Ombudsman meeting reaction

In case you missed yesterday’s EB-5 stakeholder meeting hosted by the CIS Ombudsman’s Office, here’s the gist: “the processing of EB-5 petitions and applications has not been smooth, and it’s USCIS’s fault.” The Ombudsman listened politely and made notes to convey to USCIS, which was not offered a speaking part at the meeting. I can share my recording, if you want to hear all the EB-5 stakeholders’ complaints and suggestions in detail. Since none were new to me (although some were constructive and worth stating), I shall report instead on an imagined meeting. Let’s pose St. Thomas More as Ombudsman for the American people, and imagine how USCIS representatives might tell him their side of the EB-5 processing story.

St. Thomas, thank you for holding this meeting and giving your faithful civil servants here at USCIS the opportunity to express concerns regarding the American people and their handling of the EB-5 program.

Sir, the people complain about consistency and predictability in processing of EB-5 cases. They are angry that documents similar to those approved a few years ago are not approved today. They mutter that EB-5 may be heading for a crash such as it experienced in the late 1990s – a crash that they blame on us and our track-changing. But look at the facts of the late nineties. Hundreds of Interbank Group investors lost their green cards – but Interbank was convicted on dozens of counts of visa, mail and wire fraud and a couple operators went to jail – whose fault was that? Back then hundreds of AIS investors ended up in legal limbo – but AIS had been structuring EB-5 deals so that foreign investors only had to actually invest $125,000, a fraction of the legally required amount. How could we not change course and crack down when it became clear to us that the bottom line of the EB-5 program – real investment and real job creation – was not being realized, and that fraud was being given a chance to flourish? And look at us now. The people have been sending us economic impact reports that soberly claim, for example, that building one new hotel or one new office building will result in thousands of new jobs in the community. When our in-house economists that the people agitated for us to hire point out problems with such analyses, and explain why we should not and should never have rubber-stamped claims like this – how can we not act on that? What would the newspapers and the voting public say if we didn’t adjust? How can the people gasp and swoon when our economists challenge certain job count practices when a little thinking or a call to the local university economics department would raise the same issues that our economists are raising?

How come a country full of smart people can only tear their hair and cry “you approved it before therefore you should approve it again,” and “why can’t you tell us the right way to do this?” Why can’t those smart people put their heads together and figure out together what constitutes a reasonable economic analysis, a quality business plan, and solid offering documents? Why can’t they come up with best practice guidelines for the industry, based on the combined intelligence of a range of experts in business, economics, and law? You think we wouldn’t welcome those guidelines and take them into account? We would love to see the community self-regulating to file more consistent and high-quality documentation that’s easy for us to process and approve, and that won’t get innocent investors or business people in trouble later. Who thinks we like wasting our time issuing tons of Requests for Evidence, telling people one by one to please source the claims in your documents and avoid tenuous assumptions and make your paperwork consistent and follow the relevant rules and regulations? Who thinks we like spending months wading through binders stuffed with paperwork that could have been approved more quickly if prepared differently? Sure, we should probably publish more clear instructions and more extensive policy guidance, but why wait on us? Why can’t the lawyers and economists and business experts out there participate in the challenge of creating best practices for a healthy EB-5 program that fulfills Congressional intent and resists fraud? Why are they just fixated on “what we got away with before,” leaving all the reigning in and guidance to us? Why do they promote self-serving proposals that leave a wide-open window for fraud – such as the suggestion that people should be able to freely deviate from plans approved at the I-526 stage and should have the option of not proving job creation at the I-829 stage (effectively, never having to prove job creation)? Why do the people have to resist our reform attempts all the way? The people agitate for us to limit our standards to what’s “commercially reasonable,” and yet they were angry when we started to issue Requests for Evidence with the simple question: “please reference sources to show what is commercially reasonable in this situation.” They blame us for approving that Regional Center in Chicago that’s now being taken to court by the SEC and causing an international stink, but they’re angry when we implement procedures to help to help ensure that future applicants aren’t inflating numbers and forging documents like the Chicago people did.

So you see, St. Thomas, we’re in a hard spot. No one longs more than we do for EB-5 processing to go smoothly and quickly. We want to receive paperwork that’s clear and reasonable and easy to approve. We want to quickly approve real investment that will create real jobs and give immigration benefits to investors with clean money. But we can’t do this alone. We need the American people to step back from their adversarial approach to us. We need them to support and share the goal of making EB-5 cases easier to process. We need their shared commitment to regulate the EB-5 program so that it results in real investments in solid US business, real job creation for US workers, real economic development in distressed areas, and immigration benefits for people whom we’ll be proud to call fellow Americans.

[As a business plan writer I strive for imaginative sympathy with my audience, EB-5 adjudicators, but I don’t actually know anyone at USCIS and have no evidence that this speech reflects the views of any living person.]

In other news, Steven Anapoell at GreenbergTraurig has published an article raising issues with major potential implications for use of bridge financing in the EB-5 context. Any thoughts from other securities attorneys on this article? See: The Investment Company Act of 1940 and Underwriting the Financial Gap Between Filing and Approval of the I-526 Petition