I-924A webinar, Processing Times, I-526 by country, visa numbers, EB-5 legislation (HR 3471)

I-924A Webinar
U.S. Citizenship and Immigration Services (USCIS) invites you to participate in a webinar on Thursday, August 24, from 1 to 2 p.m. Eastern to discuss Form I-924A, Annual Certification of Regional Center. This webinar will discuss certain changes to the Dec. 23, 2016 edition of Form I-924A and the accompanying instructions. Here is the invitation with instructions for registration. This webinar is also mentioned in Julia Harrison’s Talking Points (July 2017), a new document on the USCIS website that covers a bit of content from the EB-5 engagement in San Jose.

EB-5 Processing Times
Good news! The latest IPO Processing Times report indicates that IPO had a productive June and possibly made a dent in processing times. Most reports since 2014 have shown IPO processing less than a month’s worth of filings each month, which meant it got further and further behind. But in June 2017, the “processing petitions as of” date advanced 1.1 months for I-526, 1.4 months for I-829, and 2.1 months for I-924. If IPO can keep working through more than 30 days of filings every month, we’ll see processing times come down. I understand that periodic filing surges make this difficult, however.

EB-5 Investors by Country: 2016
The latest Regional Center Business Journal has an article with interesting data on I-526 petition filings by country of investor origin, obtained via FOIA request from USCIS. See A New Lens: What the Latest Data Tells Us about Raising EB-5 Capital in an Increasingly Challenging Marketplace (June 2017) by Lee Li.  The State Department publishes figures for visa issuance by country, but they aren’t a good indicator for current demand since most investors receive a visa years after investing. The figures on I-526 filings in 2016, however, likely reflect investment decisions in 2016.

A few takeaways from the 2016 data on I-526 petitions:

  • Vietnam and India register the largest demand spike, with 40+% increase in I-526 petition filings between 2015 and 2016
  • Iran, Venezuela, and Mexico are three countries that made the top 10 countries by number of petition filings in 2016, though they weren’t in the top 10 for visas issued in 2016.
  • Average I-526 approval rates vary by country. The lowest average approval rate in 2016 was for Iranian investors, at only 37%, while 96% of petitions from Hong Kong investors were approved. I will guess that approval rates correlate to the relative difficulty of verifying source of funds for specific countries, and on the relative experience/inexperience of people preparing petition paperwork for investors in each country. Other countries with low I-526 approval rates in 2016 were Mexico (57% approval rate), India (66%), and Russia (67%).
  • China-born investors filed more or less 10,948 I-526 petitions in 2016, while the rest of the world filed about 2,325. China-born investors should pay attention to that “rest of the world” number, since those petitioners and their family get to go ahead of China-born investors in the visa queue.

Visa Numbers

Speaking of the visa backlog, here’s another good article addressing the situation and possible solutions: It’s All About the Numbers (August 8, 2017) by H. Ronald Klasko.

The status quo is unsustainable and requires serious response. So long as we have a few mega-projects flooding the program and the backlog with investors, we must unite in support of visa number solutions or EB-5 will become unusable for everyone. And the U.S. would benefit from providing visas to accommodate the volume of people willing to make major investments in our economy.

New Legislation
Representatives Brian Fitzpatrick (R-PA) and Dwight Evans (D-PA) have introduced an EB-5 bill: H.R.3471 – American Job Creation and Investment Into Public Works Reform Act of 2017. The bill is nearly identical to H.R. 5992 introduced last year by Goodlatte and Conyers, with the most significant difference being the suggestion that infrastructure projects administered by a governmental entity should get a visa set-aside. This bill is significant because it’s one of only two EB-5 bills officially on the table this Congress, but I don’t hear anyone talking about it. The sponsor and co-sponsor haven’t announced it on their websites. Industry as a whole will not like the fact that it doesn’t offer a solution to the visa backlog. The big-league lobbyists won’t like it because it retains the features of H.R. 5992 that they worked so hard to negotiate out of subsequent discussion drafts: retroactive application to petitions filed since June 1, 2015, hefty and clunky account transparency requirement, gift and loan restrictions, significant incentive to invest in a distressed TEA, and significant spread in the annual fee applied to large versus small regional centers. The additional visa set-aside proposed by H.R. 3471 is sweetened by the fact that the bill eliminates the H.R. 5992 suggestion to make the set-asides permanent. I’ve added the bill to my comparison chart, and will keep watching for discussion. The Hill has another article on controversial immigration issues linked to the upcoming September spending fight, but EB-5 doesn’t get a mention. Perhaps H.R.3471 is a subtle solution to the border-wall funding argument that dominates current immigration debate?

 

RAISE Act

And now, Washington is talking about immigration after all. Today the White House announced that President Donald J. Trump Backs RAISE Act. Senator Tom Cotton introduced this bill back in February, but today released a significantly revised and expanded version of Reforming American Immigration for a Strong Economy Act (now with the number S.1720). The bill promises to “spur economic growth and raise working Americans’ wages by giving priority to the best-skilled immigrants from around the world and reducing overall immigration by half.” Most of the reduction would come at the expense of family-based visas, which would be cut dramatically. The proposal would keep the current 140,000 allocation for employment-based visas, but would do away with all current EB categories (including EB-5) and replace them with a “merit-based” or “skills-based” points system. A prospective EB immigrant would accumulate points to gain the right to enter an applicant pool, and then every year USCIS would invite the 140,000 applicants in the pool with the most points to file a visa petition. Points could be accrued based on age (the nearer to age 25 the better), English language test scores (the higher the better), educational credential (most points for US doctorate in STEM), extraordinary achievement (more points for Nobel laureate than Olympic medalist), job offer (more points for higher salary), spouse (negative points for low-point spouse), and investment in an enterprise that the immigrant will manage as a primary occupation (more points for bigger investment).

The bill seems unlikely to go far, considering that it proposes to change the current immigration system so radically and would hurt so many interests. In my capacity as a citizen, however, I’m very interested in this bill and the conversation around it. When we talk about immigration policy, we go straight to core questions of national identity – who we are, what we value, what borders define us, and where we want to go as a country. I’m fascinated by the history of U.S. immigration law, and how the laws reflect and shaped our socioeconomic history and values. I’m also fascinated by data on U.S. immigration, and how dramatically the data picture differs from the Emma-Lazarus-colored impression that both advocates and critics seem to have of US immigration. It’s helpful to consider the history and the data when assessing this new immigration vision as proposed by Senator Cotton and endorsed by President Trump.

Articles & Resources (Ombudsman, Visa Numbers, Investor Protection, Redeployment, RC Audits), Washington Updates, RC List Changes

Helpful Articles and Resources

Washington Updates
What is happening with EB-5 in Washington? I wish I knew. Immigration policy generally looks like an orphan child.  The top three leadership posts at USCIS are all still filled by “acting” people (Lee Cissna was nominated but still not confirmed as Director), and now we’re missing a DHS Secretary as well, until Congress can find time to confirm a replacement for John Kelly. That can’t facilitate significant USCIS action like finalizing regulations or hiring. The White House website listed immigration as a top issue a few months ago, and gave an immigration policy statement, but not anymore. (8/2 Update: The White House is now talking about immigration with the RAISE Act.) I hear rumors that lobbyists are still actively talking to Congressional staffers about EB-5 legislation and regional center program reauthorization, but don’t know where that will lead. Congress has so many fish to fry. We wonder whether Congress can even figure out funding the government past September 30, and there’s talk of another short-term Continuing Resolution, which could mean another series of hop-and-skip extensions of the RC program, whose current authorization is tied to the 2017 funding bill. But it’s hard to predict. Insights or insider information, anyone? (8/3 Updates: Senator Cornyn, author of the draft EB-5 legislation released most recently, has announced Building America’s Trust Act, a new immigration bill that doesn’t appear to address EB-5. Representative Brian Fitzpatrick has introduced H.R.3471 with the promising title “To amend section 203(b)(5) of the Immigration and Nationality Act to implement new reforms, and to reauthorize the EB-5 Regional Center Program, in order to promote and reform foreign capital investment and job creation in communities in the United States, and for other purposes.” I’ll report more fully when the bill text becomes available.)

Regional Center List Changes

Additions to the USCIS Regional Center List, 07/17/2017 to 8/1/2017

New Terminations:

  • Anacostia Regional Center (District of Columbia) Terminated 7/18/2017
  • AAA Florida Senior Living Regional Center, LLC (Florida) Terminated 7/12/2017
  • Allied Artist High Desert EB5 Regional Center (New Mexico) Terminated 7/12/2017
  • Rosti Capital Regional Center (California) Terminated 7/17/2017

IPO Report from San Jose (processing times, business plan advice, site visits, visa wait)

A small Employment Visa Engagement hosted at the US Patent and Trademark Office in San Jose on July 19 scored an impressive delegation from the Investor Program Office. I had a chance to meet and hear from IPO Deputy Chief Julia Harrison, IPO Senior Advisor for Economics Jan Lyons, and IPO’s FDNS Division Chief Kurt Vicha. They seemed more relaxed than usual at stakeholder meetings, and shared a lot of useful information. I haven’t seen USCIS post any notes yet (though Ms. Harrison indicated that they would do so), but I have summarized major points in this post.  (And FYI here is my folder with a rough unauthorized recording and snapshots of slides.)

Processing Times

Julia Harrison noted that program integrity was a focus for FY2017, with the launch of the site visit and audit and I-829 interview programs, and she made the welcome announcement that FY2018 will specially focus on reducing processing times.

A few initiatives that IPO hopes will improve processing times:

  1. Improve the Quality of Submissions: Mr. Lyons made the point that your processing time depends not only on your place in the queue, but also the quality of submissions before you in that queue. IPO has been hampered by quality problems, particularly in petitions filed in sunset date-surges. For example, in September and October 2015, IPO received 2.5 years-worth of I-924 filings, many of them apparently filed in haste and tough to review. No wonder processing times reports show IPO taking forever to work through I-924 filed in those months, not to mention I-526. Ms. Harrison noted two new resources designed to help make future filings easier to review.
    • In the March 2017 stakeholder meeting, IPO provided “Top 10 Tips for Submitting EB-5 Related Forms” – advice that should improve submissions and eventually reduce processing times, if followed (Also keep in mind the Form Filing Tips and EB-5 Filing Tips on the USCIS website.)
    • Ms. Harrison announced the new “Suggested Order of Documentation” pages linked to the EB-5 Resources page. This standardized order of exhibits is not required, but is designed make EB-5 forms easier and faster for IPO to review.
  2. Increase Capacity: IPO hopes to increase capacity by cross-training its economists and adjudicators so that a single staff person can handle a petition from start to finish. Previously, economists and adjudicators have each handled a distinct part of each petition.
  3. Other: The site inspection program that kicked off this year should facilitate I-829 processing by pre-emptively answering questions that might arise about actual use of investment and job creation.

I appreciated hearing Ms. Harrison say that IPO is “absolutely committed” to reducing processing times, but wish that she had mentioned some drastic measures. Education and operational efficiencies are welcome, but more will be needed to significantly improve processing times in view of a backlog that’s about 30,000 petitions long. Ms. Harrison did not mention new hiring, but I sincerely hope that’s also part of the plan.

Ms. Harrison pointed out that IPO does not have authority to offer premium processing (this would need to come from Congress), and also repeated, as has been said before, that IPO does not favor premium processing, anticipating that it would be unworkable because fees would probably not limit demand in the EB-5 context.

Advice for EB-5 Submissions and Business Plans

Jan Lyons spoke at length, introducing the EB-5 program from a business perspective and discussing adjudication issues. We forget the implications of having a veteran of investment banking and municipal finance at the helm at IPO, directing the team that reviews business plans and economic studies. When I started with EB-5 in 2009, one immigration attorney asked me to remove the financial projections from a business plan because “they’d just confuse the adjudicator.” Now we have an audience at IPO that knows how to read numbers, and struggles with the un-businesslike character of many EB-5 submissions. A cash flow statement is worth a thousand words to a finance person. Mr. Lyons shocked us with an estimate that only about 35% of business plans submitted to his office even contain a pro forma.  If you’re an attorney who reviews petitions, help change this!  Different types of financial information are appropriate to different types of projects, and in EB-5 the appropriate level of financial detail can vary depending on implications for the economic impact report, but a business plan without numbers cannot be called a business plan. Creating profit is the core rationale for any commercial enterprise (not to mention an EB-5 requirement per regulations and Matter of Izummi), and a plan without financials literally has no bottom line. A plan that’s only qualitative, not quantitative, gives a picture of the business that is incomplete, difficult to assess, and not credible. A business plan should have financials, and the financials should match and help explain the story that’s told in words. A pro forma doesn’t help if it lists revenue sources that the project description never mentioned, shows payroll expense insufficient to cover employees promised in the staffing section, indicates growth on a schedule different from what was anticipated in the schedule section, and assumes prices inconsistent with the market analysis.  That will certainly confuse adjudicators, even and especially ones with 20+ years in investment banking.  The industry needs to step up its game. (My Business Plans page describes the standards I use when writing and reviewing EB-5 plans.)

Key takeaways from the presentation by Mr. Lyons:

  • Invest in the business plan. Mr. Lyons noted that a majority of problems he sees in EB-5 submissions are not in the economic impact analysis (where simple ability to multiply is a major KSA) but in the business plans, which are often disorganized, incomplete, and full of conjectural information without backup. “We adjudicate on a preponderance of the evidence, not a preponderance of wishful thinking.”
  • A business plan should include financial information. Mr. Lyons made the point that forward-looking financial statements (pro formas) are significant evidence in a business plan, and also facilitate efficient review of the plan.  Pro formas have an expositive value that complements the written narrative of a project.  IPO economists can plod through the hundreds of pages submitted with business plans and reach a conclusion without pro formas, most of the time. But those cases could be analyzed much faster with the inclusion of three simple financial tables: a sources and uses of funds; a cash flow statement; and an income statement.  There are no specific requirements that the financial information be presented as pro forma statements, but pro formas are the most common type of financial information and are generally the most complete and the least expensive method of conveying a complete financial picture. While lack of such statements does not automatically result in an RFE or denial, it does make the plan relatively difficult to understand and assess. In reviewing pro proforms, IPO economists are not judging the quality of the investment. IPO economists are instructed that IPO is not a rating agency nor is it within its purview to make judgements relating to the suitability of investments for individual investors. However, financial information is relevant to EB-5 requirements that IPO must consider, including business plan credibility and the requirement that EB-5 investment be placed at risk with the chance of gain.
  • Do not interpret a Request for Evidence as an assault. Mr. Lyons emphasized that an RFE is not an attack on your intelligence or integrity, and not an indication that the requester is stupid. The requester simply does not have as much information about or familiarity with the petition as you do, and is asking for information.
  • When preparing I-924, keep in mind that “In an initial application, what we’re really looking for in a regional center is evidence that they know what they’re doing.” Demonstrate grasp of EB-5 requirements and show the credible experience of the applicants.
  • Limited geographic area is a legal rather than an economic requirement. In assessing geography requests, IPO is guided by Congressional intent that regional centers are literally “regional centers,” designed to create concentrated pools of investment to stimulate employment growth and economic activity within a defined and limited geographic area.

Site Visits and Audits:

Julia Harrison once again reviewed the difference between site visits and regional center audits, and added commentary on the purpose of each. Site visits are unannounced inspections of job-creating enterprises that look at the JCE site and assess the progress of development and job creation. Audits examine regional centers to see where money is going and whether the regional center has proper oversight and controls in place.

Kurt Vicha explained how the EB-5 site visit process has worked so far, and how sites are selected. In 2016, FDNS selected the one state with the most projects in each of four regions, and conducted site visits to job-creating enterprises (JCEs) in those states (for a total of 50 site visits). In 2017, FDNS selected JCEs for site visits based on a “window of opportunity” defined as about one year after I-526 approvals for that JCE, but before I-829 adjudication. Interestingly, there are about 225 JCEs within that window in 2017, and FDNS is on track to complete site visits at all of them. Inspectors are charged to observe and talk to people on-site about what’s happening at the JCE address, and then write an informational report. This report is then assessed in DC in context of petition filings, with opportunity for regional centers/project companies to respond to any questions. Mr. Vicha noted a common complaint that some questions specific to stand-alone filings have been asked at regional center JCEs (such as about the role of EB-5 investors in the business), and he promises that training will address this issue for next year. FDNS inspectors were hired at a high grade and receive extensive training.

Harrison and Vicha both suggested that site visits particularly emphasize schedule, and assessing whether the business or project has accomplished the activities anticipated in the schedule originally submitted to USCIS. Note to self: remind my clients to be extra conservative in estimating development schedule and hiring schedule dates! Better to estimate late in the business plan and give inspectors a happy surprise than to estimate on the early side and be accused of fraud if subsequent inspection shows unreached milestones.

As for audits, only one has been completed so far.

Visa Numbers and Wait Time

Charlie Oppenheim from Department of State was present, as genial and oracular as ever, and attempted once again to explain the allocation of visa numbers and the many contingencies and moving parts. He didn’t give any new figures related to the EB-5 visa queue, but mentioned that he estimated the wait time to conditional residence for a China-born investor filing now at about 9.9 years (my attempt to calculate had come up with 9.3 years). Those estimates don’t account for the possibility of demand changes, people dropping out, or action from Congress.  Mr. Oppenheim said that Congress has not yet asked for his assessment of the proposal to only count investors toward the EB-5 visa quota (rather than investors plus family members as is the current practice), and opined that such a change would indeed require legislative action.

IPO Suggested Order of Documentation

IPO has added a very valuable resource to the EB-5 Resources page on the USCIS website:

Suggested Order of Documentation

Form I-526

Form I-829

Form I-924

The links direct to pages that provide a suggested list and order of contents for each EB-5 form. The regulations and Form Instructions already describe the evidentiary requirements for EB-5 petitions and applications, and these new pages don’t add new requirements. Rather, they provide the content in handy checklist form and suggest a way to standardize submissions by arranging required documents in a predictable order. We keep asking IPO what we can do to help improve the adjudication process and processing times, and this is a very helpful response. Immigration lawyers take note! If we can widely adopt the suggested order of documentation for each form, and most petitions take on a standard shape, with the same tabs in the same order, this will certainly support operational efficiencies at IPO and should help reduce processing times. Julia Harrison flagged this resource at today’s Employment Visa engagement in San Jose. I’ll write another post with more complete report of helpful input from the IPO representatives Julia Harrison and Jan Lyons, Kurt Vicha of FDNS, and Charlie Oppenheim from Department of State.

Listening Session (EB-5 regs), EB-5 as securities (Hui Feng), RC Audits, RC List Changes

EB-5 Immigrant Investor Program Engagement July 13

At the EB-5 listening session on July 13, the USCIS participants stuck to their resolve to listen only, and did not provide input or feedback. The call solicited stakeholder comments on the questions raised by the Advance Notice of Proposed Rule-Making, which addressed regional center designation and participation and exemplar project approval. The ANPRM inspired few written comments to its preliminary questions, and this call also got tepid response. What did USCIS want to know from us, beyond what those of us who care said already in our written comments? USCIS would not specify, and we weren’t sure what to say. The Wolfsdorf Rosenthal blog has diligently summarized stakeholder comments, and my recording is available for anyone who’s really interested. I hope USCIS learned something from the call, but I did not. People with more to say on the designated topics of RC life-cycle (designation, participation, termination), RC exemplar process, RC compliance audits, or indirect job creation methodologies may email ipostakaeholderengagement@uscis.dhs.gov.

USCIS let slip one bit of info. Lori MacKenzie said that “the agency is working to finalize that rule” — referring to the regulation that people care about, the NPRM dealing with investment amounts and TEAs. No indication of timeline, however, or whether the listening session call reflects intention to combine NPRM and ANPRM topics in one new rule. (On July 3, Senators Dean Heller, John Cornyn, Rand Paul, and Thom Tillis had sent DHS a letter asking that the agency not move forward with the proposed EB-5 regulations. The listening session indicates that DHS is indeed moving forward, however slowly.)

Here is my favorite listening session caller comment, from a Mr. Fuentes in minute 45: “We have a bottleneck of processing in an environment where resources are not the limit.” Yes – that’s exactly what’s wrong and fixable in EB-5. So many problems for EB-5 projects and investors result from the fact of long processing times, and long processing times are traceable to constraints that need not exist in a program of multi-million-dollar projects and high-net-worth immigrants. I’ll write more on this soon.

The call also reminded me that we need to talk more about direct EB-5, and the kinds of business and investment that are and are not workable in that environment. Purchasing an operational existing business rarely works for direct EB-5. The history of AAO denial decisions is thick with business acquisition cases that foundered on the “new commercial enterprise” requirement and/or the requirement to create new jobs. EB-5 rules specify that mere ownership change does not make an enterprise or jobs in that enterprise new. I have a couple related posts (one on the difference between direct and regional center EB-5, and one on options for investing in an existing business), but see the need for a simpler article addressed to entrepreneurs contemplating direct EB-5.

EB-5 and Securities Law

Immigration lawyers happen to be well-placed to match EB-5 investors to EB-5 projects, and are pressured by the market and tempted with commissions to play a match-making role. This role is perilous, however, considering securities laws. In 2015 and 2016, the SEC made examples of several immigration lawyers who had received transaction-based compensation for facilitating investments, and of one of the regional centers that paid such compensation. The message: it’s illegal to be on the giving or receiving end of payments to someone acting as a broker without appropriate license.

One of the law firms targeted by the SEC fought back. Hui Feng (subject of a complaint published in December 2015 by the SEC against himself and his firm Law Offices of Feng & Associates, P.C.) argued that the SEC’s claims fail because EB-5 investments are not securities and the immigration lawyer does not act as a “broker” when receiving finder fees. He pointed out that EB-5 investments are primarily motivated by the visa, without expectation of profit, that his commissions were contingent on visa approval rather than in connection with securities sale, and that the attorney role has its own fiduciary duties and that broker requirements are inapplicable – i.e. the EB-5 process and investment and lawyer’s role are fundamentally immigration matters, not securities matters and not the SEC’s business. (My layman’s paraphrase; see the court filings for the actual legal arguments.) The US District Court, Central District of California, however, has come down on the SEC’s side in its Motions for Summary Judgment (June 29, 2017). The decision has the longest discussion I’ve seen yet in support of the point that yes, EB-5 investments are securities. It also enumerates the activities supporting the conclusion that yes, this immigration lawyer acted as a broker, and explains why the fee arrangement details were material and should have been disclosed to investors and regional centers. If you pay or receive EB-5 finders fees, pay attention to this decision. You may also want to review IIUSA’s Best Practices for Engaging with Sales Intermediaries.

Regional Center Compliance Audits
The Regional Center Business Journal has a helpful article by Mariza McKee, Kimberly Hare, and Clete Samson “USCIS Compliance Audits – Preparing Regional Centers for the First Wave”

RC List Changes
USCIS continues to cull the list of approved regional centers, with 50 terminations so far this year. 2017 termination letters haven’t been published yet, but I’ll guess that most of these terminations are for lack of recent activity.

Additions to the USCIS Regional Center List, 6/26/2017 to 7/17/2017:

  • No new regional centers.

New Terminations:

  • North Country EB-5 Regional Center, LLC (New York) Terminated 7/7/2017
  • Guam Strategic Development LLC RC (Guam) Terminated 7/7/2017
  • Good Life EB5 Georgia Regional Center, LLC (Georgia) Terminated 6/30/2017
  • Tri-Cities Investment District, LLC (California) Terminated 6/30/2017
  • Prosperity Regional Center (former name U.S. Prosperity Regional Center) (Florida) Terminated 6/23/2017

Draft legislation, NYC lawsuit, SEC action, RC decision (Path America), RC list changes

New Policy (comments due)

Recall that Wednesday June 28 is the last day to submit comments responding to USCIS’s new policy language on redeployment I appreciate the AILA Comments on the Policy Manual, which explain where the policy goes wrong in imposing an “at risk” requirement after jobs have been created.

Analysis of Draft Legislation (IIUSA, NYU)

IIUSA issued a legislative update on June 22 that comments on draft bills from Senator Grassley/Leahy and Senator Cornyn. I appreciate IIUSA’s thoughtful analysis, and its difficult position when it comes to commenting on contentious issues. The Cornyn bill would make everyone in EB-5 happy by clarifying that investors only (not investors plus family members) should be counted toward the annual EB-5 visa quota. Its TEA proposals would create winners and confirm losers – the winners being projects in rural areas and on closed military bases (which would be incentivized with new visa set-asides) and the losers being projects in distressed high-unemployment urban areas (which would only get 13.5% discount from the standard investment amount). To be fair, the Cornyn proposal would make projects in distressed high-unemployment TEAs slightly more viable than they are currently, since 13.5% is better than 0% — the effective investment threshold differential if projects not in distressed areas can also get TEA designation. But overall the TEA proposal looks designed to support the status quo, with a large percentage of EB-5 investors going to projects in prosperous urban areas and closed military bases.

NYU Scholar-in-Residence Gary Friedland, Esq. and Professor Jeanne Calderon, Esq. have expanded their analysis of paths to TEA reform and other questions in the paper EB-5 Prescription for Reform: Legislation or Regulation? (Draft 6/19/17). The authors review perceived problems in the structure of TEA incentives, summarize proposed changes, and suggest that USCIS expedite reform by finalizing regulations, which could prompt the industry to unite in supporting comparatively moderate EB-5 legislation. The authors throw down a gauntlet by arguing that allocating 100% of job creation by an EB-5-funded project to EB-5 investors overstates the economic impact of EB-5 capital.  They clarify that they do not challenge USCIS’s job credit methodology, but only question citing USCIS job credit methodology as evidence of EB-5’s economic impact. This is a helpful distinction, but I don’t see reformers in Congress accepting it, or liking the idea that EB-5 investors might get credit in practice for job impacts not supported in theory. The industry needs to take up the gauntlet, and explain (preferably with reference to economic theory, practicality, and other programs that require job creation) why and how EB-5 job counts and allocations make sense.

NYC RC Investor Lawsuit

After receiving many error reports, USCIS pulled down their logs of EB-5 petition approvals and denials by regional center. I hope that the logs will be reposted soon with corrections, and in the meantime we can prepare to interpret the data. A natural conclusion could be: if X Regional Center has had many investor petitions approved, then it must be a reliable regional center with happy investors. Coincidentally, I heard in the same week that New York City Regional Center ranks #1 among regional centers for number of I-829 approvals and #5 for volume of I-526 approvals, and also that it is facing a lawsuit by over a hundred unhappy investors in the Battery Maritime Building project. Chen Dongwu et al. v. New York City Regional Center et al. claims that the investors’ “dream turned into a financial nightmare,” with fraudulent misrepresentations and subsequent coverups and fiduciary failures leading up to investors facing the loss of their entire investment.  Presumably the investors in this suit received I-526 approval, but USCIS adjudication is only part of EB-5 investment success.  I’ll look forward to seeing how New York City Regional Center responds to the allegations, which are a big story since this RC is such a big player in EB-5. At-risk investments inherently risk loss, and some will lose, and loss does not equal fraud. Risk does not equal license to shirk responsibility or deceive investors, however, and the defendants need to explain their side of the story. Future filings for the case can be accessed at the New York State Unified Court System website with Index Number 6520242017.

RC Termination Decision

The AAO decision Matter of P-A-K, LLC JUN092017_01K2610 denies motions to reconsider and reopen filed by Path America KingCo regional center.  This decision reiterates that termination decisions “take into account a variety of factors, both positive and negative, that encompass past, present, and likely future actions.” But having reviewed new evidence of the RC’s on-going projects, AAO apparently concludes — almost in so many words — that SEC action against a former principal for fraud and mismanagement is the kind of negative that cannot be outweighed by any number of positives in terms of current management and project progress and prospects. I trust that USCIS/AAO thinking will be challenged and will develop more nuance over time.

New SEC Action

Securities and Exchange Commission v. Seyed Taher Kameli, et al. is a new civil action involving a regional center. The Complaint filed June 22, 2017 alleges that Seyed Taher Kameli and his companies, Chicagoland Foreign Investment Group, LLC and American Enterprise Pioneers, Inc., falsely claimed to foreign investors that their investments would be used to fund an EB-5 qualifying project, but instead diverted millions of dollars to fund other projects, make unrelated payments, and for personal enrichment. As with other SEC actions on EB-5, conflicts of interest are the dominant red flag. The defendant Mr. Kameli controlled the regional center, investment funds, and job-creating enterprises, and also represented many investors as their immigration attorney. This kind of scenario should not be hard for future investors (or even legislators) to avoid.

RC List Changes

Additions to the USCIS Regional Center List, 6/6/2017 to 6/26/2017

  • Art District Los Angeles Regional Center, LLC (California) Note: This is not a new RC, but recently added back to the approved list after having been briefly listed as a termination

New Terminations

  • JI Northern Nevada Regional Center, LLC (Idaho, Nevada, Utah) Terminated 6/5/2017
  • Dream Harbor Regional Center (Washington) Terminated 6/1/2017
  • ON Regional Center, LLC (California) Terminated 6/16/2017
  • Northeast Monument Regional Center LLC (Massachusetts, New Hampshire, Rhode Island) Terminated 6/20/2017
  • Rock Hill Regional Center LLC (New York) Terminated 6/1/2017
  • Texas Mining & Resource Center, LLC (Texas) Terminated 6/20/2017
  • Adirondack Regional Center of New York, LLC (New York) Terminated 5/24/2017
  • Las Vegas EB-5 Inmigration, LLC (Nevada) Terminated 6/14/2017
  • CIG Regional Center, LLC (California) Terminated 6/5/2017

I continue to update my Terminations Log, though USCIS has not yet posted any new letters for terminations since 2016.

Tally of I-526 and I-829 approvals and denials by regional center (updated)

The USCIS Immigrant Investor Regional Centers page at www.uscis.gov/eb-5centers has been updated with links to documents that list regional center names and tally the  I-526 and I-829 approvals for each RC from January 1, 2014 to May 31, 2017.

UPDATE: The logs formerly posted by USCIS have been replaced by a brief message that “USCIS is reviewing inquiries regarding the previously posted Form I-526 and Form I-829 approval and denial statistics by regional center. To provide feedback on that data, please e-mail USCIS.ImmigrantInvestorProgram@uscis.dhs.gov.” Apparently, a lot of regional centers contacted them to complain of errors. IIUSA wrote a formal letter to IPO reporting discrepancies noted by many members.

[ORIGINAL POST]

These documents — if accurate — can be very valuable for potential investors, and for program integrity. Track record of approvals is a material factor in decision-making that, until now, has been unverifiable. Records can offer investors a way to double-check claims about past approvals for a regional center.

Potential investors should interpret the numbers judiciously. As USCIS notes in the documents: “petitions may be denied for various reasons, some of which may be based on investor specific issues and not related to any project issues.” A large number of denials may be related to investor problems or to sudden USCIS policy changes (or to document errors in these posted reports), not to any problems with the regional center. A large number of approvals says something about the size, aggressiveness, and age of a regional center, but does not necessarily promise quality or reliability or anything about the character of future projects or success of future petitions. Also, keep in mind that the numbers are only for petitions adjudicated, not petitions filed. Considering processing times, I-526 adjudications in 2014 to 2017 (the time period reported) largely reflect investments made in 2013 to 2015. Most investments made and petitions filed through RCs since late 2015 would not show up on this log of approvals and denials. And the log does not show any of the EB-5 petition approvals or denials prior to January 1, 2014.

Regional centers should double-check their records in these newly published logs, and follow the instructions in the docs to alert USCIS of errors. Whoever created this database of approvals and denials made a number of entry errors on RC names (resulting in some double or even triple listings from name variants), so the probability of numerical errors is also high. Especially if the published list shows denials that your RC doesn’t in fact have, hasten to report that and request correction!

The petition tally by regional center provides interesting data on regional center activity. We’ve known that a handful of regional centers have dominated the EB-5 field, and now that phenomenon can be quantified. Assuming that the numbers reported by USCIS are reliable, we can draw conclusions about the distribution of investors by regional center.

No wonder the interests of one metro area and a handful of regional center operators dominate EB-5 politics, when those interests claim such a large piece of the EB-5 pie. The USCIS database indicates that three regional center operators (US Immigration Fund, CMB, and Related) account for nearly a quarter of all I-526 petitions approved since 2014. New York City RC alone accounts for a fifth of all I-829 approvals during that time.  Over half of the approved I-526s petitions since 2014 went through just 21 regional centers, while nearly half of investors with I-829 approvals in that time went through just four regional centers. Meanwhile, over half the regional centers currently on the USCIS list of approved RCs did not have any approved investor petitions from 2014 to the present. (Though these RCs haven’t necessarily been inactive. Long processing times mean that approvals and denials through 2017 only reflect petitions filed/investments made through 2014/2015 — or earlier for I-829. An RC that doesn’t appear with many approvals or denials yet may have many petitions currently pending.)

New EB-5 Policy (Sustaining Investment, Redeployment, and Investors in a Terminated RC)–Updated

We’ve been waiting for years for USCIS to clarify its policy on sustaining investment, and when and how EB-5 capital may need to be redeployed if a project winds up before the investor reaches the I-829 stage. Today, we have this notification:

The USCIS Policy Manual has been updated to provide further guidance regarding the job creation and capital at risk requirements for Form I-526, Immigrant Petition by Alien Entrepreneur, and Form I-829, Petition by Entrepreneur to Remove Conditions on Permanent Resident Status. Volume 6 (Immigrants), Part G: Investors is effective on June 14, 2017. The Policy Alert is available here: Volume 6 (Immigrants), Part G: Investors (Final date for comments: June 28, 2017)

The Policy Alert from USCIS does not actually say what changed. I compared the the June 14, 2017 version of the Policy Manual with my hard copy of the previous November 2016 version, and highlighted the changes to the new file in red font. (Here is my folder with dated versions of 6 USCIS-PM G). The June 2017 changes — which are significant and touch on material change and termination issues as well as redeployment — are in Chapter 2(A)2, Chapter 4(C), Chapter 5(A)2, and Chapter 5(C).

UPDATES: I’ve copied the new Policy Manual language on redeployment into a separate document and added my attempt to analyze the language and understand the terms. Here is my work so far.

Here are reactions from others to the new policy:

The new policy is effective as of today, before anyone has had a chance to review or comment on it. Indeed, the policy is essentially retroactive since it defines new requirements for investment agreements that current investors may have signed years ago. But USCIS is offering an opportunity to comment, for what it’s worth at this point.

Please send all comments to publicengagementfeedback@uscis.dhs.gov and be sure to include the following to make your comments clear:

    • State the title of the relevant volume and section in the subject line of your message;
    • Refer to a specific portion of the document;
    • Explain the reason for any recommended change; and
    • Include data, information, or authority that supports the recommendation.

Opening & Closing Dates for Comments: June 14, 2017 – June 28, 2017

As background, here are some reactions to the draft policy memo from August 2015 on sustaining investment, and wish lists of features we wish had been included in the new policy.

Q2 2017 EB-5 Petition Processing Data, Audits, Leahy letter

Q2 2017 EB-5 Petition Processing Data

The USCIS Immigration and Citizenship Data page has been updated with data from FY2017 Q2 (January to March) for petitions including I-526 and I-829.


A few points to note:

  • The fall in I-526 receipts was to be expected, since the previous quarters represented unnatural filing surges around sunset dates. Even 1,731 receipts in one quarter is not sustainable, however. So long as annual EB-5 visas are limited to about 10,000 for investors plus family members, only about 3,330 investors per year can get visas. The US actually benefited from 13,148 EB-5 investments over the past four quarters – but that’s almost four years of visa numbers for investors plus family.  Such a situation is not sustainable. If Congress wants to welcome more than 3,330 investments per year in the future, it needs to address visa availability.
  • USCIS processed 567 fewer I-526s this quarter than last quarter – not good news.
  • USCIS processed about 200 more I-829 petitions this quarter than last quarter – improvement, but not enough. If IPO continues processing about 300 I-829s per quarter, it will take over six years just to work through the existing backlog of I-829s. The California Service Center managed to process over 800 petitions in the final quarter that it handled I-829, and even IPO did better in early 2016 than it’s doing now. IPO announced their new I-829 adjudications unit in early March, so we may have to wait for Q3 stats to see real improvement.
  • The number of I-829 receipts has dropped the last two quarters. I wonder if this reflects petitioners giving up before reaching I-829, or being held up in the waiting line for conditional permanent residence.
  • The backlog of pending petitions is a tiny bit less dire than last quarter.

While inputting receipt numbers from this processing data report, it occurred to me to try linking them with the dates in the IPO processing time reports. For example, IPO seems to have been working forever on I-526 cases filed in September 2015, and we might explain this this by looking at the surge in I-526 receipts around September 2015. So I added a tab to my processing times log that tries to make the link. My calculations don’t look right, which may be additional evidence that IPO processing time reports do not simply reflect FIFO case processing.

Regional Center Audits

Notes from a May 12, 2017 meeting between AILA and the USCIS Field Operations Directorate has some Q&A on EB-5 questions (page 10-15), including:

  • EB-5 Regional Center Compliance Audit Program: USCIS answered practical questions about the process and content of an audit.
  • Investors in terminated RCs: USCIS said that “Until a regional center that has been issued a Notice of Termination exhausts its administrative remedies before USCIS, the agency will generally delay final adjudication  or revocation of I-526 petitions associated with that regional center if the sole factor determining petitioner eligibility is the termination of the regional center’s designation.” (This is a welcome statement considering past evidence to the contrary.)
  • Regional Center amendments: In another installment of confusing guidance, USCIS indicated that amendments are required for both geographic area expansion and changes to ownership/org structure/administration, but not “required” in the same sense. The geographic area amendment must be “filed and approved” before I-526s are filed, while “Regional center projects are not on hold while the amendment is pending” in the case of an ownership change amendment

Washington Developments

The Kushner Companies EB-5 roadshow in China continues to reverberate, this time in a letter from Senator Leahy, Representative Conyers, and Representative Lofgren on behalf of the Senate and House Judiciary Committees to the Kushner Companies. The letter focuses on potential conflict-of-interest issues, and airs concerns about EB-5 generally. I’m most interested in this letter for the footnotes, and disturbed by the picture it paints of one-sided and minority-focused EB-5 lobbying. This meeting, for example, gives an unfortunate impression.

RC Terminations, investor litigation victory, China trends, agent ethics, RC list changes

Regional Center Termination Reasons

USCIS has terminated 109 regional centers over the past decade, and 23 regional centers in May 2017 alone. This month USCIS also initiated a page for Regional Center Termination Notices, with most notices up to November 2016 posted so far. The page explains that “USCIS will remain consistent and committed to transparency in the EB-5 program by proactively publishing Regional Center termination notices as they become available. This is an important step in assisting investors, the EB-5 industry, and the public to understand the reasons why a regional center has been terminated and what types of regional center activities may trigger the end of a regional center’s designation.”

I’ve started a Termination Log spreadsheet (also linked to my RC List page for ongoing reference) to correlate USCIS’s terminations list with its notices list, and facilitate analysis. Pivot table analysis of this log provides a quick overview of termination reasons (from the 69 termination notices posted so far) and timing.

In fact the termination notices are not very informative (most reference Notices of Intent to Terminate, which are not attached, for specific reasons), but we can generally learn that about 77% of RC terminations from 2008 through November 2016 occurred for one of two reasons: failure to file an I-924A annual report, or the fact that the I-924A report reflected inactivity (i.e. no investor petitions in three or more years). Just 12% (notices for eight regional centers) referenced problematic behavior by the regional center as a basis for termination. Other reasons include the regional center’s voluntary request to withdraw from the program. One letter dated July 13, 2016 explains “USCIS notes counsel’s request to withdraw from the program. The mechanism to end a regional center’s designation, whether initiated by the regional center or USCIS, is termination of the designation.” (This particular letter could’ve raised on-going FBI investigation as a termination issue, but that’s another story.) The Final Fee Rule published 10/24/2016 confirms that a regional center may elect to withdraw from the program, but does not offer an exit more dignified than termination. “A regional center may elect to withdraw from the program and request a termination of the regional center designation. The regional center must notify USCIS of such election in the form of a letter or as otherwise requested by USCIS. USCIS will notify the regional center of its decision regarding the withdrawal request in writing.This is a pity, as the terminated regional center list looks like a walk of shame, and I think voluntarily withdrawal should be treated differently from termination initiated by USCIS.

Legal Win for EB-5 Investors

Investors who think they’ve fallen victim to errors by USCIS will be interested in this long but ultimately successful battle by a group of EB-5 investors.

  • 2013: Twelve EB-5 investors file I-526 petitions based on investment in a regional center hospital project that sought to qualify as a troubled business
  • 2013-2015: USCIS denies the I-526 petitions, and then denies Motions to Reopen filed by the petitioners. The petitioners appeal the denials to the Administrative Appeals Office.
  • March to May 2016: AAO posts decisions dismissing appeal of I-526 denials (for example, MAR252016_02B7203)
  • April 2016: Four petitioners file civil action against USCIS in district court: Wei Gan v. USCIS
  • May 2017: USCIS and the plaintiffs resolve the case
  • May 2017: AAO posts decisions sustaining appeal of the previously-denied I-526s (For example, MAY182017_01B7203. Other May 18 2017 decisions sustain appeals for other investors in the same project)

Trends, Pitfalls, and Ethics in Working with Overseas Agents

China Market Demand Trends
Ronald Fieldstone reflects on a recent China trip in his post EB-5 Marketplace Measurement – China and Beyond (May 25, 2017). We’re reminded of the extent to which demand shapes supply in EB-5 investment.

Agent Marketing Claims
The Kushner Companies EB-5 roadshow in China continues to reverberate, with Senator Grassley mining it for yet another press release, this one calling for investigation of the Chinese agent involved, and its sales claims. (Grassley Seeks Investigation of Companies’ Promises of Green Cards 5/25/2017.) The regional center has protested to journalists that the senator’s allegations are baseless in this case, but all regional centers can take the reminder to double-check what their agents overseas are saying and posting online. Also keep in mind IIUSA’s best practices for engaging with sales intermediaries.

Ethics for US Lawyers Retained by Migration Agents
Lawyers who deal with overseas agents in EB-5 may be interested in a March 2017 Ethics Opinion by the New York State Bar Association. The opinion discusses conditions under which a lawyer may enter into an arrangement whereby a nonlawyer “foreign migration agent” hires the lawyer on behalf of the client and assists the lawyer in communicating with the client. Cyrus Mehta explores the matter further in his post EB-5 Green Card, Ethics and Trump (May 22, 2017).

DHS Director and EB-5

Lee Francis Cissna, President Trump’s nominee for Director of USCIS, committed to finalizing EB-5 reforms in his Senate Judiciary Committee hearing last week. In other words, new EB-5 regulations are still on the table. Mr. Cissna spent much of the past two years working for Senator Grassley on immigration issues, and reportedly wrote dozens of the letters sent under the senator’s name to Homeland Security officials. This does not bode well for his attitude to immigration generally or EB-5, though he made a nice statement at the hearing.

Regional Center List Changes

Additions to the USCIS Regional Center List, 05/08/2017 to 05/30/2017

  • Atlantic Casino & Entertainment Group Regional Center (Delaware, Maryland, New Jersey, Pennsylvania)
  • New York Immigration Regional Center (Connecticut, New Jersey, New York, Pennsylvania): www.goeb5nyc.com/
  • American Family Regional Center (Washington)

New Terminations

  • Dallas Regional Center (Texas) Terminated 5/22/2017
  • East Plumas County Regional Center, LLC (California) Terminated 5/22/2017
  • Immigration Funds LLC (former name United States Investors Regional Center) (Maine, Massachusetts, New Hampshire) Terminated 5/22/2017
  • Ohio Regional Center, LLC (Ohio) Terminated 5/21/2017
  • EB5 Express Regional Center (California) Terminated 5/18/2017
  • Arkansas Regional Economic Development Center, LLC (Arkansas, Oklahoma) Terminated 5/16/2017
  • Art District Los Angeles Regional Center, LLC (California) Terminated 5/16/2017 (this RC was removed from the terminated list and added back to the approved list on 6/19/2017)
  • The Z Global Corporation Regional Center (California) Terminated 5/16/2017
  • Mariana Stones Corporation Ltd. (Guam) Terminated 5/15/2017
  • NatureAll Co., Inc. EB-5 Regional Center Terminated 5/15/2017 (New Jersey)
  • USA Regional Center, LLC (California) Terminated 5/15/2017
  • Eight Islands Regional Center, LLC (Hawaii) Terminated 5/3/2017
  • Diamond City Montana EB-5 Regional Center, LLC (Montana) Terminated 5/10/2017
  • New York Pioneer Regional Center (New York) Terminated 5/3/2017
  • Optima Arizona Regional Center, LLC (Arizona) Terminated 5/3/2017
  • Puget Sound RC, LLC (Washington) Terminated 5/3/2017

New EB-5 Regulations: Comments Discussion

We’re waiting on the fate of draft EB-5 regulations published in the Federal Register in January 2017, with a public comment period that ended in April 2017. This post briefly reviews the proposed rules, considers the probability that they will be finalized any time soon, and distills insights from the 323 public comments that I’ve now read. The post is long because the topic is important. I expect EB-5 regulations to be finalized — in my lifetime, even — and the regulation comments include valuable contributions to the debate around EB5 program changes.

Content of Proposed Regulations

Future of Proposed Regulations

Final EB-5 regulations could take effect anywhere from 30 days from now (if a final rule were published today in the Federal Register) to never. (If you’re interested in how the process works, see A Guide to the Rulemaking Process prepared by the Office of the Federal Register.) Here are factors that I know of that could affect timing in this case.

  • DHS can be very slow. For example, the regulation dealing with EB-5 petitions approved 1995-1998 (RIN 1615-AA90) first appeared as a proposed rule in 2003, the Notice of Proposed Rulemaking was published in the October 2011 Federal Register, the public comment period closed in November 2011, and as of May 2017 the rule has not yet been finalized.
  • Most commenters on the NPRM reminded DHS that Congress has been working to deal with the very same issues through legislation, and that legislation should proceed regulations. Therefore regulations should be withdrawn or put on hold to allow Congress to act. Several speakers at the House Judiciary Committee Hearing on the NPRM supported the point that policy-making belongs to Congress, and it should act first.
  • On the other hand, no one at the House Hearing spoke in favor of cancelling the EB-5 regulations, even if they did come out under Obama, and four influential Congressmen behind EB-5 reform legislation (Goodlatte, Grassley, Conyers, and Leahy) collaborated to submit a comment on the NPRM strongly urging DHS to finalize it, at least with respect to minimum investment amounts. Senator Grassley personally encouraged DHS Secretary John Kelly in January to finalize the EB-5 regulations, and called on him again on May 11 to expedite the regulations. UPDATE: DHS Director nominee Lee Cissna committed on May 24 in his confirmation hearing to finalize EB-5 reform.
  • On May 8, the New York Times quoted a White House statement that the administration “is evaluating wholesale reform of the EB-5 program to ensure that the program is used as intended and that investment is being spread to all areas of the country.” Supporting drastic reform regulations could be a strategic move for President Trump: bombing the EB-5 program would conveniently show that he’s truly not in the pocket of any tangentially-related EB-5 promoters. On the other hand, the proposed regulations would inhibit job creation and impose excessive costs on business – points Trump has committed to avoid in regulations.
  • This Congress has so far officially introduced only one EB-5 bill, but we’ve seen a couple discussion drafts that might emerge as live legislative options.
  • The rule-making process requires DHS to review and respond to public comments. I took a long time just to read all the comments and write this post, and foresee that the final rule will be tough and time-consuming for DHS to write. If DHS takes the good feedback seriously, it will likely come up with another version that’s sufficiently different to justify a second posting and comment period.

Review of Public Comments

The 290 public comments on NPRM #0006 can be roughly divided as follows: brief personal pleas from EB-5 investors (61%), analysis and experience from EB-5 project people operating outside Tier I cities (14%), lengthy and sophisticated comments from the top few big-city regional centers and their surrogates (6%), brief comments on behalf of direct EB-5 projects (6%), feedback from immigration lawyers and other service providers (10%), rants about damn furriners (3%), and comments from Congress (0.3%). I summarize common themes in these groups, and then link to specific comments of interest.

Feedback from Congress

There is only one comment from Congress – a letter signed by Bob Goodlatte and John Conyers from the House and Charles Grassley and Patrick Leahy from the Senate – but I lead with this because it’s so significant and seems to have passed unremarked.  These Congressmen have spearheaded EB-5 reform legislation, and their comment reveals their good intentions and dangerous misunderstanding of how EB-5 works. They identify real problems but go very wrong in suggesting solutions.  We particularly need to respond to their counterproductive ideas about job creation and retroactivity. Clearly they haven’t realized that their suggestions would have the practical effect of gutting small, rural, and direct EB-5 projects while lining the pockets of mega-project developers with superfluous cash. (A post with more on this soon – and staffers if you’re reading this, please call me and I will explain.)  While most other public comments ask DHS to wait for Congress to act, these influential Congressmen “strongly urge” DHS to finalize EB-5 regulations, particularly with respect to minimum investment amounts, and also propose additional items that they’d like to see DHS address via regulation (visa set-asides for TEAS, limits on job creation, mandatory I-829 interviews, limits on regional center rental and sale, and limits on job counts).

Feedback from EB-5 Investors

The many comments from investors are generally short and sweet, bringing little data and evidence but a fair amount of appealing personal experience. The dominant message – repeated across most investor comments – is that EB-5 visa backlog problems need to be addressed before any other reforms can be meaningful. Investors from China express distress at finding themselves in a three-to-ten-year waiting line just to get conditional residence, depending on when they invested, and the many problems that flow from that – children aging out and separating families, the high risk of material change, the problem of asynchronous exit strategies, the difficulty of managing enterprises and overseeing investments from overseas, and so on.  Current investors don’t see the program remaining viable for new investment if the required minimum investment more than triples plus the backlog problems aren’t solved. Investors were also united in supporting (and suggesting ways to expand and strengthen) priority date protection, and opposing any retroactive application of new rules. Many proposed granting parole after I-526 filing, and allowing EB-5 investors who have waited more than two years since I-526 approval to file I-829 once a visa becomes available. The comments impressed me with the thought that EB-5 investors need an association that allows them to organize, collaborate, and advocate for their own interests. Past investors are important stakeholders, with distinct concerns and a strong interest in influencing debates around the future of the EB-5 program. But here they are represented by scattered 100-word comments with doubtful punctuation while regional center representatives present sharp 10,000-word essays bristling with footnotes. I see evidence of group coordination in some investor comments, and encourage people to contact me if they have any groups that they’d like publicized.

Feedback from Regional Centers and Project Developers

On the project side, nearly everyone opposes the DHS proposals regarding investment amount (a one-stage 180% increase to the standard investment amount and 270% increase to the TEA investment amount). Commenters argue that this abrupt and dramatic increase would quell demand, make the US investor visa program uncompetitive, reduce the total job creation and investment impact of the EB-5 program, be tough on small projects, and dampen the incentive to invest in a TEA. They make supply-demand arguments (suggesting that any inflation-based increase should be dated from 2008 or so when demand for the program took off, not from the 1990s when it was barely used), propose linking investment amount calculation to factors such as exchange value of the dollar and household income rather than merely considering the Consumer Price Index, encourage DHS to consider Congressional intent as expressed in recent proposed legislation, not just as expressed in 1992, point out the high risks that distinguish the US program from others, and advocate for a phased-in approach and protection for past investors and midstream offerings.

When it comes to Targeted Employment Areas definitions, and the incentive to invest in a TEA, big-city and small-city/rural regional centers part ways. Comments filed on behalf of the big urban regional centers advocate for large TEA areas based on commuting patterns (allowing for TEA projects located at a distance from where unemployed people live) and for a narrow differential between the TEA and non-TEA investment threshold (minimizing the TEA incentive). Comments filed on behalf of regional centers active outside of major cities were generally supportive of TEA changes proposed by the regulations (which would require TEA projects to locate in/very near high-employment areas) and advocate for a meaningful TEA incentive/investment differential. For example Related New York City Metro Regional Center suggests that TEAs should allow for unlimited combinations of areas within an MSA (and with no requirement that the constituent areas be contiguous), and that TEA investment should be only $50,000 cheaper than non-TEA investment. By contrast, Pine State Regional Center (Arkansas, Missouri, Tennessee) supports restricting TEA definitions and significantly incentivizing TEA investment (for example taking the $800,000/$1.2M investment levels proposed last year in legislation, which would be a $400,000 differential).  The two points of view were approximately balanced in comments on the regulations (with more voices on the small/rural side and stronger voices on the large urban side), though I note that the big players are winning lobbying (each successive draft of proposed legislation has progressively bargained down the investment differential/incentive to invest in a TEA).

Nearly every commenter (except for a couple thinkers who have never experienced USCIS processing) agrees that DHS absolutely must not enter the business of issuing case-by-case TEA determinations. USCIS designations would be needless assuming that TEA requirements are clarified and codified, senseless considering USCIS’s (lack of) expertise, and disastrous considering USCIS’s existing workload and processing times. These arguments were made very strongly, many times. If the final rule persists in assigning TEA designation to USCIS rather than creating an automated process or giving unambiguous guidelines to state agencies, then we’ll know that DHS just didn’t read the comments. I hope that Congressional staffers working on EB-5 would read these comments as well, for the case against individualized TEA designation by USCIS is extremely clear and compelling.

Many of the EB-5 industry commenters joined investors in arguing for I-526 priority date protection, for measures that would ease the visa backlog by not counting derivatives or recapturing unused visas, for protecting investors who already filed under old rules, and for palliative measures in light of the backlog such as parole after I-526 approval and age-out protection and priority date protection.

The ANPRM #0008, being a just preliminary notice, got little attention and feedback – sadly, because it did ask important questions. Comments that were submitted particularly focused on the proposal to require exemplar approval prior to I-526 filing (granting that this is a good idea only if the processing time can be short, and unworkable otherwise).

A sampling of noteworthy comments

The public comments are useful to help understand what DHS sees as it prepares a final rule, and also as a source for ideas worth discussing and support for arguments that you may want to make yourself. I’ve assembled a short list of comments that make particularly interesting or characteristic points, or that make points in a particularly effective way, with compelling language and evidence.

  • The case for TEA rules that don’t disadvantage urban projects: Jeffrey Carr (gives rationale for TEAs based on commuting patterns, unlimited areas within MSAs, census block groups, and NMTC criteria), EB-5 Investment Coalition (proposes a “9-Step Process” to designate areas that include “Residence Tracts” linked to “Workplace Tracts”), Angelique Brunner and David Morris (propose expanding provision to encompass existing government-designated economic development zones).
  • The case for TEA rules that significantly incentivize projects outside prosperous urban areas: Urban Manufacturing Alliance and  Mount Snow (for distressed urban and rural areas), Invest Atlanta (economic development agency perspective), Gary Friedland (considering the purpose to stimulate investment in undercapitalized areas), IIUSA (for fairness to a broad base of EB-5 users)
  • The case for a different approach to calculating EB-5 investment amount increases: Auray Capital (considers data on currency exchange rates, competitor programs, market threats, and the population of potential investors), Jim Nail, AISA (points out why an inflation-correction approach, if used, should calculate from the TEA investment amount), Centurion American Development (consider investment risk and return, and costs to the regional center), Suman Guduru (too high would discourage startups and entrepreneurs), Deputy Mayor of Columbus, Indiana (too high would discourage investment in small cities),  Alexandre Carvalho (too high would discourage investors).
  • The case against delegating TEA designation to USCIS: Nearly every comment, but for example Elliot Winer and Kimberly Atteberry (technical reasons); Stetson Law and Chanticleer Holdings (positive benefits of state involvement)
  • The case for broadening I-526 priority date protections: Green and Spiegel and AILA and Penny Zhang (for priority date protection not only contingent on I-526 approval),  Meisheng King (for the option of assigning priority date to children), Golden Southern Chicken (priority date protection would allow for better business decisions), Fei Zhiqiang (priority date protection would free investors to act on suspicions of malfeasance)
  • The case against priority date protections: US Chamber of Commerce (could encourage investors to abandon projects that no longer qualify as TEAs), Pacific ProPartners (would further swell the visa waiting line and undermine forecasts)
  • The case for taking EB-5 visa backlog problems seriously: ZeMing Gao and Shiting Yi  (and for those unfamiliar with the backlog problems, here’s my blog post with as much as I know)
  • The case that DHS has and should use the power to modify EB-5 visa availability: EB-5 Investment Coalition (the arguments for eliminating derivatives from the visa count and recapturing unused visas)
  • The case for and against making EB-5 program changes retroactive: Goodlatte/Grassley/Conyers/Leahy (for retroactive application), Fragomen (against). Industry response would have been stronger had we realized retroactivity could even be on the table for regulations. I will write more in response to the comment from Congress, and hope others will as well. Many investor comments speak against retroactivity, but without marshaling sources and evidence.
  • The case for a revised material change policy: American Immigration Lawyers Association (EB-5 material change policy as currently stated can make an EB-5 petition un-approvable even though it was eligible at the time of filing and remains eligible after an interim material change. AILA digs into the law and proposes a more appropriate material change rule that would only focus on changes that involve EB-5 credibility requirements, and only on changes that make a petition ineligible. The argument seems sensible and could solve severe current problems in EB-5 adjudication. I hope more people read, discuss, and promote it.)
  • The case against requiring exemplar approval without a strictly-controlled processing time: Suzanne Lazicki (explaining the process and timing issues), Jillian O-Brien (providing examples). It’s so important for USCIS to understand the practical difference between a requirement to file and a requirement to file plus wait for approval.
  • Thoughts on designation, monitoring, and oversight requirements for regional centers: EB5 Securities Roundtable and Citizen for Responsible Regulation

EB-5 Primer

The media is still full of EB-5 stories, but many reports struggle to explain EB-5. Are we selling citizenship? Is this a cash-for-visas program? Why would a luxury project by celebrity New York developers get to benefit from immigrant investment?

Strictly speaking, EB-5 is not a visa-for-cash program but a visa-for-employment program. The “EB” in EB-5 stands for Employment Based. While some countries do sell citizenship, Congress took care to set up the US program differently. An EB-5 investor can get conditional permanent residence for making a qualifying investment that will result in creation of at least 10 jobs, and may eventually get a permanent green card if the investor sustains the investment and can go on to demonstrate that jobs were in fact created. Cash alone does not win EB-5 status.

Another distinctive feature of the US investor visa program is that it involves private sector investment, not government-sponsored or government-controlled investment opportunities. The prospective immigrant is free to choose to invest in anything from an Iowa farm to a New Jersey skyscraper, and may apply for a visa if job creation and other requirements can be met. Senator Grassley would like the EB-5 investor to chose the Iowa farm, and the investor might prefer it as well if the government bore the risk and responsibility for the choice and replaced market forces in underwriting the investment’s success. The government makes no such offer, however, and the investor is left to decide which private investment opportunity is most suitable. The government influences application of immigrant investor capital in two ways: by defining requirements for EB-5 eligibility, and by offering incentives. An eligible EB-5 investment must be at-risk investment of a certain amount in a for-profit enterprise that creates a certain number and kind of jobs, among other requirements, and the “Targeted Employment Area” incentive with reduced investment was designed to reward investment in high-unemployment and rural areas.

Some observers are concerned that the TEA incentive hasn’t functioned as intended, and that EB-5 investor capital is benefiting the wrong places and the wrong people. Others worry that the investment and job creation requirements need to be more robust to realize Congressional intent. EB-5 reform legislation targets these issues, as do proposed regulations from DHS. And to quote a White House spokesman, the administration “is evaluating wholesale reform of the EB-5 program to ensure that the program is used as intended and that investment is being spread to all areas of the country.”

For additional reading, see my post with comparison of investor immigration programs worldwide based on a Migration Policy Institute report, and my summary of TEA incentive proposals in proposed regulations and legislation (now significantly revised and expanded, and I welcome additional corrections).

EB-5 in the news (Kushner Cos in China, SEC in Idaho, visa dates, Ombudsman, RC terminations)

Now that we’ve celebrated the good news of regional center program extension to September 30, 2017, here’s some concerning news to keep in focus as well.

  • The regional center program was barely extended – just another few months added. The program desperately needs stability – preferably the stability of a permanent program, and at least the stability we used to have of three-to-five year extensions. These tiny months-long jumps reflect deferred decision-making, not necessarily votes in the program’s favor. We need Congress to take positive action on EB-5 — something it hasn’t done since 2012.
  • Big-city mega-projects are a minority of EB-5 offerings but claim a large number EB-5 investors, and their prominence in the news is not helpful when Congress and the public need to see how EB-5 is also working to help undercapitalized areas. This weekend, media from the Washington Post, the Wall Street Journal, the New York Times, and The Guardian to NPR and Vox.com are reporting hot stories from journalists who persevered in observing an EB-5 roadshow being put on in China by the Kushner Companies. It hardly matters if the backers are completely innocent of influence peddling – indeed, they ought be innocent, because everyone is likely to just assume and act on the assumption that they’re guilty, regardless of what they do or say. Prospective investors are likely to assume without being told that the Kushner EB-5 project promoters can leverage access to power at the highest level, making the offering very attractive, and EB-5 critics will be just as eager to jump to the same conclusion, making the offering very dangerous politically. Senator Grassley, Senator Leahy, and Senator Feinstein at least are going to have a field day. (Updates: Feinstein and Leahy have a letter out to the White House Counsel, Grassley has written a letter to John Kelly, Leahy, Conyers, and Lofgren have written a letter to the Kushner Companies, and the White House has started issuing statements.) Some of my relatives even called me today, questioning my involvement in EB-5 after reading the news. I’m proud of my personal experience with many small businesses that launched thanks to EB-5 investment, with investors who sacrificed to invest and have persevered on a difficult and lengthy path to US residence, and with entrepreneurs who’ve brought so much more to the US than their money. Such stories rarely make the news, however. In reviewing statistics on EB-5 filings for the Notice of Proposed Rulemaking, DHS indicated that regional center projects in FY2013-2015 included 15 investors on average, while non-regional center investments had two investors on average (NPRM footnote 58). That’s just an average, but reflects the EB-5 world I have known best. But mega-projects, though few in number, are increasingly making a big splash in a small pond. The Kushner project reportedly seeks to raise $150M from 300 investors, which means it could claim nearly 10% of available EB-5 visas for a year assuming an average of three visas per investor. The 27 mega-projects summarized by NYU researchers in a March 2016 article would use up over three years of EB-5 visa numbers by themselves, if fully funded. New York City Regional Center recently announced its 1000th I-829 approval, with permanent residence for over 2,750 individuals and conditional permanent residence for an additional 5,200 investors and family members  – nearly 8,000 visas facilitated by a single regional center. This big-fish phenomenon is something to grapple with as we contemplate the future of the EB-5 program.
  • Investors understandably gravitate to major-league capitalists when the SEC keeps showing up amateur capitalists. The SEC has announced another EB-5 case, this one involving Serofim Muroff, associated entities through which he allegedly misappropriated funds, and an administrative assistant/bookkeeper charged with facilitating the misappropriation. Here is a link to the SEC press release and complaint.  The woes of Idaho State Regional Center are not new (various lawsuits have been ongoing), but this SEC case looks distinctive to me in the way it applies securities laws to the EB-5 context, and I look forward to expert analysis.  The handful of EB-5 cases brought so far by the SEC have common themes that should be targeted by industry best practices and integrity measures in new EB-5 legislation.
  • The news from Charlie Oppenheim during the IIUSA EB-5 Washington, D.C. Conference was predictably sobering. Mr. Oppenheim anticipates that the cutoff date for China-born investors will have advanced only to June or July 2014 by the end of this fiscal year, and to September or October 2014 by the end of next fiscal year. Considering the I-526 filing surges that have happened since 2014, this trend  is not going to get prettier, absent legislation to change visa numbers. Mr. Oppenheim also noted that Vietnam could trigger the per-country limit and become subject to a cutoff date in 2019 or 2020. The small-pond phenomenon (only about 10,000 visas available annually for investors plus family members, and 7% per-country limit when the cap is reached) is another important issue for Congress to address as it contemplates the future of the EB-5 program.
  • President Trump, who has yet to exhibit any warm fuzzies to EB-5, despite what the Washington Post may suspect, has appointed a new CIS Ombudsman known for being anti-immigration generally and anti-EB-5 in particular.  My only question is whether Julie Kirchner’s probable bad intentions are any more likely to be effective than good intentions expressed by previous Ombudsman.
  • Meanwhile, USCIS continues to approve new regional centers while terminating others for failure to promote economic growth.

Regional Center List Changes
Additions to the USCIS Regional Center List, 04/17/2017 to 05/08/2017.

  • First American Redevelopment Regional Center (California)

New Terminations:

  • North American Center for Foreign Investments, LLC (California) Terminated May 1, 2017
  • Westgate Orlando Regional Center, LLC (Florida) Terminated May 1, 2017
  • New York Green Hotel Regional Center LLC (Connecticut, New Jersey, New York) Terminated May 1, 2017
  • DRC Capital Partners, LLC (Arizona) Terminated May 1, 2017
  • E&W Lake Tahoe Regional Center LLC (California) Terminated May 1, 2017
  • ACIC Management, Inc. Regional Center (Washington) Terminated May 1, 2017
  • PetroSam, LLC (Texas) Terminated May 1, 2017
  • Alaska Gold & Mining Regional Center, LLC (Alaska) Terminated April 21, 2017 Liberty West Regional Center (Arizona, California) Terminated April 19, 2017

RC reauthorization to 9/30/2017, Trump statements on reform

The regional center program is now authorized, as part of fiscal year 2017 Appropriations legislation, through September 30, 2017. Updates as they happened:

  • 5/8/2017: In the wake of RC program reauthorization and the flap over an EB-5 project being promoted by the Kushner Companies, the White House has started issuing more EB-5 statements, which I’m collecting in this document.
  • 5/5/2017: President Trump has signed the omnibus appropriations bill H.R. 244 – Senate Amendments to HIRE Vets Act [Consolidated Appropriations Act, 2017]. The text still includes clean extension of the regional center program to September 30, 2017 (Title III, Section 542).
  • 5/1/2017: House Appropriations Committee press release: Comprehensive Government Funding Bill Released. The bill text includes this magic sentence on page 734: “SEC. 542. Section 610(b) of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (8 U.S.C. 1153 note) shall be applied by substituting ‘‘September 30, 2017’’ for ‘‘September 30, 2015’’. If passed, this will give simple extension of the Regional Center program authorization for the reminder of the fiscal year, with no other EB-5 program changes. (Section 610(b) of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (Public Law 102-395) established the regional center program, page 47.)  Even assuming the bill will pass as-is, this is not time to relax. Congress could still come out with new independent EB-5 legislation at any time — nothing says they have to wait til the last reauthorization minute to act. Senator Cornyn’s office circulated a new discussion draft of EB-5 legislation just this morning. I’ve entered summary details in my bill comparison chart,   and will add link to the full text as soon as someone posts the draft publicly.
  • 4/28/2017: H.J.Res. 99 – Joint Resolution making further continuing appropriations for fiscal year 2017, and for other purposes has been passed and signed into law, extending government funding and other provisions of Public Law 114–223 (including the regional center program) to May 5, 2017.
  • 4/27/2017: For the first time, I’ve noticed a statement from the Trump administration on EB-5. Washington Post says,
      • The White House issued a statement to The Washington Post this week saying that the Trump administration is weighing changes to the foreign investor visa program. “There are serious concerns held by the administration regarding the EB-5 visa program, in part because it is not being used as it was primarily intended,” said Michael Short, a White House spokesman. “The administration is continuing to evaluate reforms to the program, which we believe is in need of substantial repair.”

    (Update: additional statements linked above at the 5/8/2017 bullet point.)

  • 4/26/2017: House Appropriations Committee Press Release: “House Appropriations Chairman Rodney Frelinghuysen today introduced a short-term Continuing Resolution (CR) (H.J.Res. 99) to continue funding for federal programs and services until May 5, 2017. …The legislation continues policy and funding provisions included in currently enacted fiscal year 2016 Appropriations legislation.” Here is the text of the CR. It’s set for vote on 4/28.

As a reminder, the history of recent regional center program reauthorizations:

  • 12/10/2016 – RC program is extended unchanged to 04/28/2017 as part of a continuing appropriations act (PL 114-254)
  • 9/29/2016 – RC program is extended unchanged to 12/09/2016 as part of a continuing appropriations act (PL 114-223)
  • 12/8/2015 – RC program is extended unchanged to 9/30/2016 as part of an appropriations act (PL 114-113)
  • 9/30/2015 – RC program is extended unchanged to 12/11/2015 as part of a continuing appropriations act (PL 114-53)
  • 9/28/2012 – RC program is extended (with one small change) to 9/30/2015 as part of immigration-related legislation (PL 112-176)

I-924 Webinar, Amendment Requirements

In case anyone would like to review it, here is a link to my audio recording and copies of the slides from today’s webinar on the revised Form I-924 Application for Regional Center Designation. (6/2017 UPDATE:You can now get the sound and slides together, as USCIS has posted a recording of the webinar.) The big news was a comment that the page for the March 3, 2017 EB-5 stakeholder meeting now contains remarks from Lori MacKenzie modifying what she had said at the meeting about geographic area amendments. My original blog post complained about this buried new policy posting, but shortly thereafter USCIS sent out a stakeholder email and posted a statement prominently on the EB-5 section of the USCIS website.

Update to EB-5 National Stakeholder Engagement Remarks: Regional Center Geographic Area Amendments and Form I- 526 Petition Eligibility
On March 3, 2017, USCIS held an EB-5 national stakeholder engagement.  This national engagement was part of our ongoing effort to enhance dialogue with our stakeholders in the EB-5 program.  Remarks from the EB-5 national stakeholder engagement are available here.

At the engagement, USCIS noted that a May 2013 policy memo had previously provided guidance that a formal amendment was not required to expand a regional center’s geographic area, and permitted concurrent filing Form I-526, Immigrant Petition by Alien Entrepreneur prior to approval of the geographic scope amendment.  The May 2013 guidance was superseded by the recent publication of the final  Form I-924 ,the Application for Regional Center Designation Under the Immigrant Investor Program and instructions.  The I-924 revisions included changes to the Form I-924 instructions and require that regional centers file a Form I-924 when seeking an expansion of their geographic area.  The revised Form I-924 became effective on December 23, 2016, following publication of the revisions in draft form in the Federal Register in May of 2016, and a period during which the public had the opportunity to comment.

During the engagement, USCIS addressed questions regarding how requests to change a regional center’s geographic area should be filed and the timing of such a filing.  Specifically, where a regional center has a filed and pending Form I-924 amendment requesting an expansion in geographic area, stakeholders  asked whether or not Form I-526 petitions may be filed prior to approval of the I-924 amendment, relying on such proposed expanded geography.  USCIS has reviewed stakeholder concerns raised during the engagement and has updated the engagement remarks to clarify how the agency is implementing the above policy. Specifically:

  • Where the regional center’s geographic area expansion request was submitted either through a Form I-924 amendment or Form I-526 petition filed prior to February 22, 2017 (the date on which use of the new Form I-924 became mandatory), and the request is ultimately approved, USCIS will continue to adjudicate additional Form I-526 petitions associated with investments in that area under the guidance reflected in the May 30, 2013 policy memo.
  • Any requests for geographic area expansion made on or after February 22, 2017 will be adjudicated under the current guidance; namely, a Form I-924 amendment must be filed, and approved, to expand the regional center’s geographic area.
  • For geographic area expansion requests made on or after February 22, 2017, the Form I-924 amendment must be approved before an I-526 petitioner may demonstrate eligibility at the time of filing his or her petition based on an investment in the expanded area. Form I-526 petitioners who believe they may be unable to demonstrate eligibility at the time of filing on this basis may wish to contact USCIS at ipostakeholderengagement@uscis.dhs.gov.

Sincerely,
USCIS Public Engagement

And here, since the I-924 Form and Instructions are apparently our new venue for policy guidance, is the official word on amendment requirements.

Quoted from the I-924 Instructions (version expiring 12/31/2018), page 1
Request an amendment to a previously approved regional center.
A. You must file an amendment to:
(1) Seek approval for any changes to the regional center’s name, ownership, or organizational structure, or any changes to the regional center’s administration that affect its oversight and reporting responsibilities, or to add or remove any of the regional center’s principals, immediately following the changed circumstances; or
(2) Change the geographic area of a regional center.
B. You may also file an amendment to:
(1) Change the industries of focus of the regional center;
(2) Add a new commercial enterprise associated with the regional center and/or seek a preliminary determination of EB-5 compliance for an exemplar Form I-526, Immigrant Petition by Entrepreneur, for that new commercial enterprise, before individual entrepreneurs file their petitions; or
(3) Notify USCIS of changes in the name, organizational structure or administration, capital investment instruments, or offering memoranda (including changes in the economic analysis and underlying business plan used to estimate job creation) for a previously added new commercial enterprise associated with the regional center.
NOTE: An I-924 amendment is not required to report changes of address, contact information, a change of duties among the regional center principals, changes to non-principal managing companies, contracting agents or similar changes, or information described in Item 2.B. above. The regional center must notify USCIS within 30 days of such changes. Notification of these changes can be made by sending an email to the EB-5 Program mailbox at: USCIS.ImmigrantInvestorProgram@dhs.gov. USCIS will review any changes submitted by email and may require or recommend, as appropriate, the regional center to file an I-924 Amendment.

“You must file an amendment to seek approval for….” sounds like it could be discretionary (i.e. you needn’t file an amendment if you’re not seeking approval for…), but apparently it isn’t. (Previously, IPO said that I-924 amendment was recommended to seek approval for management changes, with an option to just notify the IPO email box. No longer.) Today’s webinar slides restated the I-924 instructions as “You must file an amendment in case of…,” and the presenter said that the required amendment must not only be filed but also approved. (But approved “before what”? This point doesn’t go without saying. Before I-526s are filed? Before I-526s can be approved? Before the regional center can take any action at all? IPO needs to clarify the “before what” for each required type of amendment, and whether the requirement is to file or file plus wait for approval.)
Otherwise, today’s webinar mainly just read through the new Form I-924 content, pointing out changes for the benefit of people who hadn’t previously noted just how much the form changed, or implications of those changes. The audience asked few questions. USCIS emphasized two concerns behind Form I-924 revisions: vetting regional center principals and managers, and limiting geographic area. The revisions take effective steps toward the first objective, but make little difference to the second. Geographic area requests are limited only by imagination and chutzpah so long as USCIS continues to allow and even encourage applicants to base their requests on hypothetical/fictitious projects.

Goodlatte statement; IIUSA TEA Analysis

Two important new press releases:

  1. House Judiciary Committee Chairman Bob Goodlatte announces on behalf of House and Senate Judiciary Committee members that “Lawmakers Remain Committed to Good-Faith Talks to Reform Investor Visa Program Ahead of Expiration” (April 19, 2017)
  2. IIUSA announces First-Ever Comparative Analysis Report on EB-5 TEA Policy Reform (April 20, 2017). This very valuable report and mapping tool  takes a comprehensive look at the impact the different TEA policy proposals would have on the EB-5 Regional Center program at both a national and state-by-state level. For those of you who downloaded my TEA summary earlier, note that I erred in providing a link to an NMTC mapping tool based on old data. You should look instead at the IIUSA interactive mapping tool, which uses the dataset that would actually be required to determine TEA qualification under new proposals.

Meanwhile, a 4/19 post by Miller Mayer reports on a version of EB-5 reform legislation that I haven’t even seen, though Miller Mayer says “all major EB-5 industry representatives have agreed to this tentative compromise.”

Washington Updates (new draft bill), New Form I-526, RC list updates

Washington Updates
It’s still not clear what will happen in the next couple weeks before the next regional center program sunset date on April 28, and whether we’re likely to see EB-5 program changes first from legislation or from new regulations. In an advocacy update sent to members last week, IIUSA noted that the appropriations package to fund the government past April 28 is likely to be larger than a continuing resolution. Thus it could be a vehicle for EB-5 legislative reform, were any reform proposals ready. Right now there are three active bills – two that would terminate EB-5 entirely, and Rand Paul’s rosy wish list of improvements. Yesterday EB-5 Insights reported that the Senate Legislative Council is circulating another staff discussion draft of EB-5 reform legislation, and speculates that the RC program may get a short-term extension of a few weeks (with government funding) while Congress works out other appropriations details. I’ve added the staff draft dated 4/15/2017 to my Bill Comparison Table and updated my TEA Incentive Summary for reference. (5/11/2017 update: I’ve now revised the TEA Incentive Summary.) The new draft is basically the same document (with a few changes) as the 12/2/2016 staff discussion draft, which in turn was based on the Goodlatte/Conyers legislation from 09/2016. We shall see whether it goes anywhere this time around.

New Form I-526
There’s a new edition of the Form I-526, which everyone must use starting June 9, 2017. Wolfsdorf Rosenthal and EB-5 Insights discuss what’s new in this version of the form.

Petition Processing
The new IPO processing times report does not look good, with the “processing petitions as of date” date having regressed for every category (back almost a week for I-829, back nearly 3 weeks for I-526, and back nearly 5 weeks for I-924). If you’re new to this blog, here’s a link to a post with everything I know about interpreting processing time reports.
Also, a sharp-eyed reader pointed out to me that the number of pending I-526 petitions that USCIS reports every year does not, as one would expect, equal the number of pending petitions at previous year-end plus current-year receipts minus current-year approvals and denials. (The quarterly numbers don’t add up either.) Anyone know why this is so? If not, I’m submitting a question for the next stakeholder meeting.

Regional Center List Changes
Additions to the USCIS Regional Center List, 04/03/2017 to 04/17/2017

  • Atlas Regional Center, LLC (California)
  • Hawaiian Palms Regional Center (Hawaii)
  • Hope Investment Regional Center (California)
  • Washington Free Life (Washington)

New Terminations

  • Leaf Fischer Investment Group, LLC (Florida) Terminated 3/6/2017
  • Idaho Global Investment Center, LLC (Idaho) Terminated 3/6/2017
  • FreeMind Films Regional Center (California) Terminated 3/15/2017
  • Green Card Gateway Regional Center (Illinois) Terminated 3/30/2017
  • Florida Gateway Regional Center, LLC (Florida) Terminated 4/12/2017

Preventing fraud in EB-5 (CIIF investigation)

In his testimony before the House Judiciary Committee in February 2016, Investor Program Office Chief Nicholas Colucci discussed how much USCIS has done to improve its administration of the EB-5 program, with particular focus on adding resources to prevent the kind of fraud and abuse that can come with investment and immigration.

Over the past few years, USCIS has taken a number of steps to improve the administration of the EB-5 program. In 2013, USCIS realigned the EB-5 program into the Immigrant Investor Program Office, and relocated it from USCIS’ California Service Center, which adjudicates various immigration benefits, to Washington, D.C., with a Chief dedicated exclusively to EB-5 adjudications. As the United States Government Accountability Office (GAO) noted in its August 2015 report to Congressional requesters on the EB-5 program, this move was part of a restructuring to help USCIS better detect fraud. USCIS also created a Fraud Detection and National Security EB-5 Division (FDNS EB-5) and embedded its personnel within IPO to work alongside adjudications officers. Additionally, a dedicated team of attorneys from the USCIS Office of Chief Counsel advise on program-related legal matters. In staffing the IPO, USCIS has, and continues to invest in the specialties needed to manage the complex EB-5 caseload by hiring staff with expertise in economics, law, business, finance, securities and banking to review cases and to enhance consistency, timeliness, and integrity within the program….
USCIS has taken its responsibility to administer the EB-5 program very earnestly, through its specialized staffing devoted solely to this program and its extensive efforts to regulate the quickly growing regional center program. However, no agency can do this alone. The EB-5 program necessitates collaboration with several other agencies, and the establishment of IPO in Washington, D.C. allows USCIS to work closely with partners such as the U.S. Securities and Exchange Commission (SEC), with whom IPO shares a robust collaborative relationship. USCIS also works closely with its sister agency, U.S. Immigration and Customs Enforcement (ICE), as well as with the Federal Bureau of Investigation (FBI) and the U.S. Department of State, in support of our oversight of the EB-5 program.

Improvements have covered staffing, inter-agency collaborations, and improved processes for important functions such as vetting lawful source of investor funds (as further explained in follow-up testimony — see especially Question 15 in response to Senator Grassley and Question 5 in response to Dianne Feinstein.)

This week’s breaking news story Feds raid San Gabriel, Arcadia locations over visa-fraud scheme involving criminals on China’s most-wanted list reminds us why those improvements were so important. The case, as described in an Application for Search Warrant filed by an FBI investigator, indicates that USCIS approved I-526 petitions from 2009 to 2012 that (if FBI evidence is correct) should never have been approved — including cases that involved people who did not invest their own funds, people who were promptly refunded their investments, and three individuals listed on China’s most wanted list for financial crimes. The good news is that the net since 2013 seems to be holding. The warrant does not indicate that any investors named in the investigation have been able to to get permanent green cards (though several have had I-829 petitions on file since 2012, possibly pending this FBI investigation which seems to have started in 2013), and the post-2013 I-526 petitions discussed in the warrant are likewise pending. The investigation stands as evidence that people may try to get away with fraud and abuse — but not that they get away with it. Investors who may have been complicit have not successfully completed the immigration process, and the regional center principals have had the FBI at their heels (sometimes literally: “at approximately 11:13 a.m., observed TAT exit SUBJECT PREMISES #2’s front door and walk across the street, after which he talked to a gardener, and then returned and entered SP#2. At 11:45 a.m. observed TAT exit SP#2 and go to the mailbox in front of the residence and retrieve mail. At 12:13 p.m. observed TAT walking from SP#2 carrying a black-colored briefcase-sized soft bag in his hands. TAT then walked across the street.”) and are now facing formal fraud investigation. Dozens of good faith investors in CIIF offerings and anyone with CIIF who’s innocent of fraud are unfortunate collateral damage, and I wish for their sake that the FBI had worked more quickly. (Update: Some investors have filed suit in civil court to try to get their money back, and Federal Prosecutors have filed civil complaints seeking asset forfeiture.)

FY2017 Q1 EB-5 Petition Processing Statistics

The USCIS Immigration and Citizenship Data page has been updated with numbers for I-526 and I-829 petitions received and processed in October to December 2016. The numbers show another dramatic improvement in I-526 processing, continuing free-fall in I-829 processing, and another unnatural surge in I-526 receipts. Denial rates remain low. When IPO previewed these numbers in the last stakeholder meeting, they said that I-829 adjudications will improve going forward with a new I-829 team.

I’ve updated my summary charts with the FY2017 Q1 numbers, and also added a new chart pointing out how I-526 filing trends coincide with regional center program sunset dates. Legislators and USCIS have tended to speak as if recent EB-5 investor numbers reflect sustainable trends based on surging interest in the EB-5 program (and/or underpricing or aggressive marketing). My experience and what I read indicates that the surges are rather fueled by uncertainty about program changes, such that people who would otherwise have considered EB-5 years in the future are hustling all at once to make investments now while the program is still viable. That kind of demand is not sustainable. In fact it means that all else being equal we’ll see fewer investments in the future, because tomorrow’s demand is being pulled into today (and tomorrow’s visas are being claimed today). The increasing supply of EB-5 investment opportunities (particularly from a few mega-projects, the subject of a forthcoming post) play a role in the surges and backlog, but most of all I blame Congress for keeping the regional center program on edge by repeatedly promising and failing to act on EB-5.