SEC Ireeco, State Dept, Economists, New & Removed RCs

June 24, 2015 3 Comments

I have a sleeve full of urgent articles on the nature of the Regional Center program, inspired by legislation debates, and also a desk full of yet more urgent business plans for clients worried about the legislation debates and eager to get their deals filed. So this blog is getting neglected, but here are a few updates.

SEC Action
The SEC has announced charges against a firm for acting as an unregistered broker for EB-5 investors. See the SEC’s press release SEC Charges Unregistered Brokers in EB-5 Immigrant Investor Program. Michael Homeier emailed some helpful commentary on this case and Cathy Holmes has written a helpful article. This kind of action is not a surprise. The rules are clear and the SEC has repeatedly stated that it has its eye out for unlicensed persons receiving placement fees for introducing investors to investment offerors. EB-5 is a good place to hunt for this kind of offender, since the field includes many players who know more about immigration than about investment and are thus vulnerable to tripping up on securities issues. This case does not involve fraud, just failure to register, but the consequences are still serious and a good wake-up call for everyone. Ignorance of the law is no excuse! Talk to your counsel and make sure that nothing you’re doing could put you afoul of registration requirements. And recall that paying an improper fee can be just as wrong as receiving it. People who allege that EB-5 is a free-for-all should also take note of this SEC announcement, which reflects the fact that EB-5 investments are indeed regulated just like any other security.

State Department Update
The cut-off date for mainland China-born EB-5 visa applicants moved from May 1, 2013 to September 1, 2013, as of the July Visa Bulletin. This is good news, and means more Chinese investors who’ve passed I-526 can get in the queue to receive visas.

USCIS Updates
USCIS has posted notes from the June 4 stakeholder engagement with economists. The most recent update to IPO processing times (posted July 15) shows a fractional dip in I-526 times (to 13.4 months) and slight increase to I-829 and I-924 times (to 13.1 and 12.2 months respectively). USCIS has officially suspended its Electronic Immigration System (ELIS) for Form I-526, and the Regional Center Document Library is now inactive — not a surprise, considering feedback from the people who struggled to use these tools. Also note that there’s a new and significantly expanded edition of the Form I-829 (dated 5/7/2015).

New and Removed RCs
Additions to the USCIS Regional Center List, 6/08/2015 to 6/23/2015

Additions to the USCIS Terminated Regional Center List 5/7/2015 to 6/9/2015

  • SZNW (California)
  • EB-5, MRC LLC (Michigan)

Filed under EB-5 in the News, EB-5 Law & Policy, New RC

S.1501 legislation introduced; USCIS engagement on job creation

June 4, 2015 10 Comments

USCIS Engagement with Economics
Today USCIS held its “EB-5 Interactive Series: Expenses that are Includable (or Excludable) for Job Creation.” Here is my recording of the call. When USCIS publishes its summary, and when economists make comments, I’ll link to them here. I didn’t hear anything ground-breaking except for one point that looks inconsistent with written policy, and should eventually be recognized as wrong, so I’ll reserve my comments.
UPDATE: USCIS has posted “talking points” from this engagement.

New legislation introduced into the re-authorization debate
Senate Judiciary Committee Chairman Charles Grassley (R-Iowa) and Ranking Member Patrick Leahy (D-Vt.) have introduced S. 1501 (American Job Creation and Investment Promotion Reform Act of 2015), legislation to reauthorize and reshape the EB-5 Regional Center program, and to change some aspects of the EB-5 program generally. UPDATE: Yesterday I posted a hasty rant on this bill, which I’ve decided to take down as reader response has encouraged me to look more carefully at the provisions before commenting. Take a look at the bill for yourself and see what you think. I may continue to revise this post with additional commentary.
Probably the best commentary so far on the bill is Two Key Senators Introduce Bill to Extend and Improve EB-5 Program By Stephen Yale-Loehr.

Filed under EB-5 Law & Policy, Updates from USCIS

NYU article, 2015 Q2 Processing Stats, May 5 AAO Killer, New RCs

June 2, 2015 Leave a comment

NYU Article
We now have a final version of the paper “A Roadmap to the Use of EB-5 Capital: An Alternative Financing Tool for Commercial Real Estate Projects” (May 22, 2015) by Professor Jeanne Calderon, Esq. and Guest Lecturer Gary Friedland, Esq. of the NYU Stern School of Business. For real estate developers considering EB-5, this paper is valuable for the database of examples alone, not to mention 70 pages that carefully explain how the program can work for real estate projects. The authors tell me that their project database with ongoing updates will be posted on the NYU Stern School of Business site.

2015 Q2 Processing Stats
USCIS has finally posted official EB-5 petition processing stats for Q2 2015. It’s wonderful to see that IPO is getting up to speed on I-829 processing while also increasing I-526 volumes. Meanwhile, note that volume of petition receipts has fallen each quarter this year.

2015 AAO Decisions on I-526 Cases
So far USCIS has posted four 2015 AAO decisions on appeals of denied I-526 petitions, including three sleepers and a bombshell. APR012015_01B7203 briefly remands the appeal to IPO in light of a court settlement, APR032015_01B7203 comes to an apparently reasonable conclusion that the business plan was not credible and waxes for several pages on “material misrepresentations” and their consequences, MAY082015_01B7203 dissects source of funds problems, and MAY052015_01B7203 pursues a blindly doctrinaire line on the requirement that “the petitioner must demonstrate eligibility for the visa petition at the time of filing.” In the MAY052015_01B7203 case, the offering memorandum filed with the original I-526 had a sentence that USCIS judged an impermissible redemption agreement. All investors signed and submitted an Agreement of Waiver to remove that sentence, and USCIS/the AAO didn’t dispute that the OM+waiver was now compliant but said that the petition still needed to be denied because the waiver post-dated I-526 filing and therefore the petitioner wasn’t technically eligible at the time of filing. This point is fair to the letter of the law, but one wonders, why decide to pound this technicality?  The petitioner did not include evidence of non-EB-5 capital commitments in the first petition filed in 2012, but duly provided the evidence when USCIS got around to requesting it in 2013. But USCIS/the AAO declined to credit the commitment letters provided in part because they post-dated the original I-526 filing. If this standard were applied fairly to all EB-5 cases – if no petitioner could file unless all other funding had been documented as raised before he filed – then multiple-EB-5 investor deals (most of the EB-5 program) would become next to impossible. Further, EB-5 would be limited to the projects that can and are willing to get all the conventional funding they need in the bank one to two years before they can hope to receive EB-5 investment (considering USCIS’s long I-526 processing times, and the common use of EB-5 escrows contingent upon I-526 approvals). In other words, EB-5 would be limited to projects that don’t need EB-5; that can take out their bank loans and go to work right away before investors even file I-526 and regardless of what happens with the I-526 petitions. The AAO decision hammers this point even further in the section that tries to apply the standard that “simply formulating an idea for future business activity, without taking any meaningful concrete action, is similarly insufficient for a petitioner to meet the at-risk requirement.” Specifically, the AAO/USCIS decided that the petitioner had not placed the required amount of capital at risk in part because the contractors who had been engaged to build the subject assisted living facility had not actually started work before the investor filed I-526. Naturally the petitioner needs to show more than a general idea for a future business, but this decision seems arbitrary and unreasonable in its application of the requirement. The business owner says “yes, here are the meaningful concrete actions we have taken” and the AAO lawyer says “no, I don’t think those qualify as a meaningful concrete action; you should’ve gone further” – what is this but an arbitrary judgment made by someone with no clear metric and no claim to qualification to assess the stages in establishing various types of business? And where is the acknowledgement of the one to two-year spanner that USCIS review puts into any development plan? And what would this mean, if applied fairly to all? Again, EB-5 would be limited to 1) projects that don’t actually need EB-5 investment, since they would be required to fully mature prior to/without it; and/or 2) investors who don’t really care about the EB-5 visa, such that they can develop projects well in advance of and independent of the fate of their EB-5 petitions. I think I’m upset about this case partly because it appears to involve the kind of business that many people would like the EB-5 program to support. EB-5 petitioners were providing about half of the capital needed to fund small assisted living facilities in Texas – a business that looks like it could have provided jobs in areas of genuine need and might not have gone forward without the EB-5 investment. Why press interpretations of the regulations that knock out this kind of investment, while further privileging deals that just use EB-5 to take out a few million of existing financing for some multimillion building project that was going ahead anyway? Someone is not thinking very carefully.

New Regional Centers
Additions to the USCIS Regional Center List, 5/21/2015 to 6/1/2015

  • U.S. Investment Regional Center, LLC (Arizona): usirceb5.com
  • Alexico Los Angeles Regional Center, LLC (California)
  • California Blue Sky Regional Center, LLC (California): Designation Letter
  • California Investment Regional Center, LLC (California): www.eb5-circ.com
  • Economic Development & Investment Group LLLP (California)
  • Gateway California Regional Center (California): www.gatewayeb5.com
  • Western Pacific Regional Center, LLC (California, Oregon, Washington)
  • USEGF Florida Regional Center (Florida)
  • Advantage America Hawaii Regional Center, LLC (Hawaii): www.aaeb5.com
  • GO USA EB-5 Regional Center, LLC (Illinois): www.gousaeb5.com
  • American Regional Center-Las Vegas, LLC (Nevada)
  • Century New York City Regional Center (New York): www.centurynyceb5.com
  • Land of Sky Regional Center, LLC (North Carolina, Tennessee): www.landofskyregionalcenter.com
  • Ohio Lakeside Regional Investment Center (Ohio): www.uslakesideeb5.com
  • The Lawrence Economic Development Corporation (Ohio): www.lawrencecountyohio.org
  • JMIR Texas Mega Metro Regional Center, LLC (Texas)
  • Washington Foreign Investment Management Group, LLC (Washington): www.eb5wfimg.com

Filed under EB-5 Law & Policy, EB-5 Statistics, New RC