The report published today by The Huffington Post says that while the program attracted thousands of immigrants, mostly from China and the Middle East, many moved on to other parts of Canada after arriving in Prince Edward Island.
The investigation by students at the journalism school in Halifax also says non-profit organizations that otherwise would have been ineligible for access to money spent by immigrants to gain entry to Canada created new corporations structured to meet the program's rules to qualify for funding.
Ottawa shut down the program in 2008 after it tried to get P.E.I. to change its program to conform with federal regulations for provincial nominee programs.
"The reason people outside of P.E.I. were so upset about P.E.I. is that it was essentially the weak section of the dike and what they were doing was seen as compromising all (provincial nominee) programs and in fact, from the federal perspective, the integrity of the national immigration program," said Robert Vineberg, who retired in 2008 as director general for the western Canada division of Citizenship and Immigration. "Unfortunately, incentives became perverted in P.E.I."
Federal rules governing nominee programs were introduced in 2002 and required immigrants to have an active role and a stake in the province that nominated them for entry, increasing the likelihood they would remain there. The report says the P.E.I. government took the position that being named to the board of directors of a company constituted "active" involvement.
Since 2008, P.E.I. has introduced a new nominee program that complies with revamped federal regulations.
Jamie Aiken, director of immigration for P.E.I., said there were about 25 nominations in 2011 to new business programs and 130 to 140 immigrants who came under streams that match skills with specific labour needs. In 2008, nearly 8,000 people applied under the old program.
Immigrants interviewed by King's students said they didn't know what businesses they were investing in.
Ellie Yue, a chartered accountant from Shanghai, said she didn't know details of the program or how her investment worked when she signed the papers and paid $150,000 to come to Canada.
"The situation with the business was very muddled," she said. "When I came to the Island, I signed a lot of documents. ... You had to sign it all, and at the time I didn't understand, so I just signed it."
Yue said she hasn't had any contact with the business she invested in and, in fact, doesn't know what it is.
Businesses on the Island received a range of funding under the immigrant investments.
A flower shop received $30,000 that was used to buy new accounting software, painting and web advertising, the report says.
The Confederation Centre for the Arts, meanwhile, didn't qualify under the program because it was a non-profit. It created two companies — Centretours and Centreworks Inc. — that received $240,000 to $270,000 to fund new artistic works and the 2009 tour to Toronto of the musical "Anne of Green Gables."
"I had been aware of (the provincial nominee program) for a number of years, just knowing other people, other businesses, that had taken advantage of it," said Jodi Zver, chief financial officer of the centre. "And I had also, previous to this job, worked for a CA firm that had done some business plans for companies involved in it."
The two companies don't have any staff of their own, she said. "From an operational standpoint, it's been operated by the management of the Confederation Centre."
Aiken said the government would be "disappointed" to hear that immigrant involvement in businesses was only on paper.
"It's not what we anticipated at all," he said. "We would have anticipated more involvement."
As for creation of new companies by non-profits, he said as long as the new company had a mandate to generate revenues to provide a return on investment, that would have been allowed.
But immigrants interviewed by King's students haven't seen a return on their investments.
Rita Zhao, who worked as a teacher in Beijing, said she doesn't expect to see any of her money again.
"That investment money buys you the (permanent resident) card and that's about all there is to it. That money isn't coming back," she said.
Out of more than a dozen immigrants interviewed by King's students, only one knew which company his money went to.
No businesses that received money have ever been accused of doing anything illegal and everything they did was approved by government officials. The RCMP has investigated allegations about the program in the past and found no wrongdoing.
The report says immigration agents in China and companies designated by the P.E.I. government to act as intermediaries between businesses and immigrants made more than $150 million from the 3,300 nominees who arrived over the life of the program.
Stephen McKnight, a lawyer in Summerside who handled the legal documentation for some businesses, said the program was successful because it brought money and people to the province.
"Before this program began there was no immigration into P.E.I.," he said.
"Did people move on? Of course they did. But people move on to Alberta who are Islanders. Once you've got your visa, it's a free country; you are entitled to live wherever you wish."
But Lee Cohen, one of Canada's foremost immigration lawyers based in Halifax, said P.E.I.'s program was a failure.
"I think everybody is playing a role in the arrangement that has ultimately served to discredit the immigration program and to work contrary to the spirit and design of those programs," he said.
"What people had created was essentially a back-door way of accomplishing immigration or resident status ..."