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Qui Tam Lawsuit Alleges Abuse of EB-5 Visa Program in Florida

In 1990, Congress created the EB-5 visa program to stimulate capital investment and employment in the United States. The program allows international entrepreneurs, their spouses, and their children under the age of 21 to apply for permanent residence (green card) status, if the entrepreneur makes a significant commercial investment designed to generate at least 10 full-time jobs for American workers. However, allegations of abuse have tainted the program in recent years, especially in the technology sector, where companies have been accused of using EB-5 and other visa programs to bring in less expensive foreign labor and suppress the wages of American workers. Now, a Florida case is testing an old federal statute as a means to remedy alleged EB-5 corruption.

The federal False Claims Act allows private citizens with knowledge of fraud against the government to bring a lawsuit as a proxy plaintiff. FCA is known as the Lincoln Law, because it was enacted during the Civil War to combat rampant corruption among defense contractors who were overbilling the U.S. government or billing for goods and services they never delivered. The plaintiff in the case is generally a company employee, a whistleblower, who has inside knowledge of the fraud. The whistleblower is called a qui tamplaintiff after the Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” which means "[he] who sues in this matter for the king as well as for himself." Suing for himself is an important aspect of a qui tam lawsuit, because if the whistleblower proves fraud against the government, he gets a share of the government’s recovery of funds, generally about 15 to 25 percent. Since fraud against the government can amount to millions of dollars in some cases, the FCA provides whistleblowers with a powerful financial incentive.

In the Florida case, Emma Tirella, a former office manager of Klausner Lumber One, accuses the Austrian firm of “submitting false statements to the United States, to the state of Florida and local governmental entities in order to obtain public grants and funding, as well as EB-5 financing…” in connection with a lumber mill the company opened in Live Oak, Florida. Benefits the company secured from federal, state and local governments include:

  • $6 million in “net tax credit equity” funding from the New Markets Tax Credits program of the U.S. Treasury
  • Federal money from the Community Development Block Grant program of Suwannee County, for hiring “a minimum of 86 employees [who] must be from low to moderate income families”
  • Various other state and local government grants

Klausner has also been accused of abusing the B-1 visa program by using foreign workers to fill operating jobs when they should only have been training American workers.

The suit was only recently filed, so Klausner has not had the opportunity to refute the allegations. However, the suit should serve as a warning to companies planning to use the EB-5 and B-1 visa programs that their hiring practices may face greater scrutiny in the future.

For reliable legal advice on business immigration, consult our dedicated Tampa Bay-area immigration attorneys at the Law Offices of K. Dean Kantaras, P.A.

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