Another Direct EB-5 I-526 denied by IPO and appeal dismissed by AAO
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Another Direct EB-5 I-526 Denied by IPO
and Appeal Dismissed by AAO
By Joseph P. Whalen (May 24, 2014)
While I tend to write more about Regional Centers1 and affiliated
investors, I do recognize that not all EB-52 Cases involve a Regional Center.
In grateful appreciation of the real entrepreneurs out there who would
seek an opportunity to come to the United States in order to make a real
difference in their lives and ours, I offer this critique of a recently posted
AAO3 non-precedent dismissal. The decision is dated May 12, 2014, and I
found it posted on May 22, 2014. Admittedly, it could have been posted
before that date but not by much. The following excerpt sums up the case
and its problems that lead to its denial and then dismissal of the appeal.
“….. The NCE is located in a targeted employment area for which the required
amount of capital invested has been adjusted downward. Thus, the required
amount of capital in this case is $500,000. The NCE manufactures automotive
parts for enhancing automotive performance.
The chief determined that the petitioner had not established that he had invested
or was actively in the process of investing the required amount of capital, that he
obtained the investment capital through a lawful source and the investment
amount is his personal capital, and that the NCE has created or will create the
requisite 10 jobs. ….”
To start, it appears that this individual was not represented by
counsel or anyone else. The AAO decision uses terminology consistent with
that circumstance by only addressing the actions of the “petitioner” and
makes zero references to “counsel”. EB-5 is a highly complex area of
immigration law that mixes in many other factors from outside forces such
as: the Securities and Exchange Commission (SEC), the Internal Revenue
1 A Regional Center is a USCIS Designated economic unit or entity that focuses on
pooling EB-5 investments into larger scale investment projects in defined economic
zones and may count “indirect” jobs estimated through reasonable methodologies used
to produce an economically and statistically valid Economic Impact Analysis (EIA)
based on a credible Business Plan (BP).
2 EB-5 = Employment-Based, Fifth Preference, which is the classification of a category
of immigrant visa that focuses on the intending immigrant’s efforts to invest a minimum
required amount of capital and create a minimum number of permanent full-time jobs
for legal U.S. workers.
3 AAO = Administrative Appeals Office and IPO = Immigrant Investor Program Office,
both are housed within U.S. Citizenship and Immigration Services (USCIS).
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Service (IRS), Office of Foreign Asset Control (OFAC), and bank regulators
just to name a few. It is unwise to enter any EB-5 venture unrepresented.
Generally, there should be a cadre of helpers for EB-5 investors. Investors
should perform proper due diligence with help from appropriate advisors
such as investment analysts, economists, technical writers, legal specialists,
and subject matter experts (SMEs)/EB-5 Consultants (such as yours truly).
The AAO dismissal primarily addresses three major problems but as
anyone who has any experience with EB-5 already knows, it’s just not that
simple! The three primary issues could easily be further dissected into more
issues. I will point out a few of those additional areas for consideration as
we progress through the AAO decision. Ready? Hold on tight because here
we go again……
AAO identified the following three issues in its analysis of this case;
Investment of Capital, Source of Funds, and Employment Creation. Just to
illustrate the point that these three could easily be further subdivided I will
do just that with the first “Issue On Appeal”. The Investment of Capital
discussion in the AAO dismissal, at the very least, touches on the following
key points. Some of these I will express as questions and others just as
topics for further discussion and consideration (at your leisure) because
that is how my thought process works. Some of these cross-over into the
next “Issue On Appeal”, the “Source of Funds” which itself would lead to
“Path of Funds”.
1. Was the full $500,000 actually handed over to the business?
2. Was the full $500,000 actually spent?
3. Was the full $500,000 actually “committed”?
4. Was the full $500,000 actually “at risk”?
5. Issue: Unsecured Promissory Note!
6. Has there actually been a real investment?
7. Even if there has been an influx of capital, whose was it?
a. Where did it come from?
b. How was it originally obtained by the “investor”?
c. How is the capital being spent?
8. Issue: A mere intent to invest, or of prospective investment
arrangements entailing no present commitment, will not suffice to
show that the petitioner is actively in the process of investing.4
4 These themes are NOT new for “immigrant investors”. These and many other core
elements have been addressed for decades in the prior incarnations or “predecessor”
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The above list could grow even further but I will leave it as it now stands. As I
have maintained for years in my writings, the ultimate basics of EB-5 revolve
around two critical issues. Everything else is secondary but is an extension
from the two basic elements. Those two elements are: money and jobs. I will
attempt to graphically illustrate how everything grows from those two simple
words into a multitude of critical issues. The following does not take into
account Regional Center issues.
Capital is defined. Full-Time
Invest is defined. Permanent
Source of Funds. No Independent Contractors
Path of Funds. Preserved Jobs
Personal funds. 140% increased in “Expanded Business”
Lawful Funds. Qualifying Employees
“At Risk” investment” Investor excluded.
Unsecured promissory notes. Investor’s spouse excluded.
Retained Earnings. Investor’s sons and daughters excluded
regardless of age or marital status.
“For Profit” business. Nonimmigrants don’t count.
“Doing Business”. Unauthorized workers don’t count.
“Troubled Business” Part time employees don’t count.
140% increased in “Expanded Business” Employer-Employee Relationship.
That’s my two-cents, for now.
Joseph P. Whalen, Independent EB-5 Consultant,
Advocate, Trainer & Advisor
1348 Ridge Rd | PMB 36 | Lackawanna, NY 14218
Phone: (716) 604-4233
web http://www.slideshare.net/BigJoe5 or
DISCLAIMER: Work is performed by a non-attorney independent business consultant. It is
the client's responsibility to have any and all non-attorney work products checked by an
attorney. I provide highly-individualized training based on consultationwith my clients. I
serve Regional Center Principals and their counsel, potential EB-5 investors, and project
developers. I am not an attorney myself although I have trained numerous attorneys and
INS/USCIS adjudicators in complex issues within immigration and nationality law when I was
an adjudicator there for many years. I do not prepare forms, write business plans, or create
economic analyses. I do review them for clients prior to submission and suggest
corrections and/or modifications to run by your attorney and investment advisor.
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