Updates from the IIUSA Economic Development Advocacy Conference

May 12, 2014 3 Comments

This year’s IIUSA annual meeting in Washington DC on May 7-9 was remarkable not so much for what was said but for who spoke. At the IIUSA Washington DC meeting back in 2011, the mood was depressed and we were lucky to get prominent attorneys on the podium. Now in 2014, EB-5 is booming and we were honored by the presence of dignitaries including three members of Congress; top executives from USCIS, the State Department, the SEC, FINRA, the Department of Commerce, and even CBS; and chairpersons from eight of China’s provincial entry-exit associations.

A few things I learned from the conference:

  • USCIS Immigrant Investor Program Office Director Nicholas Colucci did not break any major news in his speech – appropriately, I think, given the private context. But his presence was a generous and appreciated gesture. [UPDATE: You can now read exactly what Mr. Colucci said, as his prepared remarks have been published on the USCIS website.] He reiterated that the Washington DC office is still ramping up on personnel, with a goal to reach 100+ staff by the end of the fiscal year; is investing additional resources in customer service through the immigrant investor program mailbox; and is taking care to provide expert training in areas including business organization and documents, SEC issues, money-laundering, decision-writing, and customer service. One of his new ISOs sat at my table and presented herself very nicely – with just the bright, collected, solicitous manner and edge of East Coast hustle that you’d want in the adjudicator for your case. I have to say that she impressed me much more than the aggrieved-looking examiners lurking at the back of the room at the California Service Center in-person EB-5 engagement in 2010. I suppose that not having to work in a Cold War bunker is good for morale. She is one of the ISOs who is new to EB-5 but not new to DHS. Mr. Colucci noted that his office has developed a 4-6 week certification process for ISOs hired from other departments, with the goal to get adjudications up to speed as quickly as possible – and at least to have the number of decisions exceed the number of receipts each week. Mr. Colucci gave us several things to look forward to: draft regulations revisions by September 15, filing tips based on analysis of RFEs, and – a surprise treat – a FY2014 Annual Report planned. Finally, he offered a few filing tips focused on economic impact analysis. He reminded economists to clearly explain economic model inputs used and to exclude ineligible inputs (e.g. some construction soft costs). He also emphasized a requirement that I haven’t previously heard made explicit by USCIS – that the economist must in all cases distinguish model direct and indirect components, not just provide an aggregate total. Economists are also reminded to break down the number of jobs associated with each distinct model input. We’re not sure how much to make of the fact that Mr. Colucci twice referenced examples of reasonable economic models and each time said “IMPLAN, REMI, and REDYN” and either accidentally or on purpose did not mention RIMS II – a model that’s currently not being updated by BEA but still very popular in EB-5 and still useable for now and being approved by USCIS, so far as we know.
  • Department of State Visa Controls Office Chief Charles Oppenheim discussed the intricacies of EB-5 visa availability and handed down his prediction that China retrogression will likely not occur until Summer 2015, with a May 2013 cut-off date possible at that time. He repeatedly advised the audience to only credit official information in the State Department Visa Bulletin and not to listen to bloggers. Apparently some of my kind have been panicking about immanent multi-year backlogs, so the audience was happy to hear from Mr. Oppenheim that we’re probably only looking at a 2-year backlog for Chinese investors (not too painful, considering that I-526s have been taking 1+ year to process anyway) and that this probably won’t occur until later next year. Mr. Oppenheim said that he would try to give 2-3 month’s notice of any new developments, and that otherwise we may expect news in the June 2015 Visa Bulletin. For those who are still confused about how the visa numbers process works, you may want to read articles on the Visa Office’s Immigration Statistics page and Ron Klasko’s simplified FAQ on the subject. For those who would like this problem to just be eliminated by an increase in the number of visas allocated to EB-5, call your Congressman and advocate.
  • SEC Division of Enforcement Chief Steve Cohen gave a speech that gently but pointedly emphasized the breadth of the SEC’s jurisdiction and enforcement interest in the EB-5 program.  While the SEC’s actions have so far focused on egregious fraud, Mr. Cohen noted that fraud is fraud whether egregious or not, that the SEC is concerned by any kind of misstatement (with its attention particularly drawn by Regional Center websites that state or imply that “approval by USCIS” means that the federal government provides a cloak of integrity to the Regional Center’s activities), and that SEC will attend not only to fraud but also to failure to comply with registration requirements. Rumor at the conference confirmed that some Regional Centers have recently been contacted by the SEC regarding registration issues.   To remind yourself about the requirements involved, you can review materials and posts around the USCIS/SEC joint conference call.  Regarding the SEC’s enforcement philosophy, Mr. Cohen stated that ignorance is not a defense, that the agency will take into account good faith compliance efforts and does not want to eviscerate the program, and that you’re strongly advised to approach the SEC for help to fix problems before the SEC comes to you to tell you that you have a problem.
  • FINRA Directory of Emerging Regulatory Affairs Kavita Jain joined Mr. Cohen and discussed how to get on the right side of registration requirements. Ms. Kavita noted that FINRA has been seeing an increase in applications related to EB-5 players and activities, and listed areas of concern for FINRA including due diligence, risk disclosures, suitability analysis, and finder’s fees.
  • Other notes. See IIUSA’s post on highlights from the Advocacy Conference for a more comprehensive summary and links to resources provided at the conference.
  • Mark your calendars. IIUSA is hosting its annual Trade Mission to China September 6-10, 2014 and the 4th annual EB-5 International Investment & Economic Development Forum in San Francisco on October 22-24, 2014.  Details here.

Filed under EB-5 Events, EB-5 Law & Policy

FY2014 Q1 EB-5 petition data, new RCs (CA, FL, WA)

May 6, 2014 3 Comments

USCIS has posted EB-5 petition processing statistics for the first quarter of FY2014 (October to December 2013) on the Immigration and Citizenship Data page. I hope that the increasing volume of I-526 decisions reflects operational improvements, and not just California Service Center adjudicators hustling to get files off their desks ahead of the February 2014 hand-off to the new Washington DC Investor Program Office. In any case the I-526 trend is significant, with the number of approvals increasing by around 20% every quarter last year (and the total number of decisions up 41% between the last two quarters).  This is good news for processing times, and also an indicator that we’re accelerating toward the annual EB-5 visa cap. USCIS has cautioned before against reading much into the number of denials that happen to occur in any given quarter, but I’m still intrigued by the recent spike in denied petitions. It will be interesting to see how second quarter statistics look, with new staff handling I-526 and the CSC free to focus on I-829 petitions. I’ve visualized USCIS quarterly data in the following charts.

q12014I-526 q12014I-829

Meanwhile, the IPO is continuing to crank out I-924 decisions.

Additions to the USCIS Regional Center List 4/29/2014 to 5/5/2014

I will be posting from the IIUSA annual meeting this week, and look forward to seeing you there.

Filed under New RC, Updates from USCIS

Regulatory changes, processing times, retrogression, ELIS, articles, new RCs (CA, CT, DC, FL, GA, IL, MA, MD, NJ, NY, PA, TX, VA, WV)

May 2, 2014 Leave a comment

Highlights of recent EB-5 activity:

  • Feedback on regulatory changes: On 4/23, USCIS hosted a “Regulatory Changes Listening Session” to solicit stakeholder input into the process of revising the EB-5 regulations, and invited the public to contribute additional suggestions through the USCIS Idea Community. You can get a recording of the listening session from IIUSA (post here) and log into the USCIS Idea Community any time through May 8 to provide your feedback and vote on suggestions made by others. Comments made so far include a few informed, constructive recommendations focused on the greater good and many that are either based on basic ignorance about what’s within the scope of regulatory changes or motivated by narrow interests such as trying to reduce competition or divert risk/responsibility or even shut down the Regional Center program entirely. I admit that I fall among those who are not motivated to offer disinterested input and take on some of the sheer hard work of drafting much-needed improvements to the current regulations. But I’m logged into the Idea Community and ready to vote for anyone who is so broadminded and generous with his or her time and expertise!
  • Processing times: USCIS updated IPO processing times (as of 3/31, posted 5/1) that show improvement overall, with 13.2 months for I-526, 8.9 months for I-829, and 10.6 months for I-924.
  • Retrogression: Mr. Charlie Oppenheim of the Department of State’s Visa Office is quoted as saying on April 21 that “retrogression for China EB-5 in the 2015 fiscal year [10/01/2014-09/30/2015] seems almost inevitable, as there are over 7,000 I-526 applications pending and 80% are from China.” For more detail, see “Update on EB-5 Visa Numbers” by Jennifer Hermansky. (For background on the retrogression issue, see FAQs on EB-5 Quota Backlog by H. Ronald Klasko.)
  • ELIS: Martin Lawler has written a useful account of his firm’s experience filing EB-5 petitions through USCIS’s new ELIS system. See “ELIS – Not the Island – Issues with Electronic Filing of I-526 Petitions” on the IIUSA blog.
  • Other articles: AILA and IIUSA have published a glossy report titled “Basic Background About the EB-5 Program” that can be used as an advocacy tool. The EB-5 Insights blog has a couple interesting posts by William Mack on Fee-based foreign finders and SEC/FINRA registration requirements and Suitability and AML Concerns for Broker/Dealers Engaged in the Offering and Sale of EB-5 Investments.

New Regional Centers

Additions to the USCIS Regional Center list 4/3/2014 to 4/28/2014:

Filed under EB-5 Law & Policy, New RC

New AAO Decisions, Processing Update, New RCs (AR, AZ, FL, MI, NM, PA)

April 4, 2014 1 Comment

New AAO Decisions
USCIS has started uploading AAO decisions to the folder for I-526 and I-829 Decisions issued in 2014. The decisions continue to show granular analysis of source of funds problems and continue to scold USCIS on the issue of deference in the wake of the 5/30/2013 EB-5 policy memo. Both FEB102014_01B7203 (a direct case) and FEB102014_02B7203 (a Regional Center case) appear from the AAO’s fact summaries to have been very faulty filings, yet the AAO nevertheless states that USCIS “did not properly deny the petition” because (in the direct case) “the director has not articulated to the petitioner in this matter why the business plan for the first investor was sufficient and the same business plan for the petitioner was insufficient or why deference was not applied to the petitioner’s business plan,” while in the Regional Center case: “the director never explained in writing, as an initial assessment, why the business plan, the business plan addendum, and the economic impact analysis filed in support of the instant petition were not due deference, either because of a material change in the underlying facts or otherwise.” Unfortunately for the direct EB-5 investor, the AAO still dismissed her appeal because her investment amount was $499,955, not $500,000, and therefore did not meet the threshold of a qualifying investment. A good reminder for all to pay attention to those bank fees.

Processing Times Update
An April 3rd update to USCIS Processing Time Information for the Immigrant Investor Program Office indicates that, as of 2/282014, USCIS was working on I-526 filed 5/18/2013, I-829 filed 4/9/2013, and I-924 filed 1/25/2013.

Regional Center Approvals
New Additions to the USCIS Regional Center List 3/19/2014 to 4/2/2014

Filed under EB-5 Law & Policy, New RC

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

March 21, 2014 1 Comment

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

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

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

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

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

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

New RCs (CA, CO, CT, DE, GA, MD, NC, NJ, NM, NY, OH, PA, PR, SC, TX)

March 7, 2014 Leave a comment

USCIS continues to expand its list of approved Regional Centers, with many of the new entries representing additional approvals for applicants already operating multiple RCs. The one new RC kind enough to post its approval letter was processed in only three months. I look forward to receiving contact information and approval letters for each of these new centers.

New Regional Centers at www.uscis.gov/eb-5centers 2/7/2014 to 3/5/2014

Filed under New RC

2/26 Stakeholder Meeting Updates

March 6, 2014 Leave a comment

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.”

Filed under Updates from USCIS

Coburn letter

February 21, 2014 1 Comment

The buzz this week has been over a letter sent by U.S. Senator Tom A. Coburn (R. Oklahoma) to all Regional Centers with content as follows:

As Ranking member of the US Senate Homeland Security and Governmental Affairs Committee, which has oversight over the Department of Homeland Security, I am writing to learn more about ___ Regional Center’s participation in the EB-5 immigrant investor program. Every Regional Center approved by USCIS will receive a similar request to help the Committee better understand the EB-5 program. To understand more about ___ Regional Center, please provide the following information by March 13, 2014 in an electronic format:

  • Any approval from USCIS to participate in the EB-5 program regarding the regional center and its business plan, including any subsequent recertification;
  • The total annual amount of investment and the number of individuals by country of origin making investments through the regional center since it has been in operation;
  • The name, address, and a description of each business in which the regional center has made an investment of funds and the number of jobs created by each investment;
  • Any fees charged to EB-5 applicants or received by the regional center, including amount and description;
  • A list of any current or former corporate officers of the regional center, including title, position, and dates of employment, and
  • The name and address of any individual or entity- either foreign or domestic- that the regional center has an agreement with to provide legal, accounting, recruiting or consulting services, as well as a description of the service provided.

Feelings are mixed about this. It’s nice to see Congressional concern and attention, and I’m a long-time advocate of transparency about Regional Center backers. But one wonders why Senator Coburn decided to circumvent USCIS, which implemented the I-924a annual reporting process to collect similar information from Regional Centers to report to stakeholders such as Congress. Also, what Senator Coburn, not being a well-known friend of immigration, intends to do with the responses he receives. IIUSA has referred its members to two relevant articles: “MINORITY RULES: WHY COMPANIES SHOULD TAKE SERIOUSLY THE INCREASING TREND OF MINORITY PARTY-LED CONGRESSIONAL INVESTIGATIONS” by Steven R. Ross, Raphael A. Prober, and Megan L. Greer, Akin Gump Strauss Hauer & Feld LLP, and A Client’s Guide to Congressional Investigations Akin Gump Strauss Hauer & Feld LLP. Also see Ron Klasko’s post on this topic.

Filed under EB-5 in the News

New RCs (CA, CNMI, DC, FL, MD, NJ, NY, PA, OR, VA, WA), Brookings Report

February 7, 2014 Leave a comment

New entries to the USCIS Regional Center List 1/22 to 2/6/2014:

The Brookings Institution has released a report on “Improving the EB-5 Investor Visa Program: International Financing for U.S. Regional Economic Development.” The report was carefully researched (and even cites me), provides a very nice overview of the EB-5 program’s history and current status, and has awesome graphics. To me its conclusions and recommendations seem theoretically reasonable but practically innocent, making the report not as significant as it might have been. But it’s still a worthwhile reference.

Filed under EB-5 in the News, New RC

2014 Events, EB-5 Stats, New AAO Decisions, New RCs (CA, CO, FL, GU, MD)

January 23, 2014 1 Comment

EB-5 Events
It’s time to sign up for the best EB-5 event of the year: IIUSA 7th Annual EB-5 Regional Economic Development Advocacy Conference in Washington, D.C. May 7-9, 2014. I look forward to seeing you there! Also notice the IIUSA 2014 Webinar Series, with monthly webinars on topics including industry advocacy, securities laws, due diligence, retrogression, economic impact analysis, EB-5 in the capital stack, adjudication trends, TEAs, I-924a, and escrow and fund administration. The IIUSA webinars last year were substantive and timely, and I look forward to this new series.

EB-5 Statistics
If you’re interested in trends in receipts, approvals, and denials of EB-5 petitions, see: “IIUSA Obtains I-526/829/924 Adjudication Data for FY2013, Releases Comprehensive Dataset (1991-2013).” The FY2013 data shows a growth in receipts over 2012 of 8% for I-526 petitions, 71% for I-829 petitions, and 82% for I-924 applications. USCIS already doubled the number of approved Regional Centers in FY2013 by approving 220 applications, and – unless many of those 436 new I-924s received in 2013 were amendments – RCs will be facing a very crowded field moving forward. We’re on track to hit the annual EB-5 visa allocation cap of around 10,000 based on filings, with the only uncertainty being whether USCIS can manage to process enough I-526s in one year to make that happen (and whether processing times will speed up enough that Chinese investors would even notice being retrogressed). As with most things in EB-5, this issue is complicated. If you want to read more, see “Department of State Predicts EB-5 Visa Retrogression for China” on the EB-5 Insights Blog and “FAQs on EB-5 Quota Backlog” by Ron Klasko.

New AAO Decisions
Since last time I checked, USCIS has uploaded 18 new 2013 AAO decisions on I-525 cases. (May 24 to June 18, and September 23 to November 15). Besides RFEs, which aren’t public, AAO decisions are my best chance to see what’s going on behind the scenes with adjudications and current policy applications. For me, the most interesting decisions in this batch are SEP232013_01B7203, which addresses a Regional Center’s attempt to claim deference to prior approvals, refers extensively to the 5/30 policy memo, and considers what amendments mean; JUN052013_01B7203, which withdraws the director’s assessment of a business plan’s credibility; and MAY242013_01B7203, which discusses which business activities prior to I-526 filing will help the investment to qualify as “fully invested and placed at risk.” Nearly all AAO decisions on I-526 cases include a section on source of funds problems. People involved in that area may particularly want to read JUN182013_03B7203, which goes into detail on what went wrong with a typical China source of funds scenario involving real estate. Or for comedy, you can review MAY242013_02B7203, which treats a petition for investment in a business that will trade in healthcare products and/or operate a restaurant and/or import textiles and/or export fly traps and avocado oil.

New RCs
New entries to USCIS’s Regional Center list 12/30/2013 to 1/22/2014
Live in America-California Regional Center (California)
U.S. Gateway Regional Center, LLC (California)
InvestAmerica EB-5, LLC (Colorado)
My Florida Regional Center, LLC (Florida)
E Development Corporation dba EDC (Guam)
Birch MD BioPark Regional Center (Maryland) USCIS Approval Letter

Filed under EB-5 Events, EB-5 Statistics, New RC

New RCs (CA, FL, IL, WA), retrogression, program assessments, due diligence

December 31, 2013 4 Comments

By my unofficial count, USCIS approved 213 Regional Centers in calendar year 2013. This brings the current number of Regional Centers to 424 – double the number this time last year. We can thank the EB-5 program office in Washington DC, which opened in April and has been handling I-924 applications, and the May 30th EB-5 Policy Memo, which brought new clarity and flexibility to Regional Center adjudications.

New RCs added to the USCIS list 12/11/2013 to 12/23
Global Investment Regional Center (California)
U.S. Golden Pacific Regional Center, LLC (California)
Valley Inception Regional Center (California)
EB-5 South Florida Regional Center, LLC (Florida)
Illinois Valley Regional Center (Illinois)
Great Ocean Regional Center (Washington)
West Washington United, LLC (Washington)

The California Service Center has been working hard on I-526 petitions but still faces an enormous backlog, with 7,083 petitions pending or awaiting customer action as of October 2013. (To see the trends, use the “Check My Case Status” tool on the USCIS website.) Even with the processing delays, a record 8,567 EB-5 visas were used in FY2013, approaching the annual quota of around 10,000 visas. For analysis of what this means and issues we can expect in 2014, see US Dept. of State Statistics on EB-5 Visa Usage Indicate Backlog in FY2014 is Likely (IIUSA Blog, 12/23/2013) and THE IMPACT OF CHINESE QUOTA RETROGRESSION ON EB-5 INVESTORS AND EB-5 INVESTMENTS by Tammy Fox-Isicoff and H. Ronald Klasko.

2013 has been a year of intense scrutiny for the EB-5 program. Significant new entries in the log of criticisms and defense include Robert Divine’s December 23rd article in The Hill Immigration service’s investment program is a winner, and the DHS Office of Inspector General report on the EB-5 program (see The Office of the Inspector General Releases Report Critical of the USCIS Administration of the EB-5 Regional Center Program by Laura Foote Reiff and IIUSA Statement on EB-5 Program Report by the DHS OIG).

A common theme through the highs and lows of 2013 has been the importance of due diligence. So as the year closes, here are links to some of my favorite due-diligence-related articles and resources from the year.

Filed under EB-5 Resources, New RC

IIUSA Alert, New AAO Decisions, New RCs (AL, CA, FL, HI, IA, LA, MS, NC, NE, NJ, NY, OH, OR, PA, SC, TX, WA)

December 18, 2013 Leave a comment

The sensational EB-5 stories proliferating on the Internet inspire Ms. Boring Verifiable Detail here to get back in gear. IIUSA has issued a notice reacting to the hype funded by opposition to President Obama’s nomination for DHS deputy secretary, and I encourage you to read the IIUSA Member Alert here. I’ll leave you to the Washington Post if you want spicy whispers suggesting that EB-5 is an unchecked den of iniquity, but if you want the dull details of what actually happens to people who try to game the EB-5 system, note that USCIS has uploaded more AAO decisions on I-526 cases. (The February, May, September, and October decisions in the Decisions Issued in 2013 folder are new since last time I checked.) The decisions give a behind-the-scenes look at USCIS’s efforts to scrutinize and challenge EB-5 petition detail, and to deny any filings that don’t toe the line of clean money fully invested in business activities that can create qualifying jobs. I’m particularly interested in MAY072013_01B7203, which discusses investment and job creation timing and nexus; MAY172013_01B7203, a decision on a New Orleans RC case that overturns challenge to a state TEA designation but confirms the need for a portfolio investment to identify specific fund uses at the I-526 stage; and SEP052013_03B7203, which explains the options for an I-526 petition when the sponsoring RC has been terminated. The later decisions include an opening reminder that: “This is a non-precedent decision. The AAO does not announce new constructions of law nor establish agency policy through non-precedent decisions.” Nevertheless, we get so few official policy announcements that I take what I can get of hints, and am quoting below a whole section from the 5/7/2013 decision’s discussion of what has the burden to create jobs: the “new commercial enterprise” or the individual EB-5 investment. This is the theoretical issue at the heart of the extremely significant question of which job creation an investor can claim, and how the timing of capital release affects job counts. The 5/7 AAO decision emphasizes the individual investment, and treats investment/job creation nexus as “before/after” issue rather than allowing a “but for” argument. We often see RFEs from adjudicators struggling to see any factors in causation besides chronology, but this is the first time I remember seeing the AAO wax theoretical on the matter. Any thoughts from the attorneys out there?

Section quoted from MAY072013_01B7203, AAO decision on an I-526 petition for direct investment.
…On November 7, 2012, the petitioner filed an appeal with U.S. Citizenship and Immigration Services (USCIS). On appeal, counsel asserts: (1) the three jobs created prior to the petitioner’s initial investment should be attributed to the petitioner; (2) the two jobs created between the petitioner’s initial investment and the maturation of the NCE’s certificate of deposit should be attributed to the petitioner…
1. Employees Hired Prior to Investment
Regarding the three employees hired prior to the petitioner’s initial investment, counsel’s appellate brief asserts that these individuals’ jobs should be considered to have been created due to the petitioner’s investment. Counsel characterizes the hiring of personnel prior to an investor’s infusion of capital as common and a business reality. At issue, however, is not whether the order of events constitutes a normal business-related process, but whether, by following this order of events, the petitioner has established that his investment is responsible for any earlier job creation. Counsel’s appellate brief also states: ”The Regulations merely state that to qualify, it must be shown that the new commercial enterprise (not ‘the investment’) will create full-time employment for not fewer than 10 qualifying employees.” Counsel further asserts that had Congress intended to “require that employment creation strictly follow the date of an alien investor’s investment transfer, it would have specifically required proof that ‘the investment will create not fewer than ten (10) full-time positions …. ‘ But as written, the statutory language focuses on the ‘new commercial enterprise’ instead.” The language counsel quotes does not specifically address situations involving multiple investors. The regulation at 8 C.F.R. § 204.6(g), however, does specifically addresses businesses for which there are multiple investors. Significantly, 8 C.F.R. § 204.6(g)(l) allows for a pooled investment with other EB5 investors “provided … each individual investment results in the creation of at least ten full-time positions for qualifying employees.” (Emphasis added.) Thus, in situations involving multiple investments, the regulatory language focuses on the “investment” as creating the jobs rather than the NCE. Furthermore, under the initial evidence requirements, the regulation at 8 C.F.R. § 204.6(j) states: “A petition submitted for classification as an alien entrepreneur must be accompanied by evidence that the alien has invested or is actively in the process of investing lawfully obtained capital in a new commercial • enterprise in the United States which “Will create full-time positions for not fewer than 1 0 qualifying employees;” (Emphasis added.) The emphasized language implies that an alien has already invested or committed capital to the NCE, and that subsequent to this investment the required employment creation will result. Significantly, the regulations do allow for job preservation, but only where the petitioner invests in a troubled business. 8 C.F.R. §§ 204.6(e) (definition of troubled business), (j)(4)(ii). The petitioner does not claim to have invested in a troubled business. Counsel also references proposed policy guidance which states that an immigrant investor is not required to have already invested his or her capital in the NCE, as long as the investor establishes that he or she is actively in the process of investing the required capital. To be actively in the process of investing the required capital, the investor must demonstrate that his or her funds are actually committed to the NCE. 8 C.F.R. § 204.6(j)(2). The petitioner has not demonstrated any actual commitment of his funds prior to September 1, 2011. Regardless, the issue of whether the petitioner is actively in the process of investing is a separate question from whether USCIS will credit the petitioner with jobs in existence at a business other than a troubled business when the petitioner began investing. In light of the above, USCIS will not credit the petitioner with the employees hired prior to his investment. …
ii. Subsequently Hired Employees
Regarding the two jobs created after the petitioner’s initial investment but before the certificate of deposit matured, the AAO does recognize these jobs as being attributable to the petitioner’s investment as he had relinquished control of the funds to the NCE. It was the NCE that elected to invest the funds rather than to allow them to sit dormant in a bank account.

Also, a belated updated on new Regional Centers. In 2013 USCIS has approved about 205 new RCs, by my count, bringing the total number of RCs to 417 as of 12/11. I look forward to being able to link to the USCIS approval letters for each of these centers. In these days of rumors and misinformation, we really need basic transparency about the identity and mandate of all Regional Centers.

New RCs added to the USCIS list 11/18/2013 to 12/11/2013
New Orleans & Gulf Coast Regional Center, LLC (Alabama, Florida, Louisiana, Mississippi)
American California Regional Center (California)
North America Wind Power LLC (California)
San Diego Regional Investment Center, LLC (California)
American Builders Regional Center (Florida)
Florida Gateway Regional Center, LLC (Florida)
Live in America – Florida, LLC (Florida)
Eight Islands Regional Center, LLC (Hawaii)
Liberty Nebraska Regional Center, LLC (Iowa, Nebraska)
Ohio Regional Center, LLC (Ohio, Indiana, Kentucky) Approval Notice
Live in America – Northwest Regional Center, LLC (Oregon, Washington)
Global City Regional Center, LLC (New Jersey, Pennsylvania)
Related New York City Metro Regional Center, LLC (New Jersey, New York, Pennsylvania)
Birch North Carolina Regional Center (North Carolina)
Southeastern Higher Education Regional Center (South Carolina)
Civitas Laredo Regional Center, LLC (Texas)
Houston EB 5 Regional Center (Texas)
ACIC Management, Inc. Regional Center (Washington)
UPDATE: The name “Midwest EB-5 Regional Center LLC” was changed on the USCIS list to add a comma, not removed from this list as I previously reported in error.

Filed under EB-5 in the News, EB-5 Resources, New RC

New RCs (CA, CO, FL, NC, TX, VA, WA, WV), CSC complaints

November 20, 2013 Leave a comment

New Regional Centers
Additions to the USCIS list of approved Regional Centers from 10/31 to 11/18

EB-5 in the News
The most buzzed-about EB-5 article this week is a Washington Times piece: “Immigration staffers pressured to rush visas for wealthy investors” (Nov. 18, 2013). The story provides an interesting look behind the scenes of EB-5 adjudications at the California Service Center. Those who have waited months upon months and then years upon years for paperwork to be reviewed may find it hard to believe that the ISOs could feel rushed, or that finally appealing to supervisors/Congressman to help move things along could backfire by pushing those rushed ISOs into resentment and suspicion. This article gives disgruntled insiders’ views, and may encourage us to have more sympathy for adjudicators in their complex task — and perhaps to share their suspicion when some groups appear to succeed in orchestrating preferential treatment.

Filed under EB-5 in the News, New RC

Another cautionary tale (SD)

November 6, 2013 7 Comments

I work with Regional Centers on the project side, and I personally don’t see much drama. Not lawsuits, not backstabbing and sabotage, not FBI agents pounding the door, and certainly not murder. I can witness that EB-5 includes a whole world of solid, ordinary businesses working hard to put capital together to get projects done, unexceptionable immigrants putting money into those projects, and new business ventures resulting in job creation and profit for investors. But there are soap operas to be had. If you are a public agency thinking about partnering with a Regional Center, a Regional Center considering a relationship with an investor recruiter, an investor recruiter wondering how many pounds of flesh you can get away with taking, or if you just like a good juicy drama with all the fixings, you’ll want to keep up with the ongoing saga of South Dakota International Business Institute Regional Center. This case is poignant because it apparently involves many sincere and well-intentioned parties and no obvious fraud, and yet it’s a dramatic example of how partnerships can go very wrong. A true cautionary tale.

I quote a summary of the story from an article in today’s Argus Leader, the daily newspaper of Sioux Falls, South Dakota:

The Northern Beef story so far
CONCEPT: The Northern Beef Packers plant was an ambitious attempt to bolster South Dakota’s economy by slaughtering the state’s cows in Aberdeen instead of shipping them out of state.
FOREIGN INVESTORS: Through years of development and false starts, most of Northern Beef’s funding came from more than 100 foreign investors under the federal EB-5 program, where foreigners could get green cards for investing $500,000 in American businesses.
EB-5: The state of South Dakota worked closely with the EB-5 program. It was promoted by Richard Benda, who then was secretary of Tourism and State Development and oversaw overseas investors. State official Joop Bollen also created private companies to manage EB-5 investments. Bollen resigned the same day he signed a contract for his own business to handle the state’s EB-5 program.
INVESTIGATIONS: State and federal officials are investigating Northern Beef, its handling of the EB-5 program, and South Dakota’s economic development office.
BENDA DEATH: Meanwhile, Benda died in late October from a gunshot wound. His death is being examined by authorities.

KELO, the CBS-affiliated television station in Sioux Falls, South Dakota, has a useful summary of the issues involved: Five Questions In State Development Investigation.

UPDATE: See EB5news.com for detailed analysis of this story. “The Rise and Fall of South Dakota: A Cautionary Tale for EB-5 Public Private Partnerships Part I”
(November 07, 2013)

Filed under EB-5 in the News

New I-526 form, new I-RIMS product, I-924a, new RCs (AL, AZ, CA, DE, FL, GA, ID, IL, KS, LA, MS, MT, NH, NJ, NV, NY, OR, PA, RI, TX, WA, WI)

October 31, 2013 Leave a comment

October has been a busy month in the business plan department; apologies to frequent blog visitors. Here’s what I think you should know of recent happenings.

New I-526
USCIS has issued a new version of the I-526 form and instructions (09/24/13 edition). Previous versions of the form will only be accepted through the end of this year, so bookmark http://www.uscis.gov/i-526 instead of using what you have on file. If you accidentally use an old form, you’ll file in the wrong place. (The new I-526 instructions don’t give a filing address but direct petitioners to consult the USCIS website for an address – currently the Dallas Lockbox facility). Otherwise, the new I-526 doesn’t look dramatically different from the previous editions.

New I-RIMS Product
The IMPLAN Group, creator the IMPLAN methodology used by many RC economic impact studies, has stepped up to create a new product that works like the BEA’s now-discontinued RIMS II system, only using IMPLAN data sets. This looks like good news for the many RCs that liked RIMS II and hoped to continue using familiar methodologies even as the BEA is no longer providing updated data sets. For more information, see the IMPLAN Group page on 2011 I-RIMS Data, and an article on the IIUSA blog “New IMPLAN “I-RIMS” Product Introduced & Available as Alternative to RIMS II.” To refresh your memory about what happened to RIMS II, see the BEA’s notice on Impact of Sequestration Reductions on the Availability and Quality of Data from the Bureau of Economic Analysis.

I-924a Reminder
Approved Regional Centers, don’t forget that the clock is ticking for you to file a Form I-924a for fiscal year 2013. See http://www.uscis.gov/i-924a and http://www.uscis.gov/forms/questions-and-answers-form-i-924a. If you don’t file by December 29, USCIS will contact you in the Spring with a nice letter threatening to terminate your RC. IIUSA has had a chance to see the I-924as filed in 2011 and 2012, and is hosting what should be a very useful webinar on 11/19/2013 on
“3rd Year of Regional Center Annual Reporting on Form I-924A.” To participate, sign up at
http://eventcallregistration.com/reg/index.jsp?cid=41196t11

Other useful items

  • IIUSA has another promising webinar on Tuesday, November 12, 2013 at 1pm on the subject of “EB-5 Bridge Financing & Escrow Options.” Register at: http://eventcallregistration.com/reg/index.jsp?cid=41195t11
  • Those of you concerned with keeping securities registration exemptions may benefit from Steven Anapoell’s helpful article on “Determining Whether a Potential Investor is a Resident or Non-Resident for Securities Law Purposes”
  • Speaking of keeping on the right side of the SEC, if you are a Regional Center principal, please pick up the phone right now and make two calls: one to your website designer to temporarily disable your RC’s website, and one to your favorite attorney to review the website content before it can go back up again. I recently checked a lot of websites in process of refreshing my Regional Center directory, and was torn between suspicion of the mysterious RCs with no web presence and sorrow on behalf of those RCs whose websites are full of content that could get them into trouble. I can see that websites are often left to innocents in the marketing department who have no idea which pretty pictures, useful information, and careless word choice could derail the RC and all its offerings. Don’t let that happen to you!

New Regional Centers
I have decided to quietly update my Regional Center directory as I receive new information, and to announce new RC names only in occasional posts. If I have contact info or other detail about these Regional Centers, you’ll find it in my directory. I also started a log of recent Regional Center approval letters to track information of interest to me (the length of I-924 processing times, the number of approvals based on actual vs. hypothetical projects, the economic methodologies being approved, and so on). To date I am only able to link to letters for 46 of the 179 Regional Centers approved (by my count) so far in 2013, but I will continue to update the log as I get additional information. Maybe one day these public licenses will all be made publicly available! Thank you to Regional Centers that have shared their letters. Note also that the IIUSA Regional Center Directory includes relatively comprehensive listings for all IIUSA-member RCs.

New entries to the list of approved Regional Centers at www.uscis.gov/eb-5centers from 9/24/2013 to 10/28/2013

Filed under EB-5 Events, New RC, Updates from USCIS

USCIS and SEC caution investors

October 2, 2013 3 Comments

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.

Filed under Updates from USCIS

New RCs (AK, AZ, CA, FL, GA, IL, KY, MA, NH, NC, NJ, NV, NY, PA, RI, TN, TX, WA), FINRA, AAO Decisions

September 24, 2013 Leave a comment

New Regional Centers
New entries to the USCIS list of Regional Centers from 9/6 to 9/23/2013:

Alaska Gold & Mining Regional Center, LLC (Alaska)

Optima Arizona Regional Center, LLC (Arizona)
http://www.optimaweb.com/

California Pacific Regional Center, Inc. (California)
http://californiapacificregionalcenter.com
Designation Letter

CMB Southeast Regional Center, LLC (Florida, Georgia)
http://www.cmbeb5visa.com

American YiYo Regional Center (Georgia)
http://yiyo.net/

DMI Real Estate Chicago (Illinois)

Live in America – Boston Regional Center LLC (Massachusetts, New Hampshire, Rhode Island)
http://www.liveinamerica.us/

Live in America – New York Regional Center LLC (New Jersey, New York, Pennsylvania)
http://www.liveinamerica.us/

Nevada Development Fund LLC (Nevada)

Carolina EB-5 RTP Regional Center, LLC (North Carolina)
http://www.carolinaeb5.com/

American Oil Regional Center (Pennsylvania)

Pangaea Regional Center, LLC (Kentucky, Tennessee)
Contact: Joe Gillas (409) 370-1553
USCIS Designation Letter with project approval

Central Texas Regional Center (Texas)
http://brassfunds.com/

American Opportunities Regional Center, Inc. (Washington)

Puget Sound RC, LLC (Washington)

(Note: See my Regional Center directory page for my most updated listings for all RCs. And please email me if you would like to provide additional information regarding your RC.)

FINRA Suitability Rule
The Financial Industry Regulatory Authority (FINRA) has issued new guidance as to how broker-dealers should take into account aspects of the EB-5 Program when determining whether an investment is suitable. For analysis of this guidance and its implications, see:

FINRA Issues Guidance on Suitability Rule for EB-5 Securities Transactions
By Jackie G. Prester, Shareholder, & Robert C. Divine (IIUSA Vice President), Head of Global Immigration Practice, Baker Donelson, Bearman, Caldwell & Berkowitz, P.C. September 23, 2013

FINRA Raises the Bar on Due Diligence by Broker Dealers Involved in EB-5
By Dawn Lurie of Sheppard Mullin on September 19, 2013

New AAO Decisions

Since my last post, USCIS has uploaded new AAO decisions from January to March 2013 to its website folder for Form I-526 and Form I-829  “Decisions Issued in 2013.” Most of these new additions are couple-page dismissals of improper filings, but a few include detailed case analyses interesting to those of us who specialize in the technicalities of EB-5.

Background to AAO Decisions
Joseph Whalen has published a useful article explaining the types of AAO decisions, varieties of cases before the AAO, and points involved in case preparation and presentation. See “Quality of Case Preparation and Presentation Counts for Immigrant Investors or Entrepreneurs” (September 24, 2013)

Filed under EB-5 Law & Policy, New RC

EB-5 Event, New RCs (AL, CA, CT, FL, GA, IN, KY, MS, NC, NJ, NY, PA, PR, SC, TN, VA), New AAO Decisions, TO Training

September 6, 2013 4 Comments

EB-5 Event Reminder
If you are reading this blog as a way to investigate the EB-5 program, save yourself time by making sure that you have the CDFA Intro EB-5 Finance WebCourse on your calendar (Sept. 18-19). The Council of Development Finance Agencies has organized one of the very few EB-5 events whose number one purpose is to educate, not to sell products and services, and the line-up of topics and contributors looks great.  If you have something to learn in EB-5, I don’t think you can find a more solid, comprehensive, and time-efficient introduction than this course.

New Regional Centers
New entries to the USCIS list of Regional Centers from 8/16 to 9/6/2013:

168 America Regional Center, LLC (California)

FutureCare Regional Center of Southern California, Inc. (California)

HT Asset Holding Inc. (California)
http://www.htassetholding.com/

San Francisco EB-5 Regional Center, LLC (California)
http://www.sfeb5rc.com/
Designation Letter

South Florida EB-5 Regional Center, LLC (Florida)
www.southfloridaeb5rc.com/

Southern Film Regional Center, LLC (Georgia)

Civitas Indiana Regional Center (Indiana)
http://www.civitascapital.com/

CP Southern Regional Center (Alabama, Kentucky, Mississippi, Tennessee, Virginia)
www.cphomes.net
Designation Letter

Encore Mississippi Regional Center (Mississippi)
http://encore.bz/

New York Metropolitan Regional Center (New Jersey, New York, Pennsylvania)

US EB5 New York City Regional Center (Connecticut, New Jersey, New York, Pennsylvania)

U.S. Business Regional Center Inc. (New York)
http://www.usabrc.com/

Carolina Global Regional Corporation(North Carolina, South Carolina)
Designation Letter

North Carolina – East Coast RC (North Carolina, South Carolina)
www.progfs.com

Reside in America Puerto Rico, LLC (Puerto Rico)
c/o The LCP Group, White Plains NY. Ph: (212) 692-7228
USCIS Designation Letter

Dominion Mid-Atlantic Associates, Inc. (Virginia)
http://www.dmaarc.com/

(Note: See my Regional Center directory page for my most updated listings for all RCs. And please email me if you would like to provide additional information regarding your RC.)

2013 AAO EB-5 Decisions

I-924 Decisions (see Request for Participation as a Regional Center Decisions Decisions Issued in 2013)
Issues: geographic area, industry focus, “general proposals,” “hypothetical” projects and approvals

In 2011-2012, we saw a trend toward increasing granularity in Regional Center approvals, with USCIS insisting that RCs submit to the mandate to “focus on a limited geographic area,” and to strictly define their industry focus down to at least the 4-digit NAICS code level.  I had wondered whether the 5/30/2013 EB-5 policy memo would effectively blow the lid off such limitations, and it seems that it has. I definitely didn’t report new five-state Regional Centers last year, but recent new approvals include many with expansive geographic areas.  The AAO decisions published in 2013 on I-924 cases both cite the 5/30 policy memo to overturn USCIS’s decisions to deny cases for being too general.  JUN122013_01K1610 discusses a Regional Center amendment that sought to add the whole of five states plus four industry categories defined at the 2-digit NAICS level. USCIS predictably denied this request, but the AAO withdrew the USCIS’s denial.  The AAO determined that:  “The record contains a general proposal based on Census Bureau and other data and general predictions concerning the kinds of commercial enterprises that will receive capital, the direct and indirect jobs that will be created as a result of such capital investments based on RIMS II data and  multipliers, and other positive economic effects. Thus, the AAO withdraws the director’s concerns. While the amendment request is approved, it is based on hypothetical projects and, therefore, is not  due any deference in future filings.”  JUL192013_01K1610 likewise indicates considerable leeway for what can approved at the I-924 stage, provided that the approval has a “hypothetical” basis.  USCIS’s denied the I-924 initial application because “The director determined that the applicant had not provided a business plan with verifiable detail regarding how the proposal will create sufficient jobs.” The AAO disagreed, determining that “The record contains a general proposal based on general predictions concerning the kinds of commercial enterprises that will receive capital, the jobs that will be created as a result of such capital investments based on RIMS II data and multipliers, and other positive economic effects. As the record contains a general proposal, the applicant is not required to submit letters of intent or commitment from the prospective sources of matching funds for regional center designation.”

I welcome the openness to general industry categories and hypothetical projects, but would caution new applicants about wide-ranging geographic area. If a course doesn’t make sense, the powers that be will eventually realize that it doesn’t make sense and change course.  I see the concept of limited geographic focus at the very core of the Regional Center program — its impetus and defining feature. Congress instituted the Regional Center program based on the economic concept that the synergies that result from pooling investment in a region give more bang for the buck than the separate effects of  individual investments here and there, as occurs with the traditional/direct EB-5 program. When a “Regional Center” covers the whole of five states, I don’t even know what the title means anymore.  I don’t want to return to the granularity of 2012, when USCIS likewise departed from Congressional intent by defining Regional Center designation so restrictively that it essentially just meant approval to pursue one project. But neither extreme restriction nor extreme flexibility are good for the program, and I hope and believe that we’ll soon find ourselves back to a reasonable middle ground, especially with respect to the key question of target geographic area.

I-526 Decisions (see Form I-526 and Form I-829  Decisions Issued in 2013)
Issues: “at risk,” “meaningful concrete action,” “overcapitalized,” “inconsistencies”

The 2013 investor petition decisions all involve I-526 petitions, and all but APR172013_01B7203 are for direct EB-5 cases. I’m interested to note that whoever’s now writing AAO decisions is highly detail-oriented and influenced by the precedent decision Matter of Ho. (In contrast to last year’s writer, who was all about Matter of Izummi and who didn’t bother with microscopic rehearsals of detail from the record.) In re Ho is best known for its paragraph definition of the comprehensive business plan, but our AAO writer repeatedly returns to the decision’s treatment of the “at risk” requirement. According to Matter of Ho: “Simply formulating an idea for future business activity, without taking meaningful concrete action, is similarly insufficient for a petitioner to meet the at-risk requirement. Before it can be said that capital made available to a commercial enterprise has been placed at risk, a petitioner must present some evidence of the actual undertaking of business activity; otherwise, no assurance exists that the funds will in fact be used to carry out the business of the commercial enterprise. This petitioner’s de minimis action of signing a lease agreement, without more, is not enough.” For the first time that I’ve noticed, the AAO repeatedly harps on the issue of “meaningful concrete action,” to the point of requiring the petitioner to provide evidence of funds already spent in the business, contracts already executed, and employees already hired prior to I-526 filing. I kept thinking I must be reading I-829 cases, but no. Take warning, direct EB-5 investors: if you have primary control over your business’s bank account, USCIS may require you to show evidence at I-526 that you not only invested $500K/$1 million but that your business has already spent or was irrevocably/contractually committed to spending that amount before you even filed the I-526 petition.
I wonder if the AAO is going overboard with its application of Matter of Ho, and will be interested to hear the lawyers’ take on this new batch of cases. Is it fair to deny a case because the petitioner provided, in RFE, a copy of a lease that post-dated I-526 filing? Because the petitioner, prior to I-526 approval, spent only a few hundred thousand of the one million invested in his business? It seems to me that the distinction between I-526 and I-829 is a key feature of the EB-5 program, and that we’re seeing a negative trend toward pushing I-829 requirements into the I-526 stage. I-526 is the plan review stage, and gives USCIS opportunity to shut down non-compliant proposals (and the investor the opportunity to change course, if EB-5 turns out not to be an option). I-829, then, is the stage where the petitioner demonstrates that he implemented his USCIS-approved business plan. I think it doesn’t make sense to require the I-526 petitioner to prove that he already did what he hasn’t yet been approved to do. 2013 AAO decisions that approach the at-risk requirement through Matter of Ho include APR012013_01B7203, APR032013_02B7203, APR152013_01B7203, APR152013_02B7203, APR162013_01B7203.
Besides the new focus on “meaningful concrete action,” our 2013 AAO writer is concerned that EB-5 enterprises may be “grossly overcapitalized” (not proving that their job-creating activities require the full amount of EB-5 investment). The decisions also devote pages to dissecting apparent inconsistencies in the record, and repeat the warning that “Any attempt to explain or reconcile such inconsistencies will not suffice unless the petitioner submits competent objective evidence pointing to where the truth lies.”

More on Tenant Occupancy
IIUSA has obtained and published a presentation used by USCIS to train adjudicators on “tenant occupancy” cases. I note that the disclosed material does not discuss the requirement to demonstrate whether tenant jobs would be new or relocated – the issue that emerged as the final deal-breaking issue in several recently-denied cases. But maybe this issue is just so juicy that it explains the many pages redacted from the presentation.

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

New Regional Centers (CA, FL, MA, ME, MI, NH, OK, TX)

August 16, 2013 15 Comments

The USCIS list of approved Regional Centers has been updated as of 8/16, with eight newly-approved centers bringing the current total number of Regional Centers to 336 by my count. To tally total centers, I count the entries on the USCIS list after removing duplicates and a few mistakes (old entries for renamed RCs and names that apparently refer to offerings, not Regional Centers).   Just to remind the world, I have no magic source for this information — anyone can go to www.uscis.gov/eb-5centers to consult the current list of approved centers, can check the “last updated” date at the bottom of the page, and can compare the current list to a previous list (or to memory, though that’s getting harder for me) to identify what’s new and calculate how many centers have been added over a period of time. I also don’t know info beyond Regional Center name unless I get it from Regional Center principals, Google, or FOIA requests. If you have more info to share about any of these centers, please email me and I will happily update my Regional Center list for my readers’ reference.

American Pacific Hotels Regional Center (California)

Faustus Capital LLC (California)
LinkedIn Info

BLMP Florida Healthcare Regional Center, LLC (Florida)
LinkedIn Info

Greystone Florida Regional Center LLC (Florida)

United States Investors Regional Center (Maine, Massachusetts, New Hampshire)

Resource Regional Center Michigan, LLC (Michigan)

Chen Roberts Regional Center (Oklahoma)
http://www.chenroberts.com/

Medical Investment in Texas Regional Center (Texas)

(Note: See my Regional Center directory page for my most updated listings for all RCs. And please email me if you would like to provide additional information regarding your RC.)

Filed under New RC

IIUSA Recommended Best Practices

August 9, 2013 3 Comments

IIUSA has finally published its Recommended Best Practices for EB-5 Regional Centers! Designed to provide guidance to Regional Centers seeking to conduct business in a manner that will foster the growth and success of the EB-5 program, this list of best practices represents a year of hard work by a team of A-list players in the EB-5 field. The recommendations are practical and detailed, providing a voice of thoughtful experience on topics from RC oversight and project selection to conflicts of interest, securities issues, escrow, jobs issues, agents and marketing, investor relations, and more.

Filed under EB-5 Resources

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