USCIS meeting with IIUSA (regs, redeployment, processing times), Analysis of Litigation

Report on USCIS Meeting with IIUSA

Thank you USCIS for posting a complete transcript of the USCIS Meeting with IIUSA on October 5, 2018. Such transparency is so helpful. Program integrity suffers from general lack of information, and from the industry’s inclination to promote asymmetry for what little info is given.

At the meeting, USCIS Director Cissna spoke about current developments in EB-5, IIUSA representatives described areas of concern for the industry, and new IPO Chief Sarah Kendall commented on IPO performance.

The entire transcript is worth reading, but here are the most newsworthy elements from my perspective:

• Regulations: Director Cissna, speaking in October, did not make it sound as of the EB-5 Modernization regulations (regarding investment amounts and TEAs) were on the brink of finalization. He said: “So on the main one, the proposed rule that has yet to go final, it is going to go final. We’re just not ready yet. We’re still working on it. You might have seen, I testified in front of the Senate a few months ago, back in June, and I got screamed at because Senator Grassley was wanting that regulation to be final even quicker. So I told him what I’ll tell you is the answer hasn’t changed. We are going to finalize it; just we’re not done yet. It’s a lot of work to finalize a regulation. But that should come soon.” And then later “Well, I think, I mean, you asked, you know, what are our priorities for the next fiscal year. I think, you know, putting aside the regulations which we already discussed, I think the main one is continuing to ensure the integrity of the program. That’s what it’s about. The reg., it might take a while yet before it gets finally published.” This is a grain of salt to go with the “last chance in November 2018” marketing pushes currently fueled by the OMB Fall 2018 Unified Agenda, which estimated 11/00/2018 for a final rule.
• Redeployment: IIUSA representatives spoke strongly for the need to clarify policy around redeployment. USCIS sounded receptive but vague — not as if they are currently working on redeployment policy. Kathy Neubel Kovarik, Chief of the USCIS Office of Policy and Strategy, threw out a couple ideas:  that the industry might submit suggestions for how to clarify the policy, and what if USCIS published the details of approved redeployments for industry reference. IIUSA pointed out pros and cons.
• Processing Times/Petition Backlog: The USCIS website has only published EB-5 petition data through March 2018, and we desperately want to know numbers for filing and adjudication volume for the year. This meeting transcript includes charts with completion information at least. The charts show a heartening increase to processing volume across all EB-5 forms in 2018 vs 2017: +21.9% for I-526, +2.5% for I-829, and +72.5% for I-924. Ms. Kendall acknowledged that I-829 (or as the transcriber tellingly heard it, “oh, no, we’re not,” haha) has “a bit of a bump going on.” She indicated that “in the next year we anticipate putting additional resources to the [I-829] so that we can address the needs of that particular line of adjudication.” She reports that IPO is now fully staffed with 200+ personnel, spread across FD&S, Fraud Detection and National Security, and Adjudications Management, plus “an excellent support team.”

I will report further when IPO Chief Sarah Kendall speaks at the AILA/IIUSA conference in Chicago next week.

Litigation in EB-5

I’m behind in reporting on litigation and enforcement actions in EB-5, but Friedland and Calderon have picked up the slack with a paper analyzing the couple SEC actions and flurry of investor-initiated litigation this year. Here is their helpful introduction to the paper.

In December 2017 when we released the first edition of “Understanding EB-5 Securities: NYU Stern Database of SEC EB-5 Securities Enforcement Actions,” we were skeptical as to whether there would be sufficient developments in this area to justify annual updates. However, any doubts were removed during the first 10 months of 2018.

Below is a link to our latest paper, entitled “EB-5 Securities – New Developments and Updated NYU Stern Database – 2018 Edition,” with the updated database as an appendix.

Topics covered by this paper include:

• The pending litigation in the CMB Century Park Hotel case, with a detailed analysis of the Investment Company Act of 1940 aspects of the case, as well as discussing the relevance to this case of the recent SEC Order against CMB even though the Order relates to unrelated projects
• The 2018 SEC enforcement action, the DOJ prosecution and the pending bankruptcy auction of the Palm House Hotel where an affiliate of the Related Companies is apparently the stalking horse bidder
• The immediate impact of the 2017 U.S. Supreme Court decision in SEC v. Kokesh based on recent SEC testimony before Congress
• The SEC settlement with Ariel Quiros, the mastermind of the Jay Peak fraud; a comparison of the distribution of proceeds with the distribution under the Raymond James Financial settlement; and possible SEC Whistleblower awards
• The pending litigation against USIF alleging a secret restructure of the EB-5 investors’ capital, in its atypical role as an in-house regional center
• DOJ criminal prosecutions in 2018, as well as expected future prosecutions
• Unregistered broker-dealer actions, including the recent enforcement action against an immigration attorney wearing multiple hats, and a 2018 US Supreme Court decision prompting a rehearing of aspects of the Hui Feng decision
• The pending litigation against People’s United Bank for its role in Jay Peak and its potential impact upon other banks’ willingness to establish and maintain EB-5 subscription escrows
• Updates to our SEC EB-5 Securities Enforcement Action Database
• Our dim outlook on the likelihood of enactment of EB-5 integrity reform measures, although a recent announcement by OMB, DHS and USCIS provides a glimmer of hope

Link to new paper: EB-5 Securities – New Developments and Updated NYU Stern Database – 2018 Edition

Link to webpage on NYU Stern CREFR site listing our EB-5 research:
EB-5 Research Papers and Articles by Gary Friedland and Jeanne Calderon