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Fighting chance to make your case part II

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Updated on Aug 31, 2012, to correct some typos.

Updated on Aug 31, 2012, to correct some typos.

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  • 1. Fighting Chance to Make Your Case: Part II By Joseph P. Whalen (July 10, 2012)In the first installment on this topic, I ended by touching on EB-5 and that is whereI will resume. If you don’t know what the crucial questions are you cannot answerthem. A major flaw in the May 2, 2011, Denied Request for Regional CenterDesignation was vagueness as well as some rather critical fundamental errors. Itseems obvious to me that the applicant did not understand the issues or underlyingquestions asked of such applicants in order to provide satisfactory answers andsufficiently detailed information.The requirements for Regional Center Designation are primarily and somewhatclumsily spelled out in 8 CFR § 204.6(m)(3). The regulations are both broad andnarrow in certain respects. The overarching goals of the statute that created the“Pilot Immigration Program” for EB-5 Employment Creation Visas aresomewhat broad and vague on purpose. Congress did not want to hamstring thoseindustrious individuals who are willing to make an attempt to create jobs in theU.S.The source statute, codified as 8 USC § 1153 Note: Pilot Immigration Program,has been supplemented with clunky regulations originally promulgated by a lawenforcement agency (Legacy INS) with a perspective towards strictly controllingthe inflow of immigrants as well as detecting and deflecting fraud. Unfortunately,the fear of fraud was, and remains, well-founded and solidly anchored in reality.Even acknowledging that reality, there is room for reinterpreting the statutoryrequirements and revising the regulations.The transformation of the government immigration infrastructure through thecreation of the Department of Homeland Security (DHS) was a true paradigmaticshift 1 rarely seen. We are still is the process of that shift. Processes andprocedures involving “Immigration Enforcement” and “Immigration BenefitsAdjudication” have greatly changed already, but the extent of that transformation1 Paradigm shift: a radical change in underlying beliefs or theory; coined by T.S. Kuhn (1922--96), US philosopher of science and author. See The Structure of Scientific Revolutions (1962) Page 1 of 4
  • 2. has yet to be fully realized. EB-5 is on the cutting edge and may serve as aproving-ground for ideas or concepts that may have greater impact in still othercontexts. The concepts of what is “reasonable” is variable to the context wherein itexists. EB-5 petitioners affiliated with Regional Centers and more precisely, thesponsors or applicants for Regional Center Designation, coordinate the evidenceneeded to show “reasonable methodologies” as to the broad economic benefits thatthe EB-5 projects will have and especially the overall job creation and/orpreservation in sufficient quantity to fulfill the program requirements. That is a tallorder and the means to achieving the goals are not static but are very dynamic.The Regional Center is the means by which multiple EB-5 investors and their non-EB-5 partners will “concentrate pooled investments” for the greater good. Theavenues open to them is virtually as limitless as any and all potential businesses.Regional Centers must select the specific “kinds of commercial enterprises thatwill receive capital from aliens”. The statute is written in the plural in variousplaces for specific reasons. A Regional Center is not meant to be a one-timemechanism used solely for a single project merely to facilitate a “capital raise” anddo it by getting designated solely to count indirect jobs one-time in that singleproject. While the “shovel-ready” concept has promise and should warrantexpedited processing, being overly narrow will defeat the overarching goal ofcreating a new constant component in a regional economic infrastructure. Thesingle project developer who lacks vision beyond the current deal is not a suitableRegional Center sponsor.The Regional Center was conceptualized as being a new player in the regionaleconomic infrastructure. Congress selected the “regional” concept so that thevarious members of both houses of Congress could help their different clustersand compositions of constituents. With the above in mind, hopefully those seekingRegional Center Designation will be better prepared to meet the challenge.To return to the major concept in the first installment 2 on this topic, vagueness andspecificity complement each other and are not truly exclusive concepts.2 See: http://www.slideshare.net/BigJoe5/they-have-to-give-you-a-fighting-chance-to-make-your-case Page 2 of 4
  • 3. Vague responses to specific questions are generally fatal to making your case. On the other hand, a vague response to vague questions leaves room for hope when challenging a specific finding-of-fact. Any denial based on a finding that a “specific fact” was not proven cannot withstand scrutiny if the inquisitor failed to ask sufficiently detailed questions likely to elicit that “specific fact” in the first place. See Shunfu Li v. Mukasey, 529 16 F.3d 141, 147 (2d Cir. 2008) (“[A] finding of testimonial vagueness cannot, without more, support an adverse credibility determination unless government counsel or the IJ first attempts to solicit more detail from the alien.”).While the implementing regulations leave something to be desired overall, they docontain some very specific points that must be addressed in the supportingdocumentation accompanying the Request for Designation as a Regional Center.One of the major stumbling blocks to a successful outcome is the basically open-ended number and variety of possibilities as the “kinds of commercial enterprises”that may be involved. Once the precise types of businesses or industries have beenselected, the vagueness begins to be confronted but the narrowing does not endthere. After selecting the industries, more precise questions may be properlyformed and presented. When suitable specific issues are identified and appropriatequestions are formed then the appropriate required data can be chosen and sourced.At that point supporting documentation can be assembled in the proper context.As an example, one of the industries chosen might be “manufacturing”. What willbe manufactured? Where will the factory be located? Where will the raw materialscome from? How will the raw materials be transported? How will themanufactured product be marketed? Is the item being manufactured a completeproduct ready for use or merely a component? Will the customers be assemblyplants, wholesaler, or retailers? Will the market be domestic or foreign or both? Asone can see, the Regional Center Applicant has to define itself within theparameters of the statute guided by the regulations, any pertinent precedents, andother interpretive materials in order to assemble and fully support the applicationpackage.However, it is a long journey to get from a vague idea to a specific fact or series offacts. Additionally, beyond mere factoids, there must be sufficient nexus andreasonable methodologies that are EB-5 compliant. The investment structure,financial pathways, sourcing of funds, standard business documents (agreements Page 3 of 4
  • 4. and contracts), and all other necessary considerations must be sufficientlyidentified and addressed. For instance, if you will produce kosher foods, you alsohave to consult the appropriate rabbinical authorities. If your factory has to be builtfrom scratch, you may need to have an environmental impact study, report, and/orstatement performed per NEPA and/or CEQA 3 etc. If your new factory will disturbhistoric or archaeological sites, then you have to plan around it or mitigate it perNHPA 4 in order to satisfy the SHPO5 just like any other project of similar size andscale. In sourcing the funds, you may need to check with the banking regulators,the SEC, and OFAC. When putting together the standard transaction documentsyou need an expert in contract law and SEC regulations.I do not want to overwhelm the reader, so I will stop here but this is NOT the endof this subject matter. Do not fool yourself.I will leave you with some EB-5 mantras:  It’s just not that simple.  Failing to plan equals planning to fail.  Deference to prior decisions has concrete limits.  Don’t paint yourself into a corner, have an escape route.  Remain within your approved scope and operating parameters.  Transparent Complexity is needed in order to preserve flexibility.  A material change is not impermissible if it was included as a contingency.  Reasonable Reliance is contingent on successful execution of the approved plan.That’s my two-cents, for now. Joseph P. Whalen, Independent EB-5 Consultant, Advocate, Trainer & Advisor 51 Ashton Place | Buffalo, NY 14220-2107 Phone: (716) 604-4233 Fax: (716)568-8208 E-mail: joseph.whalen774@gmail.com or Silver.SurferEB5@gmail.com or twitter@JoeWhalen1 web http://www.slideshare.net/BigJoe5 or http://eb5info.com/eb5-advisors/34-silver-surfer NUMEROUS TRAINING TOPICS AVAILABLE!DISCLAIMER: Work is performed by a non-attorney independent business consultant. It is the clients responsibility to have any and allnon-attorney work products checked by an attorney. I provide highly-individualized training based on consultation with my clients. I serve Regional Center Principals and their counsel. I am not an attorney myself although I have trained numerous attorneys and INS/USCIS adjudicators in complex issues within immigration and nationality law. 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 trusted investment advisor. NAICS Code: 611430 Professional and Management Development Training3 National Environmental Policy Act or California Environmental Quality Act.4 National Historic Preservation Act.5 State Historic Preservation Officer, every State has one. Page 4 of 4

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