Congress passes RC extension to 12/11/2015

Today Congress passed a short-term spending bill that keeps the government running through December 11, 2015, and, among other incidentals, the EB-5 Regional Center program running without changes for the same period. The President is expected to sign later tonight, so I trust that this post is not premature. IIUSA has already made a statement.

So what’s likely to happen between now and December 11, the deferred sunset date for the Regional Center program? Not counting today, the Regional Center program has been reauthorized six times since 1992 (in 1997, 2000, 2002, 2003, 2009, 2012), and almost every time the authorization happened the way it did today, as part of the appropriations process. 2012 was the only time the Regional Center program has had stand-alone legislation instead of being packaged with a spending bill. (The 2012 legislation passed unanimously in the Senate and by a vote of 412-3 in the House, and made a few tweaks to the Regional Center statute and no changes to direct EB-5.) But lobbyists who spoke in IIUSA’s legislative update webinar last Friday opined that we shouldn’t expect another simple extension of the Regional Center program from December 11; we should anticipate legislation with substantive changes. Reportedly a collection of Congressional representatives interested in EB-5 have actually gotten together and formed a working group that has been meeting to discuss the Regional Center program and hammer out legislation fit to garner the bipartisan, bicameral, and urban-rural support that it will need to pass. The group is expected to go public with a work product soon, now that the short-term extension is in place. The lobbyists mentioned that the two most contentious issues for this group are the Targeted Employment Area definition and effective dates. I suppose that these are sticking points because both issues will create new “haves” and “have nots,” and interested parties each hope to be on the side of the “haves” when it comes to enjoying the TEA incentive and taking advantage of grandfathering if any. The lobbyists didn’t mention argument over new integrity measures or an increase to the minimum EB-5 investment amount; I take it those are givens. I don’t hear any serious rumors that the EB-5 Regional Center program will be dropped — $14.38 billion in foreign direct investment is a pretty big golden egg, and that’s what EB-5 has brought in since the beginning, according to IIUSA numbers, with $1.4 billion in the last quarter alone – but I also don’t hear anyone optimistic that the next three months will be easy. Congress reportedly still has a low appetite for immigration issues since the Executive Actions on immigration, and it has so much to fight about between now and December besides EB-5. (See also Ron Klasko’s 10/6 blog on this topic.)

White House Report, SEC Oil&Gas, I-829

EB-5 Program Changes To Be Initiated by USCIS and DOS
The White House released a report Modernizing & Streamlining our Legal Immigration System for the 21st Century (July 2015) that summarizes recommendations from various agencies for how to streamline and modernize the immigration system, as directed in the President’s executive actions of November 2014. “The recommendations in this report reflect actions that agencies will take to modernize our system for efficiency and applicant accessibility, streamline legal immigration avenues, and strengthen our humanitarian system.” The lack of buzz around this report makes me think that the public doesn’t expect the recommendations to turn into action any time soon, but nevertheless keep in mind two recommendations that reflect commitments by USCIS and the Department of State to make changes that affect the EB-5 program:

Recommendation 1: Update standards for the EB-5 Program. By enhancing program integrity and updating eligibility requirements, this program can better serve our nation. DHS intends to pursue rulemaking to achieve those goals, including by requiring conflict-of-interest disclosures by Regional Center principals, enhancing background checks and public disclosure requirements, and increasing the minimum qualifying level of investment. DHS will also take steps to improve the adjudication and approval of Regional Center applications.
Recommendation 2: Clarify options for potential EB-5 investors to obtain visitor visas. State will amend its guidance in the Foreign Affairs Manual to clarify that potential EB-5 investors can obtain visitor visas to examine or monitor potential qualifying investments if they otherwise qualify for the visitor visa.

SEC Charges Oil Company and CEO
SEC Charges Oil Company and CEO in Scheme Targeting Chinese-Americans and EB-5 Investors, reads the SEC’s press release. The SEC charged a Bay Area oil and gas company and its CEO with running a $68 million Ponzi-like scheme and affinity fraud that targeted the Chinese-American community in California and investors in Asia, including some solicited as part of the EB-5 Program. The scheme was conducted primarily outside the EB-5 program (EB-5 investor funds accounted for a just $8 million of the $68 million involved), and it’s hardly surprising when a new company promising 20-30% returns for oil and gas exploration gets charged with fraud, but the case is still interesting from an EB-5 perspective because it involves technical selling and registration issues. Seyfarth Shaw LLP has a good article on this topic: SEC charges EB-5 fund operators and finders. As the article points out: “The SEC’s actions against various participants in EB-5 transactions make it clear that, whether or not an offering involves alleged fraud, offerors of EB-5 project securities and other persons participating in the promotion of such projects must be careful to comply with all aspects of the applicable securities laws, including either registering or securing exemptions for the offering of the securities and complying with the broker-dealer and investment adviser rules.”

New Form I-829
People preparing to file the Form I-829 should keep in mind that USCIS has posted a new version with significant updates that particularly affect Regional Center investors. An EB-5 Insights blog post summarizes the changes.

TEAs and Multipliers
The July 2015 Regional Center Business Journal includes some very good articles. I particularly appreciated two articles discussing the logic of TEAs and Scott Barnhart’s aptly titled article “Economic Multipliers in the EB-5 Arena: Voodoo Economics or Sound Economic Practice?”

I-526 Backlog
The CIS Ombudsman’s 2015 Annual Report to Congress, has a section on the EB-5 program, including this sobering chart.

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

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

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

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

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

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

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

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

Suggested RC program changes (Jeh Johnson letter)

The EB-5 Regional Center program needs another reauthorization from Congress before September 30, 2015, and debate is heating up as to what program changes may be packaged with the reauthorization. The last couple program extensions included only minor tweaks (and were for a shorter period than hoped), but some significant changes are likely this time around. An important document in the debate is a April 27, 2015 letter from Secretary of Homeland Security Jeh Charles Johnson to Senator Grassley and Senator Leahy (click the link to read the letter). Here’s my summary of (and parenthetical comments on) Secretary Johnson’s proposals:

  • That Congress define additional bases for terminating regional centers and denying applications and petitions, with a particular focus on fraud risk and national security concerns. (This doesn’t look like a big change from current practice, as USCIS has already fit a wide variety of reasons for Regional Center termination under the official justification of “no longer promoting economic growth,” and petitions can already be denied and revoked for fraud and misrepresentation. And one hopes that broader authorization wouldn’t turn into excuse for decisions based on mere suspicion or without notification or due process.)
  • That Congress provide USCIS with the options of fining or temporarily suspending a regional center, in addition to the option of terminating it.
  • That Congress authorize USCIS to require that all regional center principals be U.S. citizens or lawful permanent residents. (This would be an important change from current practice.)
  • That Congress authorize USCIS to prohibit participation in regional centers and commercial enterprises by people with certain criminal and civil violations.
  • That Congress authorize USCIS to request reporting on and certification of regional center compliance with securities laws. (It’s not clear what exactly this would involve, and to what extent such a requirement would put a regional center in the position of having to certify compliance for activities by sellers or loan recipients that it doesn’t control.)
  • That USCIS be authorized to require and publish regional center annual reports that would include project progress reports, description of fund usage, and accounting of job creation. (It’s not clear how this would differ exactly from the current I-924A. With USCIS having omitted for years to follow up on promises to publish I-924A data, and hardly releasing any documents except as forced by FOIA, I’m skeptical of the promise/threat to publish.)
  • That USCIS be authorized to charge regional centers $20,000 per year to fund an “EB-5 Integrity Fund” that would underwrite audits and site visits.
  • That Congress refine the TEA definitions to limit them to a specified number of continuous census tracts and to include closed military bases by default. (Kudos, CMB lobbyists!)
  • That Congress increase the EB-5 investment amount for both TEA and non-TEA investments, and to link the investment amount to an inflation index from now on. (Mr. Johnson does not suggest an amount for the increase, but states that USCIS is separately writing an increased minimum investment into revised regulations.)
  • That Congress authorize USCIS to require regional centers to file business plans and offering documents in advance of individual investor filings. (Apparently, a sort of “dummy-I-526” process, which we’d like if processing times weren’t so long. Mr. Johnson also notes that this requirement is already being incorporated in regulations under revision.)
  • In the letter, Mr. Johnson also notes that he has approved a new protocol specifically defining and limiting how members of the public and Congress may communicate with USCIS, and limiting senior leadership intervention in case adjudications.

Secretary Johnson is not the only one who can write to senators and advocate for changes. Consider getting on board with advocacy efforts and contacting your Congressional representatives to express your views about Regional Center program reauthorization. IIUSA has drafted a letter with helpful comments on suggestions in the Johnson letter.

New & Removed RCs, Processing Times, Websites, Multifamily, NYT, Best Practices

New & Removed Regional Centers
Additions to the USCIS Regional Center List, 4/28/2015 to 5/11/2015

  • Golden State Economic Development Fund, LLC (California)
  • Encore Midwest Regional Center, LLC (Illinois and Missouri):
  • White Lotus Group Regional Center (Iowa and Nebraska)
  • Liberty Minnesota Regional Center (Minnesota and Wisconsin):
  • American Regional Center Opportunity Fund, LLC (New Jersey, New York, and Pennsylvania)
  • Vistar’s EB-5 Business Alliance of Texas LLC (Texas)

Additions to the USCIS Terminated Regional Center List 4/22/2015 to 5/7/2015

  • LaSalle County Business Development Center (LCBDC) (Illinois)
  • US HITEC Regional Center (Illinois)
  • Tennessee Regional Center, LLC (Tennessee)

Other Items of Note

OIG and the Mayorkas legacy

After listening to an EB-5 stakeholder “Conversation with Director Mayorkas” teleconference on December 3, 2012, and hearing what seemed like just more idealistic talk about building greater expertise and professionalism and transparency into the EB-5 program, I wrote a depressed post titled “Promises for the future, not today.” I ended up deleting that post a couple months later when, to my surprise, Director Mayorkas’ Quixotic promises started coming true. He was a driving force behind hiring higher-grade subject matter experts onto the USCIS EB-5 adjudication team to improve the quality of adjudications; getting the EB-5 program office moved out of California to Washington D.C, where it gained more resources and more opportunity for oversight and collaboration with partners such as the SEC and FBI; hosting regular public stakeholder meetings to improve communication and transparency; and getting out a years-overdue EB-5 policy memo that helped make adjudication policies more standardized and transparent. Objectively, these moves were good for the integrity and health of the EB-5 program, though there were side effects. Presumably quite a few California adjudicators lost their jobs, and those who stayed with the program were reorganized and got more oversight and had to work harder (just as we who prepare paperwork had to step it up based on the rising review standards). I’m sorry but not surprised that Mr. Mayorkas has ended up with a nice big target on his back, especially since his next move after shaking up the EB-5 division and trying to whip it back into shape has involved helping President Obama with the Executive Actions on immigration. If you’d like to witness people aiming at that target, you can read the March 24, 2015 edition of the Office of Inspector General’s investigation into USCIS employee complaints. Have your gas mask ready to deal with the politics. Or if you just want the summary of the media’s take on this report: Mr. Mayorkas is a bad man who intervened in the decision-making of unimpeachable career civil servants out of favoritism for evil Democrats. My take is that a few disgruntled employee complaints about ambiguous cases cannot obscure how much Mr. Mayorkas improved the quality and predictability of EB-5 adjudications during his tenure by hiring business experts and economists and attorneys, getting more resources committed to EB-5, and pushing for published policy guidance. I personally blame his standards and staffing decisions for the fact that my business plans are about ten pages longer than they were pre-Mayorkas era and festooned with footnote citations to verifiable market and industry research. I also witness and appreciate the improved professionalism that he encouraged in preparation and review of EB-5 cases.
Update: See the comments for additional commentary and links to informed articles related to the OIG report.

Immigrant investor program comparison

To understand what the EB-5 program is and is not, it’s helpful to look at EB-5 in context of other immigrant investor programs. Last year the Migration Policy Institute published a very nice report that does just that: Selling Visas and Citizenship: Policy Questions from the Global Boom in Investor Immigration (October 2014). The report divides immigrant investor programs into two main categories and five types, as summarized (by me) in the following table.
Note that EB-5 falls within the category of private-sector business investment, and does not involve an investor-government transaction. You can give the Malta government cash in exchange for citizenship (program type #5); you can’t give the U.S. government cash for citizenship. Australia offers the option of a government investment product (government bonds) to buy in exchange for a visa (program type #3); the U.S. government does not offer EB-5 investments, leaving that to the private sector. Spain will grant a temporary visa if you purchase property (program type #2); the U.S. will not grant an EB-5 visa simply for asset acquisition. Agents trying to sell EB-5 have muddied the waters here, because potential immigrant investors like security and simplicity, and it’s not easy to sell private sector investment. Investing in a private business requires sophistication and involves risk, but that’s not such a comfortable story. So some agents try to imply that the U.S. government sponsors/underwrites EB-5 investments, and some try to peddle “secure investments” that are really only non-qualifying asset acquisitions. Do not listen to such stories. The fact is that the EB-5 and Regional Center programs fundamentally involve at-risk investment in job-creating business. You cannot buy a green card, the U.S. government does not offer or sponsor your investment (neither Regional Center approval nor project “pre-approval” constitute endorsement or underwriting by the government), and you can’t gain permanent residence simply by expending a certain amount of money. You can immigrate to the U.S. by making a qualifying investment that is spent to develop a new commercial enterprise that creates jobs. Or you can decide that the U.S. is too much trouble and go to St. Kitts & Nevis to buy citizenship.

A business investment-type program has advantages and disadvantages for governments. On the positive side (so far as domestic politics are concerned), the program can’t be criticized for simply selling green cards, and it may create jobs and spur economic growth. On the negative side, the government has a tough task in ensuring program integrity and maximizing economic impact when it doesn’t control the investment transaction. If you’re interested in this topic, I recommend reading the entire Migration Policy Institute report, which reflects thoughtfully on policy implications for each type of immigrant investor program.

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):
  • EB5 Capital – New York Regional Center (Connecticut, New York, New Jersey, and Pennsylvania):
  • Birch Miami Dade Regional Center (Florida):
  • Mariana Stones Corporation Ltd. (Guam)
  • Live in America – Indiana, Michigan, Ohio Regional Center (Indiana, Michigan, and Ohio):
  • Live in America – South Regional Center LLC (Kentucky and Tennessee):
  • Diamond City Montana EB-5 Regional Center, LLC (Montana)
  • Lubert-Adler Northeast Regional Center, LLC (New Jersey and New York):
  • Queens Fort New York Regional Center, LLC (New Jersey, New York, and Pennsylvania):
  • West Penn Regional Center (Pennsylvania)

Cautionary Tale (KS), Processing Times Update

I assume that immigration lawyers don’t have many would-be immigrants calling up to say “I want to get a CR1 visa. Please help me find a wife.” People understand that marriage and immigration are separate issues. Of course the lawyer who handles your paperwork doesn’t also help you fall in love. The CR1 relative visa grants you benefits based on a relationship that you have entered into, but the marriage decision is obviously separate from and prior to the immigration process.

When all this is clear for an immigrant spouse, why do immigrant investors get confused? Immigration lawyers do often hear the request “I want to get an EB-5 visa. Please help me find an investment.” Apparently many people do not understand that, in the US, the investment decision and the immigration decision are separate. The lawyer who handles your immigration paperwork is not placed or qualified to select a good investment for you. Neither is USCIS. The EB-5 visa grants you benefits based on an investment decision that you have made, and that decision involves factors that are separate from immigration considerations. Potential immigrant investors, take note! Investing half a million or a million dollars is a serious matter in itself, just as getting married is a serious matter in itself. These are not fundamentally immigration matters, even when they provide a basis for a visa later. Get advice from people who know about investing or who know about marriage. Go on lots of dates, talk about everything, meet the family, see a marriage counselor. Research the investment opportunity and the principals and get qualified investment advice. If you skip all that and just focus on immigration, you’re missing the point and are very vulnerable to getting hurt by your marriage or by your investment decision.

The news this week reminds us of what can happen. See the SEC’s notice “SEC Charges L.A.-Based Immigration Attorneys With Defrauding Investors Seeking U.S. Residency” and a more detailed article in the local news “Three charged by SEC in western Kan. ethanol scheme.” It’s hard to tell whether this started out a fraud or just as incompetence/bad luck that spiraled into fraud, but either way I don’t think this could have happened if the victims involved had recognized that EB-5 investment decisions require serious attention and diligence, and that one should not depend on immigration consultants to advise on much less to manage investments.  At the same time, the perpetrators might not have dared so much had they taken the investment angle of EB-5 seriously. Maybe the perpetrators thought that EB-5 is just an immigration program and they were free to do what they wanted so long as not caught by USCIS review. Now the heavy hand of the Securities and Exchange Commission is on them, reminding them that EB-5 investments are  investments and regulated and policed as such, regardless of the immigration angle. 

In other news, IPO processing times have been updated on the USCIS Processing Time Information page, with little change since last update.


China visa availability

IIUSA VP Robert C. Divine on Saturday’s Announcement of EB-5 Visa Unavailability for China for Remainder of FY-2014

by Robert C. Divine, Vice President, IIUSA; Shareholder, Immigration Group Chairman Baker Donelson Bearman Caldwell & Berkowitz, P.C.

Saturday’s dramatic announcement of EB-5 visa unavailability for China for the remainder the fiscal year provides a low impact “dry run” for a process that will have more “bite” next fiscal year. (For the record, Saturday was August 23, 2014).First, let’s remember what Saturday’s announcement does NOT do: It does not affect any I-526 or I-829 processing at all, does not delay immigrant processing for people not born in mainland China, and does not even affect mainland Chinese after next month. But let’s think about what it portends.

– Read the rest of this article at:

Coburn letter

The buzz this week has been over a letter sent by U.S. Senator Tom A. Coburn (R. Oklahoma) to all Regional Centers with content as follows:

As Ranking member of the US Senate Homeland Security and Governmental Affairs Committee, which has oversight over the Department of Homeland Security, I am writing to learn more about ___ Regional Center’s participation in the EB-5 immigrant investor program. Every Regional Center approved by USCIS will receive a similar request to help the Committee better understand the EB-5 program. To understand more about ___ Regional Center, please provide the following information by March 13, 2014 in an electronic format:

  • Any approval from USCIS to participate in the EB-5 program regarding the regional center and its business plan, including any subsequent recertification;
  • The total annual amount of investment and the number of individuals by country of origin making investments through the regional center since it has been in operation;
  • The name, address, and a description of each business in which the regional center has made an investment of funds and the number of jobs created by each investment;
  • Any fees charged to EB-5 applicants or received by the regional center, including amount and description;
  • A list of any current or former corporate officers of the regional center, including title, position, and dates of employment, and
  • The name and address of any individual or entity- either foreign or domestic- that the regional center has an agreement with to provide legal, accounting, recruiting or consulting services, as well as a description of the service provided.

Feelings are mixed about this. It’s nice to see Congressional concern and attention, and I’m a long-time advocate of transparency about Regional Center backers. But one wonders why Senator Coburn decided to circumvent USCIS, which implemented the I-924a annual reporting process to collect similar information from Regional Centers to report to stakeholders such as Congress. Also, what Senator Coburn, not being a well-known friend of immigration, intends to do with the responses he receives. IIUSA has referred its members to two relevant articles: “MINORITY RULES: WHY COMPANIES SHOULD TAKE SERIOUSLY THE INCREASING TREND OF MINORITY PARTY-LED CONGRESSIONAL INVESTIGATIONS” by Steven R. Ross, Raphael A. Prober, and Megan L. Greer, Akin Gump Strauss Hauer & Feld LLP, and A Client’s Guide to Congressional Investigations Akin Gump Strauss Hauer & Feld LLP. Also see Ron Klasko’s post on this topic.

New RCs (CA, CNMI, DC, FL, MD, NJ, NY, PA, OR, VA, WA), Brookings Report

New entries to the USCIS Regional Center List 1/22 to 2/6/2014:

The Brookings Institution has released a report on “Improving the EB-5 Investor Visa Program: International Financing for U.S. Regional Economic Development.” The report was carefully researched (and even cites me), provides a very nice overview of the EB-5 program’s history and current status, and has awesome graphics. To me its conclusions and recommendations seem theoretically reasonable but practically innocent, making the report not as significant as it might have been. But it’s still a worthwhile reference.

IIUSA Alert, New AAO Decisions, New RCs (AL, CA, FL, HI, IA, LA, MS, NC, NE, NJ, NY, OH, OR, PA, SC, TX, WA)

The sensational EB-5 stories proliferating on the Internet inspire Ms. Boring Verifiable Detail here to get back in gear. IIUSA has issued a notice reacting to the hype funded by opposition to President Obama’s nomination for DHS deputy secretary, and I encourage you to read the IIUSA Member Alert here. I’ll leave you to the Washington Post if you want spicy whispers suggesting that EB-5 is an unchecked den of iniquity, but if you want the dull details of what actually happens to people who try to game the EB-5 system, note that USCIS has uploaded more AAO decisions on I-526 cases. (The February, May, September, and October decisions in the Decisions Issued in 2013 folder are new since last time I checked.) The decisions give a behind-the-scenes look at USCIS’s efforts to scrutinize and challenge EB-5 petition detail, and to deny any filings that don’t toe the line of clean money fully invested in business activities that can create qualifying jobs. I’m particularly interested in MAY072013_01B7203, which discusses investment and job creation timing and nexus; MAY172013_01B7203, a decision on a New Orleans RC case that overturns challenge to a state TEA designation but confirms the need for a portfolio investment to identify specific fund uses at the I-526 stage; and SEP052013_03B7203, which explains the options for an I-526 petition when the sponsoring RC has been terminated. The later decisions include an opening reminder that: “This is a non-precedent decision. The AAO does not announce new constructions of law nor establish agency policy through non-precedent decisions.” Nevertheless, we get so few official policy announcements that I take what I can get of hints, and am quoting below a whole section from the 5/7/2013 decision’s discussion of what has the burden to create jobs: the “new commercial enterprise” or the individual EB-5 investment. This is the theoretical issue at the heart of the extremely significant question of which job creation an investor can claim, and how the timing of capital release affects job counts. The 5/7 AAO decision emphasizes the individual investment, and treats investment/job creation nexus as “before/after” issue rather than allowing a “but for” argument. We often see RFEs from adjudicators struggling to see any factors in causation besides chronology, but this is the first time I remember seeing the AAO wax theoretical on the matter. Any thoughts from the attorneys out there?

Section quoted from MAY072013_01B7203, AAO decision on an I-526 petition for direct investment.
…On November 7, 2012, the petitioner filed an appeal with U.S. Citizenship and Immigration Services (USCIS). On appeal, counsel asserts: (1) the three jobs created prior to the petitioner’s initial investment should be attributed to the petitioner; (2) the two jobs created between the petitioner’s initial investment and the maturation of the NCE’s certificate of deposit should be attributed to the petitioner…
1. Employees Hired Prior to Investment
Regarding the three employees hired prior to the petitioner’s initial investment, counsel’s appellate brief asserts that these individuals’ jobs should be considered to have been created due to the petitioner’s investment. Counsel characterizes the hiring of personnel prior to an investor’s infusion of capital as common and a business reality. At issue, however, is not whether the order of events constitutes a normal business-related process, but whether, by following this order of events, the petitioner has established that his investment is responsible for any earlier job creation. Counsel’s appellate brief also states: ”The Regulations merely state that to qualify, it must be shown that the new commercial enterprise (not ‘the investment’) will create full-time employment for not fewer than 10 qualifying employees.” Counsel further asserts that had Congress intended to “require that employment creation strictly follow the date of an alien investor’s investment transfer, it would have specifically required proof that ‘the investment will create not fewer than ten (10) full-time positions …. ‘ But as written, the statutory language focuses on the ‘new commercial enterprise’ instead.” The language counsel quotes does not specifically address situations involving multiple investors. The regulation at 8 C.F.R. § 204.6(g), however, does specifically addresses businesses for which there are multiple investors. Significantly, 8 C.F.R. § 204.6(g)(l) allows for a pooled investment with other EB5 investors “provided … each individual investment results in the creation of at least ten full-time positions for qualifying employees.” (Emphasis added.) Thus, in situations involving multiple investments, the regulatory language focuses on the “investment” as creating the jobs rather than the NCE. Furthermore, under the initial evidence requirements, the regulation at 8 C.F.R. § 204.6(j) states: “A petition submitted for classification as an alien entrepreneur must be accompanied by evidence that the alien has invested or is actively in the process of investing lawfully obtained capital in a new commercial • enterprise in the United States which “Will create full-time positions for not fewer than 1 0 qualifying employees;” (Emphasis added.) The emphasized language implies that an alien has already invested or committed capital to the NCE, and that subsequent to this investment the required employment creation will result. Significantly, the regulations do allow for job preservation, but only where the petitioner invests in a troubled business. 8 C.F.R. §§ 204.6(e) (definition of troubled business), (j)(4)(ii). The petitioner does not claim to have invested in a troubled business. Counsel also references proposed policy guidance which states that an immigrant investor is not required to have already invested his or her capital in the NCE, as long as the investor establishes that he or she is actively in the process of investing the required capital. To be actively in the process of investing the required capital, the investor must demonstrate that his or her funds are actually committed to the NCE. 8 C.F.R. § 204.6(j)(2). The petitioner has not demonstrated any actual commitment of his funds prior to September 1, 2011. Regardless, the issue of whether the petitioner is actively in the process of investing is a separate question from whether USCIS will credit the petitioner with jobs in existence at a business other than a troubled business when the petitioner began investing. In light of the above, USCIS will not credit the petitioner with the employees hired prior to his investment. …
ii. Subsequently Hired Employees
Regarding the two jobs created after the petitioner’s initial investment but before the certificate of deposit matured, the AAO does recognize these jobs as being attributable to the petitioner’s investment as he had relinquished control of the funds to the NCE. It was the NCE that elected to invest the funds rather than to allow them to sit dormant in a bank account.

Also, a belated updated on new Regional Centers. In 2013 USCIS has approved about 205 new RCs, by my count, bringing the total number of RCs to 417 as of 12/11. I look forward to being able to link to the USCIS approval letters for each of these centers. In these days of rumors and misinformation, we really need basic transparency about the identity and mandate of all Regional Centers.

New RCs added to the USCIS list 11/18/2013 to 12/11/2013
New Orleans & Gulf Coast Regional Center, LLC (Alabama, Florida, Louisiana, Mississippi)
American California Regional Center (California)
North America Wind Power LLC (California)
San Diego Regional Investment Center, LLC (California)
American Builders Regional Center (Florida)
Florida Gateway Regional Center, LLC (Florida)
Live in America – Florida, LLC (Florida)
Eight Islands Regional Center, LLC (Hawaii)
Liberty Nebraska Regional Center, LLC (Iowa, Nebraska)
Ohio Regional Center, LLC (Ohio, Indiana, Kentucky) Approval Notice
Live in America – Northwest Regional Center, LLC (Oregon, Washington)
Global City Regional Center, LLC (New Jersey, Pennsylvania)
Related New York City Metro Regional Center, LLC (New Jersey, New York, Pennsylvania)
Birch North Carolina Regional Center (North Carolina)
Southeastern Higher Education Regional Center (South Carolina)
Civitas Laredo Regional Center, LLC (Texas)
Houston EB 5 Regional Center (Texas)
ACIC Management, Inc. Regional Center (Washington)
UPDATE: The name “Midwest EB-5 Regional Center LLC” was changed on the USCIS list to add a comma, not removed from this list as I previously reported in error.

New RCs (CA, CO, FL, NC, TX, VA, WA, WV), CSC complaints

New Regional Centers
Additions to the USCIS list of approved Regional Centers from 10/31 to 11/18

EB-5 in the News
The most buzzed-about EB-5 article this week is a Washington Times piece: “Immigration staffers pressured to rush visas for wealthy investors” (Nov. 18, 2013). The story provides an interesting look behind the scenes of EB-5 adjudications at the California Service Center. Those who have waited months upon months and then years upon years for paperwork to be reviewed may find it hard to believe that the ISOs could feel rushed, or that finally appealing to supervisors/Congressman to help move things along could backfire by pushing those rushed ISOs into resentment and suspicion. This article gives disgruntled insiders’ views, and may encourage us to have more sympathy for adjudicators in their complex task — and perhaps to share their suspicion when some groups appear to succeed in orchestrating preferential treatment.

Another cautionary tale (SD)

I work with Regional Centers on the project side, and I personally don’t see much drama. Not lawsuits, not backstabbing and sabotage, not FBI agents pounding the door, and certainly not murder. I can witness that EB-5 includes a whole world of solid, ordinary businesses working hard to put capital together to get projects done, unexceptionable immigrants putting money into those projects, and new business ventures resulting in job creation and profit for investors. But there are soap operas to be had. If you are a public agency thinking about partnering with a Regional Center, a Regional Center considering a relationship with an investor recruiter, an investor recruiter wondering how many pounds of flesh you can get away with taking, or if you just like a good juicy drama with all the fixings, you’ll want to keep up with the ongoing saga of South Dakota International Business Institute Regional Center. This case is poignant because it apparently involves many sincere and well-intentioned parties and no obvious fraud, and yet it’s a dramatic example of how partnerships can go very wrong. A true cautionary tale.

I quote a summary of the story from an article in today’s Argus Leader, the daily newspaper of Sioux Falls, South Dakota:

The Northern Beef story so far
CONCEPT: The Northern Beef Packers plant was an ambitious attempt to bolster South Dakota’s economy by slaughtering the state’s cows in Aberdeen instead of shipping them out of state.
FOREIGN INVESTORS: Through years of development and false starts, most of Northern Beef’s funding came from more than 100 foreign investors under the federal EB-5 program, where foreigners could get green cards for investing $500,000 in American businesses.
EB-5: The state of South Dakota worked closely with the EB-5 program. It was promoted by Richard Benda, who then was secretary of Tourism and State Development and oversaw overseas investors. State official Joop Bollen also created private companies to manage EB-5 investments. Bollen resigned the same day he signed a contract for his own business to handle the state’s EB-5 program.
INVESTIGATIONS: State and federal officials are investigating Northern Beef, its handling of the EB-5 program, and South Dakota’s economic development office.
BENDA DEATH: Meanwhile, Benda died in late October from a gunshot wound. His death is being examined by authorities.

KELO, the CBS-affiliated television station in Sioux Falls, South Dakota, has a useful summary of the issues involved: Five Questions In State Development Investigation.

UPDATE: See for detailed analysis of this story. “The Rise and Fall of South Dakota: A Cautionary Tale for EB-5 Public Private Partnerships Part I”
(November 07, 2013)

EB-5 in the news

President Obama has nominated current USCIS Director Alejandro Mayorkas for a top Department of Homeland Security Post – a mixed honor for him, considering the environment in Washington these days. Luckily for those eager to block the President’s nominations, they have found in Director Mayorkas’s past God’s gift to screamer headlines: the EB-5 program. Who needs a sex scandal when there exists such a potent tool for whipping up anti-business, xenophobic, and lingering Cold War sentiments. The investigation officially involves “allegations that (1) USCIS managers and counsel directed employees to obstruct an OIG audit and (2) a (unnamed) USCIS Director personally facilitated and assisted an applicant/petitioner with an EB-5 visa approval after the petitioner was initially found to be ineligible for the program,” and has plenty of purple insinuations tagging along in the wake. I like investigations because I like information, and I look forward to getting some facts to judge. I don’t like pre-investigation smear, and the rhetoric around this case is getting on my nerves. To summarize the messages I’ve gotten from news reports on the investigation (paraphrased):

  • News flash! We have allegations that one government agency wasn’t fully cooperative with another government agency! Good heavens!
  • You’ll be shocked to hear that we asked USCIS to handle something, and get the impression that they’re obstructing. No one else ever felt like that before. There must be a conspiracy!
  • It is alleged that a Director reconsidered and overturned the decision of subordinates! How could someone in a Director position do such a thing?
  • It has come to our attention that some business people have crazy ideas and take ambitious risks and try new things. Entrepreneurs risk failure! Investors who choose to bet on business ventures can lose money! What a scandal!
  • Psst… Clinton … there’s a Clinton connection in the wings, and you know what to think about that, wink wink.
  • We have exposed the shocking fact that those people who are putting cash into US businesses because they want to move their families here and get on a path to US citizenship – why many of those people are coming from… CHINA!! Maybe they’re COMMUNISTS!!!! Maybe they’re SPIES!!!!! ALERT! The Chinese are coming! The Chinese are coming! We’ve got to get organized! We’ve just got to get organized!

I’m exaggerating, of course. Or am I? It’s sad to realize that messages like this could do actual damage regardless of the outcome to the investigation. I don’t know what Director Mayorkas did for the EB-5 program beyond hosting a lot of public stakeholder meetings, but I appreciated his patience and courtesy at those events and I hope that his other activities get a careful investigation and just assessment. The EB-5 program needs leaders who are committed to the core values of the EB-5 program – real investment leading to real job creation and real economic development — who can see the forest for the trees, and who are willing to stand up to subordinates when decisions stray from the program’s vision. Washington needs to have an environment with accountability and with honor for political courage. America needs an environment where business people may take disclosed and calculated risks, where business failure does not of itself constitute fraud. EB-5 investments need serious due diligence and underwriting at some level — and this function shouldn’t just be left to interested immigration agents or inexperienced immigration lawyers and USCIS service officers. We all need to treat immigration with reasonable caution, but without acting like Fendall Hawkins. Let’s be part of the solution.

New Regional Centers (GA, IL), Legislation Updates, ELIS, Due Diligence

The USCIS list of approved Regional Centers has added another three entries (now 46 new centers in 2013).

Southeast Foreign Investment Center LLC

Chicago Metro Regional Center, LLC
Geographic Area: Illinois counties of Cook, Lake, Will and Du Page
Industry Categories: New Multifamily Housing Construction (NAICS 236116), Commercial and Institutional Building Construction (NAICS 23622), Offices of Real Estate Agents and Brokers (NAICS 53121), Fitness and Recreational Sports Centers (NAICS 71394), Convenience Stores (NAICS 44512)
Approval Notice

Chicago Regional Center

(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.)

Chicago Metro Regional Center has the first designation letter that I’ve seen come out of the new Washington DC office, signed by Daniel Renaud as Acting Chief of the Immigrant Investor Program rather than by the California Service Center. Congratulations! I’m interested in the “Job Creation” sections of recent approval letters, and how they discuss economic model approvals, hypothetical vs. I-526 review, and deference. I also wonder about the significance of NAICS code lists appearing twice in recent approval letters, once under the “Regional Center Designation” heading and once under the “Job Creation” heading. Could this distinction open the possibility for Regional Center codes to be relatively general, even as 4-digit+ codes are used in the economic model? I hear rumors that USCIS may be hammering out a new statement on industry category requirements that loosens the highly restrictive trend toward granular industry approvals.

In other EB-5 news, Congress is continuing to discuss immigration reform legislation that includes significant EB-5 provisions. USCIS is working on implementing electronic filing for I-526 petitions, and held a conference call on 5/23 to discuss logistics and solicit feedback. And due diligence continues to be a hot topic of EB-5 conversation.

EB-5 transitions and DC move

Thanks to H. Ronald Klasko for his post yesterday on EB-5: What to Expect in the Coming Months. I’m particularly interested in these paragraphs, which provide an update on the EB-5 program office move (based on information from Rob Silvers at the AILA EB-5 conference in Miami on May 2):

Things are clearly changing, hopefully for the better. The transition of EB-5 adjudications from California to Washington is in progress. The new facility housing the EB-5 unit in Washington is open. Adjudicators of I-924s and EB-5 projects will be handled not by traditional CIS adjudicators but rather by newly hired economists. Some of the economists have already been hired, and some are being actively recruited. The DC unit, staffed by GS15 economists (very high level government employees) will first handle I-924s, then I 526s and then I-829s. For some period of time, the DC unit and the California Service Center EB-5 adjudicators will work concurrently. Eventually, the California Service Center will be phased out, and all of the applications will be handled by the EB-5 unit in Washington. This unit will be headed by Dan Renaud, Acting EB-5 Program Chief, and Robert Cox, the Acting EB-5 Deputy Chief.

The new EB-5 office in Washington will be staffed solely or mostly by new hires. The good news is that adjudications in the new office will be handled by economists rather than USCIS adjudicators and generally higher level economists than those previously hired into the EB-5 program. The bad news is that these new hires will be new to the EB-5 program, will have to be trained and likely will take some time to be completely up to speed. In my experience, new hires tend to be slower in making decisions and often wary to issue approvals until they are secure in their positions. Hopefully, this either will not occur or will be a short transition period. Also, new economists may have new positions on economic methodologies, which could be good or bad news.

For further detail on the new Washington DC office and other clarifications and updates provided by Ron Silvers at the AILA meeting, see the remainder of Ron Klasko’s update. See also the meeting report by Jennifer Hermansky on the EB-5 Insights blog.

I hesitate to comment on the EB-5 aspects included in the Senate’s comprehensive immigration reform bill (S. 744) currently under discussion, but encourage those of you with lobbying interests and suggestions for change to get involved. IIUSA posts regular updates. Senator Leahy this week proposed an amendment to the bill that would involve major changes for EB-5 — many aimed at fraud prevention. I have heard privately a number of astute suggestions for program improvements, and plan to feature them here for discussion.

What’s right with EB-5

To close a week of complaining about what’s wrong with the EB-5 program, I’d like to conclude with pointing out that the EB-5 program has been functioning, despite the challenges.  Even in 2012, when many of the processing problems that we complain about came to a head, USCIS still approved 3,677 new EB-5 immigrant petitions and verified successful job creation and granted permanent residence to 736 investors. (See my FY2012 stats post for detail.)  Those numbers represent half a million to a million dollars per investor going into US businesses and 10+ verified jobs created per investor. Those numbers are not small, despite all the problems. You’ll recall that the US Department of State issued a record total of 7,641 EB-5 visas to investors and their families in FY2012, prompting fears that EB-5 visa usage might approach its limit for the first time ever. Plenty of complaints are possible, yet the numbers demonstrate that there are still businesses successfully raising funds and creating jobs, and there are still investors successfully navigating the immigration process. The media has jumped on reports of problems and abuses, but it has also featured many positive stories about the EB-5 program. Celebrate Friday by going over to the IIUSA blog and reading the linked news stories from major media outlets profiling some of the businesses (and investors) who report that they have used and benefited from the EB-5 program. You can sober up on Monday with the Feb 2013 Newsletter from, which includes excellent articles on what’s working and not in the world of EB-5.

Avoiding Fraud in EB-5

UPDATE: I recommend that those interested in the SEC action sign up to participate in IIUSA’s webinar this Friday 2/22 on Securities Laws Enforcement in the EB-5 Context: SEC Process & Procedures.

We in the EB-5 community sometimes sigh over USCIS’s increasing fixation on “verifiable detail,” which makes applications and petitions so much harder for us to prepare. Two years ago my EB-5 business plans were about 20 pages and simply explained the business proposal. That was the norm, judging by application materials for older Regional Centers that were released in response to FOIA requests. Now my EB-5 plans are more like forty pages not counting footnotes and a stack of exhibits, and not only present the business plan but try to validate every detail with reference to evidence from independent sources. Sometimes it seems that USCIS assumes each application to be fraudulent until proven innocent, and applicants/petitioners whose face value happens to be real value are taken aback and frustrated at being suspected and probed. What does USCIS think they’d do, anyway? A complaint filed this week by the Securities and Exchange Commission against Intercontinental Regional Center Trust of Chicago, LLC details what one Regional Center did do, from inventing franchise agreements and financing commitments to forging letters and enormously inflating cost estimates and revenue projections. I think that reading this complaint should make us more supportive of USCIS in its efforts to scrutinize and test applications and petitions before approving them. And the government should not be alone in this scrutiny. Kudos to Michael Gibson for reporting on concerns about this project as early as November 2011.