Friday, February 27, 2015

Most Eyebrow-Raising Headline of the Week

Achtung, Baby

"Germans balk at new ‘Soviet snitch’ Barbie" - France 24

“As if the idea of an Inoffizieller Mitarbeiter Barbie was not alarming enough ... we can easily imagine the value that a database that collects children’s tastes has for a toy manufacturing company”

The Department of Homeland Security - What's It Good for?

Tonight's vote in the House to extend full DHS funding for another three weeks failed, and failed by a good margin - 224 to 203. There is time for another vote before DHS funding runs out at midnight, but I would not bet that Speaker Boehner can turn enough of his rebellious members to pass an unamended bill tonight.

Would it really be such a great big deal if DHS went into a 'shutdown' mode while Congress, the courts, and the President duke it out over the latter's refusal to deport millions of illegal aliens?

Maybe DHS is the only thing that stands between us and a terrorist invasion of the Mall of America, like Homeland Security Secretary Jeh Johnson says. Or, maybe we wouldn't miss it much if it were gone for a while.

As Foreign Policy magazine asks, Who Needs the Department of Homeland Security Anyway?
With two days left until funding for the Department of Homeland Security dries up, Jeh Johnson has been pleading with Republicans to save his department from a partial shutdown.

That job might be easier if the 12-year-old department weren’t so widely derided on Capitol Hill and beyond for its size and clumsiness.

-- snip --

[E]ven the entreaties of the two Republican heavyweights weren’t enough to stop a letter campaign by 30 House conservatives urging House Speaker John Boehner to “stand firm against these unlawful executive actions” and reject an emerging funding deal brokered by Senate Majority Leader Mitch McConnell.

-- snip --

[That deal] may be a tough sell, in large part because Johnson’s dire warnings about the impact of a budget cutoff ring hollow. One reason is practical: 80 percent of DHS employees are deemed “essential” to national security and would still show up to work in a shutdown — albeit without pay. All core functions of agencies such as Customs and Border Protection, the Transportation Security Administration, and the Secret Service would remain intact; the only people from the department’s 240,000-person workforce who would be furloughed would be 30,000 nonessential employees, mostly office workers.

-- snip --

But another reason for the lack of urgency boils down to one word: respect.

-- snip --

The fact that the FBI, the agency tasked to “protect and defend” against “terrorist and foreign intelligence threats” is housed outside DHS indicates the department’s awkward and uncertain place in America’s national security bureaucracy.

“DHS’s biggest problem is that it is still less than the sum of its parts,” said Daniel Byman, a professor of security studies at Georgetown University and a contributor to Foreign Policy. “The whole point of it was integration of homeland security functions, but it is still a divided organization with few synergies — so it has the problems of a big organization without the benefits.”

-- snip --

“The irony in that complaint [referring to blame-shifting by DHS's defenders] is that the very reason DHS was founded was to deal with the problem of insufficient coordination within the government,” said Jeremy Shapiro, a fellow at the Brookings Institution. “If DHS failed to solve that problem, it’s unclear why it exists.”

-- snip --

Another concern is that the department, forged in a fearful post-9/11 environment, owes its existence to a wildly exaggerated understanding of the terrorist threat to the United States. As Charles Kenny, a senior fellow at the Center for Global Development, has pointed out, Americans are substantially more endangered by threats such as infectious disease, gun violence, and drunk driving than terrorism. In fact, the odds of being killed in a terrorist attack in the United States or abroad are 1 in 20 million.

“This low risk isn’t evidence that homeland security spending has worked: It’s evidence that the terror threat was never as great as we thought,” wrote Kenny.

-- snip --

Although a shutdown still looms, most observers expect House Republicans to cave in to political pressure and pass a “clean” funding bill by the end of the week. Either way, at a time when U.S. media attention on terrorist threats is at an all-time high, it’s ironic that a department dedicated to homeland security has such a hard time justifying its existence. And until it finds more solid footing within the national security bureaucracy, that problem isn’t likely to go away soon.

It turns out that "most observers" were wrong about the House Republicans caving by the end of the week. What happens next is anybody's guess, but, regardless of whether DHS get full or only partial funding, it would be nice if we finally figured out why it exists at all.

Thursday, February 19, 2015

SecState Kerry on Countering Violent Extremism, and A Violent Extremist's Rebuttal

Mohammad Sidique Khan, Teaching Assistant, Terrorist

My hero Marie Harf has not backed down an inch, I'm happy to say. She stands like a stone wall defending the Obama administration's indefensible position on the root causes of terrorism, even if it costs her a promotion to the Number 1 spokesperson slot. We should all have employees that loyal.

Meanwhile, Secretary of State John Kerry addressed the White House summit conference on countering extremist violence, and also published remarks in an Op-Ed for the Wall Street Journal, Our Plan for Countering Violent Extremism.

Kerry, like President Obama and all the other conference speakers, persists in saying that terrorism and other forms of violent extremism are no more than common crime, just basically an irrational lashing out at life's unfairness. If that's true, the theory goes, then violent extremism might be countered by a strategy of denying the legitimacy of violence by non-state actors and promoting Good Government.

I've excerpted the best parts of Kerry's Op-Ed and juxtaposed them with bits from the martyrdom statement of Mohammad Sidique Khan, a suicide bomber whom I cited yesterday as an example of a highly rational and thoughtful Muslim terrorist who explicitly rejected the poverty-drives-terrorism explanation.

A whole bunch of folks at President Obama's summit conference could have learned more about violent extremism by reading Khan's statement than by listening to Kerry.

Kerry: "A safer and more prosperous future requires us to recognize that violent extremism can’t be justified by resorting to religion. No legitimate religious interpretation teaches adherents to commit unspeakable atrocities, such as razing villages or turning children into suicide bombers. These are the heinous acts of individuals who distort religion to serve their criminal and barbaric cause."

Khan: "Our religion is Islam - obedience to the one true God, Allah, and following the footsteps of the final prophet and messenger Muhammad ... This is how our ethical stances are dictated ... Your democratically elected governments continuously perpetuate atrocities against my people all over the world. And your support of them makes you directly responsible, just as I am directly responsible for protecting and avenging my Muslim brothers and sisters."

Khan justified his politically motivated violence as a defense of his coreligionists around the world who were under attack by Britain and the United States. That was enough, for him and his three fellow suicide bombers, to legitimize the murder of more than 50 persons and the wounding of more than 100 who were riding public transportation in London.

Kerry: "The most basic issue is good governance. It may not sound exciting, but it is vital. People who feel that their government will provide for their needs, not just its own, and give them a chance at a better life are far less likely to strap on an AK-47 or a suicide vest, or to aid those who do."

Khan: "I and thousands like me are forsaking everything for what we believe. Our driving motivation doesn't come from tangible commodities that this world has to offer."

Khan was born and raised in Great Britain, which has exemplary good governance. His parent's native Pakistan? Not so much. But then, as a Muslim, Khan might well have preferred Pakistan's kind of governance, and thought that it is non-Sharia law states which lack the good governance Kerry thinks is so basic to living a good life.

Kerry: "We must identify the zones of greatest vulnerability, the places that could descend into the chaos that breeds terrorism—or that could turn the corner and be the hotbed of growth or innovation. And then we must tailor our efforts and target our resources to meet the specific needs of those places. It may be training young people so they can get jobs and envision a future of dignity and self-reliance. It may be working to eliminate corruption and promote the rule of law, so that marginalized communities can enjoy security and justice. It’s very likely both, and of course much more."

Khan: "Until we feel security, you will be our targets. And until you stop the bombing, gassing, imprisonment and torture of my people we will not stop this fight. We are at war and I am a soldier. Now you too will taste the reality of this situation."

Khan lived in a highly stable social environment. He had a job, an education, a family, and dignity. He was not marginalized. In his martyrdom video he does not complain of chaos, or public corruption, or a lack of law and order. To the contrary, he said he committed violence to create security and advance justice for the religiously defined community ("my people") with which he identified.

Why should we not take Khan at his word?

Wednesday, February 18, 2015

Marie Harf Stays On-Message, And She Isn't Alone

Not Marie Harf's official photo, but close

As a cheerleader for the Obama administration, Marie has only one job. It's stupid, but she's going to do it. I have to admire that kind of focus.

Frankly, I wish everybody would leave Marie alone. All she did was repeat a very common bit of conventional wisdom about the "root causes that lead people to join these groups" such as ISIL. You know, root causes, like joblessness and a lack of economic opportunity.

The notion that poverty drives terrorism has been debunked repeatedly, but that hasn't made the idea go away. And it isn't just Marie who insists otherwise. Here's another believer in those root causes:
“We fight against poverty because hope is an answer to terror” – George W. Bush, remarks at the International Conference on Financing for Development (2002)

Republicans, among others, have pushed the poverty-leads-to-terrorism equation when they were selling foreign economic development programs to the American public. In the case of George Bush in 2002, it was the Millennium Challenge Corporation that was going to undermine those economic root causes of terrorism.

Joshua Keating, today in Slate, demolishes the idea that terrorists are just angry about being unemployed:
The idea of terrorists as desperate young men lacking in economic opportunity is not borne out by empirical evidence. A well-known 2002 paper by economists Alan Krueger (later an assistant secretary of the Treasury in the Obama administration) and Jitka Maleckova found that support for violence among Palestinians in the West Bank and Gaza was not any higher among those with lower living standards or levels of education. In Lebanon, participation in Hezbollah was actually associated with higher living standards and levels of education. The same was true for Israeli settlers who participated in attacks against Palestinians.

A 2012 survey in Pakistan reached a similar conclusion: Poorer Pakistanis were less likely to support militants than the middle class. The political scientists conducting the study hypothesized that “the urban poor suffer most from militants’ violent activities and so most intensely dislike them.” A 2004 study by Harvard economist Alberto Abadie, looking at country level data, found that “terrorist risk is not significantly higher for poorer countries.” Abadie found political freedom to be a more important factor: Countries in the kinda-free range had more terrorism than highly democratic or highly autocratic countries.

Actual terrorists are often better educated than most in their societies, and, indeed, in ours. From a 2005 New York Times Op-Ed
We examined the educational backgrounds of 75 terrorists behind some of the most significant recent terrorist attacks against Westerners. We found that a majority of them are college-educated, often in technical subjects like engineering. In the four attacks for which the most complete information about the perpetrators' educational levels is available - the World Trade Center bombing in 1993, the attacks on the American embassies in Kenya and Tanzania in 1998, the 9/11 attacks, and the Bali bombings in 2002 - 53 percent of the terrorists had either attended college or had received a college degree. As a point of reference, only 52 percent of Americans have been to college. The terrorists in our study thus appear, on average, to be as well educated as many Americans.

The 1993 World Trade Center attack involved 12 men, all of whom had a college education. The 9/11 pilots, as well as the secondary planners identified by the 9/11 commission, all attended Western universities, a prestigious and elite endeavor for anyone from the Middle East. Indeed, the lead 9/11 pilot, Mohamed Atta, had a degree from a German university in, of all things, urban preservation, while the operational planner of 9/11, Khalid Sheikh Mohammed, studied engineering in North Carolina. We also found that two-thirds of the 25 hijackers and planners involved in 9/11 had attended college.

Pew Research surveyed Where Terrorism Finds Support in the Muslim World and found it has exactly as much support among low-income as among high-income Muslims.

The University of Chicago's project to study suicide bombers found, where information is known about the attackers, that three times as many suicide bombers had professional or skilled occupations, or were students, than were unemployed or low-skilled. As for education, almost three times as many had post-secondary education as had only secondary education or less.

Quite a few filthy-rich kids have become terrorists. Umar Farouk Abdulmutallab, the 'underpants bomber' who failed to detonate his weaponized BVDs over Detroit, is the youngest child of a wealthy Nigerian banker and businessman, reputedly one of the richest men in Africa, and a former Chairman of First Bank of Nigeria and former Nigerian Federal Commissioner for Economic Development. He was also educated, having earned a degree in mechanical engineering from a University in London.

The four suicide bombers who committed the July 7, 2005, attacks in London did not lack economic or other opportunities. They were all second generation immigrants with university educations, jobs, and families. Why did they commit one of the more heinous terrorist attacks in recent British history?

The ringleader of the four, Mohammad Sidique Khan, explained their motive in a very articulate martyrdom video:
I and thousands like me are forsaking everything for what we believe. Our drive and motivation doesn't come from tangible commodities that this world has to offer. Our religion is Islam, obedience to the one true God and following the footsteps of the final prophet messenger. Your democratically-elected governments continuously perpetuate atrocities against my people all over the world. And your support of them makes you directly responsible, just as I am directly responsible for protecting and avenging my Muslim brothers and sisters. Until we feel security you will be our targets and until you stop the bombing, gassing, imprisonment and torture of my people we will not stop this fight. We are at war and I am a soldier. Now you too will taste the reality of this situation.

Is there any reason to doubt that was his motive? He was thirty, educated, employed, and married with a child. He did not lack opportunity. As he said, he chose to forsake that opportunity in order to take revenge upon Britons at large for their democratically expressed support for wars against his fellow Muslims. He was not distracted from this mission by tangible commodities, no matter what Washington figures from George W. Bush to Marie Harf may think. Could Khan have made that any more clear?

Friday, February 13, 2015

Shall We Place Overseas Buildings Operations Under a Security Boss?

I like the idea - don't get me wrong - but I wouldn't bet money on it being implemented. Like oil and water, OBO and DS don't mix.

Of course, there is always the chance that the next House Oversight Committee hearing on Design Excellence will blow up so badly that a hostile takeover of OBO starts to look good to the big players in that headquarters building across the river from Rosslyn. Be still, my beating heart!

Here's the unofficial restructuring proposal that has me all a-twitter.

Time for Change: Restructuring the State Department for the 21st Century:

WhirledView author Patricia Kushlis has written extensively on the corruption and incompetence that plague State's personnel system. She has also described in depth the longstanding absence of both internal and external oversight. However, there is another problem that must be addressed: the antiquated, bloated and irrational structure of management operations at State. In this article I map out a new management structure that would address these and other problems.

Because the M portfolio is too large and too diverse to be managed as one entity by one person, it should be broken up and reconfigured into more logical sub-elements. The existing Under Secretary for Management title and portfolio would be eliminated and four new Under Secretaries created – each overseeing a portfolio of related functions in which he/she would have expertise. These four Under Secretaries would report to the Deputy Secretary for Management.

--snip --

Create an Under Secretary for Security Affairs

This portfolio would group together Diplomatic Security, Information Resources Management and Overseas Buildings Operations.

In years gone by, the State Department's security concerns rested largely with threats to personnel and facilities overseas. However, in today's world, the globalization of terror and the growing ability of enemies of the United States to hack our most secure computers present new threats.

In the face of these broader challenges, it only makes sense to group together the safety of personnel and facilities, embassy construction (which is heavily dependent on security standards) and the protection of classified and unclassified information into one bureaucratic domain. The cross-cutting use of security procedures and standards, threat assessments and other intelligence for these three functions would bring greater effectiveness.

Of course the M portfolio is too large and diverse to be managed by one person. Nevertheless, it is, and it has been for a very long time. I wish the best of luck to anyone who tries to break Patrick Kennedy's iron rice bowl into four pieces. Bring Kryptonite.

Fun fact from the past: State Department information programs were placed under the Assistant Secretary for Diplomatic Security in 1989, and the unhappy marriage lasted until 1992. So the idea of merging information programs with overseas buildings and security isn't altogether new and untried.

According to this publicly available source of information, Sheldon J. Krys, Assistant Secretary of State for Diplomatic Security from 1989-1992, brought the Office of Information Management (IM) into his portfolio for all the right reasons. However, the merger did not last after his departure.

The Reagan White House also issued NSDD-211, which placed the Department of State in charge of the Diplomatic Telecommunications Service (DTS), which was largely managed by the Office of Communications but worked closely with DS to maintain its security.

Then, in 1989, in an effort to improve information security and better coordination of information, the Department, through the efforts of Assistant Secretary Krys, transferred IM to DS. The IM transfer incorporated OC’s Office of Security (OC/S) and all of OC’s electronic and technical countermeasures into DS. Also, OC’s Field Inspection Teams went to DS, as did the Shield Enclosure program for post communications centers.

The merger of IM and DS proved unpopular and difficult, and the rapid pace of innovation in computer technologies aggravated the situation. Several officials in OC and IM did not like the transfer. One OC/S veteran, Robert Surprise, who was studying at the National Defense University in 1990, devoted his research paper to a reassessment of IM’s transfer to DS. Surprise concluded that the merger did not achieve its intended goals, and that “user and IM communities have expressed dissatisfaction with the new structure” because it was “too bureaucratic, unresponsive, and a hindrance to progress.” The Office of the Inspector General used Surprise’s paper to argue that IM should be removed from DS and put back into the Bureau of Administration. Krys, who had favored the initial transfer, concluded after just two years, that IM should be its own bureau (at least theoretically). After three years, Department officials approved IM’s move back to the Bureau of Administration. While most information management and communications offices left, the security-oriented offices like Computer Security remained with DS.

Okay, so the merger of DS with the Geek Squad didn't work. Geeks with guns? But, that doesn't mean it shouldn't be tried again with DS and Overseas Buildings Operations. Please. Oh, please.

Wednesday, February 11, 2015

Evacuation From Yemen - Houthis Want to Be Our Friends, Despite That Slogan

Photo from

In a New York Times interview published today (U.S. Embassy Shuts in Yemen, Even as Militant Leader Reaches Out) the leader of the Houthi militia expressed his desire to be friends with everybody:
Mr. Sammad also said the Houthis wanted a Yemen with good relationships with the United States and other countries, provided that its sovereignty was respected. The militants’ slogan, which is chanted at rallies and painted on walls in Sana, includes the phrase “Death to America.”

“It’s not meant to suggest harming American people,” Mr. Sammad said. “This is just a slogan.”

Just a slogan? Only figurative language? Okay, then. Still, it seems very unfriendly, especially after some Houthis shot up of one of our embassy vehicles, which, according to the NYT, happened on 19 January and was a factor in the decision to evacuate our embassy.

I think something about that slogan is getting lost in translation. The Houthis ought to dial it back if they hope to achieve the good relationship with us that Mr. Sammad says they want. They could do it in steps. Start by changing the slogan to something like “Go screw yourself, America!” Then, “Go home, America!” Then, “Good riddance to you, America!” And finally, “Hey buddy, got any loose change, America?”

Some other excerpts from Sammad's interview:

In his first interview since the Yemeni government collapsed, the leader of the Houthi militants who control Sana, the capital, depicted his movement as eager to share power with its rivals and to reach out to the country’s traditional allies, including the United States and Saudi Arabia — even as the American Embassy prepared to shut down. Saleh Ali al-Sammad, the senior Houthi leader in Sana, made the remarks as a new round of United Nations-mediated talks among the Houthis and other major political parties to try to form a government entered a second day. Yemen has been leaderless since the president and his cabinet resigned on Jan. 22, citing Houthi pressure and attacks.

-- snip --

Mr. Sammad’s remarks, and his unusual willingness to be interviewed by an American news organization, suggested that the Houthis were anxious to climb down from the position they took on Friday, when they declared a unilateral plan for forming a new government.

-- snip --

Mr. Sammad took pains to say that the Houthis wanted normal relations with the United States and other countries. No diplomats have been harmed since September, when the Houthis took over security operations in Sana, he said, adding, “We are not against the missions or individuals themselves, but against policies adopted by America.” However, an attack on an American Embassy car on Jan. 19 at a Houthi roadblock was far worse than previously known, according to a Western diplomat who was briefed on the attack and spoke on the condition of anonymity because of diplomatic sensitivities. He said the armored car had been hit with 87 rounds of automatic weapons fire, but the vehicle’s armor withstood the onslaught, and those inside, including two diplomats, were able to escape to safety. “The Americans are furious,” he said. A 2012 attack on an American diplomatic compound in Benghazi, Libya, killed four staff members, including the ambassador.

Once again, those armored vehicles have proved to be worth every penny they cost. They have saved more U.S. diplomats from being killed than any other physical countermeasure the USG puts out there.

By the way, I highly recommend following this Twitter account for news and educated opinion on events in Yemen. It was the source of the photo above.

Saturday, February 7, 2015

Most Eyebrow-Raising Headline of the Week

"How a McDonald's Sausage Burrito contains more than 100 ingredients - including one chemical used in FIREWORKS" - UK Daily Mail

"Among the scrambled egg mix is ... sodium benzoate, which is also added to fireworks to produce a whistling sound"

Wednesday, February 4, 2015

Diversify Your Passport Portfolio For Only $500,000

Such a deal! The U.S. Government allows up to 10,000 foreign citizens per year to flat-out buy permanent resident status in the United States, if they invest $1,000,000 in a business or only $500,000 in a targeted employment area, i.e., a high unemployment or rural area.

Well, technically, it's conditional permanent residence, says the U.S. Citizenship and Immigration Service (USCIS), but the conditions are only loosely enforced, according to ABC News.

Whistleblowers: US Gave Visas to Suspected Forgers, Fraudsters, Criminals:
An ABC News investigation found that in addition to reaching wealthy foreign investors, the program [see this description] has become a magnet for those seeking to sidestep the scrutiny of the traditional immigration process. In one case, immigration officials pushed through a visa application from Chinese investor in a Las Vegas hotel project despite an internal review that found the investor had previously been turned back at the border, and much of his visa application had likely been fabricated, immigration records show.

-- snip --

The document summarizes 41 investigations, some open and some now closed, into allegations ranging from espionage to fraud to drug trafficking involving investors in various EB-5 investment projects.

One regional center [a private sector entity certified by Homeland Security to recruit foreign investors for specific business ventures that will qualify for EB-5 visas] run by an Iranian-born businessman living in Beverly Hills was approved to raise roughly $25 million in investment money from foreign sources even when one of his businesses was being raided by agents. Federal officials told ABC News the businessman is suspected of allegedly smuggling banned items to Iran.

Another regional center raised money from Chinese investors to finance the construction of federal buildings, including an FBI headquarters building in San Diego, raising what one internal document called “national security concerns” that “pertain to Chinese investors having visibility to FBI blueprints/information.”

-- snip --

In 2013, then-Virginia gubernatorial candidate Terry McAuliffe was accused by political opponents of trying to prod federal officials to approve visas for investors in an electric vehicle start-up venture he ran. He denied that he sought undue influence. In 2014, questions about an EB-5 investment scheme in South Dakota became grist for political ads targeting then-U.S. Senate candidate Mike Rounds, who was attacked for his role in oversight of investment projects while he was governor. Rounds called the attacks political and "inaccurate" and "defamatory."

McAuliffe is now Governor of Virginia, and has - so far as I can tell - given up his ownership in that tiny electric car company. Here's an excerpt from a 2013 WaPo story about the cozy connections between politicians, businessmen, and government officials that facilitated McAuliffe's access to foreign sources of capital.

An electric-car company co-founded by Virginia gubernatorial candidate Terry McAuliffe (D) is being investigated by the Securities and Exchange Commission over its conduct in soliciting foreign investors, according to law enforcement documents and company officials.

In May, the SEC subpoenaed documents from GreenTech Automotive and bank records from a sister company, Gulf Coast Funds Management of McLean. The investigation is focused, at least in part, on alleged claims that the company “guarantees returns” to the investors, according to government documents.

GreenTech has sought overseas investors through a federal program that allows foreigners to gain special visas if they contribute at least $500,000 to create U.S. jobs. Gulf Coast, which is run by Anthony Rodham, the brother of former secretary of state Hillary Rodham Clinton, seeks investors for GreenTech and arranges the visas.

The story noted that McAuliffe's GreenTech and Tony Rodham's Gulf Coast shared office space while they tag-teamed Chinese investors. Cozy, you see?

The [subpoenaed] documents counter the impression left last week by a top U.S. immigration official, Alejandro Mayorkas, who testified in front of a Senate panel that he met with McAuliffe on one occasion, “and that was the extent of the interaction.”

The documents show that Mayorkas and other senior DHS officials had a dozen e-mail and telephone contacts with McAuliffe, Rodham, and other representatives of GreenTech and Gulf Coast.

Mayorkas, who has been nominated to be second-in-command at DHS, is under investigation by the agency’s inspector general for allegedly providing special treatment for GreenTech. The investigation is preliminary and has not produced any findings of wrongdoing. Nonetheless, Senate Republicans have said they will not consider Mayorkas’s nomination until it is completed.

The new documents also show that some career DHS employees believe that Mayorkas broke protocol by altering a draft decision about GreenTech and how it handled stock returns to investors.

Whistleblowers have alleged to Senate investigators that Mayorkas became overly involved in GreenTech’s case.

Where would we be without our whistleblowers? Now, if only there were someone in Washington who cared enough to end this cash-for-visas scheme.

And quite a slick scheme it is. I found a nice description of the EB-5 visa business model in a Fortune magazine story:

At the heart of the program is an unusual trade: Because the immigrants care far more about getting a green card than anything else (their families get visas too), they’re willing to accept a token financial return. In fact, when “administrative” fees of about $50,000 are added, they’re typically paying for the privilege of sinking $500,000 into a U.S. venture for five to seven years—with no guarantee that they’ll ever get it back. And in part because of distance and language barriers, the targets of EB-5 pitches seem ill-equipped (or disinclined) to assess the business risks.

Though the government issues the visas, private developers reap the benefits. After middlemen get their piece, the cost of EB-5 capital runs between 4% and 6% a year—less than half of what developers would typically have to pay for mezzanine debt [which is defined here] or to equity investors. Raising $100 million through EB-5 can add $20 million to a project’s bottom line.

The growing demand for EB-5 financing is being met largely by new Chinese millionaires, eager for greater freedom and less pollution, or to send their kids to college in the U.S. More than 80% of the program’s applicants now come from China, making it the mother lode for EB-5 prospecting.

-- snip --

Many EB-5 attorneys represent both the project and the investors, a clear conflict, and take undisclosed fees from developers—up to $60,000 per immigrant—to steer clients to particular projects ... The EB-5 program isn’t overseen by a financial regulator but by the U.S. Citizenship and Immigration Services (USCIS), part of the Department of Homeland Security. Accustomed to processing visas and conducting immigrant background checks, USCIS is ill-equipped to review business plans, job-creation studies, and securities offerings. The SEC retains the power to police fraud. What that means is the agency has no mechanism to sniff out a problem until it has exploded, at which point the agency can only clean up the mess.

-- snip --

They are one of the oddities of the EB-5 system. “Regional centers,” which are legally required and USCIS-certified, sound as if they are federal offices, but they’re not. They are typically private, profit-making operations that pool EB-5 money for development projects. Oh, and there’s one other quirk: These seemingly independent operations are often launched and operated by the very developers who are raising money, giving them an extra measure of control.

The regional centers that operate independently can be highly lucrative. Centers usually charge a developer about 2% annual interest for at least five years on whatever amount of immigrant capital they raise. A $60 million deal can thus generate $6 million or more in income. One major operator, the New York City Regional Center, expects its total income on just four large ventures to total $50,187,500, according to a worksheet prepared in a lawsuit between feuding business partners.

Like banks and Wall Street firms, regional centers sell securities and handle millions. Yet there are no rules on who can own or run a center, and no audit requirements. A regional center doesn’t have to report publicly on its performance, identify its principals, or disclose any financial, legal, or regulatory problems they have encountered.

These Chinese investors, and the occasional non-Chinese, are approved for permanent resident status by USCIS, even though it has no expertise in evaluating finance or investment proposals. The Federal agency that polices investment fraud has no involvement in EB-5 visa matters at all unless and until it is called in after a project becomes a disaster. The foreign investors, our new Economic Citizens, are hooked up with their investment opportunities by unregulated middlemen who work for the project developers and profit from both ends of the deals they put together. And this money-making machine is fueled by visas that are teased or coerced out of the bureaucracy by politicians who are exchanging favors with the project developers and each other. 

Wow, it sounds like everybody wins. Except for anyone who cares about what ABC News called "the traditional immigration process" - and law - or worries about the national security implications that follow when that process is abused.

Monday, February 2, 2015

Foreign Affairs Budget Request for 2016 is Released

So the Obama Administration has proposed a Federal government budget of 4 trillion dollars for 2016. Strictly speaking, it's only S3.99 trillion, which is advertising brilliance, according to Roger Sterling.

The FY 2016 budget justification for Department of State, Foreign Operations, and Related Programs accounts for $43.7 billion of the total Federal budget, plus another $7.0 billion for Overseas Contingency Operations (i.e., the tail ends of wars in Iraq, Afghanistan, and Pakistan). Historically, the cost of conducting the Foreign Affairs of the United States has been just a little bit over one percent of the entire Federal budget, and it looks like that proportion will hold steady for next year.

According to a budget Fact Sheet that State sent out today, the request includes $3.4 billion for Worldwide Protective Operations and $4.8 billion for overseas infrastructure. Included in that 4.8 is $2.2 billion for facility security upgrades and new embassy construction in Lebanon, Saudi Arabia, Guatemala, and Paraguay.

Those protection and facility security costs cover the needs of 86,000 overseas U.S. government employees from 30-plus agencies who staff 275 diplomatic missions.

Now, it's up to our elected representatives in Congress to either vote for that budget or to once again "make priorities and choices" to fund less than requested.