The State Department is planning to welcome thousands of immigrants from terror-watch list countries into the United States this year through a "diversity visa" lottery -- a giant legal loophole some lawmakers say is a "serious national security threat" that has gone unchecked for years.

Ostensibly designed to increase ethnic diversity among immigrants, the program invites in thousands of poorly educated laborers with few job skills -- and that's only the beginning of its problems, according to lawmakers and government investigations.

"There are a lot of holes in this program in terms of security and in terms of fraud," said Rep. Bob Goodlatte, R-Va., who has written legislation aimed at killing the lottery.

Now, in the wake of the botched Christmas Day terror attack that emerged from Nigeria and Yemen, members of Congress are worried the system could be vulnerable to radicals looking to "play" the visa lottery as a means of reaching the U.S.

Here's how it works: to avoid getting stuck with 3.5 million others on a visa waiting list, hundreds of thousands of people put their names into the separate diversity lottery, which rewards countries that typically see low levels of immigration to the U.S. Immediate family are allowed to join lottery winners.

Countries like China, where lots of immigrants originate, are excluded.

Then a computer in Kentucky picks names at random from the qualified applicants, who need only a high school degree or two years at a job that requires two years of experience. The program accounts for about 10 percent of all immigrant visas each year.

Included in the lottery are all four countries the U.S considers state sponsors of terror -- Iran, Sudan, Cuba, and Syria -- and 13 of the 14 nations that are coming under special monitoring from the Transportation Security Administration as founts of terrorism. Pakistan is excluded because, like China, it sends over tens of thousands of immigrants each year and doesn't need to be in the lottery.

Among the winners for 2010 are:

Nigeria: 6,006

Iran: 2,773

Algeria: 1,957

Sudan: 1,084

Afghanistan: 345

Cuba: 298

Somalia: 229

Lebanon: 181

Libya: 152

Iraq: 142

Saudi Arabia: 104

Syria: 98

Yemen: 72

Though Umar Farouk Abdulmattallab, the 23-year-old Nigerian accused of trying to blow up an airliner on Christmas Day, used a tourist visa -- not a diversity visa -- to enter the country, Goodlatte said he worries that Al Qaeda members will game the system. He fears they will submit the names of young acolytes from Saudi Arabia or Yemen who have clean records and could gain entry to the U.S. to wreak havoc. More than 1,000 such visas have been granted to Yemenis in the past decade alone.

"You can take young people out of the madrassas that have no record of any activity with a terrorist organization but are loyal followers of Usama bin Laden," he said.

The State Department's Office of the Inspector General recommended in a 2003 report that terror-sponsoring nations be removed from the diversity visa program.

"OIG believes that this program contains significant vulnerabilities to national security as hostile intelligence officers, criminals and terrorists attempt to use it to enter the United States as permanent residents," the office's deputy inspector testified to Congress in 2004.

A separate report filed by the Government Accountability Office also faulted the program for being susceptible to widespread fraud. A cottage industry has emerged abroad to cater to the lottery, and it regularly bilks people out of massive amounts of money and even coerces some into marriage to keep their diversity visas.

But State Department officials told FoxNews.com that they have a powerful security protocol in place to protect the system -- a point underscored in their rebuttal to the GAO report.

"We do not see the DV (diversity visa) program as uniquely vulnerable," when it comes to state sponsors of terrorism, they said, because of careful vetting that includes "two types of biometric checks and name checks."

They acknowledged that fraud occurs in the lottery, with one official saying, "It is a sad reality that all visa categories encounter sham marriages, suspect identities, fraudulent documents, use of agents and unlikely stories" -- but they cited an "impressive array" of strategies they use to tackle fraud.

The program hasn't been without its cost: one beneficiary, whose wife received a diversity lottery visa, killed two people at Los Angeles International Airport in a 2002 shooting spree at the El Al ticket counter, an act the government labeled terrorism.

Still, the lottery has some staunch defenders, including Rep. Sheila Jackson Lee, D-Texas, who is sponsoring an amendment that would double the number of diversity visas to 110,000 a year. Because of State Department enforcement and lack of interest, not all of the 55,000 visas offered each year are taken by winners of the lottery.

Rep. John Conyers, D-Mich., argued that the program allows many immigrants to come and make lives for themselves in the U.S., including soccer phenom Freddy Adu, who formerly played for D.C. United.

"The Diversity Visa Program is the chance for many people of color around the world to immigrate to the United States and pursue the same American dream that many of the ancestors of the members [of Congress] here were able to pursue," Conyers said in congressional debate in 2007.

Yet the name of the game hasn't always been diversity, and some experts argue that the program itself is racist for using ethnic criteria for immigration.

Prominent Irish- and Italian-American lawmakers, including Sen. Ted Kennedy, crafted the law in 1988 as a way to confer legal status on immigrants from their countries of ancestry.

"If you look at the legislative history of it, it has nothing to do with diversity," said Anne Law, a professor of political science at DePaul University. Offering citizenship to hundreds of thousands of poorly educated illegal immigrants from Ireland and Italy was a hard sell to the public, she said, so congressmen used "diversity rhetoric" to mask ethnic pork-barrel politics.

"They were trying to tap into multiculturalism, so they thought, 'Let's jump on that bandwagon,'" she said. Government officials say the program offered 40 percent of its visas to the Irish in its early years.

Though legislation concerning the lottery has stalled in Congress, lawmakers who are seeking to end its funding say it has offered few advantages in its 21 years, even as it swells the ranks of poorly educated workers at a time of financial troubles in the United States.

"Why on Earth do we have a program that gives green cards to people for no reason whatsoever?" asked Goodlatte. "They have their names pulled out of a hat -- they have no job skills, no family -- [yet] they get to the front of the line."