/3/15 ABC piece, Whistleblowers: US Gave Visas to Suspected Forgers, Fraudsters, Criminals, reported:
Five different Homeland Security whistleblowers spoke with ABC News about a range of cases where visas were approved despite numerous red flags. They said objections were often ignored because the immigration program is so popular within the Obama Administration and with members of Congress from both parties.
It's got bipartisan support because elected officials like to offer local developers/entrepreneurs cheap capital at no seeming public costs.

But why is it so popular within the Obama Administration, or within any presidential administration? They represent the national interest.

If they acted wisely, they'd recognize that a different program--say, one in which the investment goes to the government--would serve the public interest rather than one that favors entrepreneurs who are willing to push the envelope or lie in marketing the project.

Selling green cards?

It's interesting that ABC could find someone to offer the bedrock criticism of the program, reporting:
Some immigration groups have criticized the program as “nothing more than selling Green Cards.” Brent Wilkes, the executive director of the League of United Latin American Citizens, one of the largest Hispanic civil rights groups in the U.S. said it “short circuits” the immigration process, allowing foreign nationals “with enough cash” to leap ahead of legitimate applicants who lack the means.
Of course it's selling green cards.

But because other countries do it, it's likely the United States won't stop. The question then should be how and whether the public getts any value. As Dartmouth's John Vogel put it:
One of the oddities about the EB-5 program is that the U.S. government is giving out the green cards, but the entrepreneur who puts together the investment gets the money. This scheme seems inefficient and open to corruption. If our government really believes that it is a good idea to sell green cards, maybe we should drop the pretense that this is a job creation program. It might be more efficient to have the money go directly to the U.S. Treasury and reduce the deficit by billions of dollars a year. In fact, the U.S. government could auction off these green cards and perhaps raise even more money.
The industry spin

ABC quoted Peter Joseph of the trade group Association to Invest in the USA:
Joseph noted the program is now so popular that the 10,000 visas allotted in 2014 for EB-5 investors were claimed in a matter of months, and he is lobbying for its expansion. The money has paid for popular projects -- a Brooklyn basketball arena, a California winery, a Vermont ski lodge, even a Hollywood movie studio – that have supported an estimated 42,000 jobs.

“It's a win for the investor, who's seeking to get an immigration benefit, along with a return on their investment, along with the American worker who's able to get to work, thanks to the capital investment coming through the program,” Joseph said.
That's tired rhetoric. How about: it's a win for the developer, especially since those jobs figures are so fuzzy.

Other controversies

ABC pointed to several EB-5 controversies, involving then-Virginia gubernatorial candidate Terry McAuliffe, former South Dakota Governor (and then Senate candidate) Mike Rounds, and Nevada Sen. Harry Reid's intervention in a Las Vegas hotel project, prompting the USCIS to reverse its position.

In another piece, Feds Investigating Iran Ties to Firm Involved in US Visa Program, Ross and Mosk reported on American Logistics, a Los Angeles shipping firm, and its Iranian-born owner, stating that a confidential Department of Homeland Security document warned that the EB-5 program might be used by Iran “to infiltrate the United States.”

In another report, The $500,000 Green Card: Obama, Clinton Kin Courted By Foreign Middlemen, ABC reported how big names were recruited to promote EB-5:
Hillary Clinton’s brother is involved. So are powerful California politician Willie Brown and Chicago political boss Richard M. Daley. One firm that helps wealthy Chinese gain access to the little-known immigration program even tried to recruit President Obama’s half-brother, Mark Obama-Ndesandjo.
In New York, of course, some elected officials or former officials have been involved, including former Gov. David Paterson and Sen. John Sampson.

The industry response

Responding in the Huffington Post, Ali Jahangiri, CEO and Publisher, EB5 Investors Magazine, wrote 2/13/15, 'Nightline' Misunderstands Fundamental EB-5 Program Functions and Safety:
Most pointedly, the article misunderstands how the EB-5 program works. The article alleges that immigrant investors "can jump to the front of the line and obtain legal status to live in the U.S. for two years." This implies that immigrant investors take visas and a place in "line" from other immigrants who do not have the financial means to utilize the EB-5 program. This is simply inaccurate. Each visa category is distinct and separate from other categories, so the assertion that EB-5 applicants "leap ahead of legitimate applicants who lack the means," is simply not true. 
He's right, but also not quite the full story. EB-5 applicants leap ahead simply because they're wealthy, and can show their money is legit and have found an investment that purports to create ten jobs. That doesn't ring right.

More importantly, many EB-5 applicants leap ahead of other potential immigrant investors who might actually invest in creating jobs.

As to whether "the program has become a magnet for those seeking to sidestep the scrutiny of the traditional immigration process," Jahangiri is right that there are checks and protocols. But the Nightline report aired significant in-house dismay about management.

Janangiri blamed it on a few bad apples:
As with any governing body, fraud typically stems from individuals, not the system, and the EB-5 program is no more systematically prone to exploitation than any other visa program. The program is not perfect, but the overwhelming evidence shows that right now, it is working.
And he suggested legislation would improve it:
That being said, there are several pieces of legislation in the pipeline that would drastically improve it. The most notable bill is the American Entrepreneurship and Investment Act of 2015, co-authored by Congressmen Jared Polis (D-CO 2nd District) and Mark Amodei (R-NV 2nd District). The bi-partisan bill would make the regional center program permanent, and also set more rigorous standards for regional center operators and administrators. Legislation like Congressmen Polis' and Amodei's bill makes the program more secure and efficient, and would drive more money into the American economy and create more jobs for American workers.
Other than setting some new standards regarding those involved in regional centers--a rather modest lift--the bill is an industry wish list. It endorses gerrymandering and does nothing about the job-counting issue.

The report on Mayorkas

ABC, naturally, had a field day in late March when the IG's report was issued, in Top Homeland Official Alejandro Mayorkas Accused of Political Favoritism.  (Here's coverage in CNN, the Wall Street Journal, and the New York Times.)

The special treatment involved a Las Vegas casino project pushed by Sen. Harry Reid (D-NV), an electric car company run by Terry McAuliffe, a longtime Democratic fundraiser who's now governor of Virginia (and also involving Hillary Clinton's brother Tony Rodham), and a Sony film studio in Los Angeles promoted by former Pennsylvania Gov. Ed Rendell, another Democrat.

ABC noted that, when facing confirmation, Mayorkas previously told the Senate, "I have never, ever in my career exercised undue influence to [change] the outcome of a case."

That was contradicted by the IG's report, which found:
  • USCIS personnel, including Mr. Mayorkas, recognized the risks to the EB-5 program if benefits were granted without transparency and were not adjudicated according to statute, regulations, and existing USCIS policy governing EB-5 matters. USCIS therefore took pains to ensure all communications with stakeholders were properly documented and to ensure the process for deciding on petitions and applications closely followed statute, regulations, and established policy. Indeed, USCIS was obligated by law to follow the procedures set forth in the regulations. We found a number of instances in which Mr. Mayorkas declined to become involved in certain matters, stating that he did not think it would be appropriate for the Director to do so.
  • In three matters pending before USCIS, however, Mr. Mayorkas communicated with stakeholders on substantive issues, outside of the normal adjudicatory process, and intervened with the career USCIS staff in ways that benefited the stakeholders. In each of these three instances, but for Mr. Mayorkas’ intervention, the matter would have been decided differently.
  • We were unable to determine Mr. Mayorkas’ motives for his actions. In each instance he recollected, Mr. Mayorkas asserted that he intervened to improve the EB-5 process or to prevent error. As a result, he claimed that he took a hands-on approach when a case warranted his personal involvement. Mr. Mayorkas told us that his sole motivation for such involvement was to strengthen the integrity of the program; he said he had no interest in whether a particular application or petition was approved.
  • Regardless of Mr. Mayorkas’ motives, his intervention in these matters created significant resentment in USCIS. This resentment was not isolated to career staff adjudicating within the EB-5 program, but extended to senior managers and attorneys responsible for the broader USCIS mission and programs.
  • The juxtaposition of Mr. Mayorkas’ communication with external stakeholders on specific matters outside the normal procedures, coupled with favorable action that deviated from the regulatory scheme designed to ensure fairness and evenhandedness in adjudicating benefits, created an appearance of favoritism and special access.
"That so many individuals were willing to step forward and tell us what happened is evidence of deep resentment about Mr. Mayorkas’ actions related to the EB-5 program," the IG reported.

The complaints, the IG reported, went beyond Mayorkas's efforts to change the culture of USCIS, in which "he exhorted individuals to 'get to yes.'"

No new jobs

The IG's report notes that Mayorkas created a handpicked “deference review board” (DRB) to review Time Warner movie projects and reversed proposed denials of the EB-5 applications.

The report notes USCIS staff told the DRB in a teleconference that they disagreed with the deference decision. According to one adjudicator:
I explained to the review board that we did not feel that the project was creating new jobs, and that [LA Films IV] [was] just using the money to replace other funds available to Time Warner, including cash reserves and their $5 billion revolving credit facility with Citibank. So the EB-5 money was not really resulting in any new projects that would not have otherwise been produced in the absence of EB-5 capital.
That dubious use of lower-cost immigrant investor funds to replace existing funds is exactly what happened with Atlantic Yards, and when it replaces bridge financing, it's considered A-OK.

Regarding the electric car case, a participating summarized Mayorkas’ remarks:
The Director stated that he believes that nothing is more important to the United States at this time than the creation of jobs for U.S. workers. This will inform how he views every classification. So, if the regional center claims that it will create jobs for U.S. workers, he will read the statute and the [regulations] as generously as possible. For other classifications, such as H-1 B, where there are statutory provisions designed to ensure that U.S. workers are protected, he will read the statute and [regulations] more narrowly. The director noted several times that these cases are affiliated with "people of influence" and "people with money" and that he has several more of these on his radar. It seemed clear to me that since "people of influence" have raised other cases to him (or a higher authority at DHS or the White House), the AAO will be requested to defend our draft I-924 and EB-5 decisions to the Director in the future, prior to issuance. 
(Italics added by IG, bold added by AYR)

If nothing is more important than creating jobs, then maybe they should check to ensure that jobs are actually being created. (Mayorkas told the IG he did not remember making the statement about people with influence or money, and said it sounded “absurd.”)

The DHS response

Astonishingly, DHS Secretary Jeh C. Johnson issued a statement calling Mayorkas "an exceptionally conscientious, honest and patriotic public official" who "can at times be very hands-on in resolving issues" but "works hard to do the right thing."

Johnson acknowledged that involvement in "individual matters that happen to reach our desk [can] risk the appearance of preferential treatment,"  so he is now confident that Mayorkas "understands this." OK.

Indeed, Inspector General John Roth told Congress that, while Mayorkas violated his own code of behavior, as stated in a memo he'd prepared, there was no criminal activity, according to the Times.

The continued pressure

Johnson, in his statement, also noted that DHS officials "are constantly contacted by outsiders – including Members of Congress of both parties –on behalf of those with an interest in the outcome of a particular EB-5 case," which shows how those Congressional reps are influenced by the money back home.

Johnson said he was developing "a new protocol to ensure that the EB-5 program is free from the reality or perception of improper outside influence," and requests changes from Congress:
In the past, this Department has sought unsuccessfully from Congress a number of statutory enhancements to the program’s integrity, including added legal discretion to deny or revoke cases when necessary, authority to exclude people with criminal backgrounds from participating in EB-5 regional centers, and authority to require regional centers to certify compliance with our securities laws. The EB-5 regional center program is up for statutory renewal again this year. I urge Congress to work with the Department to strengthen the security and integrity of the program.
The latest scandal

The scandals just keep coming. On 4/13/15, ABC reported FBI Investigating Former White House Military Aide:
The FBI is investigating a former top military aide to three U.S. presidents and his firm over allegations it bilked foreign investors out of millions of dollars by touting his White House ties and making promises of quick U.S. Green Cards to raise funds for a giant hotel complex, ABC News has learned. Five years after an elaborate ground-breaking ceremony in New Orleans, there is only a vacant lot and investors say almost $16 million has disappeared.
The Noble Outreach project, let by retired Air Force Col. Timothy Milbrath, is among more than 30 EB-5 projects under some form of criminal investigation. In this case, there's a civil lawsuit filed against Milbrath's company by investors who claim the firm took their money but they didn't get green cards.

Given that EB-5 marketers like to play up ties to governmental bodies or public figures, it's not surprising that, according to ABC, Noble Outreach's promotional materials "flaunt[ed] Col. Milbrath’s White House ties and feature photos of him serving Presidents Ronald Reagan, George H.W. Bush and Bill Clinton as chief of staff to the White House Military Office."

Sunday, April 19, 2015

Who knew? Former Gov. Paterson, no expert on job creation, again involved/tangled with EB-5 projects

I'm catching up on a lot of news related to the EB-5 program, which has helped the developers of Atlantic Yards/Pacific Park raise $477 million in cheap capital, with another $100 million to go. Perhaps the clearest summary of the lure and sketchiness of the program came in a February 2012 quote from an EB-5 fundraiser to The Daily:“It’s just a way of being able to get free money, basically, to build all sorts of projects.”

Entrepreneurs hoping to raise money from Chinese immigrant investors under the EB-5 program know that elected and public officials--even former officials--help give the project a sheen of legitimacy.(That's why promoters of the Atlantic Yards investment improperly tried to suggest a top State Department official was backing it.)

Thus former New York Gov. David Paterson, no expert in such projects and notorious for spuriously claiming that Atlantic Yards would have "job creation the likes of which Brooklyn has never seen," has been in demand.

And sometimes things go wrong. On 4/14/15, the Real Deal reported, How a former NY governor and a promising crowdfunding startup fell out:
For an ambitious real estate tech startup, bringing on a well-connected former governor as an adviser sounds like a match made in heaven. But in the case of iFunding and former New York Gov. David Paterson, the marriage quickly turned sour.
A year after the real estate crowdfunding startup announced New York’s former governor had joined its board, the two sides are no longer on speaking terms. Instead, they have exchanged a series of bizarre accusations, involving questionable EB-5 deals, an alleged travel ban and supposedly dire financial straits. 
The people behind iFunding saw Paterson "as their rainmaker in China," but then there were "alleged legal troubles," relating to Paterson’s effort to "court investors for the New York Immigration Fund," a regional center funding a new Times Square Hotel. 

Paterson told the Real Deal the complaints related to the regional center, not his work, and says the crowdfunding site cut him off.

I reported 12/14/11, Former Governor Paterson signs up to promote an EB-5 project, regarding the hotel. He has since vanished from the web site.

Other Paterson efforts: green taxis

Last December, Sing Tao Daily, as translated by Voices of New York, reported Paterson Brings Chinese Immigrant Investors to New York:
Since 2011, Paterson has traveled to China three times. And he is making his fourth trip on Dec. 12. This trip is for the green taxi project of NuRide Transportation Group, a Long Island City-based transportation company that is raising money for expansion. “I might be the first former governor in the U.S. going to China to promote the EB-5 [investment immigration] program,” said Paterson.
That may be true, but several current governors have gone.

Beyond the Times Square Hotel project, according to Sing Tao Daily, Paterson in 2013 went to China "to promote the Crowne Plaza Hotel project [link] in Long Island City."

And the next project was green taxis:
On Dec. 12, Paterson will arrive in China and start to promote NuRide’s project in Shanghai and Nanjing. NuRide, for which Paterson is a board member, has already been running green taxi and delivery cars. This new project aims to raise $20 million from 40 immigrant investors in the first phase to purchase more green taxies and to remodel some of them.
Here's where it gets interesting. NuRide's website is down or dead, but a cache remains:

And here's the partial assessment by an outside evaluator in the EB-5 world, which indicates a lot of unknowns.

Sing Tao Daily reported:
The promotional brochure, in Chinese, has pictures of Paterson giving a speech as governor as well as former Mayor Michael Bloomberg grinning in a green taxi. Paterson said he has talked to the TLC (Taxi & Limousine Commission) and current Mayor Bill de Blasio about the project. But he noted this project is not a governmental project but rather a private one. “We can help the city to fill the void. So the city will be willing to work with us. But of course, an EB-5 program won’t be a governmental one unless people from the government are present at the promotion,” said Paterson.
Paterson interviewed; photo from Mona Shah blog
That's par for the course, suggesting a governmental imprimatur without saying so.

Attorney Mona Shah reported on the visit by her firm and Paterson to the Luxury Property Showcase (LPS) Expo in Shanghai:
In Shanghai, former New York Governor David Paterson endorsed the New York City Green Transportation project, developed by NuRide Transportation Group. This project demonstrates how EB-5 capital is slowly traversing into the realm of transportation and infrastructure investment in the United States. The Governor’s presence attracted attention from local Chinese media, Xinhua news agency, Sina, Sohu, etc. The MSA [Mona Shah & Associates] team certainly made their presence known in China’s EB-5 capital market.
Paterson also appeared at an EB-5 seminar in February in New York. Remember, even if he knows little about EB-5 a former public official looks good in China.

A Sunset Park project?

Paterson is also apparently pitching what a Chinese new article--through imperfect machine translation--called an "8th Avenue project" in the "largest Chinese district" in New York, which would be Sunset Park, Brooklyn.

If so, that's likely this Raymond Chan project, as described in the Real Deal, the World Journal, and on this EB-5 related website, which indicates an effort to raise $150 million. (Or maybe this medical project on 8th Avenue in Sunset Park, from the same developer.)

Who knew? CUNY's York College has an EB-5 "program"

I'm catching up on a lot of news related to the EB-5 program, which has helped the developers of Atlantic Yards/Pacific Park raise $477 million in cheap capital, with another $100 million to go. Perhaps the clearest summary of the lure and sketchiness of the program came in a February 2012 quote from an EB-5 fundraiser to The Daily:“It’s just a way of being able to get free money, basically, to build all sorts of projects.”

From a 3/28/13 news release from then-Assembly Speaker Sheldon Silver, announcing the 2013-14 state budget:
To support the development of small businesses... $150,000 is provided for the creation of a new EB-5 Immigrant-Owned Business Program at CUNY's York College.
From the Summer 2013 newsletter of Assemblyman William Scarborough, the Queens legislator who chairs the Assembly Committee on Small Business (and was re-elected last year after being indicted):
I was pleased to be able to secure a $150,000 grant in the 2013 budget for the York College Small Business Development Center to create an EB-5 Immigrant Investor Program to stimulate job creation in the Queens community. Under the EB-5 Program, foreign investors who invest at least $500,000 in local businesses or create at least 10 new jobs, are given visas to reside in the United States.

The nomenclature there is a more than a little fuzzy. The "program," such as it is, already exists. Either direct investments or pooled investments must be organized to meet the requirements of the program, the latter through what's known as a regional center.

And the requirement is to invest $500,000 and (not or) create--at least on paper ten jobs.

The York College web site does not indicate whether any projects have actually been launched. I suspect that $150,000 can only buy fractional EB-5 progress; it's surely not enough to get a regional center started. Right now the web site contains only basic, boilerplate information.

Saturday, April 18, 2015

Looking for Greenland USA on the web, coming up blank

How do you find out more about the Greenland Group, which via its Greenland USA subsidiary owns 70% of the Atlantic Yards/Pacific Park project going forward (except the arena and B2)?

If you go to the web site of Pacific Park Brooklyn, the Our Team page suggests that the website represents the Internet home of Greenland USA. Except the link is dead.

Friday, April 17, 2015

Transparency deficit: announced overnight work didn't happen, Community Update meeting said to be postponed

As I wrote Tuesday, there was supposed to be noisy overnight work last night at Sixth and Atlantic avenues.

There was even a Community Notice circulated (see right).

But nothing happened last night, so the work was apparently postponed.

Was there any announcement?


I've also heard secondhand that the Community Update meeting (formerly known as the Quality of Life meeting) scheduled for next Wednesday, April 22, has been postponed.

Has there been any official notice?


These are not major transparency challenges for developer Greenland Forest City Partners and Empire State Development, the state agency overseeing/shepherding Atlantic Yards/Pacific Park.

They should be easy to fix, by circulating notices or having a central web site/blog with updated information.

Student hoops at the Barclays Center: pretty much either an all-star game or pay-to-play

I wrote in July 2012 about the promise--in a 20014 Forest City Ratner flier and other propaganda--that the Atlantic Yards arena would be a venue for "amateur athletics."

That was reinforced by elected officials.

When the first Memorandum of Understanding signed by the city, state, and Forest City was released, then-Gov. George Pataki, in a 3/4/05 press release, promised that "The new Arena will not only be home to the Nets, but will host local community events, as well as concerts and school athletics for neighboring high schools and colleges."

Well, not so much. 

Yes, there are several college tournaments with teams of national or regional interest.

And Brooklyn-based Long Island University plays a few games a year.

But the arena is a hardly a home for high school basketball, so the promises were out of line. Rather, as described below, it's been a home for pay-to-play.

There has been one regular high school event: today is the third straight year of the "country's premier prep basketball event, Jordan Brand Classic," at the Barclays Center. It includes an International Game, then the first annual Girls All-American Game, then the Regional Game, and the National Game.

The PSAL blip

New York City's Public School Athletic League (PSAL) championships did come to the Barclays Center in 2014 for the first time (press release), but returned to Madison Square Garden this year. Last year's blip was a scheduling conflict with MSG.

As the Daily News reported, the one downside of using the Barclays Center last year was a condensed playoff schedule, with fewer days between games in the tournament.

“God forbid a kid gets injured (in the semifinals), you don’t have that extra couple of days to nurse that kid back to 100%,” [Cardozo boys coach Ron] Naclerio told the newspaper last year. “That is the one negative. When you’re dealing with corporate America, unfortunately they don’t adjust to you; you adjust to them.”


You can get to the Barclays Center, it turns out, if you pay

As shown in the screenshot at right, there's a Fan Experience Package that includes:
Court of Dreams
Play where the pros play before or after a Brooklyn Nets game! Do not miss this opportunity to play an authentic basketball game on the court with the same amenities as the pros including announcers, access to the player benches, and the ability for your fans to watch and cheer you on. Call for ticket requirement.
This is hardly novel in the NBA, though the Nets are more opaque than some, since they don't announce a ticket requirement.

The Miami Heat requires at least 150 group tickets per hour. The Cleveland Cavaliers require at least 300 tickets purchased. The Indiana Pacers require 100-300 tickets. The Atlantic Hawks require 200-300 tickets. The Dallas Mavericks require $9.000-$10,000 in tickets. (For the Knicks, you only get the training center.)

A high school game at the Barclays Center

Two New Jersey high school teams did play at the Barclays Center in January of last year.

They just had to sell some tickets, as shown in the flyer at left. This is one of several examples of high school and other teams playing on the Court of Dreams.

A youth team at the Barclays Center

The youth basketball program FunSport was one of the first, in December 2012, as noted here:
* Each player will receive new uniforms, shoes, socks, backpack, headband, and t-shirt
* This weekend tickets will be on sale. Minimum tickets are $50pp or premium package which includes courtside seating during championship game and closer seating for Nets-Sixers game for $175pp (limited quantity available)
The video of the event shows a rather sparse crowd.

Barclays Center updates event calendars for April-June 2015, adds playoff games, more events

Updating my previous post, here are the updated event calendars from the Barclays Center for April through June 2015.

Note the addition of at least two home playoff games for the Brooklyn Nets, on April 25 and April 27, as well as a private event this Saturday (book launch for a major church), three more events in May, and a boxing match in June.

Thursday, April 16, 2015

Nets CEO Brett Yormark thanks "the Brooklyn community and our entire fan base for your unwavering support"

Now that the Brooklyn Nets (barely) made the playoffs, those on the team's mailing list got a personal note from team/arena CEO Brett Yormark:
We want to thank the Brooklyn community and our entire fan base for your unwavering support. You are instrumental in the team’s success and have helped us advance to the playoffs each year we’ve been in the borough.
Um, that's reminiscent of the alleged "unwavering" support from Barclays when it came time to renew the naming rights agreement in November 2008, as the project stalled during the financial crisis. Barclays actually renegotiated, and a reported $300+ million deal became a $200+ million deal.

In legal battle over modular factory, Skanska targets Forest City associate BerlinRosen, partner Greenland; seeks civil contempt ruling

No, the battle over the ill-fated modular partnership between Forest City Ratner and Skanska USA is not over.

They fighting in court over cost overruns and alleged flaws regarding B2, the unfinished modular tower they were once building together, and over Skanska's decision to shut down the modular factory they once ran together at the Brooklyn Navy Yard.

And now an associated dispute has gotten bitter, as Skanska seeks to hold BerlinRosen, a Forest City p.r. firm (and a major player in NYC politics), and Greenland USA, Forest City's new joint venture partner (and majority owner of Atlantic Yards/Pacific Park), in civil contempt of court based on their alleged failure to properly respond to subpoenas seeking documents.

A hearing is scheduled for May 6. Skanska requests compliance with the subpoenas, court costs and attorneys' fees, and a statutory penalty of $250 each against BerlinRosen and Greenland.

What Skanska seeks

The subpoena issued to BerlinRosen seeks discovery of facts related to a 9/5/14 press release that Skanska attorneys claim is "libelous per se" regarding Skanska's Richard Kennedy, a party to the case.

The press release stated that the complaint claimed Kennedy "knowingly, wrongfully, intentionally, maliciously, in bad faith and without reasonable justification or excuse induced Skanska Modular to breach" the agreement with FC Modular.

Skanska and Kennedy have separately filed a counterclaim charging those statements were libelous. Skanska "wants to know the identities of the persons or entities which authorized the issuance of the Press Release and the scope and extent of the Press Release’s dissemination." 

(In other words, Skanska's beef is really with Forest City.)

The Greenland subpoena relates to plans for the next two buildings on the arena block, B3 and B4, which Skanska says Forest City initially indicated would be built modular. (In dispute is how firm a promise that was, since Forest City says the pipeline would have had to work more smoothly to get the next buildings up.)

"Because Greenland has allegedly acquired the controlling interest in the Atlantic Yards Project and presumably has rights in the B3 and B4 buildings, it is apparent that Greenland possesses information concerning the decision that was made for B3 not to be built modularly and/or as to the manner in which B4 is to be built," Skanska says.

Thus Greenland possesses information as to how or why the modular factory has been "allegedly deprived of future work," according to Skanska

Timing and response

Skanska says that both Greenland and Berlin Rosen ignored the March 16 return date of the subpoenas and filed objections only after that date.

Both Greenland and BerlinRosen say they'd produce documents only if Forest City's’ motion to dismiss is denied and if no other party in the case can produce the documents.

Not only are the subpoenas premature, say BerlinRosen and Greenland, they are also overbroad, and seek documents that are privileged and confidential.

Skanska responded that the "meritless objections" impede its ability to oppose the motion to dismiss made by Forest City, adding that "it becomes apparent that the non-parties are acting in concert with Plaintiff to deny access to discovery."

The documents at issue

Here are the documents that describe the battle: 
Skanska Motion for Contempt of CourtSkanska Memorandum of Law backing motionSkanska lawyer's AffirmationSkanska Subpoena Request to Berlin Rosen
Skanska Subpoena Request to Greenland
Berlin Rosen Objections to Subpoena
Greenland Objections to Subpoena

Journalism, or advertising? 550 Vanderbilt gets hype in Daily News, Post

There's a famous (if murky) quote that states "News Is What Somebody Does Not Want You To Print. All the Rest Is Advertising."

Sometimes the advertising is more blatant. 

Consider excerpts from two real estate feature articles just published by the tabloids, which hype the coming Atlantic Yards/Pacific Park tower at 550 Vanderbilt, and the northwest corner of Dean Street and Vanderbilt Avenue.

(They of course ignore the skewed renderings I pointed out in the GIF reproduced at right, in which the three-story brick building directly south on Vanderbilt is stretched out so as to diminish the scale of the tower across the street. Note especially the width of the windows.)

If LIC is a template, should we expect "value priced rent stabilized" Atlantic Yards apartments?

I wrote last November how the developers of affordable housing at Hunters Point South in Long Island City resorted to advertising "the best apartment deal in New York" and sending a street team out to recruit applicants for the "affordable" middle-income housing.

(They were inundated with applications--more than 92,000 for 924 units--but I suspect a large majority sought the low-income housing. Those reporting on the issue should suss this out. When I asked last year, I didn't get an answer.)

While the housing is below market for new construction in the Long Island City waterfront neighborhood, it's hardly cheap. It was last year advertised as costing up to $2,509 for a one-bedroom and $3,300 for a two-bedroom.

Perhaps, as shown in the photos below (which I took earlier this week), that's why they seem to have added a phrase: "value priced rent stabilized apartments."

Could such phrasing be in store for Atlantic Yards/Pacific Park Brooklyn?

(Note that in LIC, there's a truly public park across the street--actually, a state park and city park that nudge up against each other--as opposed to privately-managed interior space, as in "Pacific Park Brooklyn.")