Q3 2016 EB-5 Petition Stats, GAO Report, RC List Updates

Path to Reauthorization
I’ve been updating my post Looking toward RC program reauthorization as significant developments come to my attention. I’ll make a new post when the text of new legislation is released. The days between now and September 30 will be interesting. At least the regional center program is less controversial than the Zika virus, so far.

FY2016 Q3 EB-5 Petition Statistics
The USCIS Immigration and Citizenship Data page now has EB-5 petition statistics for the third quarter of fiscal year 2016. IPO processed fewer petitions overall in Q3 than in Q2 2016. I-526 receipts were slightly up from Q2, but still relatively low, and IPO processed more I-526s than it received in Q3. An unusually large number of I-829 petitions were denied in Q3. The backlog remains dire. My charts summarize data for I-526 and I-829 receipts, approvals, denials, and pending petitions from the USCIS reports. I also added bonus charts estimating the amount of investment and number of immigrants associated with petitions filed since 6/1/2015 (to help visualize the impact of retroactive rule changes, and why we don’t want them), and showing IPO staffing levels as reported by Mr. Colucci in EB-5 stakeholder meetings (since staff increases have been a major strategy for tackling the petition backlog) and recent processing time reports.

GAO Report
The U.S. Government Accountability Office has posted a follow-up to its August 2015 EB-5 study that identified weaknesses in USCIS’s fraud mitigation activities. The title of the 9/13/2016 report summarizes the GAO’s new findings: Immigrant Investor Program: Progress Made to Detect and Prevent Fraud, but Additional Actions Could Further Agency Efforts. The 2016 GAO study mentions a number of fraud mitigation measures that USCIS has implemented for EB-5:

• The Fraud Detection and National Security (FDNS) unit has grown to 25 FTE staff, and IPO has created a specialized group focused on regulatory compliance.
• FDNS is using overseas staff to attempt to identify potential sources of fraud stemming from any false statements by immigrant investors regarding their source of funds.
• FDNS has planned at least 50 site visits in four states, and anticipates conducting additional site visits on a continual and as-needed basis. The first site visits began in August 2016.
• FDNS has conducted risk assessments, and identified securities fraud as the most frequent source of fraud in the program.
• USCIS has updated I-526 and I-829 forms to help capture additional information about petitioners and applicants that could be used to potentially identify fraud.
• USCIS conducts selected background checks on all of its immigrant investors and regional-center principals, in cooperation with partners such as the Federal Bureau of Investigation and U.S. Customs and Border Protection.
• USCIS recently signed a memorandum of understanding with the Financial Crimes Enforcement Network (FinCEN) and anticipates conducting additional reviews to help identify potential fraudulent actors and fraudulent financial activity in its regional centers.
• USCIS will use I-829 interviews to expand collection of information that could be used to identify fraud. (But so far a comprehensive interview strategy has yet to be developed.)
• USCIS hopes to implement a case management system for tracking and reporting data related to EB-5 investments and job creation. Project completion is “tentatively planned for some time in fiscal year 2017.”
• USCIS is developing standard operating procedures for adjudication staff for each investor form, and hopes to finalize these procedures by Q1 of FY2017.

GAO found that USCIS continues to be hindered by a reliance on time-consuming reviews of paper files that preclude certain potential fraud-detection activities such as the use of text analytics to help identify indicators of potential fraud. The continuation of planned efforts to digitize the files, including the supporting evidence submitted by applicants and petitioners, could help USCIS better identify fraud indicators in the program.

Regional Center List Updates
Additions to the USCIS Regional Center List, 08/29/2016 to 09/12/2016

• APIC Regional Center California (California)
• AmerAsia EB5 Regional Center SF, LLC (California)
• American Investment Fund Regional Center, LLC (Oregon, Washington): www.aif-rc.com
• Invest Atlanta Regional Center (Georgia): www.investatlantarc.com
• KOIT Global Investments (Indiana, Kentucky, Ohio, Tennessee): www.koitglobal.com
• Southern California Investments Regional Center (California)
• Sun Island Regional Center (California)
• The Flame Regional Center, LLC (New Mexico, Texas)

Renamed:

• Montana Energy Regional Center LLC (former name USA Montana Energy Regional Center) (Montana)

New Terminations:

• Resource Regional Center Michigan, LLC (Michigan) Terminated 8/31/2016

2015 Visa Statistics, RC Termination, SEC Action, New RCs

2015 EB-5 Visa Statistics

Update: The corrected summary data table can be found in my 3/7/2016 post 2015 Visa Statistics by Country.

Other Items of Note

• SEC Action on Attorneys: We’ve known for months that the SEC has been pursuing a crack-down on unlicensed persons acting as unregistered brokers, and specifically: immigration attorneys who take compensation for selling EB-5 investors on projects, despite lacking qualifications and licensure to give investment advice. Here is a copy of the SEC’s detailed complaint against one law office: SEC v. Hui Feng and Law Offices of Feng & Associates P.C. This 7/12/2015 article in Mondo Visione lists seven other individuals and firms who have also settled enforcement actions with the SEC, and links to copies of the Cease and Desist order for each. Honestly, I feared to see a lot more names on this list, but perhaps the SEC is starting with a warning shot and giving time for others to get their affairs in order. The detailed Feng complaint is good reading for anyone who receives or pays commissions for selling EB-5 investments, as the SEC goes into detail about what exactly was wrong and why it was wrong in the Feng case.
• Regional Center Termination: One of the Regional Centers terminated in 2015 was brave enough to fight back, and now we can read about its case in the Administrative Appeals Office decision Matter of K-R-C, LLC, dated November 17, 2015. AAO dismissed the appeal, as nearly always happens, but it’s interesting to see what kind of evidence USCIS considered significant, the issues judged to be problematic, and the timeline of USCIS’s interactions with the Regional Center. A moral of this denial, as with so many other cases anatomized by the AAO, is the overwhelming importance of clear and clean paperwork. The case focuses on little things like how expenditures were coded on this or that document and how statements were worded on this or that filing and whether the proper reports were made at the proper time. This denial decision doesn’t go so far as trying to prove problems with the business itself, but terminates the RC based on issues apparent in the paperwork describing the business. Spend good money on your secretaries and bookkeepers and document preparers, because their humble work pushing papers and keeping numbers in order and documents in line could prove essential.
• I-829 Approvals and Denials: I don’t expect anyone besides Mr. Whalen to click on this link, but FYI a very heavily redacted file titled I-829 RFEs, denials and approvals for NY and FL during 2009-2010 has appeared in the USCIS FOIA Reading Room in the Employment Based Petitions category. Connoisseurs may be interested in reviewing the I-829 RFE template used in 2009-2010 and seeing which lawyers were filing I-829 back then.
• Legislative Update: Whatever I hear, I add to the first paragraph of my previous post.

New Regional Centers
Additions to the USCIS Regional Center List, 12/03/2015 to 12/08/2015

• LCR Atlantic Gulf Regional Center (Florida, Georgia) www.lcrcapital.com
• Southern California EB-5 Regional Center, LLC (California)

NYU article, 2015 Q2 Processing Stats, May 5 AAO Killer, New RCs

NYU Article
We now have a final version of the paper “A Roadmap to the Use of EB-5 Capital: An Alternative Financing Tool for Commercial Real Estate Projects” (May 22, 2015) by Professor Jeanne Calderon, Esq. and Guest Lecturer Gary Friedland, Esq. of the NYU Stern School of Business. For real estate developers considering EB-5, this paper is valuable for the database of examples alone, not to mention 70 pages that carefully explain how the program can work for real estate projects. The authors tell me that their project database with ongoing updates will be posted on the NYU Stern School of Business site.

2015 Q2 Processing Stats
USCIS has finally posted official EB-5 petition processing stats for Q2 2015. It’s wonderful to see that IPO is getting up to speed on I-829 processing while also increasing I-526 volumes. Meanwhile, note that volume of petition receipts has fallen each quarter this year.

2015 AAO Decisions on I-526 Cases
So far USCIS has posted four 2015 AAO decisions on appeals of denied I-526 petitions, including three sleepers and a bombshell. APR012015_01B7203 briefly remands the appeal to IPO in light of a court settlement, APR032015_01B7203 comes to an apparently reasonable conclusion that the business plan was not credible and waxes for several pages on “material misrepresentations” and their consequences, MAY082015_01B7203 dissects source of funds problems, and MAY052015_01B7203 pursues a blindly doctrinaire line on the requirement that “the petitioner must demonstrate eligibility for the visa petition at the time of filing.” In the MAY052015_01B7203 case, the offering memorandum filed with the original I-526 had a sentence that USCIS judged an impermissible redemption agreement. All investors signed and submitted an Agreement of Waiver to remove that sentence, and USCIS/the AAO didn’t dispute that the OM+waiver was now compliant but said that the petition still needed to be denied because the waiver post-dated I-526 filing and therefore the petitioner wasn’t technically eligible at the time of filing. This point is fair to the letter of the law, but one wonders, why decide to pound this technicality?  The petitioner did not include evidence of non-EB-5 capital commitments in the first petition filed in 2012, but duly provided the evidence when USCIS got around to requesting it in 2013. But USCIS/the AAO declined to credit the commitment letters provided in part because they post-dated the original I-526 filing. If this standard were applied fairly to all EB-5 cases – if no petitioner could file unless all other funding had been documented as raised before he filed – then multiple-EB-5 investor deals (most of the EB-5 program) would become next to impossible. Further, EB-5 would be limited to the projects that can and are willing to get all the conventional funding they need in the bank one to two years before they can hope to receive EB-5 investment (considering USCIS’s long I-526 processing times, and the common use of EB-5 escrows contingent upon I-526 approvals). In other words, EB-5 would be limited to projects that don’t need EB-5; that can take out their bank loans and go to work right away before investors even file I-526 and regardless of what happens with the I-526 petitions. The AAO decision hammers this point even further in the section that tries to apply the standard that “simply formulating an idea for future business activity, without taking any meaningful concrete action, is similarly insufficient for a petitioner to meet the at-risk requirement.” Specifically, the AAO/USCIS decided that the petitioner had not placed the required amount of capital at risk in part because the contractors who had been engaged to build the subject assisted living facility had not actually started work before the investor filed I-526. Naturally the petitioner needs to show more than a general idea for a future business, but this decision seems arbitrary and unreasonable in its application of the requirement. The business owner says “yes, here are the meaningful concrete actions we have taken” and the AAO lawyer says “no, I don’t think those qualify as a meaningful concrete action; you should’ve gone further” – what is this but an arbitrary judgment made by someone with no clear metric and no claim to qualification to assess the stages in establishing various types of business? And where is the acknowledgement of the one to two-year spanner that USCIS review puts into any development plan? And what would this mean, if applied fairly to all? Again, EB-5 would be limited to 1) projects that don’t actually need EB-5 investment, since they would be required to fully mature prior to/without it; and/or 2) investors who don’t really care about the EB-5 visa, such that they can develop projects well in advance of and independent of the fate of their EB-5 petitions. I think I’m upset about this case partly because it appears to involve the kind of business that many people would like the EB-5 program to support. EB-5 petitioners were providing about half of the capital needed to fund small assisted living facilities in Texas – a business that looks like it could have provided jobs in areas of genuine need and might not have gone forward without the EB-5 investment. Why press interpretations of the regulations that knock out this kind of investment, while further privileging deals that just use EB-5 to take out a few million of existing financing for some multimillion building project that was going ahead anyway? Someone is not thinking very carefully.

New Regional Centers
Additions to the USCIS Regional Center List, 5/21/2015 to 6/1/2015

• U.S. Investment Regional Center, LLC (Arizona): usirceb5.com
• Alexico Los Angeles Regional Center, LLC (California)
• California Blue Sky Regional Center, LLC (California): Designation Letter
• California Investment Regional Center, LLC (California): www.eb5-circ.com
• Economic Development & Investment Group LLLP (California)
• Gateway California Regional Center (California): www.gatewayeb5.com
• Western Pacific Regional Center, LLC (California, Oregon, Washington)
• USEGF Florida Regional Center (Florida)
• Advantage America Hawaii Regional Center, LLC (Hawaii): www.aaeb5.com
• GO USA EB-5 Regional Center, LLC (Illinois): www.gousaeb5.com
• American Regional Center-Las Vegas, LLC (Nevada)
• Century New York City Regional Center (New York): www.centurynyceb5.com
• Land of Sky Regional Center, LLC (North Carolina, Tennessee): www.landofskyregionalcenter.com
• Ohio Lakeside Regional Investment Center (Ohio): www.uslakesideeb5.com
• The Lawrence Economic Development Corporation (Ohio): www.lawrencecountyohio.org
• JMIR Texas Mega Metro Regional Center, LLC (Texas)
• Washington Foreign Investment Management Group, LLC (Washington): www.eb5wfimg.com

FY2014 Q2 EB-5 Petition Data, Material Change AAO Decisions, New RCs (AR, CA, CT, DC, FL, ID, IL, IN, MD, MI, NJ, NV, NY, PA, TN, TX, VA, WV, UT, WI)

The USCIS Immigration and Citizenship Data page has been updated again with data for I-526 and I-829 Petitions processed in the second quarter of Fiscal Year 2014 (January to March). Once again, here are my little charts illustrating how the numbers compare with previous quarters.

I-526 processing volumes show modest increase overall, but below last quarter’s spike and still nowhere near Mr. Colucci’s goal of having the number of processed petitions at least exceed the number of petitions received each week. I-829s, on the other hand, flew off the shelf in Q2 – maybe because they’re all the California EB-5 team has to work on as of February? We’ll see how the processing story continues to unfold in coming quarters.

USCIS continues to post 2014 Administrative Appeals Office decisions on EB-5 cases. APR232014_01B7203 and MAY122014_01B7203 are interesting as case studies of the much-misunderstood material change issue. People tend to panic that “material change” means that one can’t at any time deviate from any point of a business plan submitted to USCIS. The May 30, 2013 EB-5 Policy Memo and Matter of Izummi don’t say that, however. USCIS policy focuses on the period prior to I-526 approval and the problem of petitioners who, having filed an I-526 Petition that doesn’t demonstrate eligibility for EB-5 visa benefits, respond to Requests for Evidence with a new set of facts, materially changing the proposal under which the original petition attempted to qualify. The USCIS position is that the petitioner must demonstrate eligibility for the visa petition at the time filing, the petitioner cannot secure a priority date based on future events, and USCIS cannot consider facts that only came into being subsequent to the filing of the petition. For example, the petitioner in APR232014_01B7203 invested through a loan model with indirect job creation, which a non-Regional Center investor may not do, and then, in response to an RFE, tried to change track and present USCIS with a new and different business structure and investment terms. The AAO agreed that: “Purchase and termination of ___ in response to the director’s request for evidence in order to meet the direct job creation requirements reflects a material deviation from the business structure claimed at the initial filing of the petition. The business structure change constitutes an effort to make an apparently deficient petition conform to users and regulatory requirements. Therefore, users must analyze the petition only on the basis of the original claims.” In the MAY122014_01B7203 case, the petitioner’s problem was that “at the time of filing, he had invested only $105,000 and had not, at that time, properly committed the balance of the required investment with a secured note or agreement.” The moral of the material change story is to get your ducks in a row before filing an I-526 Petition. Don’t just throw something together and file it, assuming that the worst case scenario is that USCIS will send Requests for Evidence giving you a chance to go back and forth supplying new information and fixing problems until the petition is finally approvable. The worst case scenario is that the content of that original I-526 would need such material changes to become approvable that USCIS will say (to paraphrase): Forget it. This filing was crap, and if you have new facts and a new story now then you can go back to square one and file a new petition for us to consider. (For the official statement, see pages 24 to 27 of the EB-5 Adjudications Policy memo.)

The USCIS Regional Center list continues to expand by leaps and bounds, reflecting hard work by the USCIS Investor Program Office and adding to a crowded field. We’re continuing to see many multi-state RCs and many RCs associated with operators who control multiple RCs.

Additions to the USCIS Regional Center List 5/6/2014 to 5/27/2014

• Northern Mississippi Regional Center, LLC (Arkansas, Mississippi, Tennessee)
• Beverly Hills Housing Group, LLC (California)
• California Alternative Energy Regional Center, LLC (California)
• East Plumas County Regional Center, LLC (California)
• Group I Regional Center, LLC (California)
• USA Regional Center, LLC (California)
• LCR Overseas Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
• TBC Washington DC Area Regional Center, LLC (District of Columbia, Maryland, Virginia, West Virginia)
• City of Miami Regional Center (Florida)
• United States Growth Fund, LLC (Florida)
• Westgate Orlando Regional Center, LLC (Florida)
• JI Northern Nevada Regional Center, LLC (Idaho, Utah, Nevada)
• Freedom Partners Regional Center LLC (Illinois, Indiana, Wisconsin)
• Live in America Chicago Regional Center, LLC (Illinois, Indiana, Wisconsin)
• Civitas Las Vegas Regional Center (Nevada)
• Corsario New York Metro Regional Center, LLC (New Jersey, New York)
• New York EB-5 Regional Center, LLC (New Jersey, New York, Pennsylvania)
• Civitas Rio Grande Regional Center (Texas)
• Texas Growth Fund Regional Center, LLC (Texas)

What’s New (processing times, statistics, legislation, AAO deference decision, and new RCs in CA, FL, ME, NY, WA, WI)

Processing Times: As promised in the 2/26 EB-5 stakeholder meeting, a new section has been added to the USCIS Processing Time Information page. Now, instead of selecting “CSC – California Service Center” from the dropdown menu at the bottom of the page, select “IPO Processing Dates” button to see processing times for I-526 and I-829 (with I-924 promised to appear any day now). The news still isn’t good (indicating that as of January, IPO was working on I-526s filed April 2013 and I-829s filed May 2012), but at least it’s easy to check.

EB-5 Petition and Visa Statistics: This week USCIS updated its Immigration and Citizenship Data page with reports on I-526 and I-829 adjudications through Q4 2013. The stats show that USCIS made decisions on fewer EB-5 petitions overall in FY2013 than it did in FY2012, despite an increasing number of receipts. On the bright side, the second half of FY2013 had a significantly higher volume than the first half, particularly for I-526 adjudications, so we can hope for a continuing upward trend. On the dark side, pending petitions topped 7,000 for I-526 in 2013. For visa statistics, note that the State Department has reorganized its website, with the annual Report of the Visa Office from 2000 to 2013 now collected on one Visa Statistics page. To see the EB-5 visa numbers (itemized by Country of investor origin) for any year, open that year’s report and visit Section V. Part 3. For statistics related to the volume, use, and impacts of EB-5 investment, note that IIUSA has published a sneak peek of data highlights from the IIUSA-commissioned 2012 Economic Impacts Report, and will be featuring exclusive new program data in its forthcoming edition of the Regional Center Business Journal.

Legislation: The House is talking about EB-5 again, with a new bill proposed this month (The American Entrepreneurship and Investment Act of 2014) that would permanently authorize and make some modifications to the EB-5 program. See Laura Reiff’s post “House Member Introduces Bi-Partisan Immigration Legislation to Enhance and Augment the EB-5 Regional Center Program”

New AAO Decision: USCIS has uploaded another 2013 AAO decision (DEC302013_01B7203) on a Regional Center case in which “the AAO remands the matter to the chief for a new decision that explains its compliance with the May 30, 2013 Policy Memorandum.” The AAO found that “the chief did not explain why the economic impact analyses filed in support of the instant petition were not afforded due deference.” The decision requires USCIS to support its determination that deference is not warranted by providing examples of underlying change to material facts between the impact analyses supporting the approved Regional Center application and the denied I-526 petition. (See also SEP232013_01B7203, another deference-related decision on a different Regional Center case.)

New Regional Centers 3/6/2014 to 3/18/2014

• American Dream Fund San Francisco Regional Center, LLC (California)
• Charter Square Regional Center, LLC (California)
• Golden State Regional Center (California)
• San Diego Regional Center, LLC (California)
• SOBE EB5 Regional Center, LLC (Florida) USCIS Designation Letter with Exemplar Approval
• New England Center for Business Development, LLC (Maine)
• Prime Regional Center, LLC (New York)
• American NW Regional Center, LLC (Washington)
• Green Energy Partners Central Wisconsin Regional Center, LP (Wisconsin)