EB-5 Updates

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.