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.