Ombudsman on new RFE and NOID policy, visa timing, RC list updates

New RFE and NOID Policy
Today is the effective date for the new USCIS policy memorandum on issuance of RFEs and NOIDs. Basically, the memo expands an adjudicator’s discretion to simply deny a petition, without first issuing an RFE or NOID to ask questions or request additional evidence. The policy since 2013 has been that straight denials were only allowed for statutory denials – i.e. when there was no possibility that the deficiency could be cured by submission of additional evidence. The new policy opens new ground for straight denial based on failure to establish eligibility based on lack of required initial evidence. The memo says that this is designed to “encourage applicants, petitioners, and requestors to be diligent in collecting and submitting required evidence,” and is “not intended to penalize filers for innocent mistakes or misunderstandings of evidentiary requirements.”

I listened into a Ombudsman’s teleconference on September 6, and heard representatives from USCIS answer questions about the memo. (UPDATE: Here are official notes from the engagement.) The answers indicated that the Office of Policy and Strategy, at least, seems fuzzy on what constitutes “required initial evidence” and “innocent mistakes or misunderstandings.” “Pages left on the copier” was the one example given of an innocent mistake. No examples of innocent misunderstandings – though USCIS clarified that having an attorney or not wouldn’t be a factor. In general, “required initial evidence” means evidence as required by statute, the regulations, and form instructions. But what does it mean specifically? Certainly in EB-5, we see a lot of variation among lawyers and adjudicators in their interpretation of the specific documents required in various situations to satisfy forms and regulations. Now adjudicators will be free to indulge their discretion to interpret requirements, with no chance for response before denial. Meanwhile, lawyers will likely start clogging the system with kitchen sink petitions that throw in every possible document and page in case it’s something that someone might want to see.

On the Ombudsman call, USCIS confusingly promised that they would be publishing “optional checklists of required initial evidence”(?) on September 11. If that’s happened for EB-5 yet, I can’t find it. Last year, USCIS published a suggested order of documentation for each EB-5 form, and two distinct sets of filing tips for each form. (These are on a phantom Resources page not linked to menus on the USCIS website.) The specific suggestions are helpful but not applicable to every case, so I hope they won’t end up getting treated as optionalrequired evidence. But who knows what adjudicators make of all this guidance. USCIS told the Ombudsman that adjudicators had received one day of training on the new policy, and may or may not have supervisory review for denials under the new policy. As before, adjudicators are supposed to fully explain the reasons for any denial in the denial notice, and petitioners have the same appeals recourse as before.

Response to Policy Manual Updates
Anyone not pleased about the August 24 Policy Manual update on Regional Center geographic area will appreciate the points made forcefully by AILA in its Comments on USCIS Policy Manual Guidance on the Geographic Area of Regional Centers (September 9, 2018). AILA dissects the policy itself and the suboptimal process behind it.

Gap between I-526 approval and visa allocation
I realize that my series of timing posts is missing an important piece: analysis of the steps and time factors (for countries with no cut-off date yet) between receiving the Form I-797, Approval Notice for the I-526 and claiming an EB-5 visa number. Especially Indians are trying to calculate: if I can count on receiving I-526 adjudication in the next few weeks, can I count on getting allocated a visa number in the advance of the Visa Bulletin giving a cut-off date for India? The point at which the visa number actually gets allocated, and the factors/timing between I-526 approval and that point, vary between I-485 and consular processing, and I don’t understand it all yet. But potential investors should include this in discussions with counsel, because delays can be considerable for consular processing anyway. I’m hearing reports of USCIS taking at least 3+ months and even 8+ months just to forward I-526 approvals to the National Visa Center. Ironically, it seems that the faster USCIS adjudicates I-526, the more it drags its feet on advancing that approval to the next stage. But this is a developing situation, and I have limited examples. Here is my background reading list so far FYI. Please email me any additional helpful articles and current timing information.

SEC Action
In recent years, the SEC has set examples by bringing complaints against people who misappropriated and misused EB-5 investor money. In its latest EB-5 action, the SEC reinforces a message that it’s also wrong to aid and abet fraud by others. SEC Charges Former Raymond James Branch Manager for Facilitating a Massive EB-5 Fraud (September 6, 2018)

Regional Center List Changes
Additions to the USCIS Regional Center List, 08/21/2018 to 09/11/18

  • Regional Center of Washington State, LLC (Washington)

New Terminations

  • Encore Pennsylvania RC, LLC (EPRC) (Pennsylvania) Terminated 8/20/2018
  • Gulf Coast Funds Management, LLC (Mississippi) Terminated 8/30/2018
  • The Mid-American Regional Center, LLC (Indiana) Terminated 8/30/2018
  • Citizens Regional Center of Florida (Florida) Terminated 8/24/2018
  • Central Texas Regional Center (Texas) Terminated 8/21/2018
  • California Global Alliance Regional Center c/o Lewis C. Nelson & Sons, Inc. (California) Terminated 8/31/2018
  • Invest Midwest Regional Center (former name Civitas Indiana Regional Center) (Indiana) Terminated 8/21/2018
  • L Global Regional Center, LLC (California) Terminated 8/20/2018

WA Updates, Visa Numbers, Ombudsman, RC List Updates

Washington Updates

August passed with no final rule for EB-5 regulations. OMB has not even received the regulations for review. USCIS Director Cissna told Congress in June that he thought it would be tough to finalize the regs before Sept 30, 2018, and I don’t expect any action soon.

The Regional Center program is currently authorized through 9/30/2018, pursuant to Consolidated Appropriations Act, 2018, Division M—Extensions, Title II—Immigration Extensions (PDF p. 702). The RC program could be extended beyond 9/30 explicitly (if Congress passes a 2019 appropriations act that mentions RC program authorization) or implicitly (if Congresses passes a Continuing Resolution that would postpone the deadline for 2018 appropriations, including the program authorizations in Division M Title II). 9/13 Update: The House has introduced a Continuing Resolution that would extend a number of 2018 authorities and authorizations, including Division M Title II, to December 7, 2018. I’m adding status updates to my Washington Update page.

The 2019 appropriations could be a vehicle for other immigration changes as part of the Department of Homeland Security Appropriations segment. The version of the DHS Appropriations Act 2019 voted out of committee in the House includes the Yoder amendment, which would eliminate the per-country limit for EB-5 visas. The Senate version of 2019 DHS appropriations includes no such provision. It remains to be seen what final version will be negotiated by the House and Senate.

Here’s my understanding of the current status, based on this article: Congress faces September scramble on spending (September 3, 2018) The Hill.

  • Spending legislation comprises 12 individual appropriations bills for different agencies. In 2018 these were all packaged together in one “omnibus” with miscellaneous other content; this year, lawmakers want to avoid an omnibus, instead sending individual bills to the President.
  • Senators have passed 9 out of the 12 individual appropriations bills for 2019, but the House and Senate have yet to sort out in conference any of the differences in their bills.
  • One of the three appropriations bills that has not passed the Senate, and that lawmakers do not want to touch until after the midterm election, is the Department of Homeland Security Appropriations Act (which concerns border wall funding, among other contentious issues). A Continuing Resolution may be passed as a stopgap to defer votes on 2019 DHS appropriations (and likely at least two other spending bills) until after November. The stopgap is likely to go into December, but leadership hasn’t yet worked out the details of a short-term bill. If a CR is passed for DHS appropriations, what would defer a decision on the per-country cap to December. (A CR for DHS appropriations would not affect regional center authorization, since RC program authorization is not in the 2018 DHS appropriations act, but rather in a different part of the 2018 omnibus.)
  • In 2018 appropriations, regional center program authorization is not attached to any of the 12 individual appropriations bills, but is in a 13th section – Division M – devoted to program extensions/authorization. The Hill reports that “In the Senate, Appropriations Committee Chairman Shelby and Vice-Chair Patrick Leahy agreed to keep authorizing language out of the appropriations process.” I’m not sure what that means exactly. Could Division M be folded into a continuing resolution to December, which would also extend the RC program sunset date to December? I look forward to advocacy alerts from IIUSA.

Visa Numbers

USCIS has responded to the lawsuit by Chinese investors over the issue of family members in the EB-5 visa quota. This article discusses and analyses the USCIS response: The Government’s Poor Defense of Counting Derivatives against Immigration Quotas (August 27, 2018) Cato Institute

Meanwhile, people from India have an on-going challenge to try estimating the visa queue and cut-off date timing by tracking news on EB-5 visa demand among Indians. China models a hard lesson: do not wait to be surprised by the Visa Bulletin! The visa wait time for an Indian investor filing I-526 today does not depend on today’s Visa Bulletin but on future Visa Bulletins, which in turn depend on the number of other Indians currently filing and currently waiting for I-526 processing at USCIS. 700 visas/year * 1 investor petition/about 3 visas = about 233 investors that can be accommodated per year per country considering the 7% per-country limit. Two groups active in India — Can Am and LCR Partners – each report having over 200 Indian investors in 2018, which means about two-years-worth of EB-5 visas available to India claimed just this year through just two firms. Something to watch.  The timing for a Visa Bulletin cut-off date for India depends on USCIS’s speed in adjudicating Indian petitions and advancing them to the visa stage. (My post from June explains the process in more detail.)

New RFE and NOID Policy

I plan to listen in on an Ombudsman Teleconference on USCIS Policy Updates on the Issuance of RFEs and NOIDs  September 6, 2018, from 2:00pm to 3:00pm EDT. The policy updates are not specific to EB-5, but significant for those of us who help prepare I-526 paperwork. As background, see USCIS Issues Two New Policy Memoranda on Notices to Appear and Denials in Lieu of RFEs and NOIDs – What This Means for You (July 16, 2018) GT Alert

Due Diligence

I frequently get emails from investors asking for investment advice, which I can’t give. But I will say that I appreciated the points in this article How Transparent are EB-5 Project Managers (July 11, 2018). If I were a prospective EB-5 investor, account transparency, communication, and independent oversight would be major factors in my investment decision. See also Friedland & Calderon’s article EB-5 2.0: Can Account Transparency Save the Program? (Draft December 6, 2016).

Updates from USCIS

After having hosted EB-5 engagements almost quarterly since 2010, USCIS is now on track to go an entire year with no EB-5 stakeholder meeting. Does this relate to leadership turnover at IPO, I wonder? A wish not to discuss the unfinalized regs, unwritten redeployment policy, and fluctuating processing times? One suspects that no news isn’t good news. Please talk to us, IPO. Maybe we can help.

Regional Center List Changes

Additions to the USCIS Regional Center List, 08/02/2018 to 08/21/2018

  • APRC Mesa Verde, LLC (Colorado)

New Terminations

  • APIC Regional Center, LLC (Oregon) Terminated 8/8/2018
  • Build America Capital Partners Regional Center LLC (California) Terminated 7/31/2018
  • Washington State Regional Center (Washington) Terminated 7/31/2018
  • American Bridge Seattle Regional Center, LLC (Washington) Terminated 8/1/2018
  • Saipan Regional Investment Center, LLC (Commonwealth of Northern Marianas Islands) Terminated 8/8/2018
  • American Altin Regional Center (California) Terminated 8/8/2018
  • Great Ocean Regional Center (Washington) Terminated 7/30/2018
  • Future Resources, Inc. (California) Terminated 8/15/2018
  • North American Regional Center (New Jersey, New York, Pennsylvania) Terminated 8/2/2018
  • Build America Fund 1, LLC (California) Terminated 8/9/2018
  • California International Regional Center LLC (California) Terminated 7/10/2018

RC Designation and Terminations, SEC (Palm House), RC List Updates

Regional Center Terminations

USCIS has now posted notices for regional centers terminated through March 2018, and I’ve added them to my termination log. Now we know the reasons behind about two thirds of the 250 regional center terminations to date.

USCIS has framed its activity in terminating regional centers as an integrity measure, but in fact only 11% of terminations so far have been due to integrity problems. The majority of terminations have been because (1) the regional center has not secured EB-5 investment in the past three or more years, and/or (2) USCIS did not receive the regional center’s Form I-924A annual report and fee on time for the most recent year.

The letters themselves are interesting for discussion of a topic not fully explained by the regulations or policy: what does it mean to promote economic growth? What must a regional center do, exactly, to justify its continued existence? How can the definition of “failure to promote economic growth” be stretched to cover the various reasons USCIS might want to terminate a regional center in practice?

A few noteworthy letters from the most recent batch posted on the USCIS website:

  • Some might see Lansing Economic Development Corporation Regional Center as a model of regional center worth: the economic development agency of a distressed city using EB-5 as a tool in its economic development toolkit. This development agency reported that it promoted the EB-5 option in multiple trips to India, China, Italy, and throughout Europe, and offered EB-5 as an option to all development projects in Lansing. However, USCIS found that “While these activities are necessary for the continued operation of any regional center in the EB-5 Program, it does not show that the Regional Center has engaged in activities that promote economic growth as understood under the EB-5 Program. Specifically, these actions have not resulted in increased export sales, improved regional productivity, job creation, or increased domestic capital investment in the Regional Center’s designated geographic area.” Whatever its promotional activities, the regional center had not yet secured any EB-5 investment, and its potential projects did not include a shovel-ready project certain to use EB-5 investment. Therefore “USClS concludes that the Regional Center no longer serves the purpose of promoting economic growth.”
  • Live in America-Midwest Regional Center is an example of an as-yet inactive regional center that’s part of an active network. USCIS issued the RC a Notice of Intent to Terminate for three years of I-924A that did not report any EB-5 investment. The Regional Center countered by pointing to successful projects sponsored by other regional centers in the Live in America network, arguing that this demonstrates LIA’s proven ability to get projects done, and potential to promote economic growth in the regional center geography. The RC indicated that is exploring and actively seeking investment opportunities,  has met with EB-5 project candidates, and has entered into strategic partnerships. USCIS responded that the RC cannot rely on evidence of projects outside its approved geographic area, and that the future plans described are merely “future aspirational goals,” and do not count as “actually engaged in the promotion of economic growth.”  Having an operator that’s been demonstrably successful in promoting economic growth did not save Live in America-Midwest Regional Center from termination. Sorry, Minnesota! The Midwest has had any regional centers at all thanks in part to serial regional center operators who can afford to give low-profile geographies a chance because they also have feet in New York and California. But USCIS appears less willing to give the Midwest a chance. Attract EB-5 investors within three years (or at least, get term sheets and file an I-924 amendment) or thy regional center designation shall be terminated.
  • Charlotte Harbor Regional Center is a cautionary tale of what can happen when a regional center does not have copies of documents submitted by its investors to USCIS in I-526 petitions.
  • USCIS terminated Greater Houston Investment Center, LLC for inactivity, and declined what seems to me a sensible request: the option to reactivate designation if a project opportunity presents itself in the future.
  • America’s Regional Center was terminated in 2017 for lack of activity (no investors in 3 years), but was restored on July 5, 2018 to the list of approved regional centers. No appeal has been published, so I don’t know how the RC overcame the termination decision.
  • Powerdyne Regional Center‘s mistake was to hire a President who turned out to be a wanted man in China.
  • These regional centers presented USCIS with evidence of EB-5 projects in the pipeline, but USCIS argued that the projects were insufficiently advanced or showed insufficient commitment to EB-5 financing. Liberty South Regional Center, EB5 Memphis Regional Center, LLC, North Country EB-5 Regional Center, LLC, Guam Strategic Development Regional Center, Immigration Funds, LLC
  • New Orleans Mayors Office of Economic Development got a 36-page termination notice that fits six termination reasons under the general umbrella of failure to serve the purpose of promoting economic growth. These are: lack of activity (only one project since 2008, and no new job creation/investment since 2013), lack of progress in the construction of the regional center’s one project, doubt about the legitimacy and viability of the portfolio business model used, material misrepresentations that cast doubt on the regional center’s legitimacy (Form I-924A reports that were inconsistent with each other and evidence that USCIS determined independently), improper use of EB-5 capital that casts doubt in investor’s ability with EB-5 requirements, and diversion of EB-5 funds (outside of the regional center geography, and inconsistent with the job creation purpose).  Generally the termination comes as no surprise, since the New Orleans Mayor’s Office made the mistake of hiring operators for their regional center who proceeded to loot investor funds (or so alleged investors as early as 2012 and the Department of Justice in 2018). USCIS did not consider the Mayor’s suggestion that her office might continue to use EB-5 as a tool for job creation and growth in New Orleans under a different operator. The decision includes this paragraph that reads like policy, though it’s not written elsewhere,
    • The reasons why a regional center may no longer serve the purpose of promoting economic growth are varied and “extend beyond inactivity on the part of a regional center.” 75 FR 58962. For example, depending on the facts, a regional center that takes actions that undermine investors’ ability to comply with EB-5 statutory and regulatory requirements such that investors cannot obtain EB-5 classification through investment in the regional center may no longer serve the purpose of promoting economic growth and may subvert a purpose of Section 610(a)-(b) of the Appropriations Act, which provides for regional centers as a vehicle to concentrate pooled investment in defined economic zones by setting aside visas for aliens classified under INA 203(b)(5). Likewise, a regional center that fails to engage in proper monitoring and oversight of the capital investment activities and jobs created or maintained under the sponsorship of the regional center may no longer serve the purpose of promoting economic growth in compliance with the Program and its authorities.

Most of the termination letters have little discussion, but appear to reflect a simple bright line: you didn’t attract an EB-5 investor in three years and thus are not promoting economic growth and lose your designation. This line can look reasonable, but I also see it threatening the regional center program’s basic potential as an economic tool. Consider that according to a list of investor petition approvals by regional center (briefly published by USCIS in June 2017), only 328 out of around a thousand regional centers had had one or more I-526 adjudicated from 2014 to 2017. Of those 328 regional centers, the majority were located in New York, California, Florida, Washington D.C., Atlanta, Chicago, Seattle, or Texas. If USCIS keeps terminating every regional center that’s not immediately popular with investors and active projects, the program will soon be left with few regional centers (and thus little opportunity to use the program) outside New York, California, Florida, Washington D.C., Atlanta, Chicago, Seattle, and Texas. That certainly wouldn’t match Congressional intent for economic impact. And how does it even benefit USCIS? How much would it cost USCIS to keep the generally blameless Economic Development Corporation of Lansing, Michigan on the list of regional centers, even if that RC doesn’t have EB-5 investors yet? (On the other hand, this position paper on regional center terminations makes the case that inactive RCs burden the system and are incompatible with the RC program as defined.)

SEC Action

The SEC has announced its first EB-5 fraud action this year: Securities and Exchange Commission v. Palm House Hotel LLLP, et al., No. 9:18-civ-81038 (S.D. Fla. filed August 3, 2018).  The SEC is rather late to the party, following United States of America v. Robert V. Matthews and Leslie R. Evans (3/14/2018) and a civil suit filed by EB-5 investors in 2016. (Though not as late as USCIS, which has not terminated the regional center involved even as it hustled to terminate Lansing EDC.) The allegations are familiar: misappropriation of investor funds by people who arranged to have unfettered access to those funds. I note that the SEC’s list of defendants is much shorter than the list of defendants in the complaint by investors. The SEC identifies the regional center principals as responsible for misrepresentations, while investors also felt misled by the consultants and service providers involved.

Processing Times

USCIS updated the Processing Times page on August 1, with improvements for all EB-5 forms (-23 days for I-526, -5 days for I-829, and -63 days for I-924).

Washington Updates

As I hear anything new on the Yoder amendment with potential to remove per-country limits for EB-5, I add it to my previous post. Not that I have heard much. Since the explosion of conflicting comment on my post, perhaps others in EB-5 have learned better than to make statements on this topic. (Update: IIUSA has finally made a comment.) I guess that response has also been complicated by the difficulty of reading the amendment text; it appears that even Yoder and the House appropriations committee may not have initially understood what was actually in it. I hear that my reader comments are being noticed and appreciated, and I hope that those comments help inform discussions among the powers that be.

I keep an eye on www.reginfo.gov just in case EB-5 regulations should proceed after all to the review stage in time to be finalized in August 2018. But nothing there yet.

Regional Center List Changes

Additions to the USCIS Regional Center List, 7/16/2018 to 08/02/2018

  • Cypress Regional Center LLC (California)
  • Liberty Harbor Regional Center LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • Lighthouse Regional Center, LLC (Texas)
  • My Life Atlanta Regional Center, LLC (Georgia)
  • Rise Investment Management, LLC (Connecticut, New Jersey, New York)
  • Tinian EB-5 Regional Center, LLC (Commonwealth of Northern Marianas Islands)

New Terminations

  • Northeast Ohio Regional Center (Ohio) Terminated 7/18/2018
  • Nevada Development Fund LLC (Nevada) Terminated 7/12/2018
  • Americas Green Card Regional Center (Maine, Massachusetts, New Hampshire) Terminated 7/12/2018
  • Chicagoland Foreign Investment Group (CFIG) Regional Center (Illinois, Indiana, Michigan, Minnesota, Wisconsin) Terminated 7/16/2018
  • EB5 United West Regional Center, LLC (California) Terminated 7/27/2018
  • Fairhaven Capital Advisors American Samoa Regional Center Corp. (American Samoa)
  • Cal Pacific RC LLC (California) Terminated 7/16/2018

Updates (I-829, Ombudsman, debt arrangements, PM, conference, Vermont, RC list changes)

Processing Times
The USCIS page to Check Processing Times was updated last week with minor tweaks to the I-526 and I-924 time calculations, and bad news for I-829. Someone can inquire today about an I-829 petition “outside normal” processing times if he or she filed the I-829 petition 1,175 or more days ago. Statute mandates the service to make a decision on the I-829 within 90 days of the filing date or interview, but it’s currently taking three to four years to make a decision. IPO faces pressure from increased volume of filings and an increasingly tough process. Conditional green cards maxed out the limit starting in 2014/2015, and that surge began maturing to the conditions removal stage in 2016/2017. Even as I-829 filings increase in number, IPO has implemented several time-consuming integrity measures: in-person interviews of all I-829 petitioners, and site visits to 100% of job-creating entities in I-829 petitions. IPO attempted to address processing times problems in 2017 by creating a new team of economists and adjudicators specifically to handle I-829, but this team obviously needs help now. (This post copies emails sent by USCIS last month regarding I-829 receipt notices.)

The USCIS processing times report has received three significant updates since it launched in March. (The report has a daily minor update: to add one more day to the Case Inquiry Date.)

2018 Ombudsman Report

The CIS Ombudsman’s 2018 Annual Report to Congress is a well-researched, well-presented document that I’d be proud to have written. The 2017 report made waves in EB-5 because it mentioned the 10+ year visa wait for Chinese investors, and many people in the industry found it expedient to imply that we didn’t know about the wait before that report. The 2018 report offers fewer occasions for real or feigned surprise, but does provide a solid summing up of the EB-5 program history and current status (page 48-56). I hope that Congress reads this report, as it gives a fair picture of challenges to EB-5 program effectiveness and integrity, and solid description and analysis of the substantial past, present, and planned steps taken to handle those challenges. Regarding the proposed EB-5 regulations, the Ombudsman makes a good point: “It remains to be seen whether these reforms will be sufficient to reassure those concerned about the increased oversight, or if they will have a chilling effect on participation.”

For anyone who has had problems with USCIS case processing and thought of contacting the Ombudsman for help, pages 3-5 of the report gives a nice explanation of how the Ombudsman handles inquiries. And I appreciated the detailed discussion of background checks on pages 28-32 and 57-58.

Debt Arrangements
USCIS continues to deny I-526 petitions based on finding that they include impermissible debt arrangements, while the industry continues to fight back to clarify what “invest” and “at risk”  mean. This article presents arguments and distinctions that will be helpful to anyone in midst of the battle:

Other relevant resources that I’ve previously linked here:

Conference
Suzanne Lazicki will be at the 2018 EB-5 Investors Conference in Los Angeles next week. I’ll be speaking on a panel at 1 pm on July 23 (“The Right Fit – How Current and Future EB-5 Projects are Changing with the Market”), and available to meet in-person on July 23 and 24. Look for me to chat, or use this calendar to fix a time.

Policy Guidance
In a new Policy Memorandum dated July 13, 2018, USCIS Updates Policy Guidance for Certain Requests for Evidence and Notices of Intent to Deny. The memo, which will become effective on September 11, 2018, “provides guidance to USCIS adjudicators regarding their discretion to deny an application, petition, or request without first issuing a Request for Evidence (RFE) or Notice of Intent to Deny (NOID) when required initial evidence was not submitted or the evidence of record fails to establish eligibility.” This isn’t a major change, and not exclusive to EB-5, but a good reminder. Petitioners need to establish eligibility at the time of filing, and may not be able to depend on correcting major omissions in response to RFE.

Regional Center Termination
To date, USCIS has terminated 244 regional centers, mostly for inactivity, or for not filing the I-924A annual report. A handful have been terminated in connection with problems, including, last week, Vermont Agency of Commerce and Community Development. I’m particularly interested in the Vermont RC case, because it’s hard to imagine anyone doing more than Vermont has done to try to compensate for and recover from the oversights that allowed project fraud to occur under its watch. Vermont’s response to the Notice of Intent to Terminate challenged USCIS to be more precise about a regional center’s responsibilities for monitoring and oversight, and pointed out all the positive and responsible things the RC has done — including a plan to wind down the RC in an orderly manner that protects existing investors and prevents future problems. In response, USCIS makes that responsible plan a major plank in the denial decision: no future projects means failure to actively promote economic growth. Vermont plans to appeal. For more detail, see this VTDigger article, which ends with a link to the full USCIS termination notice.

Regional Center List Changes
Additions to the USCIS Regional Center List, 06/05/2018 to 7/16/2018.

  • Allstates QSR Regional Center, LLC (Connecticut, District of Columbia, Massachusetts, New York, Pennsylvania)
  • American Dream Group, LLC Regional Center (Washington)
  • Art District Los Angeles Regional Center, LLC (California)
  • Beresford Regional Center (California)
  • Best Tire Center Regional Center, LLC (Texas)
  • BridgeForth Southeastern Regional Center, LLC (Florida, Georgia, South Carolina, Tennessee)
  • Gateway South Florida Regional Center, LLC (Florida)
  • Keystone Great Lakes Regional Center, LLC: www.keystoneeb5.com (Illinois, Indiana, Wisconsin)
  • Retail Equity Partners Regional Center Texas, LLC (Texas)
  • U.S. Immigration Fund – CA, LLC (California)
  • Xocolatl Xperience Regional Center, Inc. (Florida)
  • Zhielo, LLC (Florida)

New Terminations:

  • Charter Square Regional Center, LLC (California) Terminated 7/10/2018
  • RGV EB-5 Regional Center (Texas) Terminated 7/10/2018
  • Vermont Agency of Commerce and Community Development (Vermont) Terminated 7/3/2018 USCIS Termination Notice
  • Idaho State Regional Center LLC (Idaho) Terminated 7/3/2018
  • White Lotus Group Regional Center (Iowa, Nebraska) Terminated 6/26/2018
  • Rota EB5 Regional Center (Commonwealth of Northern Marianas Islands) Terminated 6/21/2018
  • AmerAsia EB5 Regional Center SF, LLC (California) Terminated 6/11/2018
  • Utah Invest Regional Center, LLC (Utah) Terminated 7/3/2018
  • California Pacific Regional Center, Inc (California) Terminated 6/7/2018

Processing Report, Terminations, Regulations, RC List Changes

Processing Time Report Update

The processing times reports for EB-5 forms were updated on May 31, 2018 with new Estimated Time Ranges and new variables for calculating the Case Inquiry Date. Until this update, the reports had been constant since March 23, 2018.

Form I-526 Processing Time:
* Estimated Time Range changed to 20-25.5 months (previous report: 25-32.5 months)
* Case Inquiry Date changed to today’s date minus 761 days (previous report used -971 days)

Form I-829 Processing Time:
* Estimated Time Range changed to 29-37.5 months (previous report: 23-30 months)
* Case Inquiry Date changed to today’s date minus 1,121 days (previous report used -893 days)

Form I-924 Processing Time:
* Estimated Time Range changed to 19.5-25 months (previous report: 17-22.5 months)
* Case Inquiry Date changed to today’s date minus 746 days (previous report used -663 days)

My theory, supported by an informed-sounding blog commenter, is that USCIS recalculated the time ranges based on a dramatic drop in I-526 receipts and dramatic rise in I-829 receipts over the past few months. (The Immigration Data page has not yet been updated with FY2018 Q2 or Q3 data, so I’m not sure.) Alternatively, IPO might have decided to reallocate resources away from I-829 to I-526 adjudication, or the I-526 team might be on fire while the I-829 team struggles with something.

But it’s tough to interpret these reports. A processing time estimate could be either (1) forward-looking, “the average time it will take a petition filed today to get adjudicated” or (2) backward-looking, “the average time that petitions being processed today have been waiting.” It can’t be both because 1 and 2 are very different numbers, thanks to dramatic fluctuations in receipt numbers and changing processing capacity over time. But we don’t know which we’re getting with the USCIS processing time report. The “Case Inquiry Date” would logically be backward-looking, while the “Estimated Time Range” is forward-looking if, as I suspect, it’s calculated by dividing currently-pending petitions by current average rate of adjudication. But the report says that the Case Inquiry Date is based on the Estimated Time Range. But calculating a backward-looking estimate from a forward-looking estimate would be nonsense. So I don’t know what to think. (For everything else I know/don’t know about processing times, refer back to the post How Long Does I-526 Take? (III))

Considering the ambiguity (and the fact that the report, however it’s calculated, can evidently suddenly change by six months or more), better not rely on USCIS processing time information for major decision-making. Just one thing is clear: EB-5 petition processing times are too long, and fuel a number of the political and integrity threats that face EB-5 today.

Regional Center Terminations

The USCIS website has been updated with some additional termination notices for regional centers terminated through May 2017. I added the letters to my Termination Log, summarized in the following table.

The recent termination letters mainly cite failure to file a Form I-924A annual report and/or inactivity (i.e. no EB-5 investors in the last 3-5 years) as reasons for termination. They rarely mention derogatory evidence as a reason.

Examples:

Regulations

The indefatigable Senator Grassley continues to nip at the heels of the EB-5 regulations. Today he sent a letter to President Trump with this complaint: “As I mentioned to you yesterday afternoon, certain EB-5 interest groups are telling investors they have ‘bought off the White House’ and that your Administration will never allow the EB-5 regulations to take effect. These comments are very disturbing, and undermine the American people’s faith in your ability to restore integrity to our immigration system.” Earlier this week he sent a letter to DHS urging “It is past time for your Department to publish the modernization rules. I have received reports that certain industry groups believe the White House will never allow the regulations to go into effect. Please confirm or deny this allegation, provide my office with an update on the status of these rules, and any impediments to their finalization.” (FYI I don’t know to which”certain industry group” Senator Grassley refers. To the extent that I’ve observed questionable marketing around the regulations, it’s people trying to hustle prospects into investing now by claiming that the possible August 2018 date for final action on regulations is actually a hard and firm August 2018 deadline to invest under current rules — while omitting to mention that final action date doesn’t mean effective date, and the OMB Unified Agenda dates are not guaranteed.)

I used to read between the lines of Senator Grassley’s legislative proposals that he wished to make EB-5 safe, legal, and rare, but now he seems ready to settle for just making it rare. Because the proposed EB-5 regulations (at least, the RIN: 1615-AC07 possibly on schedule to be finalized in August) do not in fact address the integrity or security concerns that the Senator raises in his letters; their major impact would be to dampen demand by increasing investment amounts.

I keep watching the OMB website to see when/whether the EB-5 regulations progress to the OMB review stage, but that hasn’t happened yet. Any status changes will be recorded on my Washington Updates page.

Regional Center List Changes

Additions to the USCIS Regional Center List, 05/25/2018 to 06/05/2018

  • 900 Regional Center LLC (Hawaii)
  • American Lending Center Arizona, LLC (Arizona): usa-rc.com
  • Birmingham Alabama Regional Center, LLC (Alabama)
  • Discovery California, LLC (California)
  • Gladstone Regional Center, LLC (California)
  • Golden Gateway Regional Center LLC (California)
  • Napa Valley Regional Center (California)
  • Northeast EB5 Regional Center, LLC (District of Columbia, Maryland, New Jersey, New York, Pennsylvania)
  • Principal Regional Center, LLC (Washington)
  • Southeast EB5 Regional Center, LLC (Alabama, Florida, Georgia, Louisiana, Mississippi)
  • West Coast EB5 Regional Center, LLC (California, Oregon, Washington)

New Terminations:

  • Encore Wash D.C. RC, LLC (District of Columbia, Maryland, Virginia) Terminated 5/25/2018
  • Colorado Headwaters RC, LLC (Colorado) Terminated 5/24/2018
  • Faustus Capital LLC (California) Terminated 5/24/2018
  • Marianas EB5 Regional Center (Commonwealth of Northern Marianas Islands) Terminated 5/29/2018

AAO Decisions (termination, exemplar approval, bridge financing), Other Updates, RC List Changes

AAO Decisions

The Administrative Appeals Office continues to issue non-precedent decisions on appeals of denied EB-5 petitions and applications. The cases give insight into recent USCIS thinking on sensitive topics: material change, deference to prior approvals, regional center oversight responsibilities, regional center activity requirements, bridge financing, and evidentiary requirements.

  • MAY032018_01K1610 (Matter of L-V-E-I, LLC) dismisses the appeal of a regional center that USCIS terminated for inactivity. The applicant successfully demonstrated that its principals have remained actively engaged in seeking EB-5 projects, have been carefully reviewing potential proposals, and have participated in EB-5 conferences and networking. However, the applicant has not received any capital from EB-5 investors since its designation in 2011, and has not offered documentation confirming any currently-active EB-5 projects. AAO concluded that “in light of the above positive and negative indicators, the Applicant has not established that, on balance, it is continuing to promote economic growth.”
  • APR032018_01K1610 (Matter of A-G-R-C, LLC) and APR022018_01K1610 (Matter of W-F-R-C, LLC) sustain the appeals of two regional centers seeking exemplar approval for a project. USCIS cited multiple reasons for denying the exemplar requests, but the core concern seems to have been discomfort with the involvement of two regional centers in the same project (with a portion of EB-5 investors in the project sponsored by one regional center, and remaining investors by the other regional center). However, AAO countered that “The record included a sponsorship agreement that contained sufficient detail to explain how responsibilities and investors would be allocated amongst the two RCs.” AAO went on to determine that USCIS made several mistakes in its denial:
    • USCIS cited Form I-924A information in the denial, but “neither the regulations nor the form instructions predicate the adjudication of an amendment to a regional center’s designation upon a demonstration of consistency or accuracy in its own Form I-924A filings or in relation to those of another regional center.”
    • When USCIS determined that funds were not at risk in the JCE, it erroneously identified the JCE as the project DBA, which is just a name, not an entity.
    • USCIS concluded that EB-5 funds were not spent to develop the project because its site visit inspectors did not see construction underway, but AAO accepted that “applicant has provided permits and records indicating that the project has undertaken meaningful business activity.”
    • USCIS questioned the terms of non-EB-5 capital commitment, but AAO found that “Funds provided from sources other than EB-5 investors are not subject to the at-risk requirements in the regs.”
    • USCIS “opined that it was unlikely that NCE would raise the total amount of required foreign investor capital. He does not cite any evidence in the record to support this contention, nor do the regulations require the Applicant to demonstrate this ability.”
    • AAO agreed that the applicant overcame USCIS concerns about working capital as an input to the economic model, and inflation affecting the revenue estimate.

These cases reflect inconsistencies in EB-5 adjudications. USCIS denied exemplar I-526 amendment requests after having already approved eight investor I-526 petitions with the same project and documents (not to mention having reviewed the project in context of an initial regional center approval). Apparently, deference in EB-5 only goes one way: from exemplar to I-526, not the reverse. We wish that an approved actual I-526 petition could serve as de facto exemplar for future petitions involving the same project, but apparently it does not.

  • APR252018_01K1610 Matter of E-B-F-N-Y concerns a regional center whose amendment request for exemplar project approval was denied, based in part on a bridge financing arrangement. AAO agreed with USCIS and dismissed the appeal. The bridge financing arrangement was found to be unacceptable because the funds were made available to an entity other than the JCE entity, and therefore “The record does not show that the EB-5 capital would go towards the construction that the Applicant claims would provide the job creation required for foreign investors, violating the holding of Mauer of lzummi and the USCIS policy on bridge financing.” Moreover the arrangement did not qualify because it was not sufficiently “temporary,” since the loan in which the investors participate is a construction-to-perm loan that will eventually be considered permanent financing. The applicant attempted to clarify matters by providing new loan agreements, but AAO countered that “the Applicant’s introduction on appeal of new loan documents between the NCE and the JCE may constitute an impermissible material change.” USCIS’s emerging and as yet undeclared new policy on bridge financing has major implications for many EB-5 offerings. For additional discussion, see: A tide change in EB-5 bridge financing policy (April 23, 2018) by Kristal Ozmun and Adam Schaye and EB-5 Bridge Financing: A Study of Market-Driven Applications & Definitions (April 2018) by David Hirson, Nima Korpivaara, Phuong Le
  • APR242018_01B7203 (Matter of H-T-B-) concerns a regional center investor petition that was denied based on problems with the business plan: specifically, failure to link the plan to reality. USCIS doubted the project’s job creation potential because the plan was not grounded in evidence such as supply contracts, lease agreements, construction bids, permits, loan agreements, or analysis of competitors. Lacking such evidence, the plan was not considered comprehensive, credible, or  “any more reliable than hopeful speculation.” This is why the business plans I write bristle with footnotes citing verifiable sources.
  • MAY032018_01B7203 (Matter of Z-Y-) and MAY032018_02B7203 (Matter of W-W-) deny direct EB-5 petitioners who apparently had not read EB-5 policy.  USCIS/AAO remind them of longstanding rules: direct EB-5 investment and job creation must be in a single enterprise (the JCE must be the same entity as the NCE, or its wholly-owned subsidiary), part-time positions cannot be combined to create full-time positions, qualifying investment must be a contribution of capital directly from the investor personally, and job preservation claims require documenting the pre-investment financial condition and employment records of a business that meets the policy definition of “troubled.”  (FYI my Direct EB-5 FAQ page summarizes policy specific to direct EB-5.)

Other Updates

Regional Center List Changes
Meanwhile, I have hard work to update my regional center list as USCIS continues to designate and (mostly) terminate regional centers. 76 regional centers have been terminated so far in 2018, presumably mostly for inactivity. (But we don’t know for sure, since USCIS hasn’t updated the Termination Notices page since 2016.)

Additions to the USCIS Regional Center List, 04/10/2018 to 05/25/2018

  • Auric Ventures International Regional Center (Connecticut, New Jersey, New York, Pennsylvania): www.eb5rc.org
  • Formosa Gardens Regional Center, LLC (Florida)
  • Greystone EB5 Northwest RC (Oregon, Washington): www.greystoneeb5.com
  • Greystone EB5 West RC LLC (California, Nevada): www.greystoneeb5.com
  • K-Stone LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • LD Capital SE Regional Center, LLC (Alabama, Georgia, Tennessee): ldcbtusa.com/regional-centers/
  • Midwest Investment Fund, LLC (Indiana, Kentucky, Ohio)
  • My Life California and Nevada, LLC (California, Nevada)
  • Pan Enterprises Regional Center (California)
  • Seattle Tacoma Area Regional Center, LLC (Washington)
  • Strategic Capital Regional Center, LLC (Connecticut, New Jersey, New York)
  • Te-Enterprise LLC (Texas)
  • Texas Expanse, LLC (Texas)
  • Utah Global Investments, LLC (Utah): utahglobalinvestments.com

Regional Center Terminations, 04/10/2018 to 05/25/2018

  • Silver State Regional Center LLC (Nevada) Terminated 4/11/2018
  • LIGTT Regional Center (Louisiana, Mississippi) 4/18/2018 Terminated
  • Commonweaith of Puerto Rico Regional Center Corporation (Puerto Rico) Terminated 4/25/2018
  • SAA Cedisus EB-5 Projects – SW Indiana Regional Center, LLC (Indiana) Terminated 4/18/2018
  • Art District Los Angeles Regional Center Terminated, LLC Terminated 4/16/2018(California) Terminated
  • SPG Regional Center, LLC (California) Terminated 4/26/2018
  • Global America Regional Center (California) Terminated 4/27/2018
  • California Bond Finance Regional Center, LLC (California) Terminated 4/12/2018
  • Colorado Growth Fund, LLC (Colorado) Terminated 5/15/2018
  • Home Paradise Texas Regional Center, LLC (Oklahoma, Texas) Terminated 4/17/2018
  • Global Century (Houston) (Texas) Terminated 4/12/2018
  • American International Venture Fund – Oregon, LLC (Oregon) Terminated 4/19/2018
  • Central California Regional Center, LLC (California) Terminated 4/13/2018
  • ADC Colorado Regional Center, LLC (Colorado) Terminated 5/1/2018
  • East Coast Renewable Regional Center, LLC (New Jersey) Terminated 4/9/2018
  • Midwest Regional Center, Inc. (Kentucky) Terminated 4/5/2018
  • Ohio Lakeside Regional Investment Center (Ohio) Terminated 5/1/2018
  • TBC Washington DC Area Regional Center, LLC (District of Columbia, Maryland, Virginia, West Virginia) Terminated
  • American General Realty Advisors Regional Center (California) Terminated 4/20/2018
  • Liongate Regional Center, LLC (Washington) Terminated 4/27/2018
  • Altura Regional Center, LLC (California) Terminated 4/9/2018
  • Florida East Coast EB5 Regional Center LLC (former name United States Growth Fund, LLC) (Florida) Terminated 4/10/2018
  • Cornerstone Regional Center, Inc. (Alabama, Florida) Terminated 4/6/2018
  • New England Center for Business Development, LLC (Maine) Terminated 5/9/2018
  • Reside in America Puerto Rico, LLC (Puerto Rico) Terminated 5/1/2018
  • Greystone EB5 Southeast Regional Center LLC (former name Greystone Florida Regional Center LLC) (Florida) Terminated 4/13/2018
  • Washington Foreign Investment Management Group, LLC (Washington) Terminated 4/26/2018
  • QueensFort Capital Texas Regional Center, LLC (Texas) Terminated 4/27/2018
  • Landy Resources Management, LLC (North Dakota) Terminated 5/1/2018
  • Encore S. CA RC, LLC (California) Terminated 4/18/2018
  • One World Development Fund, Inc. (Texas) Terminated 4/12/2018
  • Encore Boston RC, LLC (Massachusetts) Terminated 4/18/2018
  • Pacific Northwest Regional Center (Washington) Terminated 4/5/2018
  • North Atlantic Regional Center, LLC (New Jersey, New York, Pennsylvania) Terminated 5/1/2018
  • Tacoma EB 5 Regional Center (Washington) Terminated 5/2/2018
  • Collegiate Regional Center LLC d/b/a Texas Collegiate Regional Center (Texas) Terminated 5/15/2018
  • QueensFort Capital California Regional Center, LLC (California) Terminated 4/12/2018
  • Ark of the Ozarks LLC (Arkansas) Terminated 4/5/2018
  • Energize-ECI EB-5 Visa Regional Center (Indiana) Terminated 5/9/2018
  • Iowa Department of Economic Development (IDED) (Iowa) Terminated 4/19/2018
  • 5 Starr Regional Center LLC (Oklahoma) Terminated 4/5/2018
  • South Dakota International Business Institute (SDIBI) (South Dakota) Terminated 5/11/2018
  • Regional Economic Development & Investment Group (California) Terminated 4/5/2018
  • New Energy Horizons Regional Center (California) Terminated 4/12/2018
  • Liberty EB5 Regional Center (Pennsylvania) Terminated 5/1/2018
  • American YiYo Regional Center (Georgia) Terminated 4/12/2018
  • Encore Washington/Oregon Regional Center, LLC (Oregon, Washington) Terminated 4/18/2018
  • Amaxi Regional Center, LLC (California) Terminated 5/1/2018

RC Authorization to 9/30/2018, Processing Times, New RCs

Regional Center Program Authorization

The last time Congress voted a significant regional center program extension was 2012. Since then, the program has been extended a few months at a time, in connection with government funding. This is now happening again with H.R.1625, the vehicle for the Consolidated Appropriations Act 2018, which was signed by the President today.  The text includes regional center program authorization to 9/30/2018 on PDF page 1759, as follows:

SEC. 204. Section 610(b) of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (8 U.S.C. 1153 note) shall be applied by substituting “September 30, 2018” for “September 30, 2015”

This language refers back to Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (Public Law 102-395) Section 610 (PDF page 47), which established the regional center program. The 2018 Appropriations Act does not include the EB-5 Reform Act, or other EB-5 changes. It just extends the borrowed time until we get a good piece of EB-5 legislation.

Processing Times

USCIS has attempted to clarify reporting for processing times, and succeeded in confusing me, at least, even more than before. Unfortunately I missed a webinar on this topic yesterday because even the emails were confusing, but here’s what I think I understand, having read the new pages at egov.uscis.gov/processing-times/ and egov.uscis.gov/processing-times/more-info, and used my spreadsheet to fiddle with the EB-5 form numbers in comparison with numbers in the old-style report.

USCIS has changed its method for calculating processing times for four forms: N-400, I-90, I-485, and I-751. The underlying method for calculating (and underlying reality behind) times for I-526, I-829, and I-924 has not changed. What’s different for the EB-5 forms is that USCIS now reports three pieces of information: a high and low month in an “estimated time range” and a “case inquiry date.” The low month in the time range corresponds to the date USCIS previously reported for “processing cases as of…” in the old-style report, while the high month multiplies that duration by 1.3, and the case inquiry date more-or-less corresponds to the high month. Apparently IPO doesn’t want people complaining that they’re outside of normal processing times until their cases are taking 130% longer than average. If you took part in the webinar and have additional insights or corrections, please share.

See also the OIG Report: USCIS Has Unclear Website Information and Unrealistic Time Goals for Adjudicating Green Card Applications

Visa Availability

The Visa Bulletin for April 2018 confirms that Vietnam is definitely up next month for a cut-off date based on oversubscription. With visa availability being the major political and practical factor for EB-5 today, I’ll be writing more about this soon.

Regional Center List Updates

Additions to the USCIS Regional Center List, 03/09/2018 to 03/19/2018:

  • 888 American Dream Projects Regional Center (California, Nevada)
  • American National Regional Center d.b.a. EB5 Financial Regional Center (California): www.anrcs.com
  • Dayton Regional Center, LLC (Ohio)
  • Delvelyn Regional Center, LLC (California)
  • Hudson Funds New York Regional Center, LLC (New Jersey, New York, Pennsylvania): hudson-funds.com
  • MGV NYC Regional Center LLC (New Jersey, New York, Pennsylvania)
  • Monterey Massachusetts Regional Center, LLC (Massachusetts)
  • Monterey Northern California Regional Center, LLC (California)
  • Monterey Southern California Regional Center, LLC (California)
  • New York/New Jersey Real Estate and Infrastructure Regional Center LLC (Connecticut, New Jersey, New York)
  • PacNW Regional Center, LLC (Oregon, Washington)
  • Propet American Dream, LLC (Washington): www.propetamericandream.com
  • RSR EB-5 Regional Center, LLC (North Carolina, South Carolina)
  • Smith Mountain Regional Center, LLC (Colorado, Oklahoma, Texas)
  • U.S. Green Capital Regional Center, LLC D/B/A Playa Vista Regional Center (California): pvcapitalmanagement.com
  • Washington American Investments, LLC (District of Columbia, Maryland, Pennsylvania, Virginia)

New Terminations:

  • Chen Roberts Regional Center (Oklahoma)
  • Regency Regional Center LLC (California)

EB-5 No-Reform Act, RC List Changes

On Friday, IIUSA reported that “Yesterday IIUSA met with Republican negotiators and received draft legislative text that is being proposed for inclusion on the March 23rd Congressional omnibus package… We expect the House to vote the omnibus out of the chamber as early as March 16, allowing the Senate the entire week of March 19 to pass the measure before government funding expires on Friday, March 23…. the current debate over what policy provisions to include in the FY18 omnibus spending package provides one of the few, if not the only, opportunity to secure a long-term EB-5 reauthorization.”

With three years to work on drafting EB-5 legislation, why did Congressional negotiators keep this most recent EB-5 bill hidden until the very last minute, and provide even IIUSA only a few hours to read it and respond? Possibly because this “Immigrant Investor Visa and Regional Center Program Comprehensive Reform Act” is a tissue of minority hand-outs, declawed reforms, poison pills, and half-baked good ideas. We’re to conclude “This is our last chance to get significant regional center program authorization, and it’s too late to make changes now, so we have to support this, no matter the details.”  I understand, but oh those details. I am ashamed of this bill, and on behalf of the people behind it. How did years of negotiation produce this document? The media, pro-reform lawmakers, and the good proportion of EB-5 stakeholders left out of compromises will not be kind to those who drafted this bill, if it passes as-is.

The EB-5 Reform Act has a few generally-favorable provisions:

  • It would reauthorize the regional center program to 2023
  • It would add some flexibility for material change, and some protection for investors in projects that don’t work out
  • It would make some process improvements

The EB-5 Reform Act is lobbying money well-spent for a few:

    • The TEA reform in this bill is calculated to avoid unduly incentivizing investment in distressed areas. In three years of EB-5 legislative proposals, each version has had a softer TEA proposal than the last. This one reduces the monetary incentive to a hair, compensates with incentives that will either be impotent/unrealizable in practice (visa set-asides, premium processing) or positively counterproductive (lower jobs requirement for needy areas?), broadens the definitions of what qualifies as an urban distressed or rural area (e.g. switching from the NMTC “severe distress” criteria in previous proposals to just the NMTC low-income criteria, and no specified limit on gerrymandering), and adds new incentivized areas for a special few (closed military bases, U.S. territories, infrastructure, franchise investment funds). Congress was originally energized for EB-5 reform because they didn’t like seeing most EB-5 dollars flowing to already well-capitalized projects in already well-capitalized areas. That status quo has little to fear from this legislation. Luxury real estate will keep its top spot if this passes, and we’ll still have Chuck Grassley and the media shaking their fists.
    • The bill offers real estate projects an extra gift for good measure: construction jobs can be aggregated and counted as qualifying direct permanent jobs regardless of duration.
    • The integrity provisions in this bill are calculated to avoid making life difficult. Gone are the suggestions in past bills about involving third parties in oversight or reporting or requiring account transparency or fund administration. Here, integrity measures focus on internal certifications of compliance to the best of the certifier’s knowledge. That’s good for honest players who can do without burdensome and intrusive regulation, but also little limit on bad players happy to self-report compliance. Such teeth as the bill has — site visits, audits, background checks, termination threat — are largely things IPO is doing already, though I’m sure they’d appreciate the official authorization and extra funding. But generally, I’m not sure this bill will satisfy lawmakers who wanted EB-5 reform to combat fraud.
    • The bill retains integrity measures that conveniently double as anti-competitive measures. The bill keeps a previously proposed annual regional center fee – lowering the amount for the largest regional centers and keeping it high for the smallest. It is more severe than previous proposals on involvement by anyone with foreign government connection at any level, even in providing non-EB-5 capital to a job-creating entity.
    • UPDATE: Re-reading more carefully, I see that I’m wrong about this one. The bill says that for four months after enactment, no one can file I-526 except for new investors in in-progress raises with an approved examplar. The bill even attempts to set aside 7,000 visas for these privileged investors, forgetting that the numerical limit for 2018 visas was already exceeded back in 2014.

Here’s who will be most upset, if the EB-5 Reform Act passes:

  • The approximately 92,000 people in line for an EB-5 visa. These people are already in for a long wait with an annual quota of about 10,000 visas, and the EB-5 reform act has set-asides that would reduce generally-available visa numbers to about 6,900 per year. The situation will be especially bad for people from China, Vietnam, and possibly India. Those people already in line didn’t plan to wait 17 years or so for conditional green cards — and neither did the projects accepting their investment. The bill does not include on-purpose retroactivity (it doesn’t make TEA, investment amount, or job creation changes apply to people who already filed I-526), but past investors will be severely affected by the visa set-asides, and potentially by new restrictions that affect regional centers and investment projects.
  • Those hoping to raise EB-5 funds to benefit projects in rural or distressed urban areas. The new incentives are not better designed to benefit them than the current incentive structure. The new regional center fees and requirements are well-designed to put anyone out of business who isn’t raising funds from hundreds of investors for prosperous urban projects.
  • Entrepreneurs planning to file EB-5 petitions in the near future for their own enterprises, and any regional centers planning to raise funds for a project without a pre-approved exemplar. The bill has a 120-day moratorium on filing new I-526 and I-924, followed by a transition period from day 121 to day 365 that limits the petitions that can be processed.
  • The Investor Program Office. This legislation will be tough to interpret and implement. USCIS will have to figure out provisions that the bill hardly explains: the franchise investment fund idea, the provision that I-829 petitions based on investment in unrealized/failed projects are to remain valid, the new amendment and re-petition processes, the provisions that imply retroactive new requirements for past projects, and the effects on direct EB-5. The bill stipulates a 120-day transition period, during which USCIS can come up with new regulations and policy, new forms and supporting processes, a new TEA designation process, and a new premium processing option. Hahahahaha. 120 months would be more plausible, considering past experience.
  • Regional centers with fewer than 20 investors annually. They’ll face a $10,000 annual fee and a list of new compliance certifications that will be hard work if taken seriously.
  • EB-5 projects with any foreign-government-entity-related funds in the capital stack, or personnel at any level.

End of rant. If I wake up tomorrow to find that this has been attached to the House version of the new omnibus spending bill, then I shall transition to learning to live with it. And polish my resume, perhaps.

In the meantime, USCIS approved a bunch of new regional centers. Probably most of these applicants filed I-924 back in 2015, little thinking what they’d be up against today!

Additions to the USCIS Regional Center List, 02/02/2018 to 03/05/2018.

47 regional centers have been added.

  • AHRC GA, LLC (Georgia)
  • All American Investment Holdings, LLC (California)
  • Ameri-Link Northeast Regional Center, LLC (California, New Jersey, New York)
  • American Citizen Regional Center – Southern California LLC (California)
  • American Equity Fund California, LLC (California)
  • American Equity Fund, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • Avista Regional Center, LLC (Florida, Georgia)
  • BC Southeast Regional Center, LLC (Florida)
  • BC West Coast Regional Center, LLC (California)
  • Bay Area Community Regional Center, LLC (California)
  • CMB Hawaii Regional Center, LLC (Hawaii): www.cmbeb5visa.com
  • Carolina EB-5 Regional Center, LLC (North Carolina)
  • Chicago Golden Pacific, LLC (Illinois): www.usgoldenpacific.com
  • EB-5 Inc Regional Center, LLC (Florida)
  • EB5 Texas Investment Group LLC (Texas)
  • East Coast Prime Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • Education Fund SC Regional Center, LLC (Louisiana, New Mexico, Texas): edufundamerica.com
  • Gateway America Regional Center (New York, Ohio, Pennsylvania)
  • Green Mountains Regional Center, LLC (New Hampshire, Vermont)
  • Happy Family USA Regional Center (California, Nevada): www.hfeb5.net
  • Hawaii Investor Regional Center Corp. (Hawaii)
  • LJHB Perpetual, LLC (District of Columbia, Maryland, Virginia, West Virginia)
  • Landmark Regional Center, LLC (Connecticut, New Jersey, New York)
  • Manhattan CBD Development Regional Center, LLC (New York)
  • Mid-America Renaissance Regional Center, LLC (Kansas, Missouri)
  • NYC Liberty Green Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • New York City EB-5, LLC (New Jersey, New York, Pennsylvania): www.americaneconomicgrowthfund.com/nyceb5
  • New York City Transportation Regional Center LLC (Connecticut, New Jersey, New York)
  • OMS Group, LLC (North Carolina, South Carolina)
  • Omaha Old Market Regional Center LLC (Iowa, Nebraska)
  • Pacific West Economic and Development Center LLLP (California, Nevada)
  • Phoenix & Dragon LLC (Connecticut, Massachusetts, New Hampshire, Rhode Island)
  • Phoenix Pacific LLC (Washington)
  • Prime Capital, LLC (California)
  • RW EB-5 Regional Center, LLC (Nevada)
  • Real Estate Development Center of America LLC (Florida, Georgia, South Carolina, Tennessee): redcoaregionalcenter.com
  • Redwood Regional Center, LLC (Oregon, Washington)
  • Roundhay Partners Regional Center, LLC (California)
  • Serendipity Regional Center, LLC (California)
  • Smith Delta Regional Center, LLC (Alabama, Arkansas, Louisiana, Mississippi, Tennessee)
  • SoCal Global Regional Center, LLC (California)
  • South Florida Real Estate and Infrastructure Regional Center LLC (Florida)
  • SunCapital Texas Regional Center (Texas)
  • The Harbor Bank Community Development Capital RC (District of Columbia, Maryland, Pennsylvania, Virginia, West Virginia)
  • WRCI California Regional Center, Inc. (California, Nevada)
  • Zephyrus Regional Center LLC (Arizona, California, Nevada, Oregon, Washington)

Renamed:

  • EB5 Affiliate Network State of Texas Regional Center, LLC (Texas) into EB5 Affiliate Network States of Texas and Louisiana Regional Center, LLC (Louisiana, Texas

Finally restored to the approved list, after AAO sustained its termination appeal:

  • Path America Sonoco, LLC (Washington)

New Terminations:

  • Omega Puerto Rico Regional Center, LLC (Puerto Rico)
  • Southwest Kansas Regional Center (Kansas)
  • EB5 Memphis Regional Center, LLC (Tennessee)
  • New Orleans’ Mayor’s Office RC (Louisiana)
  • Diversified Global Investment, LLC (Georgia)

 

Updates (CR to 3/23, AAO sustained appeals, RC List)

EB-5 Legislation and Regulations
I’ve started a Washington Updates page off the Resources tab to keep track of what’s going on with legislation and regulations, and will revise it regularly as I hear about changes, in lieu of endless update posts. The page has details of regional center authorization (currently extended through March 23, 2018) and the immigration debate and new bills as they relate (or mostly do not relate) to EB-5.

AAO decisions: troubled RCs/projects

Do investor petitions fail when the project and/or regional center runs into trouble? Not necessarily, according to recent AAO decisions on EB-5 appeals.

  • In August 2015, the SEC filed a complaint against Path America companies including Path America Kingco LLC and Path America Snoco LLC. The case was settled in August 2017, with the former Path America principal receiving four years in prison. In the meantime, USCIS terminated Path America Kingco in March 2016, denied and revoked a bunch of Path America Kingco I-526 petitions starting in April 2016, and terminated Path America Snoco LLC in November 2016. Path America Kingco appealed its termination and was dismissed (JUN092017_01K2610), the PAK investors appealed their denials and were dismissed (e.g. DEC052016_01B7203, MAY112017_01B7203, JUL192017_01B7203), but Path America Snoco appealed its termination and was sustained (DEC212017_01K1610). PAK and PAS were terminated for malfeasance by the same former principal, but in the PAK case “he diverted proportionally more of the investors’ funds and the comparatively new management has only recently begun the process of renewing the project after its time in receivership.” AAO decided that PAS deserved to keep its designation because “the near completion of the project as proposed and the existence of a new owner committed to promoting future economic growth in the aggregate warrant maintenance of the regional center.” PAK has the same new owner, and the PAK and PAS situations appear to differ in degree more than substance, but at least AAO shows that it can give positive factors some weight. The PAS decision states that “There may be cases where, to maintain program integrity, the nature or degree of bad acts cannot be ameliorated or counter-balanced by positive factors of job creation and economic growth. For the foregoing reasons, this is not such a case.” Path America Snoco has been restored to the USCIS list of approved regional centers.
  • The PhoenixMart project by Central Arizona Regional Center has seen considerable drama and lengthy project delays. In 2017, USCIS denied a bunch of I-526 in the project, finding that “the business plan was not credible because construction did not substantively commence until years after the initially-forecasted completion date.” However, AAO just posted several decisions in the 2018 folder (JAN172018_02B7203, JAN172018_05B7203, JAN172018_06B7203, JAN172018_07B7203) that withdraw those denials, remanding the matter for further proceedings. AAO was impressed by evidence that the project has recently made substantial progress, and “Therefore, we withdraw the Chiefs finding that the business plan was not credible with regard to the construction portion of the plan.” (Reflecting its new sensitivity to return provisions, however, AAO takes the opportunity to bring up an issue not included in the USCIS denial: “whether the granting of first right of refusal to EB-5 investors for the purchase of up to 1,500 shops in ___ constitutes an impermissible redemption agreement.”)
  • The Palm House Hotel project has been the subject of numerous lawsuits and went into receivership in 2015. In 2016, EB-5 investors sued sponsor South Atlantic Regional Center and associated entities, alleging that the project was, in reality, nothing more than a façade pursuant to which their funds were stolen and distributed among the conspirators. However, the project has made some progress under the receiver, and at least two investors appealed their I-526 denials to the AAO (JUN132017_01B7203, JAN172018_03B7203). AAO denied the motions, but in a way that leaves open the possibility that the outcome might have been different had the petitioners presented better documentation regarding availability of funds to complete the project.

LucidText in the news
Suzanne Lazicki is featured in the latest EB5 Investors Magazine as one of the Top 5 Business Plan Writers of 2017, and in a podcast with Mona Shah discussing business plans and the current EB-5 landscape.

Regional Center List Changes
Additions to the USCIS Regional Center List, 12/05/2017 to 02/02/2018

  • Awesome American Regional Center LLC (California, Nevada)
  • Commuter Center Regional Center, LLC (Washington)
  • Florida Capital Group Regional Center (Florida)
  • Grand Commonwealth Regional Center, LLC (California)
  • Hawaii Investment Funds, LLC (Hawaii): www.hawaiieb5.com
  • Live in America – Louisiana Regional Center, LLC (Louisiana): www.liveinamerica.us
  • Midtown NYC Regional Center, LLC (Connecticut, New Jersey, New York)
  • Mugo Regional Center LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • North American Asset Management Regional Center, LLC (Washington)
  • Polaris Regional Center (Guam)
  • Stonehenge Regional Center, LLC (Texas)
  • TS Pacific Regional Center (California)
  • Texo Capital, LLC (Ohio, Pennsylvania): www.texoeb5.com

Additions to the Regional Center Terminations page, 12/05/2017 to 02/02/2018

  • Greater Houston Investment Center, LLC (Texas)
  • Lansing Economic Development Corporation (LEDC) Regional Center (Michigan)
  • Maryland Area Regional Center, LLC (Maryland)
  • Liberty South Regional Center (Arkansas, Mississippi)
  • Southeastern Higher Education Regional Center (South Carolina)
  • EB-5 Fund CA, Inc. (California)
  • EB-5 Regional Center Florida, LLC (Florida)
  • America Development Investment Center Regional Center (Alabama, Georgia)
  • Florida East Coast Regional Center, LLC (Florida)
  • Lakewood Regional Center a/k/a American Life, Inc. – Lakewood Regional Center (Washington)
  • American Logistics [International] Regional Center (California)
  • South East Los Angeles RC (SELARC) California (California)
  • Southwest Florida Regional Center, LLC (Florida) (terminated 5/25/2017 but not listed until 1/30/2018)

Previously listed as terminated, but now restored to the list of approved regional centers:

  • ON Regional Center, LLC (California)

RC Reauthorization to 1/19/2018, visa numbers, legal actions, RC list changes

Countdown to Regional Center Program Reauthorization

  • 12/22: President Trump has signed the continuing resolution H.R. 1370, which means that the regional center program is now extended together with other authorities to January 19, 2018. (See Congress.gov for the text of the enrolled bill H.R.1370, now Public Law No 115-96.) I also notice that the White House website has been reorganized to highlight immigration as a key issue. The new White House immigration page emphasizes these priorities for the administration: constructing a border wall, ensuring the swift removal of unlawful entrants, ending chain migration, eliminating the Visa Lottery, and moving the country to a merit-based entry system.
  • 12/21: The House and Senate have passed a Continuing Resolution that replaces the expiration date in previous legislation with “January 19, 2018,” and doesn’t include any language that would exclude regional center program authorization. See the House Appropriations Committee news release for the text of House Amendment to the Senate Amendment to H.R. 1370.
  • 12/20: The content of a Continuing Resolution through 1/19 is still under negotiation.
  • 12/18: Nothing settled yet on the next stopgap funding measure, which will have to fight with tax reform for attention this week. The Senate Appropriations Committee may come up with its own proposal to compete with the House proposal. Senator Cornyn indicates that the Senate bill would also be through January 19, but may include some different provisions.
  • 12/13: Yesterday the House Appropriations Committee introduced H.J.Res 124 – a Continuing Resolution that would temporarily extend federal funding and maintain current federal operations (currently authorized to December 22) until January 19, 2018. Basically, it’s a clean extension that just switches out expiration dates: “SEC. 101. The Continuing Appropriations Act, 2018 6 (division D of Public Law 115–56) is further amended—7 (1) by striking the date specified in section 8 106(3) and inserting ‘‘January 19, 2018.’’ The 250 pages of miscellaneous additional provisions (defense appropriations, CHIP extension, etc.) do not mention EB-5 or move to separate RC program authorization from continued government funding. This bill is just barely out of committee, not enacted yet, but I’ll add updates as I hear news ahead of the 12/22 deadline.
  • 12/8: IIUSA members will be happy to note that the association has decided to tell us its 2017 Policy Platform and comments on the draft legislative framework. Now to see if we’ll be asked for our opinion on the policy positions someone has formulated. Probably not, since the hard-won industry unity depends on a narrow base. UPDATE: IIUSA has sent an email to members with the invitation “Please contact advocacy@iiusa.org with any comments or questions” on the IIUSA policy framework.
  • 12/8: IIUSA did the right thing with a stern statement on Marketing Hypothetical EB-5 Reform Outcomes as Certainties. Prospective investors take note: do not rest your current EB-5 decision on the possibility of visa set-asides in hypothetical future legislation. We have no assurance that a set-aside proposal will ever be enacted, or to whom/what a set-aside proposal would apply, if enacted. Even if set-asides became available, the size of the visa backlog and volume of I-526 filings mean that they may disappear too quickly to have an appreciable incentive effect. Their main function appears to be now, in hypothetical form, as a phantom concession to help get what industry negotiators really want (low investment difference between TEA and non-TEA areas) and a phantom carrot to encourage new investors.

Visa Backlog Update

The backlog of EB-5 visa applications at the National Visa Center continues to grow, as one would expect with I-526 filing surges reaching the visa application stage. The Annual Report of Immigrant Visa Applicants in the Family-sponsored and Employment-based preferences Registered at the National Visa Center as of November 1, 2017 reveals that the EB-5 visa application backlog is 23% longer this year than last year, with 17% increase in pending applications from mainland China and a 106% increase in pending applications from other countries. I’ve added these numbers to my master backlog calculation spreadsheet, which has a projection tab to estimate how statistics translate into wait times.

Legal Actions

Additional reading for those interested in following litigation in the EB-5 space, and learning from the actions and statements that got other people in trouble.

Other Helpful Articles

McKee, Curylo, Parrington: Considerations for Independent Third Parties to Assist With EB-5 Investments (December 12, 2017)

Regional Center List Changes

Additions to the USCIS Regional Center List, 11/08/2017 to 12/05/2017:

  • American Dream Fund Seattle Regional Center, LLC (Washington): www.adreamfund.com
  • American EB5 Regional Center (Florida)
  • Cactus21 LLC (California)
  • Chicago Real Estate Development Regional Center, LLC (Illinois, Indiana, Wisconsin)
  • Great North Regional Center, LLC (Massachusetts, New Hampshire, New York, Vermont): www.peakresorts.com
  • Hawaii Regional Fortune Center LLC (Hawaii)
  • M5 Venture Southern California RC, LLC (California): www.m5venture.com
  • Manhattan Empire State Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • NCP Regional Center (California)
  • North Carolina EB5 Regional Center, LLC (North Carolina, South Carolina): eb5affiliatenetwork.com/regional-centers-access/eb5-regional-center-north-carolina
  • SRC NY, LLC (Connecticut, New Jersey, New York, Pennsylvania)

One regional center was removed from the approved list, but not added to the terminated list:

  • Bart Investment Group, LLC (Florida)

 

11/7 and 11/10 IPO Updates (processing, bridge financing, more), Baruch College Conference, RC List Updates

IPO staff met with EB-5 stakeholders twice this week, at an official Stakeholder Engagement on November 7 and at an EB-5 Conference hosted by Baruch College on November 10.

I’ve uploaded voice recordings of both presentations (11/7 here and 11/10 here), and you can watch the Baruch College presentation on YouTube here (IPO speaks in Part 6). Official remarks from the 11/7 engagement are posted on the invitation page. Hot topics included petition processing, Form I-924A, redeployment, bridge financing, and material change. I summarize a few highlights below.

EB-5 Program Introduction
At the 11/10 conference, IPO Senior Advisor for Economics Jan Lyons provided a basic yet substantive introduction to the EB-5 program and how it works. Agents and potential investors, this is an excellent source of reliable information straight from USCIS. He speaks near the beginning of the Conference presentation Part 6.

Processing Information
On 11/7, IPO Deputy Chief Julia Harrison generously spoke at length about processing issues, including staff allocation and petition workflow. Here’s my best effort to summarize the content (with time references to the 11/7 recording FYI).

  • Petition adjudication at IPO is divided across several teams, including a team handling I-829 and customer service, a team handling direct EB-5 I-526, and a group of teams handling regional center I-526. I-924 is also a separate workflow. Each team is staffed by adjudicators and economists.
  • IPO is working to increase capacity by cross-training personnel. Previously, adjudicators and economists had specialist roles, with economists reviewing project-related documents for I-526 and economic issues at I-829, while adjudicators looked at source of funds at I-526 and sustainment at I-829. Now economists and adjudicators are each being trained to handle a single petition from start to finish. The I-829 team is now fully-cross trained, and performing well. One of the I-526 teams is already cross-trained, and the effort will continue until all officers can individually handle any part of I-526 petition review. Ms. Harrison anticipates that this new approach will increase capacity, promote flexibility, and help IPO more nearly reach the goal of processing petitions in first-come-first-serve order.
  • Ms. Harrison described the workflow for I-526 petitions. Previously, IPO would assign all I-526 for one project to a dedicated team for that project. IPO did not intend to prioritize adjudication for big projects, but Ms. Harrison acknowledged the difficulty of keeping petitions in first-in-first-out order when they were grouped in multiple workflows by project. Today, IPO is working with a two-stage process that separates adjudication of project-specific issues from investor specific issues. For regional center projects with multiple investors, IPO waits to receive two I-526 for the project (unless exemplar approval is in place). Those two I-526 are then assigned to a an economist or cross-trained team that reviews the project portion of the petitions. This process may involve issuing an RFC (request for clarification) email or RFE asking project-specific questions. When project issues have been adjudicated, the first two I-526s are released to the general queue for all regional center petitions. Petitions in that queue get assigned to adjudicators in more-or-less first-come-first-served order for investor-specific review. New petitions for a previously-reviewed project would go directly to the adjudication queue, and the project-related aspects of those petitions shouldn’t have to be reviewed anew. A petitioner who already responded to an RFC or RFE at the project-review stage may get another RFE at the investor-review stage, however. The petitions in the adjudication queue are in order by date but may not be finished in first-in-first-out order, due to case-specific issues. (How does the strategy to combine project-specific and investor-specific issues in officer training harmonize with the strategy to separate project-specific and investor-specific issues the adjudication workflow? That question did not come up.) Time references in the recording: 10:59 – 15:15, 17:46 – 22:32, 01:19:37 – 01:22:00
  • Ms. Harrison points to posted processing times as the best estimate for when petitions filed in 2015 will be adjudicated.  (26:22) She also noted that completion rate improvement in the past few months is not yet reflected in the Processing Times report.
  • Direct EB-5 petitions have a separate queue from regional center petitions. The leader on the regional center side communicates about progress with his counterpart on the direct EB-5 side to help ensure that petitions filed at the same time are moved forward concurrently. (01:21:00)
  • IPO lacks an automated system to match an I-924 exemplar request with previously-filed I-526 petitions for the same project. (When the matching happens, it’s by means such as office-wide emails asking “has anybody done a review of this project?”) Therefore, IPO requests that exemplar requests be filed with a cover letter that identifies receipt numbers for I-526 in the same project. In case an I-526 is approved before then I-924 is adjudicated, then the I-924 should also be approved, but ideally IPO wants to have the I-924 exemplar request and any concurrent I-526 adjudicated together by one person. This raises the question of whether the first approved I-526 couldn’t itself serve as exemplar approval, with no need for the I-924, but Ms. Harrison did not answer that question. It also makes us wonder how any Exemplar ever gets matched to associated I-526, even if they are filed subsequently. Ms. Harrison did indicate that IPO welcomes help in the matching process – a cover letter on the petition indexing it to related Exemplar, or even follow-up emails to the IPO customer service mailbox providing lists of associated applications/petitions for IPO’s reference. (9:23 – 10:58, 01:27:10 – 01:28:45)
  • Currently, I-526 petitions are adjudicated more or less in first-come-first-served order by filing date, regardless of nationality. However, IPO is considering the suggestion to prioritize adjudicating petitions of countries that are not backlogged. IPO invites stakeholder feedback on this idea. (32:05 – 33:30, 01:19:37 – 01:22:04, 01:29:12)
  • I-829 adjudications are making significant progress. Julia Harrison noted that the posted processing times don’t fully reflect the improvement yet, but she’s seeing much improved completion rates.

In the 11/10 presentation, IPO Senior Advisor for Economics Jan Lyons pointed out that IPO has finally cleared a huge hurdle – the surge of applications and petitions filed in advance of the December 2015 sunset date. That surge slowed down processing not only due to volume but to the poor quality of many petitions, apparently filed in a rush. I-526 and I-924 adjudications are proceeding more quickly and smoothly going forward. Mr. Lyons pointed out three factors that affect an individual’s processing time: place in the queue, the qualify of petitions before yours, and the quality of your petition.

Bridge Financing
This issue needs its own post, so I’ll just briefly mention the points at issue: whether bridge financing to be replaced by EB-5 must be “temporary” as in “a year or less” to qualify as a bridge and establish nexus, and whether EB-5 funds must pass through the job-creating enterprise account to repay the JCE’s bridge debt. IPO’s working answers are a tentative “yes” to the duration question and firm “yes” to the path question. Jan Lyons gave thoughtful discussion in the 11/7 call at time 01:01:28 – 01:10:11 and 01:40:01 – 01:42:11, and starting at time 12:55:24 of the 11/10 conference (I’ll let you listen for the details). And he welcomes feedback from the industry. That IPO hasn’t already received solid feedback demonstrates acute industry failure. In a healthy world, IIUSA would’ve shared bridge financing RFEs with membership months ago, and appropriate people would’ve gotten together to write and submit a constructive, well-footnoted article presenting reasonable guidelines for bridge financing in EB-5. As it is, I didn’t even hear about the RFEs ‘til very recently, and there hasn’t apparently been any industry collaboration except to whine about why the RFE creates problems (while putting the burden on IPO to solve a problem that our collective experience and industry sources are competent to address). For shame. (In case you weren’t informed either, see the RFE trends presentation at this link.)

Redeployment & Material Change
I lump these topics together because IPO’s answers to questions on both issues were the same: consult written policy. IPO did not clarify ambiguities in the redeployment policy, and did not fall into the trap of contradicting the clear material change policy. People who know better keep asking at meetings whether a petitioner can change projects or change regional centers before CPR — probably because they hope someday IPO might accidentally say the “yes” we’d like to hear. But investors beware: this is not a grey area. Policy and decisions are clear that material change before conditional permanent residence will derail a petition, and that project and regional center identity are material. Changing NCEs is not an option at any time. (I have a post detailing the material change policy and applications.)  The grey area comes at the I-829 stage. IPO said they’re working on policy specific to the question of how to treat regional center changes for an I-829 petitioner. (For sure the petitioner is protected from any changes that occur after I-829 filing, but the situation before that is less clear.)

I-924A
Most answers to I-924A questions likewise boiled down to “read the instructions,” but you can re-listen to the 11/7 recording for any nuances. In the 11/10 meeting, Julia Harrison made the welcome comment that “two to three years” is not a hard and fast requirement for the time during which a regional center must sponsor a project or face termination. “We do look at the totality of the evidence you submit,” and will consider evidence that the regional center is “making progress toward a project” or at least “has something on the horizon” (2:44:00)

Policy & Regulations
Julia Harrison reports having no information to indicate that the April 2018 target date for finalizing the EB-5 regulations will not be met, though this does not depend on IPO. Her team is “always working” on the Policy Manual, but doesn’t have specifics on future updates. Lori McKenzie is no longer the Policy Division Chief, and Ms. Harrison did not mention a replacement.

Baruch College Conference
The EB-5 Conference with USCIS IPO, Hosted by the Steven L. Newman Real Estate Institute – Baruch College (November 10, 2017) had a number of solid presentations besides the IPO panel. Here is the list of speakers, and video of the panels.

Regional Center List Changes
Additions to the USCIS Regional Center List, 10/2/2017 to 11/08/2017:

  • 1 America Regional Center (California)
  • AHRC PA, LLC (Pennsylvania)
  • ARE Regional Center (MA), LLC (Massachusetts)
  • American Ace Development Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • American East Coast Regional Center, LLC (Connecticut, New Jersey, New York)
  • American Fortune Regional Center, LLC (Texas)
  • American Real Estate Growth Regional Center, LLC (California): www.aregrc.com
  • City by City EB-5 Regional Center PR USA, LLC (Puerto Rico)
  • Fairhaven Capital Advisors American Samoa Regional Center Corp. (American Samoa)
  • Florida Opportunities Regional Center LLC (Florida)
  • Genesis Regional Center, LLC (California)
  • Golden Shores Regional Center (California)
  • Gulf Coast SW Regional Center, LLC (Florida)
  • Hawaiian Opportunities Regional Center, LLC (Hawaii)
  • LA Yucaipa Regional Center, LLC (California)
  • Liberty Investment Center LLC (Illinois, Wisconsin)
  • MZH Capital Partners, Inc. (New Jersey, New York, Pennsylvania)
  • Montana Real Estate EB-5 Regional Center, LLC (Montana)
  • New Sun EB-5 Regional Center, LLC (California)
  • Paradise City Funding Regional Center, LLC (Connecticut, New Jersey, New York)
  • Pocono EB-5 Regional Center LLC (New Jersey, Pennsylvania)
  • Related California Regional Center (California): www.relatedusa.com
  • Related Chicago Metro Regional Center (Illinois, Indiana, Wisconsin): www.relatedusa.com
  • Related Florida Regional Center (Florida): www.relatedusa.com
  • SRC LA, LLC (California)
  • South Carolina Global Regional Center (South Carolina)
  • United Land RC LLC (Connecticut, New Jersey, New York, Pennsylvania)
  • Vegas Regional Center, LLC (California, Nevada)
  • Wealth Global Regional Center, LLC (Connecticut, New Jersey, New York)
  • A List Partners Regional Center, LLC (Texas): www.alistpartners.com
  • Inkstone States Regional Center LLC (Washington): www.inkstone-capital.com
  • Noblemen Regional Center (Washington)
  • Wasatch Front Regional Center, LLC (Utah)

This regional center was listed as terminated on 8/10/017, but restored to the approved list on 11/6/2017:

  • Civitas Rio Grande Regional Center (Texas)

New Terminations:

  • Charlotte Harbor Regional Center (Florida) Terminated 10/2/2017
  • California Development Regional Center (California) Terminated 10/23/2017

Washington Updates, Articles, SEC Actions, RC List Changes

Washington Updates
We’re entering FY2018 with another RC program sunset date coming up on December 8, 2017, and new EB-5 regulations waiting for final clearance by the Office of Management and Budget. In a September 28 podcast with Mona Shah, Peter Joseph of IIUSA reports that “Congressional leadership including Senator Cornyn, Majority Leader McConnell, and Speaker Ryan has spent time working with judiciary committee leadership in coming to an agreement. The fact that these parties continue to dedicate time to a legislative solution is a very good sign.” However, “We don’t know the details of what might come out of a Congressional agreement. Investment amounts and other key issues are part of a fluid conversation, and negotiation will continue until there is enough agreement to move to the next stage.” I’m glad to hear that conversations are on-going, with IIUSA taking an active part. I’m also inclined to agree with Mintz Levin’s conclusions in the thoughtful article Lawmakers May Not Spend Political Capital on Standalone EB-5 Bill (September 28, 2017). It’s hard to imagine that Congress will prioritize EB-5 legislation when issues like health care and tax reform are pending, and easy to imagine them deferring responsibility with another content-free short-term RC program extension, or waiting for regulations. If DHS finalizes new EB-5 regulations before Congress gets around to legislation, then Congress doesn’t have to touch donation-losing issues like investment amount increases and TEA reform. Congress must act eventually, because only Congress can authorize the RC program and deal with visa numbers, but we’ll see. Prior to the last couple sunsets I heard whispers that certain lobbyists had secured a gentleman’s agreement with staffers for new legislation that would protect the status quo. (Senator Grassley heard the whispers too, and was not pleased). I’m hearing similar reports this time around, together with protests from other people in communication with the same offices who say no, Congressional leadership is not on board with the status quo proposals (to minimize the investment differential, protect the natural advantage of big-city projects, and generally avoid painful disruption). I’m not sure what to expect. I look forward to listening in to EB-5 Legislation: Where Are We? a free webinar to be hosted on October 4 by Kurt Reuss of EB5 Diligence, with an all-star cast including Stephen Yale-Loehr, Robert Divine, Robert Cornish, Laura Reiff, H. Ronald Klasko, Carolyn Lee, and Douglas Hauer. (10/12 Update: Mona Shah reports on a possible new legislative compromise.)

Interesting Articles

  • NES Financial has published another white paper with EB-5 Trends & Insights based on data from the many regional center transactions they facilitate. NES comments on 2017 trends in EB-5 capital structure, investor markets, escrow terms, and size and location of EB-5 projects.
  • Bloomberg Businessweek recently featured EB-5 in How Rich Chinese Use Visa Fixers to Move to the U.S. (September 14, 2017). I appreciate the article for its clever graphic, and for its old-fashioned vision of Chinese flocking to the smooth path of EB-5, not sweating at home over backlog calculations and the question of whether an EB-5 green card is worth a decade wait on top of investment risk and political uncertainty and capital control complications. CNN Money seems closer to the current situation with its article America’s ‘golden visa’ is losing its luster in China (September 29, 2017). The changing role of Chinese investors in EB-5 will likely define our experience in 2018. Unless, of course, we get good news on legislation and visa numbers.
  • Those involved with EB-5 investors from Iran, and people of conscience generally, will want to keep an eye on the emerging situation with President Trump’s new Presidential Proclamation on Visas. The State Department summarizes the revised travel ban, and how it affects nationals of Chad (?), Iran, Libya, North Korea, Syria, Venezuela, Yemen, and Somalia. (10/24 update: the Supreme Court has dismissed a final attempt to block the ban.)

SEC Actions
The Securities and Exchange Commission continues to highlight the need for investor vigilance. This month brought two new complaints, against Ronald Van Den Heuvel and Green Box NA Detroit (filed September 19, 2017) and Edward and Jean Chen and Home Paradise Investment Center LLC (filed September 20, 2017). I’ve added select details to my log of all SEC actions in EB-5. If we believe the SEC’s version of events, these cases did not involve complex or sophisticated schemes, just daylight theft and open lies enabled by related-party transactions and weak diligence. USCIS wasn’t necessarily taken in (the briefly-posted list of I-526 and I-829 adjudications by RC showed 0 petition approvals for Home Paradise), but quite a few investors were. The market needs to be more careful. The good actors who account for a majority of EB-5 players need to go the extra mile with transparency and account controls to demonstrate their good faith. Meanwhile, we appreciate the SEC putting bad actors on notice that EB-5 is not a free lunch.

Regional Center List Changes
Additions to the USCIS Regional Center List, 8/28/2017 to 10/02/2017

  • American Real Estate Regional Center, LLC (Connecticut, New Jersey, New York)
  • American Stone Energy EB5, LLC (Texas)
  • Broadway Regional Center, LLC (California)

(Additionally Live in America – Carolinas Regional Center LLC, previously removed in error, has been restored to the list of approved regional centers)

New Terminations

  • California Blue Sky Regional Center, LLC (California) Terminated August 29, 2017
  • Arundel Capital Partners (Massachusetts) Terminated August 29, 2017
  • California Economic Development Fund, LLC (California) Terminated September 25, 2017
  • Global Medical Center of Southern California (California) Terminated September 25, 2017

Redeployment, Reauthorization, I-485, AAO Decisions, RC List Changes

Redeployment
Julia Harrison’s published statement for the July 19 engagement in San Jose has been updated with cautious answers to two important questions about how redeployment policy applies to pending I-526 petitions. Specifically, whether adding redeployment language to filed documents would constitute material change, and what process and documents are required if redeployment occurs while I-526 is pending. The answers aren’t direct and substantial enough to provide comforting guidance, but on the other hand they’re so open-ended as to potentially offer a lot of flexibility for compliance. I’ll let you consult the link to read for yourself. You needn’t return to my recording to check whether these topics were discussed in more detail in person on July 19, because they were not. Maybe these redeployment questions came up in follow-up emails to the Public Engagement mailbox, and now kindly being shared with everyone. Though it’s lucky I’m so vigilant, or we might never have noticed that the USCIS website replaced one version of the July 19 talking points with another.

Speaking of redeployment, here’s another helpful article. Fiduciary Duties of General Partners and Managers in Connection with Redeployment of EB-5 Capital (August 28, 2017) By Catherine DeBono Holmes

EB-5 Engagements
USCIS posted an official recording of the 8/24 I-924A webinar very promptly, and also sent a “Save the Date” announcement. “U.S. Citizenship and Immigration Services (USCIS) will hold the next EB-5 Immigrant Investor Program national stakeholder engagement on Tuesday, November 7, from 1 to 2:30 p.m. Eastern. This event will take place at the USCIS New York City Field Office with in-person and telephone participation and the option to submit questions in advance. We will send an invitation with more details in the coming weeks.”

Reauthorization
The next sunset date for the Regional Center Program comes in just a few days, on September 30. Since dropping or substantially extending the RC program would require attention and discussion, and no one seems to have time or interest for that, I’m guessing we’re in for another series of uncomfortable and inconclusive short extensions with spending bills, as in 2015 and 2016. (9/8 update: the Regional Center Program is now extended as part of a Continuing Resolution to December 8, 2017.)

EB-5 has an awkward position, politically. When the right likes investment but is queasy about immigrants, and the left is just the opposite, what’s the future of immigrant investment? EB-5 is a visa category that demonstrably creates rather than takes U.S. jobs, supports U.S. business development and American products, and brings in a small number of legal immigrants likely to generate a lot of tax dollars and not strain the welfare system. That should make it a favorite visa category, especially for economic nationalists. But a Congressman who’s actively working against the immigration prospects of US-raised kids and overseas grandmas is already getting some flack, and may hear criticism from all sides if he’s seen to simultaneously support wealth-related immigration. On the other hand, people concerned to protect visa opportunities get more political credit for focusing on kids and grandmothers and tech talent than on a small category of legal immigrants associated in the press with luxury real estate. So far as I know, no one in Congress has been interested enough in EB-5 recently to even criticize it, must less speak in support of it. The Senate Judiciary Committee is reportedly about to hold a hearing on immigrant visas, but EB-5 probably won’t be on the agenda. The hearing is designed to scrutinize visas that conflict with the administration’s “Buy American Hire American” policy, and EB-5 doesn’t conflict with that policy. Since EB-5 isn’t in the cross hairs, it may not even be on the radar. But I’ll keep looking for news, and please tell me if you have insights into what’s likely to happen between now and December. Maybe USCIS’s threat to possibly finalize EB-5 regulations by 4/00/2018 will incentivize lobbyists to push for substantial EB-5 legislation sooner rather than later, but we’ll see. A lot of good EB-5 projects and good faith investors depend on smooth seas ahead.

I-485 Interviews
Immigrants who apply for an EB-5 visa through the adjustment of status (I-485) rather than consular process should note the announcement that USCIS to Expand In-Person Interview Requirements for Certain Permanent Residency Applicants (August 28, 2017). These interviews are designed to provide USCIS officers with the opportunity to verify the information provided in an individual’s application, to discover new information that may be relevant to the adjudication process, and to determine the credibility of the individual seeking permanent residence in the United States. Miller Mayer comments on practical implications.

AAO Decisions (geography, material change, RC termination)
The 2017 folder of AAO decisions on I-526 appeals has already posted 177 decisions – or 26 decisions, if we exclude near duplicates (different petitioners, same decision). I read all the decisions and keep a log of points that are significant to my work with EB-5 business plans. A few comments on decisions that interested me.

  • JAN132017_03B7203 (Matter of WX) and AUG152017_01B7203 (Matter of SL) deal with the same business model: a proposal to open and operate three franchise hair salons, of which the first two have identified TEA locations and the third is a plan for the future, with location to be determined. The AAO decisions confirm what I’ve always said: that only the identified locations can be considered for the total EB-5 investment and employment eligibility requirements. A petition can’t depend on applying TEA investment to a prospective location, since the TEA status of that unidentified location can’t be determined at the time of investment or filing.
  • AUG152017_01B7203 (Matter of SL) has the additional wrinkle that the salons funded by qualifying investment had already gone out of business (after having operated 1.5 years) by the time USCIS got around to adjudicating SL’s I-526 petition. SL expressed her intention to make additional investment and resume operations in the same locations. Interestingly, AAO did not say that such a situation would automatically lead to denial or the need to file a new I-526 petition. AAO challenged the practical feasibility of restarting the business (based on minute analysis of the business plan), but does not challenge the very idea of funding a new business after the previously-funded business failed. The decision implies that business failure and need for new investment would not be, in themselves, a material change. The decision specifically states that opening new salons in the same TEA with different management and different staffing plan is not a material change.
  • JUN302017_01B7203 (Matter of WL) gives another rare example of a change NOT found to be material. WL filed Form I-526 with a business plan that anticipated that the NCE would provide shuttle and tour services, with auto accessories sale as a sideline (about 10% of business). A site visit subsequently found little evidence of shuttle/tour service, and auto accessories sale accounting for far more than 10% of the business. But AAO judged that “Merely shifting the percentages of the types of services the Petitioner said the NCE would offer is not, by itself, a sufficient basis to deny the petition.”
  • APR262017_02B7203 (Matter of YL) and JUL062017_01B7203 (Matter of YY) identify material changes and explain what makes the changes material. In Matter of YL, a change in business focus and location are judged to be “predictably capable of affecting” and “have a tendency to influence” determinations of whether the Petitioner invested at the required capital investment threshold and will prospectively create the requisite qualifying jobs. In Matter of YL, the petitioner filed a series of plans for different types of food service business. AAO judged that in this case “The NCE’s business plans two and three constitute a material change to the original one because they represent far more than a change in food styles. …In addition to the type of food, business plans two and three include changes to the NCE’s nature of business, services offered, location, start-up costs, and staffing needs. These changes are material and are made to correct a deficiency in the original submission.”  (By the way I add these examples as they come to my master post on material change.)
  • JUN222017_01B7203 (Matter of LPT) shows how real-life business development after I-526 can help the petitioner, so long as it’s successful. USCIS questioned the reasonableness and credibility of LPT’s business plan, and LPT responded not by revisiting the projections but by documenting actual successful business performance since I-526 filing. On the other hand, JUN132017_01B7203 (Matter of MYA) explains why disastrous developments after I-526 filing (in this case, the Palm House Hotel woes) justify judging the original business plan not credible in hindsight.
  • APR182017_01B7203 is good reading for anyone intending to set up a direct EB-5 investment with elements of a debt model, such as preferred return.
  • The cases from JUL192017_01B7203 to JUL282017_11B7203 are denials of appeals or motions to reopen/reconsider filed by Path America investors whose petitions were denied or revoked following the termination of Path America Regional Center. All are nearly identical to one or the other of the linked decisions, and dismiss the petitioners’ attempts to claim some due process protection.

Regional Center List Changes

Additions to the USCIS Regional Center List, 8/23/2017 to 8/28/2017

  • Guardian Regional Center, LLC (Texas)
  • NationSure, LLC (New York)
  • State of Maine EB-5 Regional Center, LLC (Maine)

New Terminations

  • Live in America – Georgia Regional Center LLC (Georgia) Terminated 8/18/2017
  • Live in America – Boston Regional Center LLC (Massachusetts, New Hampshire, Rhode Island) Terminated 8/18/2017
  • Live in America – Florida, LLC (Florida) Terminated 8/18/2017
  • Live in America – Nevada Regional Center, LLC (Nevada) Terminated 8/18/2017
  • Live in America – Louisiana Regional Center, LLC (Louisiana) Terminated 8/18/2017
  • Live in America – U.S. Virgin Islands Regional Center LLC (U.S. Virgin Islands (USVI)) Terminated 8/18/2017
  • Live in America – Arizona Regional Center, LLC (Arizona) Terminated 8/18/2017
  • Live in America – Indiana, Michigan, Ohio Regional Center (Indiana, Michigan, Ohio) Terminated 8/18/2017
  • Live in America Chicago Regional Center, LLC (Illinois, Indiana, Wisconsin) Terminated 8/18/2017
  • Live in America – Midwest Regional Center, LLC (Minnesota, Wisconsin) Terminated 8/18/2017
  • SoCal Regional Center, LLC (California) Terminated 8/18/2017

I-924A webinar, EB-5 regs, Articles, RC list changes

I-924A Webinar

Today USCIS held a webinar to discuss the latest version of Form I-924A, Annual Certification of Regional Center. USCIS has linked an official recording to the webinar page. (I previously posted a folder with my recording.)

The webinar was technical and specifically focused on Form I-924A — what’s new in the December 23, 2016 version of the form, and how to complete it. A couple points of general interest came out in the presentation.

  • The presenter highlighted the expanded definition of regional center “principal” in the new I-924A and additional information requested about principals. The presenter confirmed that the IPO Compliance Division plans to use this information to conduct background checks of everyone in a position to control, influence, or direct the management or policies of the regional center, and that the results of such background checks are material to the regional center’s ongoing designation.
  • USCIS instructed that petitions that were withdrawn should be reported as “denied” on I-924A. This categorization could explain the petition approval and denial statistics published last month by USCIS, which reported a surprisingly high number of denied petitions. A caller encouraged USCIS to consider recording withdrawn and denied petitions as separate categories, and the call presenters said they’d consider the suggestion. The presenters also indicated that regional centers can add a note to I-924A explaining how many of the “denied” petitions were in fact denied, and how many withdrawn.

EB-5 Regulations

The Semiannual Regulatory Agenda published today by DHS lists regulation 1615-AC07 (the EB-5 regulation concerning TEAs and investment amount increases) as being in the “Final Rule” stage. The timetable on the rule’s summary page gives an estimated date of 04/00/2018 for Final Action. I’m not sure how seriously to take the agenda or the date estimate.

Articles

Developer FAQ: Jim Butler of JMBM Global Hospitality Group has put together a booklet titled The Developer’s EB-5 Handbook for EB-5 Construction Financing. Although targeted to hotel developers, this free booklet provides experienced answers to a range of practical questions common to businesses as they first consider EB-5 financing.

Large-Scale EB-5 Real Etate Projects: Gary Friedland and Jeanne Calderon of the NYU Stern Center for Real Estate Finance Research have released a new paper featuring a database of large-scale real estate projects that incorporate EB-5 into the capital stack. See EB-5 Projects Database: 2017 Supplement with Trends and Observations (August 16, 2017 Draft).  This 2017 database collects publicly-available information on 26 projects in major metro areas with current/recent EB-5 raises. The authors previously published a 2016 database with 27 projects and a 2015 database with 25 projects.  These large-scale projects are significant for the industry because they target such a large number of investors. The 26 projects in Friedland & Calderon’s 2017 database aim to attract 6,736 EB-5 investors, which means that they alone could use up over two years of available EB-5 visas. Megaprojects take a large piece of a small pie, are too big to fail, can offer attractive and well-managed investment opportunities, and present a public relations challenge. A high-profile luxury development in a Tier 1 city is not typical of the EB-5 program overall, but it is typical of the few projects that seek and find hundreds of EB-5 investors.

Vermont: Speaking of too-big-to-fail, I continue to follow the efforts of Vermont Regional Center to clean up from fraud charges against a couple of its project managers. The regional center has worked hard to recover from the disaster and (at least recently) to protect and compensate investors, but now faces having to respond to a NOIT from USCIS. A Notice of Intent to Terminate is not the same as a termination notice (the RC has a chance to respond to a NOIT, and not all NOITs are followed by termination), but it is a significant development. This news story discusses the whole situation, and this story gives detail of NOIT content. “What level of oversight are regional centers responsible to provide?” is a grey area question in EB-5, and a question that USCIS addresses in its assessment of Vermont Regional Center.

Regional Center List Updates

Additions to the USCIS Regional Center List, 08/01/2017 to 8/23/2017

  • Liberty Regional Investment Center (Georgia)
  • Nevada First National Regional Center, LLC (Arizona, Nevada)
  • Pass2NY Regional Center, LLC (New York)
  • USA New York Liberty EB-5 Regional Center, LLC (Connecticut, New Jersey, New York, Pennsylvania)

New Terminations

  • IZON, LLC (South Carolina) Terminated 8/17/2017
  • America’s Regional Center, LLC (Florida) Terminated 8/15/2017
  • First American Regional Center, LLC (California) Terminated 8/14/2017
  • Civitas Rio Grande Regional Center (Texas) Terminated 8/10/2017
  • Illinois Valley Regional Center (Illinois) Terminated 8/10/2017
  • Southern California Investment Center, LLC (California) Terminated 8/10/2017
  • Powerdyne Regional Center, LLC (California) Terminated 8/2/2017

Articles & Resources (Ombudsman, Visa Numbers, Investor Protection, Redeployment, RC Audits), Washington Updates, RC List Changes

Helpful Articles and Resources

Washington Updates
What is happening with EB-5 in Washington? I wish I knew. Immigration policy generally looks like an orphan child.  The top three leadership posts at USCIS are all still filled by “acting” people (Lee Cissna was nominated but still not confirmed as Director), and now we’re missing a DHS Secretary as well, until Congress can find time to confirm a replacement for John Kelly. That can’t facilitate significant USCIS action like finalizing regulations or hiring. The White House website listed immigration as a top issue a few months ago, and gave an immigration policy statement, but not anymore. (8/2 Update: The White House is now talking about immigration with the RAISE Act.) I hear rumors that lobbyists are still actively talking to Congressional staffers about EB-5 legislation and regional center program reauthorization, but don’t know where that will lead. Congress has so many fish to fry. We wonder whether Congress can even figure out funding the government past September 30, and there’s talk of another short-term Continuing Resolution, which could mean another series of hop-and-skip extensions of the RC program, whose current authorization is tied to the 2017 funding bill. But it’s hard to predict. Insights or insider information, anyone? (8/3 Updates: Senator Cornyn, author of the draft EB-5 legislation released most recently, has announced Building America’s Trust Act, a new immigration bill that doesn’t appear to address EB-5. Representative Brian Fitzpatrick has introduced H.R.3471 with the promising title “To amend section 203(b)(5) of the Immigration and Nationality Act to implement new reforms, and to reauthorize the EB-5 Regional Center Program, in order to promote and reform foreign capital investment and job creation in communities in the United States, and for other purposes.” I’ll report more fully when the bill text becomes available.)

Regional Center List Changes

Additions to the USCIS Regional Center List, 07/17/2017 to 8/1/2017

New Terminations:

  • Anacostia Regional Center (District of Columbia) Terminated 7/18/2017
  • AAA Florida Senior Living Regional Center, LLC (Florida) Terminated 7/12/2017
  • Allied Artist High Desert EB5 Regional Center (New Mexico) Terminated 7/12/2017
  • Rosti Capital Regional Center (California) Terminated 7/17/2017

Listening Session (EB-5 regs), EB-5 as securities (Hui Feng), RC Audits, RC List Changes

EB-5 Immigrant Investor Program Engagement July 13

At the EB-5 listening session on July 13, the USCIS participants stuck to their resolve to listen only, and did not provide input or feedback. The call solicited stakeholder comments on the questions raised by the Advance Notice of Proposed Rule-Making, which addressed regional center designation and participation and exemplar project approval. The ANPRM inspired few written comments to its preliminary questions, and this call also got tepid response. What did USCIS want to know from us, beyond what those of us who care said already in our written comments? USCIS would not specify, and we weren’t sure what to say. The Wolfsdorf Rosenthal blog has diligently summarized stakeholder comments, and my recording is available for anyone who’s really interested. I hope USCIS learned something from the call, but I did not. People with more to say on the designated topics of RC life-cycle (designation, participation, termination), RC exemplar process, RC compliance audits, or indirect job creation methodologies may email ipostakaeholderengagement@uscis.dhs.gov.

USCIS let slip one bit of info. Lori MacKenzie said that “the agency is working to finalize that rule” — referring to the regulation that people care about, the NPRM dealing with investment amounts and TEAs. No indication of timeline, however, or whether the listening session call reflects intention to combine NPRM and ANPRM topics in one new rule. (On July 3, Senators Dean Heller, John Cornyn, Rand Paul, and Thom Tillis had sent DHS a letter asking that the agency not move forward with the proposed EB-5 regulations. The listening session indicates that DHS is indeed moving forward, however slowly.)

Here is my favorite listening session caller comment, from a Mr. Fuentes in minute 45: “We have a bottleneck of processing in an environment where resources are not the limit.” Yes – that’s exactly what’s wrong and fixable in EB-5. So many problems for EB-5 projects and investors result from the fact of long processing times, and long processing times are traceable to constraints that need not exist in a program of multi-million-dollar projects and high-net-worth immigrants. I’ll write more on this soon.

The call also reminded me that we need to talk more about direct EB-5, and the kinds of business and investment that are and are not workable in that environment. Purchasing an operational existing business rarely works for direct EB-5. The history of AAO denial decisions is thick with business acquisition cases that foundered on the “new commercial enterprise” requirement and/or the requirement to create new jobs. EB-5 rules specify that mere ownership change does not make an enterprise or jobs in that enterprise new. I have a couple related posts (one on the difference between direct and regional center EB-5, and one on options for investing in an existing business), but see the need for a simpler article addressed to entrepreneurs contemplating direct EB-5.

EB-5 and Securities Law

Immigration lawyers happen to be well-placed to match EB-5 investors to EB-5 projects, and are pressured by the market and tempted with commissions to play a match-making role. This role is perilous, however, considering securities laws. In 2015 and 2016, the SEC made examples of several immigration lawyers who had received transaction-based compensation for facilitating investments, and of one of the regional centers that paid such compensation. The message: it’s illegal to be on the giving or receiving end of payments to someone acting as a broker without appropriate license.

One of the law firms targeted by the SEC fought back. Hui Feng (subject of a complaint published in December 2015 by the SEC against himself and his firm Law Offices of Feng & Associates, P.C.) argued that the SEC’s claims fail because EB-5 investments are not securities and the immigration lawyer does not act as a “broker” when receiving finder fees. He pointed out that EB-5 investments are primarily motivated by the visa, without expectation of profit, that his commissions were contingent on visa approval rather than in connection with securities sale, and that the attorney role has its own fiduciary duties and that broker requirements are inapplicable – i.e. the EB-5 process and investment and lawyer’s role are fundamentally immigration matters, not securities matters and not the SEC’s business. (My layman’s paraphrase; see the court filings for the actual legal arguments.) The US District Court, Central District of California, however, has come down on the SEC’s side in its Motions for Summary Judgment (June 29, 2017). The decision has the longest discussion I’ve seen yet in support of the point that yes, EB-5 investments are securities. It also enumerates the activities supporting the conclusion that yes, this immigration lawyer acted as a broker, and explains why the fee arrangement details were material and should have been disclosed to investors and regional centers. If you pay or receive EB-5 finders fees, pay attention to this decision. You may also want to review IIUSA’s Best Practices for Engaging with Sales Intermediaries.

Regional Center Compliance Audits
The Regional Center Business Journal has a helpful article by Mariza McKee, Kimberly Hare, and Clete Samson “USCIS Compliance Audits – Preparing Regional Centers for the First Wave”

RC List Changes
USCIS continues to cull the list of approved regional centers, with 50 terminations so far this year. 2017 termination letters haven’t been published yet, but I’ll guess that most of these terminations are for lack of recent activity.

Additions to the USCIS Regional Center List, 6/26/2017 to 7/17/2017:

  • No new regional centers.

New Terminations:

  • North Country EB-5 Regional Center, LLC (New York) Terminated 7/7/2017
  • Guam Strategic Development LLC RC (Guam) Terminated 7/7/2017
  • Good Life EB5 Georgia Regional Center, LLC (Georgia) Terminated 6/30/2017
  • Tri-Cities Investment District, LLC (California) Terminated 6/30/2017
  • Prosperity Regional Center (former name U.S. Prosperity Regional Center) (Florida) Terminated 6/23/2017

RC Terminations, investor litigation victory, China trends, agent ethics, RC list changes

Regional Center Termination Reasons

USCIS has terminated 109 regional centers over the past decade, and 23 regional centers in May 2017 alone. This month USCIS also initiated a page for Regional Center Termination Notices, with most notices up to November 2016 posted so far. The page explains that “USCIS will remain consistent and committed to transparency in the EB-5 program by proactively publishing Regional Center termination notices as they become available. This is an important step in assisting investors, the EB-5 industry, and the public to understand the reasons why a regional center has been terminated and what types of regional center activities may trigger the end of a regional center’s designation.”

I’ve started a Termination Log spreadsheet (also linked to my RC List page for ongoing reference) to correlate USCIS’s terminations list with its notices list, and facilitate analysis. Pivot table analysis of this log provides a quick overview of termination reasons (from the 69 termination notices posted so far) and timing.

In fact the termination notices are not very informative (most reference Notices of Intent to Terminate, which are not attached, for specific reasons), but we can generally learn that about 77% of RC terminations from 2008 through November 2016 occurred for one of two reasons: failure to file an I-924A annual report, or the fact that the I-924A report reflected inactivity (i.e. no investor petitions in three or more years). Just 12% (notices for eight regional centers) referenced problematic behavior by the regional center as a basis for termination. Other reasons include the regional center’s voluntary request to withdraw from the program. One letter dated July 13, 2016 explains “USCIS notes counsel’s request to withdraw from the program. The mechanism to end a regional center’s designation, whether initiated by the regional center or USCIS, is termination of the designation.” (This particular letter could’ve raised on-going FBI investigation as a termination issue, but that’s another story.) The Final Fee Rule published 10/24/2016 confirms that a regional center may elect to withdraw from the program, but does not offer an exit more dignified than termination. “A regional center may elect to withdraw from the program and request a termination of the regional center designation. The regional center must notify USCIS of such election in the form of a letter or as otherwise requested by USCIS. USCIS will notify the regional center of its decision regarding the withdrawal request in writing.This is a pity, as the terminated regional center list looks like a walk of shame, and I think voluntarily withdrawal should be treated differently from termination initiated by USCIS.

Legal Win for EB-5 Investors

Investors who think they’ve fallen victim to errors by USCIS will be interested in this long but ultimately successful battle by a group of EB-5 investors.

  • 2013: Twelve EB-5 investors file I-526 petitions based on investment in a regional center hospital project that sought to qualify as a troubled business
  • 2013-2015: USCIS denies the I-526 petitions, and then denies Motions to Reopen filed by the petitioners. The petitioners appeal the denials to the Administrative Appeals Office.
  • March to May 2016: AAO posts decisions dismissing appeal of I-526 denials (for example, MAR252016_02B7203)
  • April 2016: Four petitioners file civil action against USCIS in district court: Wei Gan v. USCIS
  • May 2017: USCIS and the plaintiffs resolve the case
  • May 2017: AAO posts decisions sustaining appeal of the previously-denied I-526s (For example, MAY182017_01B7203. Other May 18 2017 decisions sustain appeals for other investors in the same project)

Trends, Pitfalls, and Ethics in Working with Overseas Agents

China Market Demand Trends
Ronald Fieldstone reflects on a recent China trip in his post EB-5 Marketplace Measurement – China and Beyond (May 25, 2017). We’re reminded of the extent to which demand shapes supply in EB-5 investment.

Agent Marketing Claims
The Kushner Companies EB-5 roadshow in China continues to reverberate, with Senator Grassley mining it for yet another press release, this one calling for investigation of the Chinese agent involved, and its sales claims. (Grassley Seeks Investigation of Companies’ Promises of Green Cards 5/25/2017.) The regional center has protested to journalists that the senator’s allegations are baseless in this case, but all regional centers can take the reminder to double-check what their agents overseas are saying and posting online. Also keep in mind IIUSA’s best practices for engaging with sales intermediaries.

Ethics for US Lawyers Retained by Migration Agents
Lawyers who deal with overseas agents in EB-5 may be interested in a March 2017 Ethics Opinion by the New York State Bar Association. The opinion discusses conditions under which a lawyer may enter into an arrangement whereby a nonlawyer “foreign migration agent” hires the lawyer on behalf of the client and assists the lawyer in communicating with the client. Cyrus Mehta explores the matter further in his post EB-5 Green Card, Ethics and Trump (May 22, 2017).

DHS Director and EB-5

Lee Francis Cissna, President Trump’s nominee for Director of USCIS, committed to finalizing EB-5 reforms in his Senate Judiciary Committee hearing last week. In other words, new EB-5 regulations are still on the table. Mr. Cissna spent much of the past two years working for Senator Grassley on immigration issues, and reportedly wrote dozens of the letters sent under the senator’s name to Homeland Security officials. This does not bode well for his attitude to immigration generally or EB-5, though he made a nice statement at the hearing.

Regional Center List Changes

Additions to the USCIS Regional Center List, 05/08/2017 to 05/30/2017

  • Atlantic Casino & Entertainment Group Regional Center (Delaware, Maryland, New Jersey, Pennsylvania)
  • New York Immigration Regional Center (Connecticut, New Jersey, New York, Pennsylvania): www.goeb5nyc.com/
  • American Family Regional Center (Washington)

New Terminations

  • Dallas Regional Center (Texas) Terminated 5/22/2017
  • East Plumas County Regional Center, LLC (California) Terminated 5/22/2017
  • Immigration Funds LLC (former name United States Investors Regional Center) (Maine, Massachusetts, New Hampshire) Terminated 5/22/2017
  • Ohio Regional Center, LLC (Ohio) Terminated 5/21/2017
  • EB5 Express Regional Center (California) Terminated 5/18/2017
  • Arkansas Regional Economic Development Center, LLC (Arkansas, Oklahoma) Terminated 5/16/2017
  • Art District Los Angeles Regional Center, LLC (California) Terminated 5/16/2017 (this RC was removed from the terminated list and added back to the approved list on 6/19/2017)
  • The Z Global Corporation Regional Center (California) Terminated 5/16/2017
  • Mariana Stones Corporation Ltd. (Guam) Terminated 5/15/2017
  • NatureAll Co., Inc. EB-5 Regional Center Terminated 5/15/2017 (New Jersey)
  • USA Regional Center, LLC (California) Terminated 5/15/2017
  • Eight Islands Regional Center, LLC (Hawaii) Terminated 5/3/2017
  • Diamond City Montana EB-5 Regional Center, LLC (Montana) Terminated 5/10/2017
  • New York Pioneer Regional Center (New York) Terminated 5/3/2017
  • Optima Arizona Regional Center, LLC (Arizona) Terminated 5/3/2017
  • Puget Sound RC, LLC (Washington) Terminated 5/3/2017

Washington Updates (new draft bill), New Form I-526, RC list updates

Washington Updates
It’s still not clear what will happen in the next couple weeks before the next regional center program sunset date on April 28, and whether we’re likely to see EB-5 program changes first from legislation or from new regulations. In an advocacy update sent to members last week, IIUSA noted that the appropriations package to fund the government past April 28 is likely to be larger than a continuing resolution. Thus it could be a vehicle for EB-5 legislative reform, were any reform proposals ready. Right now there are three active bills – two that would terminate EB-5 entirely, and Rand Paul’s rosy wish list of improvements. Yesterday EB-5 Insights reported that the Senate Legislative Council is circulating another staff discussion draft of EB-5 reform legislation, and speculates that the RC program may get a short-term extension of a few weeks (with government funding) while Congress works out other appropriations details. I’ve added the staff draft dated 4/15/2017 to my Bill Comparison Table and updated my TEA Incentive Summary for reference. (5/11/2017 update: I’ve now revised the TEA Incentive Summary.) The new draft is basically the same document (with a few changes) as the 12/2/2016 staff discussion draft, which in turn was based on the Goodlatte/Conyers legislation from 09/2016. We shall see whether it goes anywhere this time around.

New Form I-526
There’s a new edition of the Form I-526, which everyone must use starting June 9, 2017. Wolfsdorf Rosenthal and EB-5 Insights discuss what’s new in this version of the form.

Petition Processing
The new IPO processing times report does not look good, with the “processing petitions as of date” date having regressed for every category (back almost a week for I-829, back nearly 3 weeks for I-526, and back nearly 5 weeks for I-924). If you’re new to this blog, here’s a link to a post with everything I know about interpreting processing time reports.
Also, a sharp-eyed reader pointed out to me that the number of pending I-526 petitions that USCIS reports every year does not, as one would expect, equal the number of pending petitions at previous year-end plus current-year receipts minus current-year approvals and denials. (The quarterly numbers don’t add up either.) Anyone know why this is so? If not, I’m submitting a question for the next stakeholder meeting.

Regional Center List Changes
Additions to the USCIS Regional Center List, 04/03/2017 to 04/17/2017

  • Atlas Regional Center, LLC (California)
  • Hawaiian Palms Regional Center (Hawaii)
  • Hope Investment Regional Center (California)
  • Washington Free Life (Washington)

New Terminations

  • Leaf Fischer Investment Group, LLC (Florida) Terminated 3/6/2017
  • Idaho Global Investment Center, LLC (Idaho) Terminated 3/6/2017
  • FreeMind Films Regional Center (California) Terminated 3/15/2017
  • Green Card Gateway Regional Center (Illinois) Terminated 3/30/2017
  • Florida Gateway Regional Center, LLC (Florida) Terminated 4/12/2017

Washington updates, articles, RC list updates

Washington Updates

  • Legislation: Another piece of EB-5 legislation has been thrown into the ring – this one from Rand Paul: S.727 Invest in Our Communities Act. Dianne Feinstein made an extreme bargaining statement with S.232, which threatens to eliminate the EB-5 program entirely, and Rand Paul’s bill takes the opposite pole – offering to make the regional center program permanent with more visas for everyone, better processing times, more investor protections, reasonably limited integrity measures, and no changes to the investment amount or Targeted Employment Area incentive. I’ve entered S.727 in my bill comparison chart, but I guess it lacks sufficient compromise to gain traction (and the similar S.2122 from Mr. Paul in 2015 didn’t go anywhere) . I can’t guess what will happen between now and April 28, but am following what The Hill has to say about prospects for a continuing resolution or omnibus spending bill. UPDATE: An April 6, 2017 letter from Senators/Representatives Grassley, Leahy, Conyers, Goodlatte, and Feinstein encourages Congressional leadership not to extend the RC program on April 28 unless accompanied by reforms. (Then why don’t any of these people introduce reform legislation??)
  • Regulations: Recall the April 11 deadline if you want to comment on USCIS proposed EB-5 regulations USCIS 2016-0006 and USCIS-2016-0008. So far, 0006 (with proposed TEA and investment amount changes) has 54 comments and 0008 (the advance notice requesting feedback on regional center designation issues) just 11 comments.

Other Resources

  • Wolfsdorf Rosenthal and EB-5 Insights have posts about a new kind of source of funds RFE that requests SOF evidence for people transfering funds on behalf of an EB-5 investor.
  • Carolyn Lee of Miller Mayer discusses the newly-unveiled regional center compliance audit program.
  • A journalist called to ask me for the story behind the surge of regional center terminations in 2015 and 2016. In case anyone else is interested in this topic, here are the sources I sent him.

RC List
Additions to the USCIS Regional Center List, 03/01/2017 to 04/03/2017:

  • Coastline Regional Center (Washington)
  • Extell Utah Regional Center (Utah): eb5extell.com
  • Mainsail Florida Regional Center (Florida)

Removed from the list of terminated RCs, and restored to the list of approved RCs:

  • South Dakota International Business Institute (SDIBI) (South Dakota)

New Terminations:

  • San Gabriel Valley Regional Center (California) Terminated 3/15/2017
  • Washington Center for Foreign Investment, LLC (Maryland) Terminated 3/28/2017

By the way I work hard to keep my blog Regional Center List complete and consistent with information from USCIS, but the task is not easy and I welcome regional centers to correct my information.

Articles (Project Oversight, Redeployment, TEA Changes), RC list changes

EB-5 Articles

What to do if you suspect your EB-5 project is in trouble (February 17, 2017) by Catherine DeBono Holmes, Esq., Daniel B Lundy, Esq. and Jeffrey E. Brandlin, CPA, CIRA, CFF
This article gives practical advice for managers and investors in EB-5 investment funds. It offers a checklist of warning signs that an EB-5 project may be in trouble, defines a role for a construction monitor/accountant and lists tasks that person should accomplish, describes monitoring systems that should be in place, suggests steps for investors to take if they are not satisfied with monitoring and reporting, and begins to address the question of what EB-5 investors should do in case of a fraud enforcement action. I particularly recommend this article to EB-5 investors, as a reminder of what they can demand and what they should do after investment. EB-5 managers are not necessarily motivated to meet a high and expensive standard for oversight (a manager affiliated with the project owner may not see the need, an unaffiliated manager may prefer to keep at arms length from the project, and the odd bad actor lives on opacity). EB-5 investors, however, certainly benefit from exercising their rights to active and on-going due diligence. People drafting EB-5 legislation and regulations may also be interested in this article, as they consider appropriate requirements for EB-5 managers.

Standards and Guidelines for Redeployment of EB-5 Investment Funds – A White Paper (February 21, 2017) by Klasko Immigration Law Partners, LLP, Arnstein & Lehr LLP, Jeffer Mangels Butler & Mitchell LLP
This article steps into the grey area that USCIS has left by failing to finalize or replace its DRAFT guidance on the Job Creation Requirement and Sustainment of the Investment for EB-5 Adjudication of Form I-526 and Form I-829 (8/10/1015). At issue is the question of what EB-5 enterprises can do with EB-5 money considering that (1) an EB-5 investor’s funds are required to remain at risk in the enterprise throughout the investor’s conditional residence period, (2) visa backlogs mean that the investor might not be reaching the I-829 stage until up to 10 or more years following the initial investment, and (3) most EB-5 deals involve loans due to be repaid to the enterprise in less than 10 years. The draft guidance memo suggested that “to the extent that all or some portion of the new commercial enterprise’s claim against the job-creating entity is repaid to the new commercial enterprise during the sustainment period, the new commercial enterprise must continue to deploy such repaid capital in an ‘at risk’ activity for the remainder of the sustainment period” and “the capital will not be considered ‘at risk’ if it is merely being held in the new commercial enterprise’s bank account or an escrow account during the sustainment period.” Although this suggestion is questionable, and not final policy, it’s the only indication we have of USCIS’s thinking, and the authors of the above-linked article suggest practical ways to satisfy that standard for sustained investment. The authors explain why investment in publicly-traded or privately-held securities or real estate investment should comply with the “at risk” requirement, and they suggest guidelines for making such investments in a manner that complies with Federal securities laws and state law fiduciary obligations.

EB-5 Proposed Regulations: A Missed Opportunity, Next Steps for Reform (Rev. 2/14/17) by NYU Scholar-in-Residence Gary Friedland, Esq. and Professor Jeanne Calderon, Esq.
In this article, the authors once again address the sticky issue of EB-5 Targeted Employment Areas from an academic rather than industry perspective. They discuss TEA changes in proposed regulations and proposed legislation with reference to their database of EB-5 projects, which is dominated by the kind of large big-city projects that make poster children for TEA reformers. The EB-5 industry will not join the authors in lamenting that the draconian proposed regulations appear doomed by timing, but it should account for and consider effective response to the evidence that the authors present in support of TEA reform.

Regional Center List Changes
Additions to the USCIS Regional Center List, 02/04/2017 to 02/22/2017

  • Invest Guam Regional Center (Guam)
  • Universal Regional Center (California)
  • Discovery Northeast, LLC (New Jersey, New York, Pennsylvania)
  • Star EB5 Group (Connecticut, Delaware, New Jersey, New York, Pennsylvania)