The No. 2 official at the Homeland Security Department intervened several times in projects with connections to insiders, including Virginia Gov.
Alejandro Mayorkas, while head of the U.S. Citizenship and Immigration Services, created an "appearance of favoritism" in a program that offers visas to wealthy foreigners willing to invest in American companies, the report says, though it stops short of saying Mayorkas was guilty of wrongdoing.
More than 15 whistle-blowers came forward to complain that Mayorkas was giving special treatment to connected applicants, the report by the department's Office of Inspector General says.
The projects included McAuliffe's electric car company, GreenTech Automotive; a series of films by Sony Pictures; and a luxury hotel and casino in Las Vegas.
Mayorkas intervened "in unprecedented ways," the report says, and "created a perception … that certain individuals had special access and would receive special consideration." If it were not for Mayorkas, the report says, the applications would have been decided differently.
The report says the projects eventually won approval after Mayorkas heard from advocates like Senate Minority Leader Harry Reid of Nevada and former Pennsylvania Gov. Ed Rendell, both Democrats.
In a 32-page response, Mayorkas, now the department's deputy secretary, said he weighed in only to fix a broken system that wasn't moving applications.
"I did so not because I wanted to but because I needed to," Mayorkas wrote. "It was not easy or pleasant to hear complaints of how poorly our agency was performing … and how incompetent we were in the performance of some of our work."
Homeland Security Secretary
The complex EB-5 visa program, mixing immigration policy with economic development goals, offers U.S. visas to people willing to invest at least $500,000 in projects that create at least 10 jobs and meet other requirements. Most of the visas, about 10,000 annually, are snapped up by wealthy Chinese investors.
But a number of the deals have turned out to be fraud schemes, and critics in
Mayorkas, who once served as U.S. attorney in Los Angeles, said the visa program was a mess when he began at Citizenship and Immigration Services in 2009. The office was short-staffed, he said, and the agency was deluged by complaints about stalled applications.
Some of the complaints were from McAuliffe, a former chairman of the Democratic National Committee who helped run presidential campaigns for Bill and Hillary Rodham Clinton. Gulf Coast Funds Management, a company run by Anthony Rodham, Hillary Clinton's brother, was trying to attract EB-5 applicants to invest in GreenTech, where McAuliffe was board chairman until he left in 2012 to run for governor.
The report says Mayorkas became involved at some point in the long application process but declined to do so in others, saying it was inappropriate. The project ultimately won approval. Though Mayorkas didn't ultimately make the decision, the report says, his unusual involvement was "corrosive" and intimidated staffers. Mayorkas, though, said McAuliffe kept complaining about his treatment, at one point leaving a high-volume, expletive-laced message on his voice mail.
Mayorkas also intervened in 2011 in a project called LA Films, set up to steer money from about 200 investors into Sony Pictures projects, the report says. His staff members wanted to deny the project, the report says, but that changed after Mayorkas received a call from Rendell, who knew the project head from his previous dealings in Philadelphia. And Reid, then Senate majority leader, asked Mayorkas to look into a stalled application from a company that wanted to invest in the SLS Hotel in Las Vegas.
The report spurred biting criticism of Mayorkas from Republicans.
The report shows "just how questionable Mr. Mayorkas' ethics and judgment were," said Iowa Sen.
"And just as bad is the blind eye that the Obama administration turned when elevating this individual to the No. 2 slot at the Department of Homeland Security," Grassley said, adding that the EB-5 program needs to be revamped or perhaps eliminated altogether.
Rep. Michael McCaul (R-Texas), chairman of the House Committee on Homeland Security, said he would hold a hearing Thursday to explore the report's findings.
Johnson said that he also had concerns about the integrity of the EB-5 program but that the problem was not Mayorkas, but lawmakers.
"Officials of this department 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," Johnson said. He said he had asked his staff to come up with a way to keep the program free from outside influence.