3/3/2017 USCIS EB-5 Engagement

From: U.S. Citizenship and Immigration Services [mailto:uscis@public.govdelivery.com]
Sent: Friday, January 13, 2017 8:55 AM
Subject: USCIS Invitation: EB-5 Immigrant Investor Program, 03/03/2017

Dear Stakeholder,

U.S. Citizenship and Immigration Services (USCIS) invites you to participate in a stakeholder engagement on Friday, March 3, from 1 to 2:30 p.m. to discuss the Immigrant Investor Program, also known as the EB-5 program.  This engagement is part of our ongoing efforts to enhance dialogue with our stakeholders in the EB-5 program.

During the first part of this engagement, USCIS officials will provide EB-5 program updates. The second part will be a question-and-answer session. We invite you to ask non-case specific questions or provide feedback on the EB-5 program.

Participation Details:

You may attend this engagement either in person at USCIS Headquarters in Washington, D.C., or by teleconference.

To register, please follow these steps:
·        Visit our registration page
·        Enter your email address and select “Submit”
·        Select “Subscriber Preferences”
·        Select the “Event Registration” tab
·        Provide your full name and organization, if any
·        Complete the questions and select “Submit”

If you wish to attend in person, please indicate so in your subscriber preferences when selecting your method of attendance. Please note that seating is limited, so we encourage you to register early.

Once we process your registration, you will receive a confirmation email with additional details.

To submit non-case specific questions before the engagement:

·        Email us at USCIS-IGAOutreach@uscis.dhs.gov by Friday, February 3, at 5 p.m. Eastern.

If you have any questions regarding the registration process, or if you have not received a confirmation email within two business days, please email us at the same address.

Note to Media: This engagement is not for press purposes. Please contact the USCIS Press Office at (202) 272-1200 for any media inquiries.

We look forward to engaging with you!

7/28 Meeting Notes (RC site visits & audits, I-829 interviews, redeployment), New AAO Decisions (RC geography, indebtedness)

7/28 Stakeholder Meeting

If you would like to review today’s USCIS EB-5 stakeholder engagement, best talk to someone who attended the meeting in person in Miami. I’ve uploaded my recording as usual, but much of it is barely audible. (Updates: USCIS emailed on 7/29 to apologize for the sound quality for phone participants, and published prepared remarks from Colucci and Mackenzie on 8/16 at the above link. Also, Cletus Weber has posted a summary more comprehensive than mine on the IIUSA blog.) Here are points of significance that I think I heard:

  • New Policy: IPO has a new Policy and Performance Division responsible for drafting policy. They’ve been working on revised EB-5 forms (i.e. revised Form I-526 currently out for comment) and on chapters on EB-5 for the in-progress USCIS Policy Manual. Eagerly-awaited policy on the requirement to sustain investment through the period of conditional residence (including the issues of redeployment and what happens to investors in case of regional center termination) will be part of these forthcoming policy manual chapters or amendments to the manual. USCIS will send this policy out in draft form for comment before finalizing it. We can expect to see the draft “in the near future” but “not tomorrow.” Until then, we can look back to the August 2015 draft memo to “see what we’re thinking,” but may also expect changes based on public feedback to that draft and IPO’s consultation with securities professionals.
  • New Regulations: No update on when exactly we may see new regulations published for comment.
  • Compliance: IPO Chief Colucci reports that his office is in contact with Immigration and Customs Enforcement (ICE) and the SEC at least weekly, and again encouraged the public to submit tips on any suspected EB-5-related malfeasance. Contact IPO through the website (https://www.uscis.gov/eb-5) or call the Fraud Detection and National Security (FDNS) team directly at (202) 357-9326.
  • Regional Center Site Visits and Audits: IPO provided this information:
    • Site visits will generally be at the job-creating enterprise site, unannounced, performed by local FDNS staff, and mostly observational (not necessarily interacting with people on site). Their purpose will be to assess whether what’s happening at the JCE site is consistent with what was proposed/represented to IPO.
    • Regional center audits will generally be at the regional center’s office, announced (by letter and by telephone call to the RC principal), involve interaction with management and staff, and may last a week or more. Their purpose is to assess RC compliance with applicable laws and regulations, and they will be conducted in accordance with generally accepted goverment audit standards.
  • I-829 Interviews: IPO is in a beta/testing phase with I-829 interviews, and developing a strategy for them in response to last year’s GAO report recommendations. Interviewees are currently selected at random. Interviews are conducted by video. It is understood that the petitioner may not have exhaustive info about the investment ready to hand, and petitioners will have opportunity to supplement the record in writing after the interview.
  • Processing: IPO has 25,000+ petitions pending. Premium processing continues unlikely as the Congressionally-mandated fee limit is low enough that nearly all EB-5 applicants could be expected to take advantage of PP, were it offered to them. Meanwhile, prospective investors are apparently starting to wonder whether even a lifetime is sufficient time to complete the EB-5 process. IPO addressed a number of questions on the topic of “what happens if the petitioner dies before I-829 is adjudicated” (short answer: case-by-case determination) and “can someone under 18 apply as the primary petitioner” (short answer: yes and no — not prohibited under the regs but IPO foresees practical issues such as capacity to enter into contracts that are binding on the petitioner).
  • Other items:
    • The Commerce Department study commissioned by IPO to assess the EB-5 program’s economic impact is “in the final stages of review” and will be released “in the next couple weeks.” The study covers FY2012-2013, so old news now, but its impact assessments are reportedly higher than estimates for the same period by industry groups (who had less data to work with).
    • Congress has approved funds for IPO to implement a new data system (hooray!) that will allow for better tracking.
    • I won’t bother repeating what Mr. Lyons said about feasibility studies (the obvious – IPO doesn’t require one by default, but may ask for one if the project’s feasibility isn’t established by other means) and pro forma financials (the obvious – that a business plan had better include them). I do appreciate clever Mr. Lawler’s insight into what would encourage Mr. Lyons to repeat himself so we all could hear.
    • Mr. Colucci emphasized that due diligence by regional centers is essential to the integrity of the EB-5 program, and that IPO is focused on regional center responsibility for monitoring and oversight of projects.
    • IPO is translating some EB-5 web content.

New I-924 AAO Decision: Geographic Area

Matter of R-T-E-R-C-, LLC (JUL152016_01K1610) addresses a grey area for regional center designation – how to justify a request for a certain geographic area. The statute and regs say that a regional center is to be designated for a “limited geographic area,” but naturally applicants want to claim the largest area possible. The common way to accomplish this goal, especially since the May 2013 policy memo, is to formulate a hypothetical project (often flag hotels, because they are easy to write up and pack a fairly wide economic impact) and then hypothetically locate that project at strategically chosen locations throughout the desired geography – strategically chosen so that the aggregate impact areas of each project essentially blanket the desired geography. USCIS has approved many RC applications and amendment requests that use this method, but apparently the amendment request in JUL152016_01K1610 came before a new adjudicator who didn’t feel right about designating a huge geographic area (all of Texas and part of New Mexico) just based on seven hypothetical projects. AAO agreed that “it is particularly challenging to define the geographical scope for a regional center that has only proposed hypothetical projects,”  but AAO was compelled by the applicant’s arguments that commuting patterns show that the hypothetical projects would, if real, affect 249 of Texas’ 254 counties, and that worker spending habits and supply chain would also contribute to state-wide impact. AAO also found that “while the Form 1-924 instructions require that the geographic area be contiguous, there is no requirement for an applicant to show contiguous – for example, county-by-county – economic growth throughout the requested geographical area.” The appeal was sustained.

New I-526 AAO Decisions: Source of Funds

The latest AAO decisions on I-526 appeals (JUL072016_01B7203, JUL072016_02B7203, JUL112016_01B7203) continue to press the point that indebtedness only counts as capital placed at risk if secured by the petitioner’s own assets. JUL072016_02B7203 finds that USCIS remarks on indebtedness at the 4/22/2015 stakeholder meeting are a correct reading of relevant statutory and regulatory requirements. JUL112016_01B7203 further argues that remarks at that meeting were not a new rule or new policy, instituted without due procedure, but were just clarifying existing requirements. JUL112016_01B7203 adds a reminder that capital is not at risk if the NCE is overcapitalized (doesn’t show a use for the full amount of investment) and fails to present sufficient evidence of the actual undertaking of business activity (just entering into a lease is insufficient).

Regional Center List Changes
Additions to the USCIS Regional Center List, 07/05/2016 to 07/27/2016.

  • 5 Starr Regional Center LLC [ID1504052589] (Oklahoma)
  • Advantage America Southern California Regional Center, LLC (California): www.aaeb5.com
  • AmerInvest Regional Center East, LLC (Connecticut, New York)
  • AmerInvest Regional Center West, LLC (California)
  • CV West Coast Regional Center, LLC (California)
  • Golden State Northern California Agriculture Development, LLC (California)
  • One World Development Fund, Inc. (Texas): www.oneworldrc.com

New Terminations:

  • US EB5 New York City Regional Center (Connecticut, New Jersey, New York, Pennsylvania) Terminated 7/13/2016
  • Harris Real Estate Fund LLC (former name U.S. Federal Investment Immigration Fund, LLC) (Arizona) Terminated 7/13/2016
  • South Dakota International Business Institute (SDIBI) (South Dakota) Terminated 7/7/2016
  • California Regional Center, LLC (California) Terminated 7/12/2016
  • Harris Investment Immigration Fund, LLC (California) Terminated 7/13/2016

4/25 meeting notes, RC list changes

4/25/2016 Listening Session
Today’s EB-5 stakeholder meeting with USCIS was indeed a listening session — a venue for stakeholder opinions and not for tips and answers from USCIS. In case you’re a lawmaker or regulator and interested in reviewing insightful comments from the public, here is my recording. For the rest of us, who are mainly just curious about what USCIS has to say, here are a few tidbits that came out in the meeting:

  • USCIS will be initiating an IDEA community campaign to collect additional input on EB-5 regulation/policy changes. When that goes live, I’ll post a notice here.
  • I-829 interviews will begin this year, at first virtually, and interviewees may bring counsel, Regional Center representatives, and Regional Center counsel.
  • An audit program for regional centers is being implemented this year, and site visits are being expanded for direct and regional center projects.
  • IPO is up to 126 staff and on track to have 171 employees by year end.
  • IPO did not give any hints about the anticipated content of or timeline for revised regulations or new policy.
  • IPO will work closely with Congress up to the next deadline for regional center program reauthorization (September 30, 2016), and just in case will prepare “what if” guidance for two sunset scenarios: if the Regional Center program lapses but Congress apparently intends to reauthorize it, or if Congress indicates its desire to end the program.
  • IPO Chief Nicolas Colucci reported some preliminary processing data. Q2 2016 receipts: 849 (I-526), 886 (I-829), 40 (I-924). Completions from October 2015 to March 2016 (Q1-Q2 2016): 4,141 (I-526), 1,255 (I-829), 135 (I-924). The big story in these numbers is I-526 receipts, as illustrated in the following figure.
    Q22016I526

Regional Center List Changes
Additions to the USCIS Regional Center List, 04/19/2016 to 04/25/2016

  • Regional Center of the Pacific (California)

Additions to the USCIS list of terminated regional centers:

  • WRC EB-5 Regional Center, Inc. (Washington) Terminated 4/13/2016

4/13 Senate Hearing Notes, RC Research, SEC Case (VT), RC List Changes

Senate TEA Hearing
You can now review video of the 4/13 hearing on EB-5 targeted employment areas on the Senate Judiciary Committee website (be patient, the video does start eventually), or download my audio recording. My main take-away from the hearing is that Senate leaders are on a long-term path to EB-5 reform and Regional Center reauthorization. They discussed very substantive potential changes in a very preliminary manner and sounded no-where near ready to sit down and agree on legislation. This is worrisome, considering that only a handful of Congress workdays remain before the 9/30/2016 Regional Center sunset date (what with conventions and vacation and holidays) – hardly enough time to hammer out the issues and questions that this hearing raised as important. The TEA issue is a thorny one because it comes down to a question of what kind of projects Congress wants to see incentivized, and our representatives don’t agree about that, much less on the question of what type and method of incentive would effectively focus on such projects.

EB-5 Project Research
Listening to Gary Friedland testify at the Senate Hearing reminded me that I’ve been remiss in reporting on the latest EB-5 research that Mr. Friedland and Professor Calderon have posted at the NYU Center for Real Estate Finance Research. Their paper EB-5 Mezzanine Financing: A Real World Example (3/23/2016) presents and analyzes an actual term sheet for a large EB-5 regional center deal, and will be very interesting for people seeking examples of EB-5 documents and deal terms. EB-5 Capital Project Database: Revisited and Expanded (3/29/16) follows up on last year’s paper A Roadmap to the Use of EB-5 Capital: An Alternative Financing Tool for Commercial Real Estate Projects (5/24/2015) by adding details of 27 additional EB-5 projects. The number 27 is small – representing a minority of EB-5 projects – and yet these few projects alone involve over $5.6 billion in EB-5 capital, which means over 11,000 EB-5 investors and almost three years of the total EB-5 visas available. I have to hope that Senators and journalists don’t examine the NYU database, because these few projects claiming so many dollars and visas could provide ammunition for criticism that EB-5 TEA investments have become a subsidy for luxury developments in tier one cities, a benefit for mega-developers and Chinese developers, an opportunity to replace existing financing rather than a source of needed capital, and a minor contribution to job creation. As a business plan writer I work with EB-5 projects that could be attractive poster children for the regional center program, but such modest projects usually don’t make the research papers or the news and their fate may depend on how the big players are seen to use EB-5.

New SEC Case (VT)
Also in the category of the last thing we need when facing a fight for Regional Center reauthorization: a venerable figure in the RC program is now subject of fraud charges and an asset freeze. According to today’s press release: SEC Case Freezes Assets of Ski Resort Steeped in Fraudulent EB-5 Offerings. The State of Vermont has filed a concurrent suit. The SEC Complaint does not name Vermont Regional Center, but it does call out Ariel Quiros, William Stenger, and a whole list of Jay Peak companies. I read the SEC complaint ready to make allowances, since I know that in real life it’s extremely difficult to produce documents that are completely free from omissions and misleading statements or that perfectly anticipate what subsequently happens, and I think one should be very hesitant to cry fraud. Sadly the SEC complaint leaves little room for charitable interpretation, and this situation looks like a mess likely to pass beyond Jay Peak and their investors to leaders who have been regional center program champions. Senator Leahy concluded his comments on the enforcement action by saying: “Given the significant problems plaguing this program, I will continue to push for meaningful reform. Without reform, I believe the time has come for the program to end.” Hurry up, reformers!

Additions to the USCIS Regional Center List, 04/05/2016 to 04/13/2016

  • America FX Regional Center, LLC (California)
  • EB5 International II, LLC (California)
  • Hawaiian Ohana Regional Center (Hawaii)
  • Luichi, Inc. (Nevada)
  • Manhattan Metropolitan Regional Center (Connecticut, New Jersey, New York)
  • Watercrest Florida Regional Center, LLC (Florida)

Removed from the list

  • Deictic Investment Group LLC (California)

4/13 Hearing, 2016 AAO Decisions (NCE requirement), RC List Changes

Senate Judiciary Committee Hearing Rescheduled 4/13
The Senate Judiciary Committee’s provocatively titled hearing on The Distortion of EB-5 Targeted Employment Areas: Time to End the Abuse has been rescheduled for Wednesday April 13th.  The hearing will be streamed live at the above link.

AAO Decisions: Regional Center NCE, Jobs Allocation, At Risk Requirement
Several 2016 AAO decisions on I-526 cases have been posted on the USCIS website. I’m particularly interested in MAR252016_02B7203 (and the nearly identical _03 and _04), which deal with a regional center investment. Here’s what I’m particularly surprised or intrigued to hear AAO saying in the MAR252015 cases:

  • In the Regional Center context, the job-creating entity’s history and creation date are not relevant to the question of whether EB-5’s “new” commercial enterprise requirement has been met. When the regional center investment involves a new commercial enterprise and a separate job-creating enterprise, only the NCE has to qualify as “new.” In making this point, AAO argues against a position commonly taken by USCIS. In the MAR252016 case, the petitioner invested in a limited partnership formed in 2013 that deployed capital in a hospital established in the 1960s. In its denial, USCIS predictably cited Matter of Soffici and indicated that the NCE requirement wouldn’t be met unless the hospital were restructured or substantially expanded. (Soffici deals with a new enterprise’s purchase of an old hotel and says “It is the job creating business that must be examined in determining whether a new commercial enterprise has been created”.) AAO countered that: “We disagree with the Chief’s analysis. Soffici, unlike this case, did not involve a regional center project.” AAO argues that the relevant precedent is rather Matter of Izummi, which did deal with a regional center case, and “In Izummi, when determining what constituted a ‘new commercial enterprise’, we reviewed the date of creation of the entity in which a petitioner had invested or intended to invest, not the job creating entity where the funds were ultimately to be deployed.”
  • A petitioner can’t get credit for any jobs created by the project if the project didn’t create enough jobs for all EB-5 investors in the project (unless there is an agreement among all investors about how jobs will be allocated). In the MAR252016 case, AAO wouldn’t consider whether any of the 61 new jobs finally claimed could be credited to the petitioner, since there were 11 other EB-5 investors in the project and no job allocation agreement on file. This is not new policy, but an important reminder. Make and file a job allocation agreement, just in case!
  • An EB-5 investment does not meet the “at risk” requirement if the business plan does not “present a comprehensive analysis of the potential net profit available for distribution to each of the limited partners” and therefore fails to “sufficiently establish that there is a reasonable chance for gain, especially in the foreseeable future.” This is not technically a new point (the full “at risk” requirement is “at risk for the purpose of generating a return on the capital placed at risk”), but I haven’t seen AAO/USCIS focus on insufficient profit analysis as a basis for denial.

I’ll let you read the MAR252016 decisions for yourself to get the rest of the story. The case also involves the hot issues of troubled business qualification and the separation of ownership, management, and employment among multiple entities, and AAO doesn’t raise all the questions or reach all the conclusions I would’ve expected. What AAO doesn’t say in this case may be as significant as the points that are made. To assist in following the case, I’ve done my best to illustrate the fact pattern (reading around redactions, so mistakes are possible).
Fig-1UPDATE: You can read more about this case in a civil suit filed by the petitioners.

AAO Decisions: Search Function
The Administrative Appeals Office has launched a search tool for most non-precedent decisions since 2005. Just enter a search term in the box under “AAO Non-Precedent Decision Repository” and poof – links to all AAO decisions where that term is mentioned, with sorting options. I love it. (And now regret that weekend spent downloading EB-5 decisions one by one to make my own searchable master file.)

Regional Center List Changes
Additions to the USCIS Regional Center List, 03/21/2016 to 04/05/2016

Terminations

  • Path America KingCo, LLC (Washington), Terminated 3/23/2016
  • MCIG Regional Center (Florida) Terminated 3/29/2016
  • Velocity Regional Center (California), Terminated 3/24/2016

2/3 USCIS EB-5 Stakeholder Engagement

2/12 UPDATE: You can now visit the USCIS’s 2/3 engagement page and download copies of the opening statements by Nicholas Colucci, Julia Harrison, and Lori MacKenzie, which were the most informative part of this engagement. Ron Klasko and Jessica DeNisi have a good summary on the IIUSA blog of significant content.

I’ve uploaded my recording of today’s EB-5 Immigrant Investor Program Stakeholder Engagement with USCIS, though I do not particularly recommend it. If you want an interesting and information-rich update, look at IPO Chief Colucci’s written testimony for yesterday’s judiciary committee hearing. We appreciate having stakeholder engagements with open Q&A, and practitioners will benefit from reviewing the updates and the answers that were given and withheld, but overall I didn’t learn much from the meeting. The next EB-5 engagement will be held on April 25 in Washington DC, with opportunity for in-person attendance.

8/13 Meeting Recording, GAO Report

In case you missed today’s EB-5 stakeholder meeting, here is a link to my recording. The recording sound quality is not my fault; that’s how it sounded on the phone too. (Also, Peng & Weber have typed up a transcript of part of the meeting.) UPDATE: USCIS has posted opening statements.

Here is a link to the Government Accountability Office’s newly-released report “Immigrant Investor Program: Additional Actions Needed to Better Assess Fraud Risks and Report Economic Benefits” (August 2015).

Both the meeting and the report give an interesting look into details of actions already taken to protect and improve EB-5 program integrity. Congress may be busy vacationing and not passing bills, but agencies are still making change happen. The meeting did not reveal much about the draft policy memo, except to show that USCIS is as much at sea as everyone else when it comes to the practicalities of applying an investment requirement that’s divorced from job creation, and thus divorced from the governing logic of the EB-5 program and existing guidance for the parameters of acceptable EB-5 investment. Apparently USCIS plans to add more detail and clarification to the final memo, but hasn’t yet figured out how to clarify the sustainment issue. Stakeholders were repeatedly invited to submit their suggestions. The GAO report is worth reading, being well researched and much more serious and thoughtful than the narrowly political and personal-grievance-fueled March 2015 OIG report.

4/22 Stakeholder Disengagement

UPDATE: The prepared remarks of Chief Colucci and Deputy Chief Harrison have been posted on the USCIS website. Thank you USCIS!

I apologize for reminding you to call in to today’s EB-5 stakeholder “engagement.” What a waste of time. I’ve uploaded my recording as usual on the off chance that anyone wants to repeat the ordeal, and hope that my groans aren’t too audible in the background. Here is a summary of call content with time references to the recording:

  • [2:04 – 9:24] IPO Chief Nicholas Colucci gives an update on staffing levels, processing volumes, and Regional Center terminations.
  • [9:25 – 15:18] IPO Deputy Chief Julia Harrison reiterates but doesn’t explain or justify USCIS’s new stand on cash as indebtedness and loan proceeds as qualifying capital (investor source of funds issues). She acknowledges that that “there are questions” but states that “this is the way we do it now” and disinvites debate. Her statement will eventually be posted on the USCIS website, and I’ll link to that (for what it’s worth) when it’s available (and expect to eventually link to the retraction, once reason prevails).
  • [15:20 – 1:50:00] There is a Q&A with lots of Q and very few A to speak of. Many stakeholders call in bristling with questions and legal reference related to the indebtedness issue, but don’t even get the usual vague courtesy that their input has been heard with thanks and will be seriously considered. Input and questions on this topic are explicitly not welcome. Stakeholders call in begging for answers on oft-repeated questions (increasingly urgent now with the China cut-off date) regarding sustaining investment and changes between I-526 and I-829, and once again receive no response (except “wait for our ‘essentially drafted’ draft policy memo, forth-coming ‘as soon as possible,’ for comment on these questions”). Division Chief John Lyons fails to even understand questions that involve processing time implications, and scares us once again with evidence that ignorance and irrationality start from the top. Oh I’m so depressed! There may be a few real insights somewhere in the Q&A, but other bloggers will have to find them.

Apparently USCIS has learned from the investigation into former Chief Mayorkas, who tried to engage with stakeholders and hear their ideas, who pressed for transparent and consistent policy, and who was willing to be convinced with reference to law and policy and business reality that adjudicator interpretations might be wrong. And now we’re back to the bad old days. The leadership on today’s call let us know that “this venue is for us to state our positions, not for debate” and furthermore “everything that we do here is on a case by case basis.” (They may as well have said: “We can’t give general guidance because our decisions are made individually and reactively, not shaped by consistent general principles, and also we can’t lift the veil on our case-by-case decision-making because that would involve answering case-specific questions, so really why are we all here talking?”).

A few bits of actual information from the call:

  • Next meeting: USCIS will host an “interactive engagement” with its economists on June 4th. The meeting will focus on eligible costs for job creation. I will duly post the invitation when it appears, for what it’s worth.
  • Staffing: As of now IPO has 101 staff, including 53 adjudicators and 21 economists, and has a target of 121 staff by the end of the year. Director Colucci thinks this will be sufficient to help processing catch up to petition receipts.
  • Processing Times: Posted processing times apparently include times for expedited petitions, meaning that normal processing averages are longer than posted. IPO has prioritized petitions that are outside of posted processing times, and “expects to finish cleanup efforts by the end of the year.”
  • I-924a and Regional Center Terminations: In FY2013, USCIS terminated eight Regional Centers for failing to file I-924a and another seven Regional Centers for not promoting economic growth. For FY2014, USCIS issued 57 Notices of Intent to Terminate to Regional Centers that didn’t file Form I-924a for the year, is preparing additional NOIT alleging that the I-924a filing reflects failure to promote economic growth, and has terminated four Regional Centers outside of the I-924a review process (one because it dissolved, another two because they were the focus of criminal complaints, and another for misallocation of investor funds).
  • Processing Volume: From October 1, 2014 to March 31, 2015, IPO processing volumes were as follows (preliminary numbers):
    I-526 – Receipts: 5,250, Processed: 4,036
    I-829 – Receipts: 1,533, Processed: 341
    I-924 – Receipts: 170, Processed: 135

EB-5 Events

Don’t forget to dial in today at 1 pm Eastern for the USCIS EB-5 stakeholder teleconference.

Here are other good conferences and webinars to keep in mind, if you’re seeking quality (and often free) EB-5 information and networking opportunities.

Please email to alert me of good EB-5 webinars that I’ve missed in this list.

IIUSA Day 2 (Congress, Markets, Securities, Impacts)

Additional notes from the IIUSA EB-5 Advocacy and Leadership Conference in Washington D.C. April 12-14…

Congressional Update
We heard from three members of Congress: Senator Ron Johnson (R-WI), Hon. Zoe Lofgren (D-CA19), and Hon. Darrell Issa (R-CA49). Senator Johnson encouraged us to fight the cultural tendency to cartoonishly villainize business and success, but he didn’t seem as eager to support the immigrant part of immigrant investment. As chair of the Senate Homeland Security and Government Affairs Committee, he has formulated a strategic plan that is all about securing borders and defending against threats, with no bullet points related to the welcome mat aspect of immigration. Lofgren and Issa did promise to support Regional Center Program reauthorization, with changes, and referred back to their respective (now dusty) IDEA Act and Skills Act proposals. Lofgren and Issa agreed that the qualifying investment amount needs to be increased and that it would be nice, if tough, to increase the visa cap. IIUSA’s advocacy panel discussed the climate in Congress generally and opined that program reauthorization is likely, but that it will likely be another extension rather than permanency, and will likely involve changes to the minimum investment amount, TEA process, and additional oversight provisions. Apparently the executive actions on immigration quelled Congress’ appetite to discuss immigration issues, especially across the aisle, and many members are unwilling to consider any other immigration measures until the executive action issues have been dealt with.
Markets Update
Panel discussions suggested that mainland China is still basically the only choice for large EB-5 capital raises (e.g. over about $20 million), because it’s the only country with infrastructure in place, though an increasing variety of other countries have supplied EB-5 investors in recent years. A change to the licensing procedure for migration agents in China has resulted in a proliferation of new agencies (over 2,000). However agencies dealing with immigration in China do still need to be licensed, and foreign parties cannot obtain such a license or legally do their own advertising or seminars in China. Provincial Entry & Exit associations continue to help oversee and organize migration agencies. The Guangdong association for example, provides training and screening and even publishes rankings for member agencies. The panel of representatives from Chinese migration agencies noted that the market for EB-5 investments in China is still strong, and that they do not anticipate demand reduction in response to the China EB-5 cut-off date or the possible increase to the EB-5 investment amount. For additional info on the China market, note recent posts on the Klasko Law Blog.
Securities Law
If only the panel with Catherine DeBono Holmes, Michael Homier, Ozzie Torres, and Lili Wang had lasted another hour or so. Such timely and critically important information! Homeier discussed the SEC’s crackdown on receipt of broker fees by unlicensed persons. The SEC has reached settlement agreements with a number of attorneys (with an announcement naming 15-25 firms expected soon), and the likely next step is SEC cases against any Regional Centers that paid impermissible finders fees. Torres reminded the audience that our SEC panelist from the previous day basically said that there is no such thing as a finders exemption. (From my notes: C. Joshua Felker called the so-called finder’s exemption “a popular belief.” He stated that somebody called a “finder” is actually a broker assuming his activity matches the defined activity of a broker, and that foreign “finders” can only be compensated as such if they provide a name only and give no investment advice.) Of course attorneys can get paid for legal services, but they cannot get paid to refer a client to a Regional Center, and they’d be wise to generally avoid transaction-based compensation, which attracts SEC attention. The panelists discussed possible exemptions to broker-dealer registration and ways to involve broker-dealers in the process of selling EB-5 investments. For better summary than I can give of the securities law details, see Catherine DeBono Holmes’ articles on the Investment Law Blog. Here is the PDF copy of the booklet Regional Centers & Sponsors and U.S. Securities Laws that Cathy was giving away at the conference.
Economic Impact
IIUSA unveiled an economic impact study of EB-5 Regional Center investments from 2010 to 2013. The report was prepared by David Kay of the Alward Institute for Collaborative Science, and uses a comprehensive data set thanks to the FOIA process, which allowed IIUSA to obtain redacted copies of Form I-924a filings for all Regional Centers. I’ll link to the summary report and charts when IIUSA posts information. The short story is that during FY2013, spending associated with Regional Center investors contributed $3.58 billion to U.S. GDP and supported over 41,000 U.S. jobs. Not bad! The impact study breaks down impacts by spending category and by geography, down to the Congressional District level.

IIUSA Day 1 (USCIS, DOS, SEC, FINRA)

I’m at the IIUSA EB-5 Advocacy and Leadership Conference in Washington D.C., where the mood is mixed. The proposed legislation and congressional champions that we applauded at last year’s conference are now gone. Journalists who get paid for sensation and senators who didn’t get their way in confirmation hearings have had a heyday with EB-5, and there’s every incentive for the news to get worse as other officials with tangential EB-5 connections (e.g. Hilary Clinton) stand for election/roasting. (EB-5 makes a great political weapon if it looks inherently bad, so purple insinuation pays.) A few real-life scandals have happened besides the political mirage ones, not helping matters. Despite this gathering gloom, however, the tone here at the conference is not that depressed. The ballroom is full of people who are continuing to raise capital, who are seeing their own projects and investors succeeding and economic development happening in their own areas, and who know enough to put media reports in context. With this concentration of positive personal experience in the room, it’s easy to forget what’s outside. But we can’t be complacent, because the general public isn’t in our conference room, and scandal-mongering sounds louder than boring business success. Former DHS Secretary Michael Chertoff discussed the Regional Center program’s vulnerability and emphasized the need to convey a message that will give people confidence that EB-5 is good for America – a message that can be supported by solid and understandable job creation metrics, rigorous vetting of people and investments in the program, quality control in overseas marketing, and cooperation with local development agencies. (PS Membership Committee: This is also a time to push to increase IIUSA membership, aligning a greater number of concerned people with the best practices and education and message of IIUSA and broadening the financial base accordingly, not a time to redefine the association as an exclusive Big Boys Club effectively limited to those who make the most money from EB-5 Regional Centers.)

A few notes from today’s conference presentations…

USCIS Updates
The USCIS Investor Program Office did not provide a representative to this year’s meeting, but we did receive updates from Maria Odom and Fredrick Troncone from the CIS Ombudsman’s office. The Ombudsman is independent of USCIS but they liaise frequently with USCIS, have more power to extract information from the agency than we do, and ask the kind of questions we’d want asked. We got a preview of statistics that will be included in the Ombudsman’s annual report to Congress (forthcoming in June) and comments on staffing and retrogression. (The following are my notes from the live presentation, and I may need to correct some details after I can review a recording.)

  • 329 I-924 Regional Center applications are currently pending at USCIS.
  • I-526 investor petition filings showed a 50% increase in 2014 over 2013 (which had about as many receipts as 2012).
  • In FY2015, USCIS received over 5,200 I-526 petitions by the end of March.
  • As of the end of March, USCIS had 585 I-526 petitions with a Request for Evidence pending, 629 petitions with decision pending after response to RFE, and over 400 I-526 petitions with an outstanding Notice of Intent to Deny.
  • USCIS currently averages, per month, about 800 I-526s received and 630 I-526s processed. That means that the backlog of I-526s awaiting adjudication — already at a faint-worthy 13,027 petitions – is growing as receipts regularly exceed decisions.
  • USCIS’s plan to address the backlog, as reported to the Ombudsman, involves adding staff and approving overtime. Ms. Odom said that IPO presently has 54 adjudicators, 18 economists and 12 program analysts, and plans to add 25 more staff by the end of the year. (She also commented that this plan hardly seemed equal to really addressing the backlog). Ms. Odom noted the effect of USCIS’s Quality in the Workplace initiative, which replaced quantitative with qualitative goals – a good move for employee morale but creating challenges for setting goals related to number of petitions adjudicated.
  • USCIS’s promised policy memo related to retrogression is reportedly in final process, but apparently, mysteriously, the memo will not focus on the specifics of retrogression but rather on the issue of what constitutes material change. Oh well, material change is an important issue too. Ms. Odom’s understanding is that the much-questioned 2.5 year job creation window, stated in the May 30, 2013 policy memo, will be reiterated in the forthcoming memo. No word on whether the new memo may cover questions related to sustaining the capital investment or priority dates and child status issues.
  • We are reminded that the CIS Ombudsman serves as “an office of last resort” when there are EB-5 case problems. If you have a case that’s pending 60 days over posted processing times (or presents special issues) and you’ve already tried contacting USCIS about the problem, you can go to the Ombudsman. See http://www.dhs.gov/case-assistance.

DOS Updates
Charles Oppenheim, Chief of the Department of State’s Visa Controls Office, announced a May 1, 2013 cut-off date for mainland China-born EB-5 visa applicants. (You can also read this news, with commentary, in the Visa Bulletin for May 2015.) Per-country limits kick in when DOS foresees running out of visa numbers for the year – a new problem for the EB-5 program, which historically didn’t get close to using its annual allocation of around 10,000 visas. Now demand is up and we have our first cut-off date (affecting mainland China-born applicants, because they use a disproportionate number of EB-5 visas). Starting next month if you (and your spouse) were born in Mainland China and you get approval of an I-526 petition filed sometime after May 1, 2013, you can’t move forward in the visa stage of the process until DOS advances the cut-off date. (Everyone else is not affected.) Mr. Oppenheim anticipates advancing the cut-off date gradually, at least in conjunction with the new visa allocation that will come with the new fiscal year starting in October. It’s also possible that he might move the cut-off date back (which I learned is the only part of this process that’s accurately termed “retrogression”) if visa numbers prove even more limited than expected (which might happen if USCIS does improve its processing speed and volume). We’re encouraged to keep an eye on Item D in the monthly Visa Bulletin for periodic updates on movement of the cut-off date. The current cut-off date involves a wait of about two years (not terribly onerous, considering how long people have to wait for I-526 processing anyway), and demand trends suggest a wait of more like three years by the end of 2016. Panelists David Hirson and Bernard Wolfsdorf (and Robert Divine) pushed for clarification on procedural questions related to securing priority dates for child status protection, and Mr. Oppenheim promised that his legal department would be addressing such questions in a memo to be released in the next few days. (He may also have answered the question himself, but you’ll have to ask Mr. Hirson to translate into English!) Mr. Oppenheim also mentioned that visa usage is about 45% principals (investors) and 55% derivatives (spouse/children) – rather different from the 1/3 to 2/3 breakdown that I’ve heard previously. He warned specifically against trusting bloggers for visa advice, but nevertheless I’m repeating links to posts that I found helpful from Robert Divine and Ron Klasko.

SEC and FINRA
We got nice presentations from C. Joshua Felker (SEC Enforcement Division Assistant Director) and James Wrona (FINRA VP and Associate General Counsel) on the relevance of their agencies for EB-5 – but no breaking news that I could perceive. Felker mentioned five EB-5 enforcement actions but only named the three from 2013/2014. He did not discuss the forthcoming action involving some fee-taking immigration attorneys (see EB-5 Analytics for discussion of this important topic). The issue of whether/when a Regional Center may need to register as an investment adviser was also not really addressed (see Holmes & Shum’s recent article for discussion of this important topic). We got the usual reminders that SEC enforcement interests do cover registration issues as well as fraud, and that something that acts like a security is a security (and that acts like a broker, is a broker) regardless of what they’re called. I learned from Wrona that FINRA currently has about 60 broker-dealers engaged in EB-5 activity, a marked increase from previous years. The number of broker-dealers at the conference reflect this welcome trend. As we know, FINRA guidelines that particularly overlap with EB-5 include the suitability rule (which must consider both investment and immigration suitability for EB-5 per the Trustmont letter), the advertising rule, Bank Secrecy Act issues, and anti-fraud issues.

ABC News stories, New RCs, IIUSA Conference

ABC on EB-5 Investors
This has been a week of journalistic exposés of how unsavory high-net-worth people can be. The New York Times has published a series of articles unveiling shady characters who’ve been buying up prime New York real estate, the Guardian has a multi-part series on how HSBC’s Swiss private bank has facilitated financial malefactors, and ABC news has released a bunch of screamer articles and videos on EB-5 investors that ask the question “are suspected criminals, spies, terrorists buying their way into the US?”
There are a few lessons for businesspeople offering EB-5 investments. First, do be serious about vetting your investors, assuming you don’t want to end up some day with unsavory connections and cameras chasing you down a hallway. USCIS, the State Department, OFAC and their partners are much more serious and meticulous about vetting EB-5 petitioners than the ABC reports imply, but still you can’t be too careful with your own screening.
As you read the ABC stories yourself and field reactions from others, here are some points to keep in mind:

  • ABC’s key sources appear to be Senator Charles Grassley and a few disgruntled USCIS employee insiders who felt they were rushed and micromanaged;
  • Senator Grassley’s stand on immigration is to increase border security, beef up interior enforcement, oppose amnesty, scrutinize DHS, and find program abuse;
  • Each EB-5 investor’s petition currently takes an average 13.8 months to get reviewed by USCIS, which is not exactly a rush job; both the petition process and subsequent visa process involve stringent review and requirements;
  • In fact you can’t buy a green card in the US, not for $500,000 or for any other amount; some countries do have visa-for-sale programs but the US does not; the EB-5 program grants a visa in exchange for investor-funded business development resulting in job creation, not for money (to put the EB-5 program in context, see this Migration Policy Institute report on investor visa programs around the world);
  • The fact that an investigation exists is a cause for concern, but not sufficient basis for assuming that the investigation will close with a guilty verdict;
  • There are terrorists and spies and cheats in the world, but people are not terrorists because they’re Iranian and are not spies and cheats because they’re Chinese, despite ABC’s implications.

FYI: EB5info has posted a copy of the memo referenced in the story, and IIUSA and Klasko Law have issued reaction statements.

IIUSA Conference Registration
A reminder that this is the last week for early bird registration for IIUSA’s 8th Annual EB-5 Regional Economic Development Advocacy Conference on April 12-14 in Washington D.C. We’ll have a lot to advocate about this year.

New Regional Centers
Additions to the USCIS Regional Center List, 12/31/2014 to 2/3/2015

  • Dine’ Bi Keyah Regional Center, LLC (Arizona and New Mexico)
  • American Liberty Alliance (California)
  • Zhonghong Regional Center LLC (California)
  • Live in America – Colorado Regional Center LLC (Colorado): www.liveinamerica.us
  • EB5 Capital – New York Regional Center (Connecticut, New York, New Jersey, and Pennsylvania): www.eb5capital.com
  • Birch Miami Dade Regional Center (Florida): www.birchcapital.com
  • Mariana Stones Corporation Ltd. (Guam)
  • Live in America – Indiana, Michigan, Ohio Regional Center (Indiana, Michigan, and Ohio): www.liveinamerica.us
  • Live in America – South Regional Center LLC (Kentucky and Tennessee): www.liveinamerica.us
  • Diamond City Montana EB-5 Regional Center, LLC (Montana)
  • Lubert-Adler Northeast Regional Center, LLC (New Jersey and New York): lubertadler.com
  • Queens Fort New York Regional Center, LLC (New Jersey, New York, and Pennsylvania): queensforteb5.com
  • West Penn Regional Center (Pennsylvania)

FAQ page, Retrogression, I-829, Processing Times, New RCs (CT, IL, IN, LA, NJ, NY, TX)

FAQ
I have started a new Frequently Asked Questions page that compiles official and unofficial USCIS answers to questions that affect business plans. So far I’ve linked in answers from USCIS policy guidance and stakeholder meetings, and I’ll be adding references to AAO decisions that treat sticky business plan questions.

Retrogression
Speaking at the IIUSA conference on October 23, Charles Oppenheim predicted that the EB-5 visa category will likely retrogress in July 2015. This remains a moving target, however. Ron Klasko’s blog has published a timely article on Surviving and Thriving in Times of EB-5 Quota Backlogs.

I-829
You may thank us at the IIUSA editorial committee for another great edition of the Regional Center Business Journal (October 2014). Three feature articles provide advice and analysis for I-829 petitions: The Latest Analysis of What USCIS Looks For in EB-5 I-829 RFEs and Denials, It’s Never Too Soon to Begin Preparing for I-829 Petition Filings, and Removal of Conditions for EB-5 Investors: Practical Guidance in Preparing I-829 Petitions.

Processing Times
The USCIS website has a sharp new look as of last week, but no new EB-5 content except a IPO processing times update. I-829 times are back to normal, while average I-526 and I-924 processing times continue to inch up.
IPO 930

IIUSA Conference
Mark your calendars for IIUSA’s 2015 EB-5 Regional Economic Development Advocacy Conference on April 12-14, 2015 in Washington, DC.

Additions to the USCIS Regional Center List, 10/20/2014 to 11/04/2014

  • EB5 Fund, Inc. (Connecticut, New Jersey, and New York)
  • Great Lakes Regional Center, LLC (Illinois, Indiana, and Wisconsin): www.glrceb-5.com
  • Southern Opportunity Regional Center LLC (Louisiana and Texas)
  • Premier Regional Center, LLC (Texas): www.premierregionalcenter.com

12/5 EB-5 Stakeholder Meeting (in person)

From: U.S. Citizenship and Immigration Services
Sent: Monday, November 03, 2014 9:31 AM
Subject: USCIS Invitation: EB-5 Immigrant Investor Program Stakeholder Engagement, 12/05/2014

Dear Stakeholer,

U.S. Citizenship and Immigration Services (USCIS) invites you to participate in a stakeholder engagement session on Friday, Dec. 5, from 1 to 3:00 p.m. Eastern to discuss the Immigrant Investor Program. This engagement is part of our efforts to enhance dialogue with external stakeholders regarding the program, also known as EB-5.

During the first part of this engagement, we will provide EB-5 program updates from fiscal year 2014 and discuss initiatives for fiscal year 2015. The second part of the engagement will be a question-and-answer session. You may ask non-case specific questions or provide feedback on the EB-5 program.

You can attend this engagement either in-person or by teleconference. Please note that in-person attendance is limited to the first 80 people who register.

To register for this session, please follow the steps below:

  • Visit our registration page to confirm your participation
  •  Enter your email address and select “Submit”
  •  Select “Subscriber Preferences”
  •  Select the “Event Registration” tab
  •  Be sure to provide your full name and organization
  •  Indicate if you plan to attend in-person or by teleconference; and
  •  Complete the questions and select “Submit”

If attending in-person, please RSVP for this event no later than Friday, Nov. 14.

Once we process your registration, you will receive a confirmation email with additional details.

To submit questions before the teleconference, please:

If you have any questions regarding the registration process, or if you have not received a confirmation email within two business days after you register, please email us at Public.Engagement@uscis.dhs.gov.
Dec 5 EB5 Quarterly Stakeholder Engagement Invitation.pdf

IIUSA Conference, AILA Book, New RCs (CO, CA), Removed RCs (CO, FL)

To those in San Francisco this week for the 2014 IIUSA EB-5 Market Exchange, happy deal-making! I’m not able to make this conference, but send best wishes and look forward to sharing feedback from attendees.

To those stuck behind a desk this week, I recommend you to the virtual EB-5 masterclass that is AILA’s new Immigration Options for Investors & Entrepreneurs, 3rd Ed. I received a free copy as a contributing author (I wrote the chapter on EB-5 business plans), but can now testify that the book is worth the full price ($129 for AILA members, $199 for the rest of us). This is not a collection of quick opinions, general introductions, and veiled advertising but a set of serious articles that incorporate comprehensive research and extensive experience. If I were an immigration attorney working with EB-5, I’d buy the book for the sample documents and case materials alone, not to mention excellent articles such as Estelle McKee’s practical discussion of issues in demonstrating job creation in I-829 petitions and Carolyn Lee’s definitive analysis of the at-risk requirement. (And Suzanne Lazicki’s lucid treatment of the EB-5 business plan!)  If I were an investor or offering EB-5 investments, I probably wouldn’t buy the book for myself (it’s specialized and heavy) but I would make sure that the attorney representing me had a copy. The book works hard to make good on its promise “to provide everything you need to successfully represent clients in this highly specialized area.” Click here to preview the Table of Contents, and update your Christmas list as needed.

I expect to have important updates shortly, as USCIS is overdue to update Q4 2014 petition processing statistics, and the State Department may come out with the Report of the Visa Office 2014 any day. For now, we just know that average processing times are holding steady for I-526 (13.8 months) and I-924 (8.1 months), and have shot up for I-829 (to 15.1 months, likely in connection with the transfer from California to Washington DC).

Those interested in Targeted Employment Area issues should note the new approach to TEA designations adopted by California, which has tended to be a trendsetter.

Meanwhile, USCIS continues to add and subtract Regional Centers from its list (and continues to fail to update its FOIA reading room with designation letters for the Regional Centers approved since 2012).

Changes to the USCIS Regional Center List, 10/1/2014 to 10/20/2014

Added:

  • Dynasty Group Regional Center, LLC (California)
  • California Economic Development Fund, LLC (California)
  • California Capital Investment Regional Center, LLC (California)
  • InvestAmerica EB-5 (Colorado) www. investamericaeb5.com

Removed:

  • Invest U.S. Regional Center (Colorado)
  • Hollywood Beach Regional Center LLC (Michigan)

9/10 EB-5 Stakeholder Meeting

U.S. Citizenship and Immigration Services (USCIS) invites you to participate in a stakeholder teleconference on Wednesday, Sept. 10, from 2:30–4 p.m. (Eastern) to discuss the EB-5 Immigrant Investor Program. During this teleconference, USCIS officials will share EB-5 Immigrant Investor Program updates and respond to your questions. Visit the USCIS Public Engagement registration page to confirm your participation.

Updates from the IIUSA Economic Development Advocacy Conference

This year’s IIUSA annual meeting in Washington DC on May 7-9 was remarkable not so much for what was said but for who spoke. At the IIUSA Washington DC meeting back in 2011, the mood was depressed and we were lucky to get prominent attorneys on the podium. Now in 2014, EB-5 is booming and we were honored by the presence of dignitaries including three members of Congress; top executives from USCIS, the State Department, the SEC, FINRA, the Department of Commerce, and even CBS; and chairpersons from eight of China’s provincial entry-exit associations.

A few things I learned from the conference:

  • USCIS Immigrant Investor Program Office Director Nicholas Colucci did not break any major news in his speech – appropriately, I think, given the private context. But his presence was a generous and appreciated gesture. [UPDATE: You can now read exactly what Mr. Colucci said, as his prepared remarks have been published on the USCIS website.] He reiterated that the Washington DC office is still ramping up on personnel, with a goal to reach 100+ staff by the end of the fiscal year; is investing additional resources in customer service through the immigrant investor program mailbox; and is taking care to provide expert training in areas including business organization and documents, SEC issues, money-laundering, decision-writing, and customer service. One of his new ISOs sat at my table and presented herself very nicely – with just the bright, collected, solicitous manner and edge of East Coast hustle that you’d want in the adjudicator for your case. I have to say that she impressed me much more than the aggrieved-looking examiners lurking at the back of the room at the California Service Center in-person EB-5 engagement in 2010. I suppose that not having to work in a Cold War bunker is good for morale. She is one of the ISOs who is new to EB-5 but not new to DHS. Mr. Colucci noted that his office has developed a 4-6 week certification process for ISOs hired from other departments, with the goal to get adjudications up to speed as quickly as possible – and at least to have the number of decisions exceed the number of receipts each week. Mr. Colucci gave us several things to look forward to: draft regulations revisions by September 15, filing tips based on analysis of RFEs, and – a surprise treat – a FY2014 Annual Report planned. Finally, he offered a few filing tips focused on economic impact analysis. He reminded economists to clearly explain economic model inputs used and to exclude ineligible inputs (e.g. some construction soft costs). He also emphasized a requirement that I haven’t previously heard made explicit by USCIS – that the economist must in all cases distinguish model direct and indirect components, not just provide an aggregate total. Economists are also reminded to break down the number of jobs associated with each distinct model input. We’re not sure how much to make of the fact that Mr. Colucci twice referenced examples of reasonable economic models and each time said “IMPLAN, REMI, and REDYN” and either accidentally or on purpose did not mention RIMS II – a model that’s currently not being updated by BEA but still very popular in EB-5 and still useable for now and being approved by USCIS, so far as we know.
  • Department of State Visa Controls Office Chief Charles Oppenheim discussed the intricacies of EB-5 visa availability and handed down his prediction that China retrogression will likely not occur until Summer 2015, with a May 2013 cut-off date possible at that time. He repeatedly advised the audience to only credit official information in the State Department Visa Bulletin and not to listen to bloggers. Apparently some of my kind have been panicking about immanent multi-year backlogs, so the audience was happy to hear from Mr. Oppenheim that we’re probably only looking at a 2-year backlog for Chinese investors (not too painful, considering that I-526s have been taking 1+ year to process anyway) and that this probably won’t occur until later next year. Mr. Oppenheim said that he would try to give 2-3 month’s notice of any new developments, and that otherwise we may expect news in the June 2015 Visa Bulletin. For those who are still confused about how the visa numbers process works, you may want to read articles on the Visa Office’s Immigration Statistics page and Ron Klasko’s simplified FAQ on the subject. For those who would like this problem to just be eliminated by an increase in the number of visas allocated to EB-5, call your Congressman and advocate.
  • SEC Division of Enforcement Chief Steve Cohen gave a speech that gently but pointedly emphasized the breadth of the SEC’s jurisdiction and enforcement interest in the EB-5 program.  While the SEC’s actions have so far focused on egregious fraud, Mr. Cohen noted that fraud is fraud whether egregious or not, that the SEC is concerned by any kind of misstatement (with its attention particularly drawn by Regional Center websites that state or imply that “approval by USCIS” means that the federal government provides a cloak of integrity to the Regional Center’s activities), and that SEC will attend not only to fraud but also to failure to comply with registration requirements. Rumor at the conference confirmed that some Regional Centers have recently been contacted by the SEC regarding registration issues.   To remind yourself about the requirements involved, you can review materials and posts around the USCIS/SEC joint conference call.  Regarding the SEC’s enforcement philosophy, Mr. Cohen stated that ignorance is not a defense, that the agency will take into account good faith compliance efforts and does not want to eviscerate the program, and that you’re strongly advised to approach the SEC for help to fix problems before the SEC comes to you to tell you that you have a problem.
  • FINRA Directory of Emerging Regulatory Affairs Kavita Jain joined Mr. Cohen and discussed how to get on the right side of registration requirements. Ms. Kavita noted that FINRA has been seeing an increase in applications related to EB-5 players and activities, and listed areas of concern for FINRA including due diligence, risk disclosures, suitability analysis, and finder’s fees.
  • Other notes. See IIUSA’s post on highlights from the Advocacy Conference for a more comprehensive summary and links to resources provided at the conference.
  • Mark your calendars. IIUSA is hosting its annual Trade Mission to China September 6-10, 2014 and the 4th annual EB-5 International Investment & Economic Development Forum in San Francisco on October 22-24, 2014.  Details here.

2014 Events, EB-5 Stats, New AAO Decisions, New RCs (CA, CO, FL, GU, MD)

EB-5 Events
It’s time to sign up for the best EB-5 event of the year: IIUSA 7th Annual EB-5 Regional Economic Development Advocacy Conference in Washington, D.C. May 7-9, 2014. I look forward to seeing you there! Also notice the IIUSA 2014 Webinar Series, with monthly webinars on topics including industry advocacy, securities laws, due diligence, retrogression, economic impact analysis, EB-5 in the capital stack, adjudication trends, TEAs, I-924a, and escrow and fund administration. The IIUSA webinars last year were substantive and timely, and I look forward to this new series.

EB-5 Statistics
If you’re interested in trends in receipts, approvals, and denials of EB-5 petitions, see: “IIUSA Obtains I-526/829/924 Adjudication Data for FY2013, Releases Comprehensive Dataset (1991-2013).” The FY2013 data shows a growth in receipts over 2012 of 8% for I-526 petitions, 71% for I-829 petitions, and 82% for I-924 applications. USCIS already doubled the number of approved Regional Centers in FY2013 by approving 220 applications, and – unless many of those 436 new I-924s received in 2013 were amendments – RCs will be facing a very crowded field moving forward. We’re on track to hit the annual EB-5 visa allocation cap of around 10,000 based on filings, with the only uncertainty being whether USCIS can manage to process enough I-526s in one year to make that happen (and whether processing times will speed up enough that Chinese investors would even notice being retrogressed). As with most things in EB-5, this issue is complicated. If you want to read more, see “Department of State Predicts EB-5 Visa Retrogression for China” on the EB-5 Insights Blog and “FAQs on EB-5 Quota Backlog” by Ron Klasko.

New AAO Decisions
Since last time I checked, USCIS has uploaded 18 new 2013 AAO decisions on I-525 cases. (May 24 to June 18, and September 23 to November 15). Besides RFEs, which aren’t public, AAO decisions are my best chance to see what’s going on behind the scenes with adjudications and current policy applications. For me, the most interesting decisions in this batch are SEP232013_01B7203, which addresses a Regional Center’s attempt to claim deference to prior approvals, refers extensively to the 5/30 policy memo, and considers what amendments mean; JUN052013_01B7203, which withdraws the director’s assessment of a business plan’s credibility; and MAY242013_01B7203, which discusses which business activities prior to I-526 filing will help the investment to qualify as “fully invested and placed at risk.” Nearly all AAO decisions on I-526 cases include a section on source of funds problems. People involved in that area may particularly want to read JUN182013_03B7203, which goes into detail on what went wrong with a typical China source of funds scenario involving real estate. Or for comedy, you can review MAY242013_02B7203, which treats a petition for investment in a business that will trade in healthcare products and/or operate a restaurant and/or import textiles and/or export fly traps and avocado oil.

New RCs
New entries to USCIS’s Regional Center list 12/30/2013 to 1/22/2014
Live in America-California Regional Center (California)
U.S. Gateway Regional Center, LLC (California)
InvestAmerica EB-5, LLC (Colorado)
My Florida Regional Center, LLC (Florida)
E Development Corporation dba EDC (Guam)
Birch MD BioPark Regional Center (Maryland) USCIS Approval Letter

New I-526 form, new I-RIMS product, I-924a, new RCs (AL, AZ, CA, DE, FL, GA, ID, IL, KS, LA, MS, MT, NH, NJ, NV, NY, OR, PA, RI, TX, WA, WI)

October has been a busy month in the business plan department; apologies to frequent blog visitors. Here’s what I think you should know of recent happenings.

New I-526
USCIS has issued a new version of the I-526 form and instructions (09/24/13 edition). Previous versions of the form will only be accepted through the end of this year, so bookmark http://www.uscis.gov/i-526 instead of using what you have on file. If you accidentally use an old form, you’ll file in the wrong place. (The new I-526 instructions don’t give a filing address but direct petitioners to consult the USCIS website for an address – currently the Dallas Lockbox facility). Otherwise, the new I-526 doesn’t look dramatically different from the previous editions.

New I-RIMS Product
The IMPLAN Group, creator the IMPLAN methodology used by many RC economic impact studies, has stepped up to create a new product that works like the BEA’s now-discontinued RIMS II system, only using IMPLAN data sets. This looks like good news for the many RCs that liked RIMS II and hoped to continue using familiar methodologies even as the BEA is no longer providing updated data sets. For more information, see the IMPLAN Group page on 2011 I-RIMS Data, and an article on the IIUSA blog “New IMPLAN “I-RIMS” Product Introduced & Available as Alternative to RIMS II.” To refresh your memory about what happened to RIMS II, see the BEA’s notice on Impact of Sequestration Reductions on the Availability and Quality of Data from the Bureau of Economic Analysis.

I-924a Reminder
Approved Regional Centers, don’t forget that the clock is ticking for you to file a Form I-924a for fiscal year 2013. See http://www.uscis.gov/i-924a and http://www.uscis.gov/forms/questions-and-answers-form-i-924a. If you don’t file by December 29, USCIS will contact you in the Spring with a nice letter threatening to terminate your RC. IIUSA has had a chance to see the I-924as filed in 2011 and 2012, and is hosting what should be a very useful webinar on 11/19/2013 on
“3rd Year of Regional Center Annual Reporting on Form I-924A.” To participate, sign up at
http://eventcallregistration.com/reg/index.jsp?cid=41196t11

Other useful items

  • IIUSA has another promising webinar on Tuesday, November 12, 2013 at 1pm on the subject of “EB-5 Bridge Financing & Escrow Options.” Register at: http://eventcallregistration.com/reg/index.jsp?cid=41195t11
  • Those of you concerned with keeping securities registration exemptions may benefit from Steven Anapoell’s helpful article on “Determining Whether a Potential Investor is a Resident or Non-Resident for Securities Law Purposes”
  • Speaking of keeping on the right side of the SEC, if you are a Regional Center principal, please pick up the phone right now and make two calls: one to your website designer to temporarily disable your RC’s website, and one to your favorite attorney to review the website content before it can go back up again. I recently checked a lot of websites in process of refreshing my Regional Center directory, and was torn between suspicion of the mysterious RCs with no web presence and sorrow on behalf of those RCs whose websites are full of content that could get them into trouble. I can see that websites are often left to innocents in the marketing department who have no idea which pretty pictures, useful information, and careless word choice could derail the RC and all its offerings. Don’t let that happen to you!

New Regional Centers
I have decided to quietly update my Regional Center directory as I receive new information, and to announce new RC names only in occasional posts. If I have contact info or other detail about these Regional Centers, you’ll find it in my directory. I also started a log of recent Regional Center approval letters to track information of interest to me (the length of I-924 processing times, the number of approvals based on actual vs. hypothetical projects, the economic methodologies being approved, and so on). To date I am only able to link to letters for 46 of the 179 Regional Centers approved (by my count) so far in 2013, but I will continue to update the log as I get additional information. Maybe one day these public licenses will all be made publicly available! Thank you to Regional Centers that have shared their letters. Note also that the IIUSA Regional Center Directory includes relatively comprehensive listings for all IIUSA-member RCs.

New entries to the list of approved Regional Centers at www.uscis.gov/eb-5centers from 9/24/2013 to 10/28/2013

EB-5 Event, New RCs (AL, CA, CT, FL, GA, IN, KY, MS, NC, NJ, NY, PA, PR, SC, TN, VA), New AAO Decisions, TO Training

EB-5 Event Reminder
If you are reading this blog as a way to investigate the EB-5 program, save yourself time by making sure that you have the CDFA Intro EB-5 Finance WebCourse on your calendar (Sept. 18-19). The Council of Development Finance Agencies has organized one of the very few EB-5 events whose number one purpose is to educate, not to sell products and services, and the line-up of topics and contributors looks great.  If you have something to learn in EB-5, I don’t think you can find a more solid, comprehensive, and time-efficient introduction than this course.

New Regional Centers
New entries to the USCIS list of Regional Centers from 8/16 to 9/6/2013:

168 America Regional Center, LLC (California)

FutureCare Regional Center of Southern California, Inc. (California)

HT Asset Holding Inc. (California)
http://www.htassetholding.com/

San Francisco EB-5 Regional Center, LLC (California)
http://www.sfeb5rc.com/
Designation Letter

South Florida EB-5 Regional Center, LLC (Florida)
www.southfloridaeb5rc.com/

Southern Film Regional Center, LLC (Georgia)

Civitas Indiana Regional Center (Indiana)
http://www.civitascapital.com/

CP Southern Regional Center (Alabama, Kentucky, Mississippi, Tennessee, Virginia)
www.cphomes.net
Designation Letter

Encore Mississippi Regional Center (Mississippi)
http://encore.bz/

New York Metropolitan Regional Center (New Jersey, New York, Pennsylvania)

US EB5 New York City Regional Center (Connecticut, New Jersey, New York, Pennsylvania)

U.S. Business Regional Center Inc. (New York)
http://www.usabrc.com/

Carolina Global Regional Corporation(North Carolina, South Carolina)
Designation Letter

North Carolina – East Coast RC (North Carolina, South Carolina)
www.progfs.com

Reside in America Puerto Rico, LLC (Puerto Rico)
c/o The LCP Group, White Plains NY. Ph: (212) 692-7228
USCIS Designation Letter

Dominion Mid-Atlantic Associates, Inc. (Virginia)
http://www.dmaarc.com/

(Note: See my Regional Center directory page for my most updated listings for all RCs. And please email me if you would like to provide additional information regarding your RC.)

2013 AAO EB-5 Decisions

I-924 Decisions (see Request for Participation as a Regional Center Decisions Decisions Issued in 2013)
Issues: geographic area, industry focus, “general proposals,” “hypothetical” projects and approvals

In 2011-2012, we saw a trend toward increasing granularity in Regional Center approvals, with USCIS insisting that RCs submit to the mandate to “focus on a limited geographic area,” and to strictly define their industry focus down to at least the 4-digit NAICS code level.  I had wondered whether the 5/30/2013 EB-5 policy memo would effectively blow the lid off such limitations, and it seems that it has. I definitely didn’t report new five-state Regional Centers last year, but recent new approvals include many with expansive geographic areas.  The AAO decisions published in 2013 on I-924 cases both cite the 5/30 policy memo to overturn USCIS’s decisions to deny cases for being too general.  JUN122013_01K1610 discusses a Regional Center amendment that sought to add the whole of five states plus four industry categories defined at the 2-digit NAICS level. USCIS predictably denied this request, but the AAO withdrew the USCIS’s denial.  The AAO determined that:  “The record contains a general proposal based on Census Bureau and other data and general predictions concerning the kinds of commercial enterprises that will receive capital, the direct and indirect jobs that will be created as a result of such capital investments based on RIMS II data and  multipliers, and other positive economic effects. Thus, the AAO withdraws the director’s concerns. While the amendment request is approved, it is based on hypothetical projects and, therefore, is not  due any deference in future filings.”  JUL192013_01K1610 likewise indicates considerable leeway for what can approved at the I-924 stage, provided that the approval has a “hypothetical” basis.  USCIS’s denied the I-924 initial application because “The director determined that the applicant had not provided a business plan with verifiable detail regarding how the proposal will create sufficient jobs.” The AAO disagreed, determining that “The record contains a general proposal based on general predictions concerning the kinds of commercial enterprises that will receive capital, the jobs that will be created as a result of such capital investments based on RIMS II data and multipliers, and other positive economic effects. As the record contains a general proposal, the applicant is not required to submit letters of intent or commitment from the prospective sources of matching funds for regional center designation.”

I welcome the openness to general industry categories and hypothetical projects, but would caution new applicants about wide-ranging geographic area. If a course doesn’t make sense, the powers that be will eventually realize that it doesn’t make sense and change course.  I see the concept of limited geographic focus at the very core of the Regional Center program — its impetus and defining feature. Congress instituted the Regional Center program based on the economic concept that the synergies that result from pooling investment in a region give more bang for the buck than the separate effects of  individual investments here and there, as occurs with the traditional/direct EB-5 program. When a “Regional Center” covers the whole of five states, I don’t even know what the title means anymore.  I don’t want to return to the granularity of 2012, when USCIS likewise departed from Congressional intent by defining Regional Center designation so restrictively that it essentially just meant approval to pursue one project. But neither extreme restriction nor extreme flexibility are good for the program, and I hope and believe that we’ll soon find ourselves back to a reasonable middle ground, especially with respect to the key question of target geographic area.

I-526 Decisions (see Form I-526 and Form I-829  Decisions Issued in 2013)
Issues: “at risk,” “meaningful concrete action,” “overcapitalized,” “inconsistencies”

The 2013 investor petition decisions all involve I-526 petitions, and all but APR172013_01B7203 are for direct EB-5 cases. I’m interested to note that whoever’s now writing AAO decisions is highly detail-oriented and influenced by the precedent decision Matter of Ho. (In contrast to last year’s writer, who was all about Matter of Izummi and who didn’t bother with microscopic rehearsals of detail from the record.) In re Ho is best known for its paragraph definition of the comprehensive business plan, but our AAO writer repeatedly returns to the decision’s treatment of the “at risk” requirement. According to Matter of Ho: “Simply formulating an idea for future business activity, without taking meaningful concrete action, is similarly insufficient for a petitioner to meet the at-risk requirement. Before it can be said that capital made available to a commercial enterprise has been placed at risk, a petitioner must present some evidence of the actual undertaking of business activity; otherwise, no assurance exists that the funds will in fact be used to carry out the business of the commercial enterprise. This petitioner’s de minimis action of signing a lease agreement, without more, is not enough.” For the first time that I’ve noticed, the AAO repeatedly harps on the issue of “meaningful concrete action,” to the point of requiring the petitioner to provide evidence of funds already spent in the business, contracts already executed, and employees already hired prior to I-526 filing. I kept thinking I must be reading I-829 cases, but no. Take warning, direct EB-5 investors: if you have primary control over your business’s bank account, USCIS may require you to show evidence at I-526 that you not only invested $500K/$1 million but that your business has already spent or was irrevocably/contractually committed to spending that amount before you even filed the I-526 petition.
I wonder if the AAO is going overboard with its application of Matter of Ho, and will be interested to hear the lawyers’ take on this new batch of cases. Is it fair to deny a case because the petitioner provided, in RFE, a copy of a lease that post-dated I-526 filing? Because the petitioner, prior to I-526 approval, spent only a few hundred thousand of the one million invested in his business? It seems to me that the distinction between I-526 and I-829 is a key feature of the EB-5 program, and that we’re seeing a negative trend toward pushing I-829 requirements into the I-526 stage. I-526 is the plan review stage, and gives USCIS opportunity to shut down non-compliant proposals (and the investor the opportunity to change course, if EB-5 turns out not to be an option). I-829, then, is the stage where the petitioner demonstrates that he implemented his USCIS-approved business plan. I think it doesn’t make sense to require the I-526 petitioner to prove that he already did what he hasn’t yet been approved to do. 2013 AAO decisions that approach the at-risk requirement through Matter of Ho include APR012013_01B7203, APR032013_02B7203, APR152013_01B7203, APR152013_02B7203, APR162013_01B7203.
Besides the new focus on “meaningful concrete action,” our 2013 AAO writer is concerned that EB-5 enterprises may be “grossly overcapitalized” (not proving that their job-creating activities require the full amount of EB-5 investment). The decisions also devote pages to dissecting apparent inconsistencies in the record, and repeat the warning that “Any attempt to explain or reconcile such inconsistencies will not suffice unless the petitioner submits competent objective evidence pointing to where the truth lies.”

More on Tenant Occupancy
IIUSA has obtained and published a presentation used by USCIS to train adjudicators on “tenant occupancy” cases. I note that the disclosed material does not discuss the requirement to demonstrate whether tenant jobs would be new or relocated – the issue that emerged as the final deal-breaking issue in several recently-denied cases. But maybe this issue is just so juicy that it explains the many pages redacted from the presentation.