Amid the cornfields and upstart subdivisions in McHenry County, a debate is under way over a $52 million vision for the future — all-American in concept but fueled by investors from places like Dubai and China.
A sprawling sports complex planned in the village of Lakewood would feature baseball fields, bicycle trails and restaurants meant to draw families from throughout the region.
In return for kicking in $500,000 apiece, foreign investors in the project would jump to the head of the nation’s often-tangled line for legal immigration and win a route toward U.S. citizenship for themselves and their families.
The arrangement comes courtesy of an arcane but increasingly popular federal immigration program that has provided a ready source of cash to foster development in a weak economy.
But at a time when all aspects of immigration are subject to debate, the dramatic growth of the “EB-5” visa program has also sparked resentment, particularly from opponents of the scores of projects sprouting across the country — including an NBA basketball arena in New York and a ski resort in Vermont.
“Nobody here wants to sell their birthright to a foreign investor just because he has money,” said Al Stenstrom, who lives in a subdivision near where the McHenry County sports complex would be built. “Excuse my French, but, as a nation, we’re becoming whores.”
Launched in 1990, the EB-5 program was designed to stimulate the U.S. economy by attracting foreign investors able to create new jobs. Nearly 10,000 visas are set aside every year that serve as a pathway to U.S. citizenship for the investors, their spouses and dependent children.
Most of the recent growth has come under an initiative that enables third-party brokers to profit from the investments by creating federally approved “regional centers” that facilitate projects in areas of high unemployment.
Since 2007, the number of regional centers has grown by more than 10 times, to 117 — with applications pending for 88 more, federal immigration officials said. During the 2009 fiscal year, 4,218 investors and their relatives got their EB-5 visas, more than five times the number in 2007.
But with the spurt of popularity have come concerns of fraud that hark back to the late 1990s, when brokers of some regional centers were caught trying to steal millions of dollars in investments.
“Frankly, I think there’s fraud in a lot of these,” said Anna Morzy, a Chicago-based attorney with Fragomen, Del Rey, Bernsen & Loewy, a world leader in immigration law. “A lot of these regional centers, I don’t know if I’d recommend them” to her overseas investment clients.
The principal broker for the Lakewood project is Taher Kameli, 38, an Iranian-born Chicago attorney who has partnered with a Naperville dentist and a small group of other board members to launch the two regional centers now operating in Illinois.
Well-versed in laws governing immigration and U.S. securities, Kameli recently sat inside his downtown law office overlooking the Chicago River and rattled off plans for other developments in the region for which he has been soliciting tens of millions of dollars during numerous trips to Dubai, United Arab Emirates.
One plan is to build a string of “memory care” centers for Alzheimer’s patients in Aurora, Elgin and Wood Dale. Other ideas include a manufacturing plant in Rockford, a water park in Wisconsin and coffee shops and restaurants throughout the region, he said.
“It’s a win-win for everybody,” said Kameli, who, before joining the EB-5 program, ran a wholesale vitamin company in Chicago that, with U.S. approval, sold to clients in Iran. That enterprise failed in 2008 after the company was sued that year over a since-repaid $1 million debt, records show.
“The investor wants to come to the United States for a better future for their children and grandchildren,” said Kameli, who secures most of his foreign investors through an office in Dubai. “The local governments are happy because you’re bringing all that sales tax and property tax revenue to them. The U.S. government is happy because you’re creating jobs.”
Yet, as the program gains fresh steam, so have worries over questionable practices from regional center representatives who have flooded China, India and the Middle East in search of investors — often wrongly guaranteeing U.S. citizenship and huge profits.
“The whole marketing strategy is not controlled,” said Lu Sun, a Beijing-based EB-5 broker with strong ties to the Chicago area. Federal immigration officials “are not aware of what’s happening with the program outside the U.S.”
Sun and others involved in the program vividly recall the instances of fraud that nearly upended the program in the late 1990s. In one case, two Virginia men wound up in prison for running a $21 million scheme that produced hundreds of fraudulent EB-5 visa applications and illegally funneled investors’ money into offshore banking accounts.
Officials at U.S. Citizenship and Immigration Services, which administers the program, acknowledged that their investigators are looking into cases of possible fraud but declined to offer details.
Kameli, whose regional centers in Illinois have not been accused of any wrongdoing, said he welcomes more federal scrutiny.
“What exactly are these regional centers doing?” he said. “The trust of different individuals in this program has diminished.”
Kameli has had to deal with issues of trust with clients himself. In 2007, he was sued by one of his foreign investment clients for alleged fraud.
He had met Iranian businessman Mohammad Reza Mohaghegh Ardebili in Dubai and guided him to an investment visa program similar to EB-5 that promised legal U.S. residency for Reza and his family, according to a Cook County lawsuit that ended in a confidential settlement with no exchange of money.
Reza claimed that Kameli and some associates misled him into buying a failing Middle Eastern restaurant in Chicago for $70,000 over the restaurant’s asking price. Reza confronted Kameli, who returned the difference to Reza, according to court documents.
But the mix-up also affected Reza’s visa application, jeopardizing the immigration status of his family, including a son with cerebral palsy he had brought to the U.S. for medical treatment, Reza alleged.
Reza, still in the Chicago area, declined to comment on the lawsuit.
But in a brief interview, he said that as a result of what happened, “I’m in a very bad situation right now.”
Kameli said that he was not found liable in the case and that the conflict was really between Reza and a real estate broker also named as a defendant.
“In our contract (with foreign investors), we always say we don’t do due diligence,” Kameli said. “You are taking the risk.”
Local supporters of the Lakewood sports complex laud the idea of new immigrants creating a recreational paradise with arcades, shops and restaurants that developers say would create 400 new jobs.
“In this economy, the opportunity to bring in a (multimillion-dollar) commercial project into the village of Lakewood without investing high taxpayer dollars? That’s pretty unique,” said Erin Smith, village president of Lakewood.
To qualify for the program, the investors must undergo intense screening that includes verification that their money is not tied to any criminal activity, federal officials say.
They and their families are then allowed temporary U.S. residency for two years, after which they must prove that their money created at least 10 new jobs per investment. If they meet that goal, the investors are processed for permanent residency, which would open the door to U.S. citizenship.
Smith said the sports complex could function as a town center in a village that has no downtown shopping area. Lakewood included the proposed site in an ongoing annexation of roughly 685 acres of unincorporated land and is studying how to provide sewer services and other utilities to the project’s 165-acre site.
As a measure of the enthusiasm for the proposed sports complex, the state economic agency that initially found the site was ineligible under the guidelines for regional centers reversed itself and went out of its way to qualify the project for EB-5 financing, documents obtained by the Tribune show.
A July 2009 letter to Kameli’s group from the state Department of Commerce and Economic Opportunity said the land, near homes valued up to $800,000, did not meet federal standards requiring that EB-5 projects be in census tracts with an unemployment rate more than 1.5 times the average national rate.
Meetings were held and a department researcher wound up surveying at least 10 nearby U.S. census tracts before he found one with a high enough unemployment rate — 16.8 percent — to meet requirements, records show. The tract, in neighboring Woodstock, nicks a corner of the project site.
Smith said the village hired a New York-based attorney who specializes in EB-5 projects to convince Illinois officials that federal law allowed for the extra census tract to be included.
The state qualified the site for EB-5 financing in February. In an e-mailed statement, a Department of Commerce and Economic Opportunity spokeswoman said the agency consulted with the local Citizenship and Immigration Services office before making the designation.
A Citizenship and Immigration Services spokeswoman in Washington said the agency has yet to review the application. If it doesn’t qualify as a regional center, investors would have to up their ante to $1 million.
As momentum builds for the project, so does the opposition against it.
Front lawns along Illinois Highway 47 and Pleasant Valley Road are decorated with white signs reading “No McHenry County Sportsplex.”
“It doesn’t belong here,” said Kathryn Francis, who lives in the nearby Colleens Cote subdivision, a place of quiet, curving streets and star-filled nights that is home to most of the sports complex opposition.
Francis and other residents cited increased traffic and potential damage to local wetlands.
But their biggest worry is that the sports complex will wind up a failed local eyesore.
They point out that sports complexes elsewhere in the country have struggled financially.
Moreover, they argue, the foreign investors could easily decide to abandon the project after they realize the level of bureaucracy involved in the EB-5 program, which offers no guarantees that they’ll be approved for permanent U.S. residency.
Kameli said there’s little chance of that happening. So far, he said, he has lined up five overseas investors for $2.5 million, declining, however, to provide a list of investors. But Kameli said he’s confident more will follow and developers hope to start construction next spring.
As part of the $52 million deal, the investors would pay off $34million in federal and state bonds that would be issued for the project.
Kameli bristled at the local opposition.
“When was the last time someone came in and said, ‘I have this idea and I don’t want anyone’s help,'” he said. “The people who are unemployed, I will create jobs. Come in. You want job? I create it for you. When was the last time someone did something like that of this magnitude?”
He added that he eased investors’ concerns by structuring the EB-5 financing so the money would serve as a loan, with the farmland and whatever is built on it serving as collateral.
“If the project fails, at least that building, the land, the equipment inside would be worth something,” Kameli said.
If enough jobs are initially created before then, the investors would still get to stay in the U.S., federal officials say.
