2/26 Stakeholder Meeting Updates

UPDATE: USCIS has posted an Executive Summary of the call.
Last week, EB-5 stakeholders enjoyed the “first of a new series of quarterly engagements” with USCIS. It’s been over a year since the last EB-5 stakeholder meeting, so this one was very substantive. I faint at reproducing everything of importance from the call, but am sharing my recording (click here to download it) for the benefit of anyone who would like to review details. Other bloggers (Mona Shah and EB-5 Insights) have also posted highlights, and IIUSA members can access an excellent article from Robert Divine. (See also H. Ron Klasko’s excellent posts on “EB-5 Stakeholders Call – What We Learned,” and “Unanswered Questions from the EB-5 Stakeholders Meeting“).

The first 23 minutes of the call feature program updates from Daniel Renaud, Deputy Associate Director of USCIS Field Operations Directorate, and Nicholas Colucci, USCIS EB-5 Program Office Chief. A few highlights:

• Priorities: Mr. Renaud stated five goals for the EB-5 program: reduce processing times, improve filing options and reduce paperwork, update regulations to align with statute and improve initial filings, improve customer service, and solicit stakeholder input more frequently
• Office Updates and Staffing: The EB-5 program office in Washington DC currently has 53 staff, including 20 economists and 25 adjudicators. 80% of the staff have advanced degrees, including 20 law degrees. In the “near term,” new hires (mostly adjudicators) are expected to increase the DC staff to 75, with a goal to reach about 100 staff by the end of the fiscal year. A training program has been implemented to bring adjudicators up to speed within 5 weeks of entering on duty. New hiring compensates for the loss of about 35 California Service Center personnel who had adjudicated I-526 and I-829. As of 2/14/2014, all I-924 and I-526 petitions are being adjudicated in Washington DC. A team at the California Service Center will continue to work with I-829 and I-485 through the end of the year.
• Processing: Some I-526 petitions have already been filed through the ELIS electronic filing system, and USCIS is continuing to test this system while also unrolling a document library that can be used for EB-5 cases. USCIS prioritizes improving processing times, particularly for Form I-526, by the end of this year, though further delays are expected in the short term as new adjudicators are hired and trained. USCIS repeats its commitment to a basically FIFO system, and claims that no one type of petition can expect faster processing than others. USCIS promises to update its website shortly with I-924 processing times refreshed monthly. (The 2012 times were deleted from the USCIS RC Page the day after the call, so we’ll see if new info appears there soon.)
• Regulations and Policy: USCIS is preparing to launch into revising EB-5 regulations to address fraud and national security issues (a priority as a result of recommendations from the Office of Inspector General’s audit report) and to generally improve program efficiency and procedures. Stakeholder feedback will be solicited through an upcoming stakeholder meeting to be announced and through the USCIS Idea Community (email to follow). USCIS is also working with the Office of Policy and Strategy to put together a comprehensive policy manual that will consolidate existing memoranda and the AFM into one policy guidance document.
• Filing Tips: Mr. Renaud promises that filing tips will be published soon on the USCIS website, and mentions five on the call: please don’t send duplicate copies of supporting evidence; translation documents need to comply with the regulations (complete, not summary, and accompanied by translator certification that complies with the regulations); don’t provide outdated TEA letters; Regional Center I-526 petitions should include a cover letter with the name of the new commercial enterprise and the name, receipt, and ID number of the Regional Center; for I-924 applications, state in cover letter the type of approval requested: hypothetical, actual, or exemplar.

Minutes 23-50 of the call were devoted to prepared responses to stakeholder questions submitted in advance of the call. This section was handled by Robert Cox, Deputy Chief of the EB-5 Program Office. I won’t reproduce the Q&A, which was very carefully worded, but provide time references to my recording so that you can revisit topics of interest to you:

• 23:45 Clarify types of RC applications (hypothetical and actual with exemplar), and whether a project can be approved as an actual project with deference if it is not accompanied by an exemplar I-526.
• 25:45  How much detail does a “hypothetical” plan need to have?
• 27:45 What is “an objective mistake of fact or law” that eliminates deference?
• 29:15 Will USCIS accept a TEA constructed from an aggregation of census tracts from an investor, or must this be in the form of an official state designation?
• 32:00 What is the standard for determining the geographic range of a regional center, and what kind of expansion outside the approved boundaries of the RC would be accepted?
• 35:20 May an EB-5 new commercial enterprise invest in a non-profit job-creating enterprise?
• 36:40 May one EB-5 investment be divided among businesses in separate TEAs?
• 37:40 May a developer have a guaranteed return so long as the promise is not made to the investor?
• 39:20 May Regional Centers be bought and sold?
• 40:40 May a business that purchases assets of a previously-existing business qualify as a new commercial enterprise?
• 43:30 What limits on use of bridge financing should investors know about?
• 46:00 What is the legal standard for allowing EB-5 investors to gain credit for guest expenditure jobs?
• 49:30 At the I-829 stage, what evidence will be accepted for creation of model-derived jobs?

The remainder of the call includes live Q&A. In my opinion, this is less useful since USCIS apparently instructs its people to avoid giving definitive answers off-the-cuff to call-in questions. But you’re welcome to review the recording (noting that I got briefly disconnected at 1:18 and lost 8 minutes).

USCIS clearly put a lot of work into this call, which was much appreciated. I look forward to the in-person engagement promised “in late Spring or early Summer.”

USCIS and SEC caution investors

The U.S. Securities and Exchange Commission (SEC) and U.S. Citizenship and Immigration Services (USCIS) have jointly issued an Investor Alert cautioning potential EB-5 investors. The alert notes that USCIS and the SEC are committed to fostering EB-5 program integrity, and to stopping the few rogues who try to misuse EB-5 as a means to carry out scams (with named offenders being USA Now Regional Center and A Chicago Convention Center). The alert takes a very sensible approach in addressing investor education as a means of discouraging fraud, and I look forward to the translated versions of this alert promised shortly. I’m also copying here the due diligence steps recommended by the Investor Alert. I trust that this alert will not only educate investors but also serve to discourage rogues and amateurs from attempting to use EB-5, and will effectively reward the best practices implemented by the many professional Regional Centers with legitimate offerings.

Quoted from “Investor Alert: Investment Scams Exploit Immigrant Investor Program” (10/1/2013). Published at http://www.sec.gov/investor/alerts/ia_immigrant.htm.

The fact that a business is designated as a regional center by USCIS does not mean that USCIS, the SEC, or any other government agency has approved the investments offered by the business, or has otherwise expressed a view on the quality of the investment…..As with any investment, it is important to research thoroughly any offering that purports to be affiliated with EB-5. Take these steps:

• Confirm that the regional center has been designated by USCIS. If you intend to invest through a regional center, check the list of current regional centers on USCIS’s website at http://www.uscis.gov. If the regional center is not on the list, exercise extreme caution. Even if it is on the list, understand that USCIS has not endorsed the regional center or any of the investments it offers.
• Obtain copies of documents provided to USCIS. Regional centers must file an initial application (Form I-924) to obtain USCIS approval and designation, and must submit an information collection supplement (Form I-924A) at the end of every calendar year. Ask the regional center for copies of these forms and supporting documentation provided to USCIS.
• Request investment information in writing. Ask for a copy of the investment offering memorandum or private placement memorandum from the issuer. Examine it carefully and research similar projects in evaluating the proposal. Follow up with any questions you may have. If you do not understand the information in the document or the issuer is unwilling or unable to answer your questions to your satisfaction, do not invest.
• Ask if promoters are being paid. If there are supposedly unaffiliated consultants, lawyers, or agencies recommending or endorsing the investment, ask how much money or what type of benefits they expect to receive in connection with recommending the investment. Be skeptical of information from promoters that is inconsistent with the investment offering memorandum or private placement memorandum from the issuer.
• Seek independent verification. Confirm whether claims made about the investment are true. For example, if the investment involves construction of commercial real estate, check county records to see if the issuer has obtained the proper permits and whether state and local property tax assessments correspond with the values the regional center attributes to the property. If other companies have purportedly signed onto the project, go directly to those companies for confirmation.
• Examine structural risk. Understand that you may be investing in a new commercial enterprise that has no assets and has been established to loan funds to a company that will use the funds to develop projects. Carefully examine loan documents and offering statements to determine if the loan is secured by any collateral pledged to investors.
• Consider the developer’s incentives. EB-5 regional center principals and developers often make capital investments in the projects they manage. Recognize that if principals and developers do not make an equity investment in the project, their financial incentives may not be linked to the success of the project.
• Look for warning signs of fraud. Beware if you spot any of these hallmarks of fraud:
  • Promises of a visa or becoming a lawful permanent resident. Investing through EB-5 makes you eligible to apply for a conditional visa, but there is no guarantee that USCIS will grant you a conditional visa or subsequently remove the conditions on your lawful permanent residency. USCIS carefully reviews each case and denies cases where eligibility rules are not met. Guarantees of the receipt or timing of a visa or green card are warning signs of fraud.
  • Guaranteed investment returns or no investment risk. Money invested through EB-5 must be at risk for the purpose of generating a return. If you are guaranteed investment returns or told you will get back a portion of the money you invested, be suspicious.
  • Overly consistent high investment returns. Investments tend to go up and down over time, particularly those that offer high returns. Be suspicious of an investment that claims to provide, or continues to generate, high rates of return regardless of overall market conditions.
  • Unregistered investments. Even though a regional center may be designated as a regional center by USCIS, most new commercial enterprise investment opportunities offered through regional centers are not registered with the SEC or any state regulator. When an offering is unregistered, the issuer may not provide investors with access to key information about the company’s management, products, services, and finances that registration requires. In such circumstances, investors should obtain additional information about the company to help ensure that the investment opportunity is bona fide.
  • Unlicensed sellers. Federal and state securities laws require investment professionals and their firms who offer and sell investments to be licensed or registered. Designation as a regional center does not satisfy this requirement. Many fraudulent investment schemes involve unlicensed individuals or unregistered firms.
  • Layers of companies run by the same individuals. Some EB-5 regional center investments are structured through layers of different companies that are managed by the same individuals. In such circumstances, confirm that conflicts of interest have been fully disclosed and are minimized.

If your investment through EB-5 turns out to be in a fraudulent securities offering, you may lose both your money and your path to lawful permanent residency in the United States. Carefully vet any EB-5 offering before investing your money and your hope of becoming a lawful permanent resident of the United States.

Investors may also be interested in IIUSA’s Recommended Best Practices for Regional Centers.

New Policy on RFE and NOID

USCIS has just published a new policy memorandum about Requests for Evidence and Notices of Intent to Deny. And it’s wonderful! It seeks to clarify the role of RFE and NOID in all adjudications, not only for EB-5 petitions and applications, but oh how we need this memo in EB-5. I’m quoting much of the memo below because it’s just so clear and rational and encouraging. Listen up, EB-5 team! This is how you adjudicate cases! We appreciate your expertise, but you weren’t hired just to wield theories and scattershot questions until applicants have validated every detail for you beyond a reasonable doubt. You are immigration service officers now. Your job is understand the legal eligibility requirements and review standard that apply to EB-5 cases, and to review evidence accordingly. (PS, Mr. Renaud, don’t you think it would be wise to include at least some people with legal education among your new EB-5 hires? We suffered in 2012 from multiple RFEs fueled by economists who were conscientious about details but seemed to have little sense of the process and standards for adjudication. We need the new EB-5 team in Washington DC to be staffed by people with the skills to understand and apply the general principles articulated in this memo.)

quoted from 6/3/2013 Policy Memorandum on Requests for Evidence and Notices of Intent to Deny
A. General Principles: RFEs and NOIDs
The guidance articulated under this heading is generally applicable. However, there may be special circumstances where the general principles do not apply. In such instances, there will be accompanying special instructions that will provide alternate guidance. In the absence of special instructions, officers must follow these general principles.

In each case, officers must:
• Understand the specific elements required to demonstrate eligibility for the particular application, petition, or request.
• Understand the standard of proof that applies to the particular application, petition, or request. In most instances, the individual has the standard of proving eligibility by a preponderance of the evidence. Under that standard, the individual must prove it is more likely than not that each of the required elements has been met.
• Review all the evidence to determine whether each of the essential elements has been satisfied by the applicable standard of proof. Fraud and national security concerns should be vetted pursuant to FDNS and CARRP protocols.

If all the essential elements have been satisfied by the applicable standard of proof, including any additional requirement to establish that the individual warrants a favorable exercise of discretion, the officer shall approve the application, petition, or request without issuance of an RFE. 8 CFR 103.2(b)(8)(i).

If the totality of the evidence submitted does not meet the applicable standard of proof, and the adjudicator determines that there is no possibility that additional information or explanation will cure the deficiency, then the adjudicator shall issue a denial.

RFEs. If not all of the required initial evidence has been submitted or the officer determines that the totality of the evidence submitted does not meet the applicable standard of proof, the officer should issue an RFE unless he or she determines there is no possibility that additional evidence available to the individual might cure the deficiency.

NOIDs. The issuance of a NOID is required as described under AFM Chapter 10.5(a)(3). A NOID is required before denying any immigration benefit requests submitted on the following forms:
• Form I-800A (relating to adoptions) based on a mandatory denial ground in 8 CFR 204.309(a);
• Form I-800 based on a mandatory denial ground in 8 CFR 204.309(b); or
• Form I-485 filed by a physician under 8 CFR 245.18(i) because the physician failed to comply with the conditions attached to his or her National Interest Waiver.
A NOID is also required when derogatory information is uncovered during the course of the adjudication that is not known to the individual, according to 8 CFR 103.2(b)(16).
The issuance of a NOID is also appropriate in the following circumstances:
• There is little or no evidence submitted (e.g., a “skeletal filing”); or
• The individual has met the threshold eligibility requirements for the requested benefit or action, but has not established that he or she warrants a favorable exercise of discretion (where there is also a discretionary component to the adjudication).

B. Additional Considerations
In some cases, particularly where the response to an RFE opens up new lines of inquiry, a follow-up RFE might prove necessary. However, officers must include in a single RFE all the additional evidence they anticipate having to request. The officer’s careful consideration of all the apparent gaps in the evidence will minimize the need for multiple RFEs.