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

April 18, 2017 5 Comments

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

Filed under EB-5 Law & Policy, New RC

Preventing fraud in EB-5 (CIIF investigation)

April 6, 2017 Leave a comment

In his testimony before the House Judiciary Committee in February 2016, Investor Program Office Chief Nicholas Colucci discussed how much USCIS has done to improve its administration of the EB-5 program, with particular focus on adding resources to prevent the kind of fraud and abuse that can come with investment and immigration.

Over the past few years, USCIS has taken a number of steps to improve the administration of the EB-5 program. In 2013, USCIS realigned the EB-5 program into the Immigrant Investor Program Office, and relocated it from USCIS’ California Service Center, which adjudicates various immigration benefits, to Washington, D.C., with a Chief dedicated exclusively to EB-5 adjudications. As the United States Government Accountability Office (GAO) noted in its August 2015 report to Congressional requesters on the EB-5 program, this move was part of a restructuring to help USCIS better detect fraud. USCIS also created a Fraud Detection and National Security EB-5 Division (FDNS EB-5) and embedded its personnel within IPO to work alongside adjudications officers. Additionally, a dedicated team of attorneys from the USCIS Office of Chief Counsel advise on program-related legal matters. In staffing the IPO, USCIS has, and continues to invest in the specialties needed to manage the complex EB-5 caseload by hiring staff with expertise in economics, law, business, finance, securities and banking to review cases and to enhance consistency, timeliness, and integrity within the program….
USCIS has taken its responsibility to administer the EB-5 program very earnestly, through its specialized staffing devoted solely to this program and its extensive efforts to regulate the quickly growing regional center program. However, no agency can do this alone. The EB-5 program necessitates collaboration with several other agencies, and the establishment of IPO in Washington, D.C. allows USCIS to work closely with partners such as the U.S. Securities and Exchange Commission (SEC), with whom IPO shares a robust collaborative relationship. USCIS also works closely with its sister agency, U.S. Immigration and Customs Enforcement (ICE), as well as with the Federal Bureau of Investigation (FBI) and the U.S. Department of State, in support of our oversight of the EB-5 program.

Improvements have covered staffing, inter-agency collaborations, and improved processes for important functions such as vetting lawful source of investor funds (as further explained in follow-up testimony — see especially Question 15 in response to Senator Grassley and Question 5 in response to Dianne Feinstein.)

This week’s breaking news story Feds raid San Gabriel, Arcadia locations over visa-fraud scheme involving criminals on China’s most-wanted list reminds us why those improvements were so important. The case, as described in an Application for Search Warrant filed by an FBI investigator, indicates that USCIS approved I-526 petitions from 2009 to 2012 that (if FBI evidence is correct) should never have been approved — including cases that involved people who did not invest their own funds, people who were promptly refunded their investments, and three individuals listed on China’s most wanted list for financial crimes. The good news is that the net since 2013 seems to be holding. The warrant does not indicate that any investors named in the investigation have been able to to get permanent green cards (though several have had I-829 petitions on file since 2012, possibly pending this FBI investigation which seems to have started in 2013), and the post-2013 I-526 petitions discussed in the warrant are likewise pending. The investigation stands as evidence that people may try to get away with fraud and abuse — but not that they get away with it. Investors who may have been complicit have not successfully completed the immigration process, and the regional center principals have had the FBI at their heels (sometimes literally: “at approximately 11:13 a.m., observed TAT exit SUBJECT PREMISES #2’s front door and walk across the street, after which he talked to a gardener, and then returned and entered SP#2. At 11:45 a.m. observed TAT exit SP#2 and go to the mailbox in front of the residence and retrieve mail. At 12:13 p.m. observed TAT walking from SP#2 carrying a black-colored briefcase-sized soft bag in his hands. TAT then walked across the street.”) and are now facing formal fraud investigation. Dozens of good faith investors in CIIF offerings and anyone with CIIF who’s innocent of fraud are unfortunate collateral damage, and I wish for their sake that the FBI had worked more quickly. (Updates: Some investors have filed suit in civil court to try to get their money back, and Federal Prosecutors have filed civil complaints seeking asset forfeiture. Victoria Chan has pled guilty to fraud and money-laundering charges.)

Filed under EB-5 in the News, EB-5 Law & Policy

FY2017 Q1 EB-5 Petition Processing Statistics

April 5, 2017 3 Comments

The USCIS Immigration and Citizenship Data page has been updated with numbers for I-526 and I-829 petitions received and processed in October to December 2016. The numbers show another dramatic improvement in I-526 processing, continuing free-fall in I-829 processing, and another unnatural surge in I-526 receipts. Denial rates remain low. When IPO previewed these numbers in the last stakeholder meeting, they said that I-829 adjudications will improve going forward with a new I-829 team.

I’ve updated my summary charts with the FY2017 Q1 numbers, and also added a new chart pointing out how I-526 filing trends coincide with regional center program sunset dates. Legislators and USCIS have tended to speak as if recent EB-5 investor numbers reflect sustainable trends based on surging interest in the EB-5 program (and/or underpricing or aggressive marketing). My experience and what I read indicates that the surges are rather fueled by uncertainty about program changes, such that people who would otherwise have considered EB-5 years in the future are hustling all at once to make investments now while the program is still viable. That kind of demand is not sustainable. In fact it means that all else being equal we’ll see fewer investments in the future, because tomorrow’s demand is being pulled into today (and tomorrow’s visas are being claimed today). The increasing supply of EB-5 investment opportunities (particularly from a few mega-projects, the subject of a forthcoming post) play a role in the surges and backlog, but most of all I blame Congress for keeping the regional center program on edge by repeatedly promising and failing to act on EB-5.

Filed under EB-5 Statistics

4/26 USCIS Webinar on I-924

April 5, 2017 Leave a comment

Note: The subtext to this webinar may be the storm over IPO’s claim that the revised Form I-924 justifies the new policy to require amendment approval for expanded geographic area prior to I-526 filing. However, the invite doesn’t solicit any advance comments or indicate whether the event will allow questions.

From: U.S. Citizenship and Immigration Services [mailto:uscis@public.govdelivery.com]
Sent: Wednesday, April 05, 2017 10:34 AM
Subject: USCIS Invitation: Form I-924, Application for Regional Center Designation Under the Immigrant Investor Program, 04/26/2017

Dear Stakeholder,

U.S. Citizenship and Immigration Services (USCIS) invites you to participate in a webinar on Wednesday, April 26, from 1 to 2 p.m. to discuss the Form I-924, Application for Regional Center Designation Under the Immigrant Investor Program. This webinar will discuss certain changes to the Dec. 23, 2016 edition of Form I-924.

Form I-924 is used by any economic unit, public or private, in the United States that is involved with promoting economic growth (including increased export sales, improved regional productivity, job creation, or increased domestic capital investment) to:

  1. Ask USCIS to be designated as a regional center under the Immigrant Investor Program; or
  2. Request an amendment to a previously approved regional center.

Form I-924 and its instructions are available at https://www.uscis.gov/i-924.

To Register:

Please email ipostakeholderengagement@uscis.dhs.gov with your full name and the name of your organization. Also, please place “I-924 Webinar” in the subject line. Once we process your registration, you will receive a confirmation email with additional details.

If you have any questions regarding the registration process, or if you have not received a confirmation email within two business days, please email us at the same address.

Note to Media: This engagement is not for press purposes. Please contact the USCIS Press Office at (202) 272-1200 for any media inquiries.

We look forward to engaging with you!

Filed under EB-5 Events, Updates from USCIS

Washington updates, articles, RC list updates

April 4, 2017 6 Comments

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 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.

Filed under EB-5 Law & Policy, EB-5 Resources, New RC

Washington updates, RC termination appeal, SEC (WA), Petition processing

March 21, 2017 Leave a comment

Washington Updates

The comment period for proposed EB-5 regulations closes on April 11, and the regional center program’s current authorization expires on April 28. Either of those immanent deadlines could be associated with significant EB-5 program changes, but I’m not hearing any confident predictions for what will happen exactly. Last week Senators Grassley and Leahy wrote a letter reacting against news that a couple lobbyists for large real estate developers may have recently agreed to “secret backroom deals to thwart reforms.” The senators promised to oppose any such deal, which would presumably protect investment amounts and TEA definitions from significant change, but have yet to  reintroduce substantial EB-5 reform legislation of their own.  And Congress has so much to do in the next month that one wonders whether our representatives can even agree on a plan to fund the government beyond April 28, much less figure out EB-5 changes. For other commentary on state of play in Washington, see for example posts from IIUSA and Wolfsdorf Law. (This is probably too unserious to even mention, but Representative Steve King of “other people’s babies” fame has introduced another bill, H.R.1502, proposing to repeal the EB-5 program entirely. I don’t see this particular bill going anywhere, not least because terrorist threats may be the one problem EB-5 does not have.)

Appealing Regional Center Termination

Matter of S-D-R-C-, ID# 13768 (AAO Mar. 15, 2017) considers the question of whether or how USCIS would be justified in terminating South Dakota International Business Institute  — a regional center that on the one hand has had many successful projects and contributed significantly to economic growth over the years, and on the other hand was – for a number of years, though not currently – in the hands of management charged with various improper activities. The AAO concludes, after interesting discussion deserving industry attention and response: “Evidence of a regional center’s improper or unlawful activities is relevant to the question of whether that center is continuing to promote economic growth, but derogatory evidence must be weighed against countervailing equities on a case-by-case basis. This case contains evidence of the diversion of funds away from job-creating activities, as well as evidence of substantial economic activity that created thousands of jobs. USCIS must consider all relevant factors in determining whether the Applicant’s regional center designation should be terminated or maintained.” AAO withdrew USCIS’s termination decision and remands the matter for further proceedings.

Challenging Capricious Decision-making

Mr. Whalen also posted a decision on the Quartzburg Gold case that I discussed last summer. The court denies part of the plaintiffs’ motion, but grants the plaintiffs’ charge that USCIS was arbitrary and capricious in its decision-making. “First, the reasoning underlying USCIS’s denial of an initial set of Plaintiffs’ petitions was arbitrary and capricious and counter to the evidence before USCIS. Second, USCIS’s decision to treat the petitions of certain Plaintiffs differently than others, despite the fact that all of the Plaintiffs presented effectively equivalent petitions, without providing any explanation for doing so, was also arbitrary and capricious.”

Litigation

The SEC has announced fraud charges against Washington-based businessman Andy Shin Fong Chen and his company Aero Space Port International Group, Inc. The complaint has the usual allegations regarding misappropriation of EB-5 investor funds, and is distinctive in targeting just one of the regional center’s several offerings. The RC response argues that the EB-5 investments are not securities (SEC begs to differ), and points out that the investors involved still support the project and its management (unsurprisingly, considering that they have I-526 petitions pending). I haven’t had time to fill out details in my log of SEC EB-5 cases, but hope someone else will publish an exercise like this to highlight common themes.  In an article published today in The Hill, Catherine DeBono Holmes discusses reforms that could help reduce or eliminate the factors that keep repeating in the scattered cases of alleged fraud in EB-5.

I-526 Petition Processing

The EB-5 Insights blog reports that that IPO seems to be implementing an undeclared policy of holding I-526 petitions in abeyance when an Exemplar I-924 Petition associated with the same new commercial enterprise has been filed. For reference, here is my running log of communications from USCIS regarding EB-5 petition processing practices and times. My EB-5 discussion forum is still open for investors to discuss their experience and progress of the cases they are tracking.

Filed under EB-5 in the News

RC compliance audits

March 21, 2017 Leave a comment

From: U.S. Citizenship and Immigration Services [mailto:uscis@public.govdelivery.com]
Sent: Tuesday, March 21, 2017 11:18 AM
Subject: USCIS Message: EB-5 Regional Center Compliance Audits

Dear Stakeholder,

U.S. Citizenship and Immigration Services (USCIS) announces the launch of an EB-5 Regional Center Compliance Audit Program.  Regional center compliance audits are an additional way to enhance program integrity and verify information in regional center applications and annual certifications. These audits will verify compliance with applicable laws and authorities to ensure continued eligibility for the regional center designation.

For example, the audit team:

  • Reviews applications, certifications, associated records, and information on the regional center;
  • Verifies supporting documents, submitted with the application(s) and in the annual certification(s);
  • Conducts site inspections; and
  • Interviews personnel to confirm the information provided with the application(s) and annual certification(s).

You can read additional details on the program on our Regional Center Compliance Audit page.  Read more about the EB-5 program online at uscis.gov/EB-5.

Sincerely,

USCIS Public Engagement

U.S. Citizenship and Immigration Services
20 Massachusetts Ave NW, Washington DC 20529 · 1-800-375-5283

 

Filed under Updates from USCIS

FY2016 EB-5 Visas Stats by Country

March 13, 2017 8 Comments

The US State Department Report of the Visa Office 2016 has been updated with Table V (Part 3), which gives a breakdown of all EB visas issued by country in fiscal year 2016. I’ve updated my chart with the EB-5 visa numbers. I’m interested to note the growing number of visas based on direct EB-5 investment (8.5% of the total visas versus 1.6% the previous year), the distribution of TEA investments (99.9% of regional center investments but 68% of direct investments), the growing number of visas going to investors from outside mainland China (24% versus 17% the previous year), and the growing national diversity of EB-5 investors. South Korea and Brazil each claimed over a hundred more EB-5 visas in FY16 than FY15, and five new countries entered the list of those with more than 20 visas each: Germany, Argentina, Colombia, Singapore, and Italy. Considering processing times and the visa backlog, these trends likely reflect EB-5 investments made/I-526 petitions filed in 2014 and earlier. (UPDATE: IIUSA has data on I-526 filings by country in 2016, and you can see additional detail in my post on Q3 2017 petition filings.)

Edit: updated link https://travel.state.gov/content/dam/visas/Statistics/AnnualReports/FY2016AnnualReport/FY16AnnualReport-TableV-Part3.pdf
For reference, here are links to my posts with summary charts of 2014 visa numbers by country and 2015 visa numbers by country.

Filed under EB-5 Statistics

3/8 House EB-5 Hearing (TEA & Investment Amounts)

March 8, 2017 3 Comments

Today’s House Judiciary Committee hearing on The Department of Homeland Security’s Proposed Regulations Reforming the Investor Visa Program focused on changes to the EB-5 investment amount and TEA incentive proposed by USCIS in its Notice of Proposed Rule-making EB-5 Investor Program Modernization (DHS Docket No. USCIS 2016-0006).

The hearing opened with statements from the Congressmen responsible for two of last year’s reform bills – Senators Grassley and Leahy, and Representatives Goodlatte and Conyers. All four expressed support for USCIS’s proposed EB-5 regulations, though Leahy and Conyers also argued that there’s no substitute for a legislative solution. Leahy said that he and Grassley will soon reintroduce their reform legislation (an interesting development); Goodlatte and Conyers did not say anything about sponsoring legislation. All four made almost the same points as in last year’s House and Senate hearings, but sounded a darker note this year – turning “mend it or end it” from a question into a threat. Representatives Sensenbrenner and Lofgren followed with relatively positive statements, listing EB-5 successes and contributions, but both agreed on the need for modernization (higher investment amounts) and reform (TEA adjustments). The Committee then heard testimony from and questioned a panel including the GAO (recapping its Sept. 2016 study on TEA use in EB-5), regional center operators (ably represented by Angelique Brunner and Sam Walls III), an organization that specializes in property revitalization and blight prevention, and an anti-immigration activist. Oddly, USCIS was not represented. (Speaking of which, Colucci’s reponses for the record from last year’s Senate hearing are worth reviewing.)

I don’t have time report on all the details (you can watch the video and read the testimony), but conclude with a few general impressions. Not one of the Representatives who spoke opined that EB-5 is just fine the way it is – all expressed at least one concern, and sounded ready to support mending (if not ending) the RC program.Likewise, no one on the Committee side advocated for canceling the proposed Obama-era regulations – the only question was whether Congress should take back the policy-making ball and act first.  I heard little sympathy for the industry position that USCIS’s proposed investment amounts are too high and its proposed TEA incentive too restrictive. (Lofgren (D-CA) and Nadler (D-NY) spoke out for qualifications considering the urban context and investor demand, Goodlatte noted that he’d been willing to accept less drastic proposals, and Brunner advocated for market-based alternatives.) Goodlatte and Lofgren both raised the specter of retroactivity, which they didn’t call “changing the rules of the game midstream and thus derailing thousands of good-faith investors and projects and job creation” but rather “implementing reform now, instead of postponing it 7-8 years until the backlog is through the system (while not blaming ourselves for the legislative lollygagging that spurred the surges/backlogs)” Even David North was taken aback by the suggestion that Congress could impose a retroactive new investment amount, but apparently Mr. Goodlatte still hasn’t been shown how disastrous and counterproductive such a move would be.  What are you doing, industry advocates, besides earning a bad reputation for obstruction?  This hearing also suggested that Congress isn’t being informed about direct EB-5, and hasn’t considered the impact of investment amount, TEA, and job allocation changes outside the regional center context. Generally, I came away from the hearing with a sense that the House Judiciary Committee agrees about the need for some EB-5 program changes, recognizes program benefits but is more angry than before about flaws, and has progressed little since last year toward refining or agreeing about specific proposals for change.  (However a lobbyist speaking to The Real Deal pointed out that the hearing was not well attended by Judiciary Committee members, so the views expressed may not be representative.) There’s reportedly EB-5 reform legislation cooking behind the scenes, but we didn’t get any preview at this hearing, and the clock to the next regional center program sunset date on April 28 is ticking loudly.

Filed under EB-5 Law & Policy

3/3 USCIS EB-5 Stakeholder Engagement (I-829 division, RC geographic area, site visits, filing tips)

March 3, 2017 Leave a comment

Today’s EB-5 Stakeholder Engagement with USCIS provided a number of important updates. (3/20 UPDATE: USCIS has now uploaded copies of prepared statements by Colucci and Harrison.) I have uploaded my recording, and summarized a few highlights.

  • EB-5 Petition Statistics: In October to December 2016, IPO saw a continued surge in petition filings, with 4,395 I-526 petitions received, 752 I-829 receipts, and 184 I-924 receipts. During that quarter, IPO processed 3,583 I-526 petitions (a record high), 112 I-829 petitions (a near-record low), and 88 I-924 petitions. IPO is now reorienting resources toward I-829, after having previously prioritized I-526 and I-924. Mr. Colucci commented that IPO processed more I-829s last month than in all of last quarter.
  • IPO Staffing: IPO is subject to the executive freeze on Federal agency hiring; however, USCIS has requested exemptions for certain “mission-critical” positions, and IPO has received an exemption for its adjudicator position. IPO now has 157 employees (below their target of 171 employees for the end of last year). IPO is authorized to hire up to 247 employees this fiscal year, subject to the hiring freeze and any exemptions. Increased staffing is IPO’s primary strategy for improving processing times.
  • I-829 Processing: In October 2016, IPO created a new division to focus on Form I-829 adjudications and customer service inquiries. The division will have three teams, with eight adjudicators and economists on each team. The most senior member of each team will interview I-829 petitioners, with most interviews conducted remotely with assistance from local field offices. (As previously stated, the I-829 petitioner can bring her counsel, qualified interpreter, and a representative from the regional center if applicable.) IPO expects I-829 adjudication output to improve significantly once this division is fully staffed and trained. There are currently 18 of 24 people on board, including three senior economists and three senior adjudicators who are working to cross-train for improved efficiency.
  • RC Reporting: IPO says that they will “soon” publish regional center termination notices in the USCIS Electronic Reading Room to promote transparency about reasons for termination. They are also planning to publish petition approval and denial statistics for each regional center.
  • Compliance, Audits, Site Visits: IPO has grown its compliance unit to become a division that oversees pooled investments (both regional center and pooled direct investments) with three branches to review I-924A, issue termination notices, and oversee audits (the first of which is scheduled for next month). IPO has trained 13 site inspectors from around the country, and expects to conduct about 250 EB-5 project site visits this year. IPO reassured stakeholders that IPO would interpret any site visit results in context, and would not make decisions based on the info before notifying petitioners through RFE or NOID. There are two types of site visits: for-cause visits triggered by questions about the project, and random visits that are scheduled at some point between I-526 approval and I-829 filing.
  • Policy: IPO plans to publish content related to sustained investment “in the near future” in the USCIS Policy Manual (rather than finalizing the draft August 2015 policy memo). IPO reviewed comments on the Policy Manual but does not plan any changes in response to the comments.
  • Regional Center geographic area expansion must now be approved BEFORE I-526 petitions can be filed: Here is a transcription of what Lori Mackenzie said (starting at minute 25 of the recording):

    UPDATE: These remarks from the meeting have now been superseded by Lori MacKenzie’s published remarks.
    We also received some questions related to the new Policy Manual publication as well as to the new I-924 Form release, which was effective on December 23, 2016, and the question really does relate to an expansion of geographic scope of a regional center. So just to give everyone a little bit of background around that. There is some guidance in the May 2013 Policy Memo that talks about how to expand geographic scope. After that guidance, we published the Policy Manual in November of 2016 which superseded that guidance, and then on December 23 we issued some guidance with respect to the Form I-924 and the instructions for filing the Form I-924. And so the question really relates to ‘if a Regional Center has filed an I-924 amendment requesting an expansion of geographic scope, may concurrent I-526 petitions be filed in the meantime relying on such proposed expanded geography?’ And the response to that is a little tricky, so you might want to take a few notes. We will continue to adjudicate all petitions filed prior to December 23, 2016, which is the effective date of the new Form I-924, under the prior guidance. So the May 2013 policy guidance holds for that. Petitions filed on or after December 23, 2016 must follow the current guidance, which means that Form I-526 petitions based on an area not previously approved will be deniable due to ineligibility at the time of filing. Note that in May 2016, prior to publication of the final revised Form I-924, we did provide the public with an opportunity to comment on this process by publishing the draft form in the Federal Register.

    I had been wondering about this issue, ever since I noticed that the November 2016 USCIS Policy Manual dropped two little words — “geographic area” – out of the May 2013 Policy Manual’s sentence about changes not requiring an amendment. However, both the Policy Manual and the new I-924 Instructions only said that amendments need to be filed, and we didn’t hear until today that IPO also demands that they be approved before investors can file I-526. Stakeholders strongly encouraged IPO to reconsider this surreptitious policy change, which has major implications for in-process projects that relied on previous policy, and which is unworkable considering that USCIS may take over a year to process amendment requests. Robert Divine has published a helpful article that explains the issues and suggests how industry and investors can respond to USCIS’s move:
    USCIS Reneges on Sponsoring Projects Outside Approved RC Area, Claiming it Gave Notice Through “Stealth” Disclosures

  • Filing Tips: IPO noted practices that would facilitate adjudications. They requested that petitions come with a cover letter and table of contents and tab-separated sections; that documents be single-sided, with page-numbers, and not permanently bound; and that copies be clear and legible and come with full translation if applicable. The petition should indicate whether it’s direct or regional center, and whether it’s part of a dual I-924/I-526 filing. I-924 applications need not include organizational and transactional documents unless associated with an Exemplar I-526. If submitting an interfiling with revised documents, highlight changes with yellow highlighter or some other method that is readily noticeable. Petitioners who have decided to abandon the process are requested to notify IPO of the decision to withdraw their petitions.

Filed under EB-5 Events, Updates from USCIS

Washington updates

February 24, 2017 Leave a comment

The article Will EB-5 Survive? (February 23, 2017) in National Real Estate Investor reviews the current status of EB-5 politics.

[See also my more recent post on the 3/8 House Judiciary Committee hearing.]

Filed under EB-5 in the News

USCIS EB-5 Training Materials (April 2015)

February 22, 2017 Leave a comment

I just noticed that the FOIA Reading Room on the USCIS website contains a 458-page document with presentations used by IPO in April 2015 to train EB-5 adjudicators. I may be the last person to notice? In case not, I’ve sketched out a Table of Contents and highlights below. The presentations are dated (especially now that the 11/2016 Policy Manual has replaced the 5/2013 Policy Memo and other guidance referenced in this training), but still quite interesting, especially for the examples. Also, because some currently-active adjudicators were trained on this. I’m especially intrigued by the section starting on page 383, which describes a process and checklist used by IPO economists when reviewing regional center I-526 petitions.

Presentation Title Pages Select points of interest (with PDF page numbers)
Capital at Risk 1 – 37 Indebtedness Analysis (6-9), list of red flags for investment (17), comment on shielding risk (20), evidence of business activity (23), comment on construction reserves not at risk (24), examples of redemption agreements and guaranteed returns (25-26), examples of permissible and impermissible escrow conditions and holdback conditions (29-32)
Comprehensive Business Plan 38 – 56 Definition of credibility (47), list of expected supporting documents (48), explanation of labor division between economists and adjudicators in business plan review (50), reminder that IPO reviews the business plan for evidence of capital at risk, not only for job creation (52), list of problems common to business plans not prepared by Suzanne Lazicki (53)
Child Status Protection Act 57 – 76 Explains CSPA age calculation and its effect under visa retrogression
DHS Overview 77 – 99 Discusses coordination with other agencies  (95-96)
Direct Job Creation 100 – 130 Reminder to adjudicators to require evidence of any existing employment at the I-526 stage (121)
EB-5 Overview 131 – 184 Indication that I-924 and I-924A are adjudicated by IPO economists not adjudicators (165-166), stats on petitions received, approved, and denied  and visas issued from 2005 to 2014 (175-178)
Indirect Job Creation for Adjudicators 185 – 210 Clarifies that “economically direct jobs” are one of the three types of indirect job creation estimated by economic models (194); discusses of reasonable inputs (198, 203); comments on model-derived construction jobs (205) and tenant occupancy (206)
Introduction to Standalone I-526 Adjudication 211 – 247 Mainly just summarizes policy
IPO Overview 248 – 281 IPO organizational chart (263) and explanation of IPO roles and duties (264-276)
In-Depth Lawful Source of Capital Issues 282 – 338 Examples of unlawful means (291), examples of income evidence (301-305), how to analyze funds derived from real property (307-312), how to analyze shareholder loans as source of funds (313-315), how to analyze gifts as source of funds (322-325), OFAC and FinCEN
Formation of an NCE and Active Management 339 – 382 Examples of expansion to establish an NCE (350-351), active management example (356-358), ULPA limited partner powers in LP (359) and LLC (370)
Reviewing the Economist Due Diligence Summary 383 – 400 This entire section is extremely interesting, describing how IPO economists review regional center applications and regional center investor petitions. Immigration attorneys may want to pre-emptively structure their case summaries according to the economist checklist described in this presentation
Targeted Employment Area 401 – 423 Comments that state TEA designation letters are usually valid for one year from the date of the letter (414)
USCIS Overview 424 – 458 Just an organizational overview

Filed under Updates from USCIS

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

February 22, 2017 Leave a comment

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)

Filed under EB-5 Resources, New RC

Understanding USCIS Processing Time Reports–Updated

February 13, 2017 7 Comments

How long does USCIS take to process EB-5 petitions and applications? We have two sources of data relevant to the processing time question: the IPO Processing Time report, which indicates the filing date of petitions currently being processed, and the Forms Data Page, which gives data for the number of received, approved, denied, and pending petitions by quarter. The first source is helpful for past petitioners, while the second source can be better for current/prospective petitioners estimating future processing times.

IPO Processing Time Report
Every month, the USCIS Processing Time Information page updates a chart titled “Average Processing Times for Immigrant Investor Program Office” that looks like this.
chartWhat does this chart mean?
The single unambiguous function of this report is to indicate when petitioners may begin to complain. A stakeholder email from USCIS in January 2017 explained,

We post case processing times on our website as a guide for when to inquire (service request) about a pending case. For the last several years, we have posted case processing times using two different formats: For cases that were within our production goals, we listed processing times in weeks or months; For cases that were outside of our production goals, we listed processing times with a specific date.
Always refer to your I-797C, Notice of Action, and look for “receipt date” to determine when we accepted your case. If the receipt date on the USCIS Processing Times web page is after the date we have listed on your notice, you should expect to hear from us within 30 days. If after those 30 days, you have not heard from us, you may make an inquiry on your case. We recommend using our e-request tool for all case inquiries.

With this in mind, the table can be read to mean “As of November 30, 2016, we were processing at least some I-526 cases filed as of August 7, 2015. If your I-526 petition was filed before 8/7/2015 and you haven’t heard from us, you may start making inquiries.”

The processing report also allows a general conclusion that the I-526 processing time for investors with an August 2015 priority date was 16 months (November 30, 2016 – August 7, 2015 = 16 months).  (Though we know of people who filed I-526 in August 2015 and got earlier decisions or are still waiting, thanks to one or another exception to the first-come-first-served principle.)

The processing report indicates expected times for past petitioners up to a certain date. (I’ve logged processing times/dates for petitions from 2013 to 2015 in this spreadsheet.) The report does not say anything about the future. Since August 2015, IPO capacity has grown and EB-5 demand has grown even faster. The fact that an August 2015 petition had a 16-month processing time does not promise that a 2016 or 2017 petition will have the same time.

Petition Data
As a prospective EB-5 investor, or someone who filed I-526 in 2016 or 2017, I would look at form filing data to estimate future processing times. For example, see this chart of I-526 data from the USCIS Immigration Forms Data page:

This report provides information commonly used in waiting line models: inventory (pending petitions in the system), arrival rate (petitions received) and flow rate (approved + denied petitions, aka completion rate or throughput).  For an example of how to use this data to make predictions with a simple waiting line model, see the Prediction tab of my I-526 times spreadsheet.

2019 UPDATE: I made an EB-5 Timing page to combine links to articles and resources related to petition processing and visa timing.

Filed under EB-5 Resources, Updates from USCIS

S.232 Update, SEC & Attorneys, RC list changes

February 6, 2017 4 Comments

S.232 Update
Senator Feinstein and Senator Grassley have finally published text for and issued a joint press release on the long-shot S.232 – A bill to terminate the EB-5 Visa Program. The statement from Senator Grassley clarifies what this piece of legislation is really about: “For years, I’ve worked with bipartisan colleagues in good faith to reform it. Unfortunately, despite its many flaws, EB-5 proponents are apparently content with the status quo, and that’s unacceptable. I was hoping that it would not come to this point, but absent serious efforts to bring about reforms, we need to take the necessary steps to wind down the program and completely mitigate fraud, abuse and threats to our security.” S.232 expresses frustration at the progress of EB-5 legislation and makes a hardball negotiating statement: “if you don’t respond to my concerns, here’s what could happen.” The proposal to eliminate EB-5 entirely must be too drastic to gain much support or pass into law, but we should still take the frustration seriously. I can understand why EB-5 industry advocates in Washington DC would settle on a “protect the status quo” platform, that being the path of least resistance to industry consensus, but we cannot afford a reputation for being unserious about reform. We should address each of the concerns that Feinstein and Grassley raise in their press release. We can clarify points that are factually wrong (EB-5 is not green card sale and does not avoid waiting lines, as Feinstein assumes), respond constructively to valid concerns (for example support effective protections in response to past instances of fraud, address questions raised by GAO and Commerce studies on job counts), and have the leadership to offer some considered concessions on the fundamentally divisive issues (such how the targeted employment area incentive should be used, what investment amounts should be). We must not leave oxygen for S.232, or give it excuse to become anything more than a negotiating threat.

SEC Issues for Attorneys
IIUSA has reposted 10 Observations from Reviewing Evidence in an SEC Civil Enforcement Action, an article with good advice for attorneys based on the author’s review of documentary evidence in a civil enforcement action brought by the SEC against an attorney for taking commissions as an unregistered broker-dealer.

RC List Changes
Additions to the USCIS Regional Center List, 12/06/2016 to 02/04/2017

  • Health and Welfare EB-5 Regional Center, LLC (New Jersey, Pennsylvania)

Additions to the list of Terminated Regional Centers:

  • Medical Investment in Texas Regional Center (Texas) Terminated 1/23/2017
  • Pacific Proton Therapy Regional Center, LLC (California) Terminated 1/26/2017

Filed under EB-5 Law & Policy, New RC

Washington updates

January 27, 2017 2 Comments

2/6/2017 UPDATE: The news in this post is now all outdated. Please see my Washington Updates page.
–Original Post–
This week Washington has been busy making good on campaign promises and also throwing babies out with the bathwater. Of most significance for EB-5, the President has frozen federal hiring (halting USCIS plans to deal with petition backlogs and improve processing by bringing on more staff) and created two hurdles for new regulations (a regulatory freeze and a make-one-delete two requirement), deferring hopes and fears for the long-awaited modernization of EB-5 regulations. A horrifying new order suddenly suspends whole countries of people from US visas and even entry based on nationality. Senator Dianne Feinstein decided the time was right put her long-running opposition to EB-5 in the form of a bill (S.232) that proposes eliminating EB-5 entirely, both direct investment and the regional center program. I’ll write more about this bill if anything comes of it, but I expect that that the significant legislation will be a forth-coming update to the Goodlatte EB-5 reform bill (last released 12/2/2016). I am going forward with my work as usual under the assumption that reason will prevail eventually and that immigrant investment and the country generally are not, after all, doomed.  But if anyone would like to offer me a chance to move from the immigration business to the walls-and-bunkers business, I’m listening.

Filed under EB-5 in the News

Regulations freeze, SEC action (San Francisco), RC List Changes

January 23, 2017 Leave a comment

Progress of Proposed Regulations
As EB-5 stakeholders process proposed new EB-5 regulations, they are thinking (1) how can I dissuade USCIS from the changes that would be most harmful for me personally; (2) how can I take best advantage of this golden opportunity to explain to USCIS how EB-5 works in the real world; and (3) how early could the proposed regulations become final, effective regulations? We know at least that regulations can’t proceed to the next step until after the public comment period closes on April 11, 2017, and now the new administration has put another hurdle in the road.

President Trump’s first Presidential Memorandum is addressed to the Heads of Executive Departments and Agencies with the subject Regulatory Freeze Pending Review (January 20, 2017). It does not put a moratorium on new federal regulations, but does require that any new or pending regulations be presented for review and approval of a Trump-appointed agency head before proceeding any further. This means that proposed new EB-5 regulations will need to go before General John Kelley, the newly-confirmed Secretary of Homeland Security. Would General Kelley allow new EB-5 regulations to move forward? The tireless Senator Grassley met with General Kelley on January 13, and reported that “In addition, we talked about new proposed regulations published by the Department today that would go a long way to restoring the EB-5 immigrant visa program to the way Congress intended it to be used: to help bring much-needed jobs and capital to rural and economically distressed areas. I [Grassley] expressed my strong desire that these rules be kept in place and allowed to go forward to ensure that this program fulfills its original intent.” I don’t know what input General Kelley may get from other directions, or whether the flood of lobbying dollars out of New York will have an impact. IIUSA indicates that its official comment submission to DHS will seek to demonstrate the negative effects that proposed changes would have on the industry.

New SEC Action
People drafting new EB-5 regulations and legislation are motivated, in part, to implement reforms that can help preempt the kind of situations that end in SEC action. When cases appear, we have a post-mortem opportunity to consider: what went wrong here, and how might problems have been prevented or at least detected earlier? Last week the SEC published a complaint against San Francisco Regional Center, Thomas Henderson, and related parties. This case has the usual allegations (commingling, misuse, and misappropriation of funds), but offers a relatively challenging “what-if” analysis. The regional center’s website and offering documents (as quoted in the suit) appear to make all the right representations about account transparency; it just happens that the RC apparently didn’t follow through on these representations, and a third-party co-owner with apparently every right and motivation to monitor proper use of funds had to resort to a lawsuit to claim his right to oversight and eventually apply the breaks. Retrospective armchair due diligence isn’t as easy for this case as for some others. I wonder – what different policy or different industry practices could have contributed to improved policing in this situation?

Regional Center List Changes
Additions to the USCIS Regional Center List, 11/29/2016 to 12/06/2016.

  • Advantage America Seattle Regional Center (Washington): www.aaeb5.com
  • CP Northern Regional Center (Michigan, Wisconsin)
  • California Agricultural Greenhouse Regional Center, LLC (California)
  • California Bond Finance Regional Center, LLC (California)
  • Greystone EB5 Northeast RC, LLC (Connecticut, Delaware, District of Columbia, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Virginia): www.greystoneeb5.com
  • QueensFort Capital Texas Regional Center, LLC (Texas): queensforteb5.com
  • Texas Crown Regional Center, LLC (Texas)

Renamed:

  • Civitas Pacific Northwest Regional Center, LLC (former name Civitas Northwest Regional Center) (Oregon, Washington)

New terminations:

  • American Development and Investment Regional Center (California) Terminated 1/5/2017
  • Bay Area Regional Center LLC (California) Terminated 12/22/2016
  • Path America Sonoco, LLC (Washington) Terminated 11/23/2016

Filed under EB-5 in the News, EB-5 Law & Policy, New RC

Recap of Major Winter Developments (policy, regulations, legislation, statistics, fees, Commerce study, new AAO, SEC actions, litigation)

January 13, 2017 2 Comments

The past few months have been packed with important EB-5 news, and it’s hard to keep up with all that’s happening.  As a reminder, here is a summary list of the major developments to keep in focus. (The first five I’ve discussed in previous posts; the last five I haven’t had time to write about yet.)

  1. New Policy: Effective November 30, 2016, USCIS replaced all existing EB-5 policy with a new Policy Manual: USCIS Policy Manual, 6 USCIS-PM G (November 30, 2016). This major event puts the whole program on a new footing (though 6 USCIS-PM G is essentially similar to the policy it replaced, with a few adjustments, additions, omissions, and clarifications as I started to discuss here).
  2. Proposed New Regulations: As I announced this week, USCIS has published notices of proposed EB-5 rule-making in the Federal Register.  Advance Notice #0008 invites stakeholders to give input on possible changes to regional center designations and terminations and the I-924 and project approval process. Notice #0006 gives proposed new rules covering priority dates, investment amounts, and TEA designation, among other things. If the new rules are finalized as proposed, the EB-5 minimum investment amount will increase to $1.8 million (or $1.35 million within a TEA) as calculated from inflation, fewer projects will qualify for TEA status, investors with approved I-526 will have the option to invest in a different project without losing their original priority date, and regional centers may need to get project approval before offering investments. We can expect action toward finalizing regulations at some point after the public comment period closes on April 11, 2017 – maybe shortly or maybe long after, if the comments inspire redrafting and/or if the new administration chooses not to greenlight the regulations.
  3. Proposed New Legislation: Congress was (reportedly) actively working on EB-5 reform legislation before the continuing resolution that passed on December 10 provided the regional center program with a clean extension through April 28, 2017. We have a staff draft of an EB-5 bill dated December 2, 2016, and understand that staffers and lobbyists are still working with this document behind the scenes. If the staff draft were passed as-is, the EB-5 minimum investment amount would decrease to $700,000 (or $650,000 for a TEA investment), with incremental increases up to $1M/$800K, additional TEA categories and incentives (including rolling visa set-asides) would be introduced, and regional centers would  be given hefty new annual fees ($10,000 or $20,000) and relatively gentle new fund administration and reporting requirements. (My bill comparison chart gives a link to the bill text and summarizes the provisions.) We may see action toward passing reform legislation in the coming months before the next regional center sunset date on April 28 – or may not, with so many other matters demanding attention during Trump’s first 100 days in office, and the anti-change lobby.
  4. New Data and Statistics: We got updated numbers from USCIS and the Department of State on EB-5 petition and visa processing and backlogs as of the end of 2016. The numbers show a queue of current and prospective visa applicants about 75,000 people long, which implies an 8-year visa wait for new China-born investors. And unless USCIS improves processing volumes, it will take 2+ years just to process the currently-pending I-526 petitions and 3+ years to just process the currently-pending I-829 petitions. Proposed EB-5 reform legislation and regulations both plan to improve processing times/volumes, but do not offer to increase available visa numbers.
  5. Fee Increases: EB-5 petitions and applications have higher filing fees since December 23, 2016. The new I-924 fee (dramatically increased to $17,785) is likely to curb the burgeoning number of regional centers (perhaps especially new applications from serial operators, which have accounted for an increasing percentage of new RCs) and discourage voluntary filing of amendments.
  6. Department of Commerce EB-5 Impact Analysis: We finally have the long-promised Department of Commerce study commissioned by USCIS: Estimating the Investment and Job Creation Impact of the EB-5 Program (January 2017). The product is a slender report and based on old data from 2012-2013, so the numerical conclusions are of limited interest at this point, but the analysis is still significant and could have political impact. I can see EB-5-critic Senator Grassley seizing on this report and the barriers to good analysis that the authors describe. EB-5 economists should review the formerly common EIR problems identified on p. 9, and ensure that they’re not still repeating them.
  7. New AAO Decisions: In November and December, USCIS published 27 new decisions on I-526 cases and one new decision on a regional center termination appeal.  The termination decision (NOV022016_01K2610) and 15 nearly-identical I-526 decisions (for example DEC142016_07B7203) are related to Path America KingCo, LLC, which lost designation after an SEC action mainly targeting its principal. The regional center appealed its termination based on pursuing active, viable projects under reputable new management. Investors appealed with the argument that their petition denials were premature, coming while the regional center appeal and the SEC case were still unresolved. AAO found that the investor appeals were hopeless due to the issue of material change, and that the regional center appeal was not sufficiently compelling. (But the RC decision interestingly grants the possibility that mitigating, corrective, and restorative actions could potentially compensate for past problems with the regional center or related entities.) Among decisions not related to Path America, I hope to write more about three decisions with good discussion of material change issues (NOV012016_02B7203, NOV072016_01B7203, NOV292016_02B7203) and two that address the level of business activity necessary before filing I-526 (NOV092016_01B7203, NOV292016_01B7203). I’ll particularly highlight NOV292016_01B7203, which explicitly states what I’ve always said – that an investor must not file a TEA-based I-526 before securing a location for the business.
  8. New SEC Actions: On December 27, 2016, the SEC published a complaint brought against California-based attorney Emilio Francisco and associated companies who are charged with diverting and stealing EB-5 investor funds. On December 28, 2016, the SEC announced settlement on a case against AJN Investments LLC/Jason Adam Ogden, who was charged with diverting EB-5 investor funds and wrongly making midstream business model changes.  I’m interested to note that these SEC complaints do not implicate or even identify the regional centers that sponsored the EB-5 investments involved. The SEC holds the project companies and principals exclusively responsible for problems in the offerings, projects, and use of funds. I wonder whether USCIS will pursue the regional center sponsors, holding them responsible for oversight, or whether it will follow the SEC’s lead in considering the sponsors out of the picture. It appears that the regional centers in these cases did not control any NCE bank accounts and were not involved in offering documents or investor promotion. In other news, the SEC has just settled with Path America (a case that did implicate the regional center).
  9. Other litigation: On November 14, 2016, a long list of EB-5 investor plaintiffs brought a civil suit against a long list of defendants associated with the Palm House Hotel EB-5 project. The suit enumerates the lies that the investors believe they were told, calls out every party and service provider allegedly involved in making false representations, and traces alleged misuse of investor funds. The case appears complicated and ambiguous (not the kind of low-hanging fruit that the SEC seems to favor) but full of drama and makes for gripping reading. Another case that’s older now (filed August 2016), but also a colorful Florida story: USA v. Karamchand Doobay, who was charged with perpetrating fraud through his regional center and projects. I’m sure the investors in these cases would unite in one message for the future: do not neglect due diligence before investing! And the defendants would likely encourage care in partnerships and representations.
  10. Good news: Meanwhile, just to keep  perspective, 99% of the 865 regional centers are apparently doing well and good, or avoiding lawsuits and bad press at any rate. At least $10.4 billion dollars of EB-5 investment entered the U.S. economy in 2016, judging by the number of I-526 petitions filed during the year. I was privileged to write business plans last year for 32 new EB-5 deals that look promising for both local communities and foreign investors, and I continue to be encouraged by what I see on the ground on the bright side of EB-5.

(Also note, adding to the festival of updates and feedback opportunities, an in-person EB-5 stakeholder meeting just announced for March 3 in DC.)

Filed under EB-5 in the News, Updates from USCIS

Proposed New EB-5 Regs (priority dates, investment amounts, TEAs)

January 12, 2017 2 Comments

On January 13, the Federal Register is publishing a Notice of Proposed Rule-making titled EB-5 Investor Program Modernization (DHS Docket No. USCIS 2016-0006). The notice proposes and explains the rationale behind new EB-5 regulations on priority dates, investment amounts, and targeted employment areas, among other changes. The Notice gives a comment period ending on April 11, 2017, and the regulation amendments could go live at any time after that point – though I assume not very soon thereafter, since the notice solicits and will presumably receive extensive public comment.

Summary of Proposed Regulation Amendments in DHS Docket No. USCIS-2016-0006

  1. Priority Dates: Allow an EB-5 petitioner to use the priority date of an approved EB-5 petition for any subsequently-filed petition. (In other words, an investor with an approved I-526 in one project could choose to file a new I-526 in a different project while keeping the original priority date. This would benefit investors whose project or regional center has trouble after petition approval, but before the investor receives a visa number. The regulations do not restrict investor reasons for choosing to file a new petition.)
  2. Investment Amounts: Increase the standard minimum investment amount to account for inflation, reduce the differential between standard and TEA investment amounts, and implement automatic increases every five years based on inflation (rounded to the nearest 100,000).  Based on CPI increases since investment amounts were set in 1990, this means that the standard minimum investment would become $1,800,000 in 2017. The TEA amount, set at 75% of the standard, would be $1,350,000 in 2017. The investor would be required to contribute the minimum investment amount that is designated at the time the petition is filed.
  3. Targeted Employment Areas: Eliminate state designation of TEAs, and have DHS determine TEA qualification by applying its own uniform standards to evidence presented by investors and regional centers. For high-unemployment TEAs, DHS would only designate an MSA, county, city, or project tracts. (A project tract TEA is the census tract where the project is located, or a group comprising any or all census tracts that touch the tract where the project is located — but not a group including any indirectly connected census tracts). The regulations do not specify which unemployment data DHS would use or accept. (This document compares TEA regulations in the proposed regulations to current policy and legislative proposals.)
  4. Other technical changes: define a process by which derivatives may file Form I-829 if not included on the principal’s position; provide greater flexibility in selecting the I-829 interview location; remove the requirement that investors report to a district office in order to receive a permanent resident card; miscellaneous other changes (including clarifying that an investor can be sufficiently engaged in an NCE merely by virtue of being an equity holder, without requiring a management or other active role).

The notice goes into extensive detail about USCIS’s thinking and research behind the proposed changes (which is interesting in itself, even apart from context), and invites stakeholders to respond with equally substantial data and analysis. I look forward to IIUSA or others stepping up to help organize a serious stakeholder response. We need to do better than hundreds of individual stakeholders mailing to basically just say “this would hurt” and “we don’t like change.” (Update: Comments can be reviewed at this link.)

The regulators at USCIS and legislators in Congress share similar goals — to modernize the EB-5 program and change certain aspects of the program in need of reform — but so far the draft legislation and proposed regulations suggest quite different changes. I wonder whether Congressional staffers will be influenced by these Notices of Proposed Rule-Making as they continue to refine legislation. (Update: The House Judiciary Committee held a hearing on March 8 to discuss the proposed regulations.) I note that the draft regulations frequently reference Congressional intent as expressed around 1990, but not current discussions in Congress.

Filed under EB-5 Law & Policy, Updates from USCIS

EB-5 Regs (Regional Centers), I-924 Process and 2015 Stats, Processing Times

January 10, 2017 Leave a comment

I-924 Approval Data

I try to improve the accuracy of my Regional Center List by requesting regional center designation letters from USCIS through the FOIA process. So far I have logged all initial designations and amendments through 2015. I’m sharing summaries of data points gleaned from the most recent letters in my collection (2015 approvals) to help shed light on processing issues.  As we prepare to respond to the ANPRM, let’s think about what’s wrong with the following pictures, and how to improve the situation.

Status of Amended Regulations

USCIS has published an Advance Notice of Proposed Rulemaking (ANPRM) in the Federal Register. This notice “EB-5 Immigrant Investor Regional Center Program” (Docket No. USCIS-2016-0008) does not unveil any revised regulations, but instead generously solicits stakeholder input to help formulate new rules for regional center designation, the exemplar filing process, continued RC participation, and RC termination. (Docket #0008 references a separate notice “EB-5 Immigrant Investor Program Modernization” Docket No. USCIS-2016-0006 that may cover the other EB-5 topics that we expected to see addressed. 1/12 UPDATE: here is Docket No. USCIS-2016-0006, which proposes new regulations for EB-5 investment amount increases, TEA requirements, priority dates, and other EB-5 matters.)

The bad news about notice #0008 is that it suggests USCIS is in a preliminary stage of thinking about new regional center designation rules, hasn’t actually drafted any regulations on this topic, and doesn’t expect to start for at least another 90 days. (Though hustle might be useless anyway, if Trump makes good on his election commitment to issue a temporary moratorium on most new regulations.) The good news is that notice #0008 demonstrates genuine concern to understand and work with regional center reality, presents thoughtful analysis of the issues, and poses excellent questions. Answers prepared for USCIS in response to the ANPRM should be organized and shared with Congressional staffers as well, since draft EB-5 reform legislation covers the same issues that USCIS aims to resolve, and would benefit from the same input.

Processing Times

Speaking of processing times, here is an email that I should have shared last week.

From: U.S. Citizenship and Immigration Services [mailto:uscis@public.govdelivery.com]
Sent: Thursday, January 05, 2017 11:32 AM
Subject: USCIS Now Uses Specific Dates to Show Case Processing Times

Dear Stakeholder,

Starting on Jan. 4, 2017, we will post processing times using a specific date format rather than weeks or months. This is the first step in providing processing times that are timelier and easier to understand.

We post case processing times on our website as a guide for when to inquire (service request) about a pending case. For the last several years, we have posted case processing times using two different formats:

  • For cases that were within our production goals, we listed processing times in weeks or months.
  • For cases that were outside of our production goals, we listed processing times with a specific date.

Always refer to your I-797C, Notice of Action, and look for “receipt date” to determine when we accepted your case. If the receipt date on the USCIS Processing Times web page is after the date we have listed on your notice, you should expect to hear from us within 30 days. If after those 30 days, you have not heard from us, you may make an inquiry on your case.

We recommend using our e-request tool for all case inquiries. In addition, we have many other services and tools at my.uscis.gov

If you move, remember to update your address for each pending case and receipt number at uscis.gov/addresschange.

Kind Regards,
USCIS Public Engagement Division

Note that this change is cosmetic: processing “as of month” and “as of date” are the same information, just in a different form. But the change is helpful to clarify that the report does not give average processing times, but rather a metric for judging when it’s okay to inquire about case status. FYI here is my spreadsheet of historical IPO processing times with columns translating month to date and vice versa. (But whether considering month or date, keep in mind individual deviations as illustrated above in my scatter plot charts of actual I-924 processing in 2015.)

Filed under EB-5 Law & Policy, EB-5 Statistics, Updates from USCIS

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