Action to Reauthorize RC Program

IIUSA has  posted welcome news about solid action on the part of the Senate toward re-authorization of the Regional Center aspect of the EB-5 program (see S.3245) . Now let’s see if we can get the House to take up this matter before September 30th, when the current authorization is set to expire.

Senate acts to reauthorize EB-5 Regional Center Program for three years
IIUSA is thrilled to be present in DC to support Senate action yesterday to reauthorize the EB-5 Regional Center Program for three years via unanimous consent. The House is expected to do the same in September after August Congressional recess.
The bipartisan support of this Program should come as no surprise since its explicit purpose is U.S. job creation without adding a dime to the deficit (in fact, it contributes to deficit reduction through tax revenue generation by driving economic activity and adding high net worth individuals to U.S. taxrolls). IIUSA will continue to advocate for prompt action by the House in September to make sure this Program can continue its growing contribution to the U.S. economy, on track for over $2.0BILLION and 40,000 U.S. jobs in FY2012. Congressional action to reauthorize will allow FY2013 to account for even more economic impact.
With today’s jobs report ticking unemployment up to 8.3%, it is gratifying to know that Congress understands the importance of reauthorizing an emergent source of reliable, job-creating capital.

New Orleans Cautionary Tale

The principals of New Orleans Mayor’s Office RC ( are named in a suit in Federal Court brought by 27 EB-5 investors who allege fraud and mismanagement. The court has yet to judge the validity of the finger-pointing, but it’s clear at least that this case exemplifies a diversified investment strategy gone very wrong.  With this case in mind, I can see why USCIS is demanding extreme clarity and specificity in the I-924 and I-526 petitions regarding path and use of investor funds. See the article EB-5 Investors File Suit Against New Orleans Regional Center for a summary of the key issues and a link to the case. Those responsible for drafting offering documents for EB-5 deals should pay special attention, and note the risk of inadequate disclosures.

2018 updates:

RC News (SD and more)

I appreciate the research and reporting that Adam Green and Michael Gibson have been doing over at, and I recommend the latest batch of posts on Regional Center activities. The story South Dakota Lawsuit Could Put EB-5 Visa Project on Hold provides a fascinating look at what can go wrong in a Regional Center-migration agent relationship. Ongoing Lawsuit Stalls Maryland EB-5 Visa Project, Promotion Persists tells a common story of how lawsuits can threaten to snarl real estate developments using EB-5 funding. Additional stories highlight potential contributions of the EB-5 program, including in North Carolina, New England, and Oakland.

“On hold at USCIS headquarters”

2/17 update: USCIS has identified the problem as relating to whether for a particular case “it is economically reasonable to attribute ‘tenant-occupancy’ jobs to the underlying EB-5 commercial real estate project.”
2/6 update: I recommend this article on the issue by Bernard Wolfsdorf , an attorney who works with EB-5: “Transitions and Predictions for the EB-5 Program”
1/23 update: In the 1/23 EB-5 Stakeholder meeting, Sasha Haskell confirmed that the hold at headquarters indeed resulted from questions about the economic analyses that were raised by USCIS’s contract economists and currently under review by the senior leadership.

A number of Regional Center applicants, including a few who filed over a year ago, have been told that their applications are currently “on hold at USCIS headquarters pending resolution of an issue.”

This hold hasn’t affected all I-924s (the CSC has issued recent Regional Center approvals and RFEs), but it’s a significant phenomenon. I’ve heard several personal reports from attorneys and applicants in the last couple months, and the audience at the 1/12/2012 EB-5 engagement asked USCIS Director Mayorkas about it.

So far as I’ve heard, communications from USCIS to the affected applicants haven’t disclosed the nature of the hold-up(s) or when resolution might be expected, and Director Mayorkas didn’t give much more information at last week’s meeting. He agreed that USCIS should be able to identify the issues and provide a timetable for resolution, and he suggested that the matter will be treated at the up-coming January 23 EB-5 stakeholder meeting. (He didn’t agree that it was unfair for applications filed many months ago to be judged according to current standards. He also noted that the unusual volume of new RC applications has been naturally accompanied by an unusual volume of unprecedented issues requiring judgment calls, thus the need for evolving guidance.)

While we wait for the 1/23 meeting, can we guess what might be the unresolved issue(s) holding up some Regional Center applications? Let’s review a few questionable/questioned areas that we know of:

1)     Econometric Studies
As a layman I’ve struggled to make sense of the economic impact reports and job counts that get filed with Regional Center applications, and I’ve wondered what to conclude when different professional economists working with EB-5 criticize each other’s approaches. How do the adjudicators at the CSC interpret and assess these reports? What do they make of the widely varying length, level of detail, and use of methodologies? And now that USCIS has just hired three new economists, do they disagree among themselves as much as the economists preparing the reports do? Perhaps most adjudicators used to rubber stamp the econometric studies, not being qualified to critique them, but now the new team of USCIS economists is providing more oversight and raising questions? I’ve heard several people (including Joseph McCarthy, who asked about holds at the in-person meeting with Director Mayorkas) speculate that issues raised by the newly hired economists may explain the “hold at headquarters” phenomenon.  I expect that the 1/23 stakeholder meeting will include new guidance for econometric studies.

2)     Targeted Employment Area Designation
Even the New York Times recently joined the clamor pointing out “rule-stretching” to allow projects with apparently prosperous surroundings to take advantage of the $500,000 EB-5 investment threshold that Congress intended to benefit areas of high unemployment. Surely USCIS has also noticed the negative press, and is struggling to create guidelines that will limit applicants’ self-serving creativity and the states’ inconsistent practice in TEA designation. For in-depth analysis of the issues at stake, see two excellent articles by (New York Times, EB-5 Visa, TEAS, and Gerrymandering Part I and Part II). I particularly note the issue of whether a census tract per se is an allowable building block for a TEA. Census tracts were the common building block until questions started to be raised last year, and apparently the jury is still out on whether a single census tract or census tract group can qualify as a geographic area or political subdivision for TEA designation purposes. As recently as the 1/12/2012 meeting, Director Mayorkas said that he couldn’t say for sure and would huddle with his team to consider the matter. The conclusion could affect a lot of pending applications.

3)     Project Detail
An unresolved issue that I notice is the question of how much and what kind of project detail needs to be included with a Regional Center application. The I-924 instructions say “The job creation analysis for each economic activity must be supported by a copy of a business plan for an actual or exemplar capital investment project for that category.” The EB-5 community tends to pull one way, taking that “or exemplar” option to allow filing applications based on briefly sketched hypothetical projects, while USCIS tugs the other way, issuing RFEs that request extensive real-world project information, often quoting the further I-924 instruction that: “A business plan provided in support of a regional center application must contain sufficient detail to provide valid and reasoned inputs into the economic forecasting tools and must demonstrate that the proposed project is feasible given current market and economic conditions.”  Official guidance (notably the 2009 Neufeld memo) specifically allows for “hypothetical” projects in RC applications, but I get the sense that the adjudicators currently don’t like them very much and may be debating what to do with initial RC applications not grounded in actual projects.

Anyone else have first hand evidence or guesses about the reasons for the hold on some I-924s at USCIS headquarters? I’m not happy that we have to speculate about this, but also thankful that USCIS is trying to be vigilant. I hope that eventually the new standards will be honed so that the many good proposals aren’t delayed and the many faulty applicants/projects are cut off before they go live and disgrace the EB-5 program. (But if I had to choose delays or disgrace, I’d choose delays.)

Regional Center News and Cautions

US Advisors ( has just issued another very interesting and informative newsletter. Follow the links below to read the stories.

Huge Chicago EB-5 Multi-Hotel Project Under Scrutiny by Investors
At $249.5 million, this multi-hotel EB-5 visa project will be one of the largest offerings the program has seen to date. But with overseas agents collecting exorbitant fees from the regional center, potential investors may be unaware that the promoters extolling the project have an enormous conflict of interest.
Read More »
China’s Migration Agents – Polarized by EB-5 Failures and Demands for Higher Commissions
According to Kevin Jeffers of Pinnint, Ltd., there is a growing culture of “profit at any cost” among many of China’s migration agents. “Performance claims continue to be exaggerated with risk understated,” he says.
Read More »
Four Conferences, Four Cities: EB-5 Visa Project Risk & Due Diligence Presentations
At a number of recent EB-5-related events,’s Michael Gibson spoke about EB-5 due diligence issues, their complexity, and the potential for failure in many EB-5 visa offerings. His notes and slides from these presentations are now available on our blog.
Read More »
Could a New Visa Law Affect the EB-5 Program?
A new bill would make it easier for foreign citizens to obtain U.S. tourist visas if they purchase homes costing $500,000 or more – with cash. Some are already saying that this measure could impact the EB-5 visa program.
Read More »
IIUSA Calls for Support Letters From EB-5 Advocates
In a recent message to members, IIUSA requested advocacy for EB-5 permanency: “In the past couple of years, the economic impact generated by [the EB-5 program] has become truly national in scope. Join us in telling that story to our legislators, so we can secure passage of the [EB-5 permanency legislation] and get about the business of creating U.S. jobs.”
Read More »
New Owner Means New Projects at One EB-5 Regional Center
With new ownership, the InvestAmerica EB-5 Regional Center (formerly Colorado Intercontinental Regional Center) will pursue completely different projects from the ones we reported on last year. Instead of turning Colorado timber into cellulosic biofuel, the regional center will move forward with one of the EB-5 program’s most popular investment types – hotel construction.
Read more »
More Ski Resorts? You Bet. New EB-5 Regional Centers Make Headlines
A menagerie of EB-5 regional centers received media attention this fall. As should come as no surprise, many of them will pursue real estate projects. A few will even have a go at what seems to be an EB-5 standby: the ski resort.
Read more »
Former USCIS Adjudicator Calls Material Change Prohibition “Onerous”
“The [material change] precautions have gone too far,” declares a former adjudicator. At a time when the EB-5 program is undergoing reform, might USCIS also reconsider the notion of material change that investors and their attorneys believe makes participation in the EB-5 program more difficult?
Read more »
Crowdfunding Legislation Passes in House, Good for EB-5 Funding
The “Entrepreneur’s Access to Capital Act,” which lets small businesses sell non-public securities through social media solicitations, has just passed with overwhelming bipartisan support from members of Congress and support from the White House. But how might it affect EB-5 funding?
Read more »

Regional Center News

I found the August 2011 newsletter from especially interesting. It includes a nice overview of this summer’s USCIS updates and is rich with news and links to stories — positive and negative — about current Regional Center activities and projects. I particularly appreciated “Sweet EB-5 Visa Deal Turns Sour For Investors, Missouri State Officials,” a detailed analysis of a cautionary tale that emphasizes the importance of due diligence on EB-5 projects.

Is EB-5 investment insurance safe? has published an interesting and sobering article “Investment Reimbursement Insurance: A Safe Option for EB-5 Investors?

In light of concerns voiced by EB-5 practitioners, industry experts, and prospective investors, took a look at an insurance policy that promises to repay any loss of principal to investors in the Idaho State Regional Center’s Blackhawk Gold project. As part of a four-part series dedicated to the matter, we consider the possible legal implications of such a policy.

I also recommend the Can-Am blog, and particularly this recent post “My personal perspectives and comments on the current state of the EB-5 Program

Processing Times and Meeting Update

According to the latest report of Processing Time Information for the California Service Center (4/18),  I-526 petition processing is back on track at 5 months.

In other good news, the IIUSA EB-5 conference in Washington D.C. on May 10 has just dramatically reduced the registration fee plus added a special session in which copies of the newly released EB-5 Training Materials from USCIS will be distributed to all attendees and discussed by an expert panel including representatives from USCIS. This is looking like a must-attend event, but hurry if you want to take advantage of the the hotel group rate.

Also, note another opportunity to hear from man-of-the-hour H. Ronald Klasko, who made the FOIA request that brought us the EB-5 training materials and is speaking at the IIUSA EB-5 Conference in Washington DC on May 10, the EB-5 Webinar Series on July 6, and now the newly-announced EB-5 for Experts Phone Session on securities law on April 28.

Do-nothing Congress?

I keep reassuring people that the EB-5 Regional Center program will surely be renewed before 9/30/2012, that Congress couldn’t possibly delay and prevaricate and let a good jobs-creating economy-supporting program expire … or… wait….   If you are also reading the newspaper and getting nervous, IIUSA President K. David Andersson has some suggestions about how to be proactive about pressing our legislators to keep EB-5 on track.

Making the EB-5 Regional Center program permanent?

The EB-5 Regional Center program is currently only authorized through September 30, 2012, and Congress needs to renew it or there will be bad news for regional centers and for all investors whose petitions are still in the pipeline. With the economy as it is I can’t imagine Congress allowing a jobs program like this to expire, but still the last two renewals didn’t come until literally the last minute and caused a lot of needless stress to businesses and investors.

Fortunately IIUSA and others are pressing hard, not only for renewal well in advance of the sunset date but for the Regional Center program to be made permanent. As the IIUSA blog reported yesterday:

The Hon. Senator Patrick Leahy (D-VT), Chairman, Senate Judiciary Committee, introduced the Creating American Jobs with Foreign Capital Act (S. 642) – which would permanently authorize the EB-5 Regional Center Program – into the Congressional Record.

The bill’s proposal is commendably lean and to-the-point:

Section 610 of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (8 U.S.C. 1153 note) is amended–
(1) by striking “pilot” each place such term appears; and
(2) in subsection (b), by striking “until September 30, 2012”.

Note that as part of its advocacy efforts, IIUSA is hosting a day-long EB-5 Regional Center Conference in Washington DC on 5/10/2011. This conference will be a unique opportunity to network with the prominent movers in the EB-5 community and to advocate for the extension of the Regional Center program. Although I personally fear networking and lobbying, I’m considering attending the conference for two sessions planned on topics that are extremely hot for EB-5 at the moment: SEC-compliance and job creation methodologies. The excellent line-up of guest panelists includes:

  • Representative from SEC Office of Small Business Policy
  • Howard L. Kramer, Partner, Schiff Harden, LLP (former SEC Senior Associate Director of Division of Market Regulation)
  • Zoe Ambargis, U.S. Dept. of Commerce, Bureau of Economic Analysis (invited)
  • Kim Atteberry, USCIS, Investment & Economic Analysis Division (invited)
  • John Barrett, Principal, IHS Global Insight, Inc.
  • Hart Hodges, Director, Western Washington Universiry, College of Business and Economics (former President of Association of University Busines and Economic Research)

Ready, set… delay!

The good news: the EB-5 community is on a roll. I spent the weekend in Las Vegas taking part in two excellent EB-5 seminars (one organized by Wright Johnson and McAdam & McCarthy, the other by Brian Su of Artisan Business Group). Listening to the presentations by legal, financial, economic, and marketing professionals, I was impressed by how far we’ve come over the past couple years in getting this complicated EB-5 process figured out. The packed-out audiences testified to how excited businesses still are about the EB-5 opportunity.

The bad news: NOTHING IS HAPPENING OVER AT USCIS! Only two regional centers approved so far this year! Come on California Service Center! It’s almost March! We know you have over 100 applications waiting on your desks! What happened to all those new adjudicators you hired last year? They’re not hustling with I-526 petitions for investors either. The latest CSC processing time report (as of 2/14) has given up claiming a five month processing for the I-526 and admits that last week they were starting to process petitions filed on 7/13/2010. I understand that last year was challenging, with the new filing fees bringing a flood of RC applications, and a flock of new Regional Centers bringing in a larger volume of investor petitions. But the immigration service is going to have to step up its game a little if this program is going to survive. Job growth is waiting!

By the way, the talk on EB-5 business plans that I presented in Las Vegas is available to anyone interested in current strategies for presenting your business in the context of Regional Center applications and investor petitions. Please email me if you’d like a copy.

Special Report on EB-5

Reuters published today a lengthy and well-researched article on the EB-5 program titled Special report: Overselling the American dream overseas. As its title suggests, the report presents a largely negative view of the program.

Over two months this fall, Reuters reporters in the United States, China and Korea attended EB-5 sales presentations and interviewed dozens of people associated with the program — from officials at the U.S. agencies that monitor it to the immigrants who have used it, from the attorneys that steer immigrants into specific investments to the U.S. businesses that pay them to do so. The picture that emerged was troubling…

Criticisms largely focus on misrepresentations in overseas marketing and the rocky history of EB-5. The information will not be new to those in the EB-5 field, but may influence public opinion. The yahoo home page has already picked up the story.

USCIS gives Chinese-language introduction to the EB-5 program

The official USCIS blog has posted an introduction of the EB-5 program. The most interesting aspect of this post is that it originated in an article in Chinese published as part of a “You Ask: USCIS Answers” series in The Epoch Times. I wonder if the translation choices in this article should be taken as standard (ie 区域中心 not 经济特区 for “regional center”). Regional Center promoters should find the article very useful as an official Chinese-language introduction to the EB-5 program.

In other news, USCIS updated its list of approved regional centers as of 12/01 and 12/08, but not with any new centers.

Comprehensive Immigration Reform Act of 2010

The American Immigration Lawyer’s Association has posted a section-by-section summary of the Comprehensive Immigration Reform Act of 2010 (S. 3932), introduced by Senator Menendez (D-NJ) and Senator Leahy (D-VT) on 9/29/10. This act proposes significant changes to the EB-5 program (see pages 43-45 and 52 of the PDF), which I summarize as follows:

  • The “permanent partner” of an alien entrepreneur would have the same rights as a spouse.
  • The fee to apply for regional center designation would be $2500.
  • Investors could pay a $2500 fee to guarantee visa processing within 60 days. The creation of a premium processing program for EB-5 would be authorized.
  • An adjustment application could be submitted concurrently with a visa petition (??).
  • The definition of “Targeted Employment Area” would be expanded beyond high-unemployment and rural areas to cover areas of population decrease, areas designated in connection with government economic incentive programs, and State-designated TEA areas.
  • Investors could extend by two years the time for filing an I-829. (This would provide a possible total 4.5 years for the investment to succeed and create jobs.)
  • Investment could create full time OR “full-time equivalent” jobs (which would allow adding up hours worked by part time employees).

I must say I’m not impressed with the EB-5 portion of this legislation. It includes some attractive but probably unapprovable proposals (premium processing and broad TEA definition for example) while omitting (so far as I can find) the single most important EB-5 issue: making the regional center program permanent, or at least extending it beyond the current sunset in 2012.

Changes to Canada’s Immigrant Investor Program

Canada’s immigrant investor program, formerly an important competitor to the US program, at least in the China market, is currently frozen pending price increases. The Canadian Federal Investor Program has not been accepting applications since June and the Quebec program was taken offline this week. According to the new federal rules which are in their final stages of approval, the price of admission to Canada for future immigrants will double to $800,000. The new rules indicate that applicants will have to prove their personal net worth to be $1.6 million in order to be accepted as permanent residents under the immigrant investor program. This freeze and the planned price increases may be a boost to the US EB-5 program.

AILA article on EB-5

The September 2010 issue of Voice, a publication of the American Immigration Lawyers Association, features an article introducing the EB-5 program. The author is Boyd Campbell, one of the principals of America’s Center for Foreign Investment, a regional center covering most of five states. The article doesn’t provide new information or insights, but does offer a useful overview of the program and practical considerations for immigration lawyers.

In other news, the USCIS list of approved Regional Centers was updated on 9/7 and 9/8, but not with any new centers.

Lansing RC in The New Republic

The New Republic (August 5, 2010) has a positive article on the potential of EB-5 investment (presented as synonymous with Chinese investment) to benefit the Lansing area economy, and particularly Michigan State University.

AILA summary of new EB-5 developments

The AILA yesterday published a useful document entitled “New Developments in EB-5s.” Prepared by Ron Klasko, Chair of AILA’s EB-5 Committee, the report presents developments/clarifications in EB-5 processing taken from EB-5 stakeholders meetings and memoranda from June 2009 through June 2010. Topics include condition removal, troubled businesses, job creation, TEA designation, Regional Center proposals and business plans, requirements for the manner and timing of EB-5 investment, new commercial enterprise issues, and the material change problem.

2010 AAO Decision (CanAm)

This fascinating AAO decision (April 23, 2010) was referenced by CSC Division III Supervisor Blake Gotto at the March 16, 2010 EB-5 Forum at the California Service Center as an example of USCIS thinking on the “material change” issue. Apparently a lot of people asked about it, and the decision was distributed by USCIS to participants in the June 16 EB-5 Stakeholder Meeting in Washington, DC, with the caveat that it is “not being used as a binding decision on the agency, but does reflect their perspective.” The decision includes a number of very interesting features.

Reading between the black-outs, the case involves a Partnership under Philadelphia Industrial Development Corporation (PIDC), which is operated by CanAm Enterprises, a weighty and professional player in the EB-5 field. The petitioner in this case filed an I-526 in May 2005 and an I-829 in November 2008. The I-829 was denied for the following reasons:

  • Material change issue: “The petitioner’s failure to execute the plan presented in support of the form I-526 petition by not only switching to a project that USCIS had never reviewed but also by financing different expenses with the original project than those projected in the original business plan.” The project as presented at the I-526 stage involved acquisition and renovation of a warehouse to be used by a discount seller of home improvement materials; the EB-5 funds were in fact used to pay off interim financing and an existing mortgage for a restaurant. Citing Matter of Izumi, Chang vs. United States of America, and the 12/11/2009 Neufeld Memo, the AAO argued that the I-829 could not be decoupled from the I-526, or rely on approval of a Form I-526 for an investment project that USCIS did not review as part of that adjudication.
  • TEA designation issue: The petitioner demonstrated TEA-designation for an address other than the address where the project was in fact located.
  • Investment structure issue: A bridge loan does not allow the petitioner to be credited with the statutorily-required job creation.

The website for Philadelphia Industrial Development Corporation states, presumably relevant to this case, that “Consistent with the offering [for EB-5 Immigrant Investment Project loan to 1801 Restaurant Partners], an attractive alternative investment was recommended by the general partner. All limited partners who elected not to make the alternative investment have received a full return of their $500,000 principle investment.”

2010 AAO Decisions (CARc)

USCIS has updated its website with EB-5-related decisions from the Administrative Appeals Office through February 18, 2010. The following is a summary of salient points from the newly-posted decisions:

Nov 09, 2009_01: No content of note.

Jan 06, 2010_01: This decision concerns a stand-alone EB-5 case involving an operational hotel purchased through investment by the petitioner in 2006. It was denied for the following reasons:

  • The petition did not establish creation of 10 new jobs (in addition to preserved jobs) and did not provide a satisfactory business plan.
  • The petition did not establish a personal investment of $1,000,000 (“an investment by a corporation cannot be considered a personal investment by its sole shareholder”). (This issue was introduced by the AAO, not a point in the original denial by the service center.)

Feb 18, 2010_01 to _07: These decisions concern I-526 petitions filed in August 2008 for an investment within Capital Area Regional Center Job Fund (for renovation of the former Watergate Hotel). The decisions are similar, and include the following reasons for denial:

  • The petition was supported by agreements substantially amended from those filed with the original regional center proposal, and did not disclose that the agreements had been amended. The petitioner subsequently filed an amendment with USCIS, but this did not help matters since “amendments to agreements or business plans that postdate the filing of the petition will not be considered.” CARc’s informal and ex parte communications with a USCIS official concerning the acceptability of the amendments were also not admitted.
  • The Operating Agreement included disqualifying provisions relating to reserve accounts, interim investments, membership units in exchange for services and the waiver of expense fees from the aliens.
  • EB-5 Project Capital toward job creation and organizational fees were paid out of the same account, and it wasn’t demonstrated that the account included sufficient funds to pay organizational fees without the use of any of the $500,000 being invested by each alien.
  • Use of EB-5 investment to back a letter of credit to secure a construction loan does not sufficiently place the investors’ funds at risk for job creation.
  • The petitioner did not demonstrate that the location of the investment was considered a TEA at the time of filing or investment.
  • The business plan included “material changes” from the original business plan. (“While we recognize that business plans often require some flexibility to deal with unforeseen circumstances, the business plan and the terms of the commitment letter in this matter have been amended with nearly every filing. These amendments go far beyond mere clarifications.”) The petitioner failed to demonstrate that the original business plan and projections continued to be viable.

I note that, as usual, all the decisions cite Matter of Ho on business plans.