What Can We Learn from the Recently  Released AAO Regional Center Dismissals?                         By Joseph P. Whalen ...
AAO gave a very professional response explaining that if you want deference laterin the process, then you have to make the...
I think it might be better phrasing to say that “USCIS is under pressure to continueto accept projections at the I-526 sta...
money. I will back that up with the following excerpt and let the reader decide ifyou agree. This blurb is quoted text in ...
The analysis goes on to discuss the advantages of clusters for rural economic      development in Nevada. Once again, the ...
example of a similar completed project with similar costs and job requirements or some      other basis for reaching these...
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What can we learn from the recently released AAO RC Dismissals?


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What can we learn from the recently released AAO RC Dismissals?

  1. 1. What Can We Learn from the Recently Released AAO Regional Center Dismissals? By Joseph P. Whalen (September 13, 2012)I just happened to find three newly posted AAO non-precedential Regional CenterAppeal Dismissals when I checked on September 12, 2012. They are not exactly“fresh” compared to the date they appeared. They are dated November 10, 2010;November 23, 2010; and January 18, 2011. Before anyone starts complainingabout how long they took to be released, remember that USCIS is a GovernmentAgency and is bound by certain procedures and protocols. Then remember thatthere was a huge backlog of well....everything. Just be glad we have something todissect and digest in the realm of EB-5 Regional Center Decisions and be happy!I will pull a few bits and pieces out of one of these decisions and see what I canmake out that might be worthy of study. You are welcome to come along for theride. I may dissect the others later in another essay or two. We’ll see how it goes.From January 18, 2011 AAO RC Dismissal: EB-5 Compliance ConsultantThis applicant sought to claim the entire State of Nevada; provided vagueundefined projects; supported by bizarre new-new-new math (that made no sense).Unsupported assumptions as to job creation and construction costs seemed to havebeen pulled out of thin air. Why don’t I just give you some excerpts? Here goes... “The director determined that the applicant had not provided sufficient information as to how it would create jobs directly, which impacts the number of projected indirect and induced jobs. The director also noted certain ambiguities in the applicants business plan. On appeal. counsel submits a brief. For the reasons discussed below, we uphold the directors ultimate conclusion that the economic analysis and the exemplar projects provided are insufficient.”It started out polite and business-like and the written decision does not contain anyintentionally mean-spirited or belittling comments, those will be all mine. AAO’sdecision presents us with laughable assertions (I think you might call them quotes)and AAO addressed with a straight-face. I am adding the smirks. “On appeal, counsel asserts that the director was demanding the type of evidence not required until an alien files a Form I-526 petition based on an investment in a specific regional center project or the regional center seeks preapproval of a specific project.” Page 1 of 6
  2. 2. AAO gave a very professional response explaining that if you want deference laterin the process, then you have to make the grade up-front. Of course, they usedmany more words to express that sentiment in legalese with well supportedarguments but that was the gist of it. I will have to state for the record that I feelthat AAO missed an opportunity to tackle the misconception as to the veryexistence of the mythical “pre-approval”.There is no such thing as a “pre-approval”. The best that the Regional Center canget is a “thorough advance vetting” of certain “reasonable methodologies”, itschosen industry clusters/categories (NAICS Codes from two on up—but I wouldnot go beyond four digits) which define a large portion of its “scope” (i.e.,operational parameters), investment mechanisms and approaches (loans vs. equityvs. bridge-financing vs. whatever) which is another aspect of its “scope, and basicstandardized transaction documents. The last part of the “scope” that is usually thefirst thing that comes to mind is the geographic area. These and some otherconcepts will collectively define the true “scope” of the Regional Center.We are talking about broad concepts in certain things and minute details for otherthings. I have written about the concepts of “advance vetting” and “scope”previously so I won’t go into great detail here but I had to say that an opportunitywas missed to dispel the myth of the “pre-approval”.This next quote speaks to the concept of “deference” to prior decisions withoutusing those words. The bottom-line that I can see in this verbiage is that if youwant deference later, show us the goods up-front. Nobody should expect a free-rideor a “pass”. Nobody can submit slop and expect any deference later. The vaguerthe proposal, the quicker the denial, because USCIS will have less garbage todissect and discard. “U.S. Citizenship and Immigration Services (USCIS) is under pressure to accept any projections previously submitted at the regional center stage when adjudicating the Form I-526 petitions filed by individual alien investors provided that there has been no material change and absent fraud. ............... USCIS will not abdicate its authority to verify that the regional center proposals are reasonable. Addressing any concerns at the regional center stage should increase the likelihood that, absent a material change, the aliens who invest in the project will not only be able to obtain conditional permanent resident status but also demonstrate compliance with the requirements to remove conditions on their status through the success of their investment in the regional center. ......” Page 2 of 6
  3. 3. I think it might be better phrasing to say that “USCIS is under pressure to continueto accept projections at the I-526 stage IF they were found acceptable at the I-924stage”. Once USCIS has been convinced that the “whatever” is sound andreasonable, and there has been reliance upon that acceptance then it would beunacceptable to renege on that acceptance, IF the basic plan has been followed andfulfilled. That is, if the stated assumptions (or conditions precedent 1) upon which“indirect jobs creation projections” were based have been fulfilled then, USCISwould, for all practical purposes, be obligated to accept that the “indirect jobs”have been created as predicted. {USCIS can’t re-adjudicate at that very late stage.} “.... While we recognize that the applicant cannot guarantee the proposed regional center’s success, it is not in the interest of USCIS or the aliens who invest in a regional center or consistent with Congressional intent to improve regional productivity to approve a regional center whose proposal is not demonstrated to be based on a reasonable economic analysis.”I am with USCIS in the above sentiment. However, I would take it even furtherand add that it must also make good business sense and be well planned (at somepoint there will need to be a Matter of Ho-compliant Business Plan). AAO didventure into that aspect in the following excerpt. “By requesting approval of the entire state of Nevada as the geographic area for the regional center and including eight industries and economic clusters, the applicant bears the burden of demonstrating how investment in each of the eight areas will impact the economy of the entire state of Nevada. We concur with the director that this burden is a result of the applicants broad request. Counsel has not explained why USCIS should approve the regional center for all eight industries where the general proposal does not cover each industry. More specifically, the general proposal in this matter covers only agriculture, hospitality, alternative energy production, and transportation.”Moving along in the decisions and we next come to the part about what I woulddescribe as the “entity” seeking licensure as a Regional Center. It turns out that theapplicant describes itself as an “EB-5 compliance consulting services company”. Iwould have to call this application as having been filed by nothing more than arecruiter who wants an Official Approval Notice from USCIS to waive in front offoreigners desperate for U.S. Immigrant Visas in order to his or her hands on1 Example: X indirect jobs will be created if “this condition” comes into being. That would be a“condition precedent”. It might be meeting construction target dates, or creating and leasing acertain amount of a specific type of commercial space (restaurant vs. retail vs. office space) or itmay be a certain number of the aliens’ own EB-5 “direct” jobs or a predicted base-level of“direct-like” third-party (commercial tenants’) jobs. It might be based on expenditures alone. Page 3 of 6
  4. 4. money. I will back that up with the following excerpt and let the reader decide ifyou agree. This blurb is quoted text in the decision. This is Counsel’s response! “Because [the applicant] is structured as an EB-5 compliance consulting services company only, the request for project-specific information is not applicable. However, the [applicant] anticipates using escrow accounts established through a limited partnership offering, which would describe the limited partnership as both the "new commercial enterprise" and the "investment vehicle" for the purpose of establishing the flow of foreign investors funds to the "job-creating entity."...”This next is AAO response to the above (and more) found in the “proposal”. “.... At issue is whether the applicants proposal is sufficient. While neither the statute nor the regulations state exactly how a regional center entity must be structured or what services it must provide, the applicant cannot demand that USCIS waive the requirements for a regional center simply because the applicant has chosen a business strategy in which it will not be responsible for selecting and structuring the investments. Significantly, the applicant does not identify any of the investment project developers" or even explain what type of entity will serve as a developer. The applicant also fails to explain how the applicant will attract and select among various prospective developers.”As to the last item of concern, it is not a great stretch of the imagination that this“recruiter” would target desperate folks and promise them anything and tell themwhatever he or she thought they wanted to hear. After all that is exactly theapproach taken in the instant proposal as evidenced by the following excerpt.The applicant is desperate to justify the $500,000 investment amount because ofthe other widely held myths that the mere association with a Regional Centerguarantees Immigrant Visa approval AND automatically qualifies at the $500,000investment level. Neither is true but those “myths” persist because ofunscrupulous foreign-based (not necessarily foreign) recruiters who act withimpunity and out of the reach of the U.S. authorities. “.... The importance of attracting investment dollars to rural areas is apparent from congressional mandates of a lower minimum investment amount for rural areas and we do not contest the importance of investing in rural areas. That said, it is still the applicants burden to provide a business plan explaining how the regional center will create the necessary employment in rural areas and high unemployment areas (defined at 8 C.F.R. § 204.6(e)) as claimed. Moreover, counsel acknowledges that only eight of Nevadas 17 counties qualify as "rural" under the definition of that term at 8 C.F.R.§ 204.6(e). Thus, it is the applicants burden to demonstrate how it will select investments in the non-rural counties that are also included in the requested regional center geographic area. Page 4 of 6
  5. 5. The analysis goes on to discuss the advantages of clusters for rural economic development in Nevada. Once again, the proposed regional center includes nine counties that are not rural as defined at 8 C.F.R. § 204.6(e). If the applicant wants to include those counties in the regional center, it must provide an economic analysis that encompasses the non-rural counties as well. The analysis does not explain how the alien investment limited partnerships would structure their investments in individual projects. For example, the analysis does not indicate whether they would provide loans to fund the project, would purchase an equity interest in the project or some other means. It would seem that such information is vital to the type of "general proposal" contemplated by Congress.”I do appreciate AAO’s discussion about “exemplars” in this decision. I haverecently written an essay which was published on this topic so will not expoundupon it again here. Instead, I will just provide an excerpt from AAO’s discussion inthis decision. “The petitioner also included four "exemplar" projects. These projects include a greenhouse, an outlet [mall] and hotel, a solar energy research facility and an investment in an existing helicopter transport company for development on its land. We accept that these are hypothetical projects that do not represent the actual projects in which the aliens will invest. Nevertheless, it remains that these hypothetical projects must be sufficiently detailed and credible pursuant to 8 C.F.R. §§ 204.6(m)(3)(iv) and (v) if USCIS is to approve the regional center proposal.”AAO then thoroughly dissected the information which it was provided and tore itto shreds. It looks like it was rather easy to shred this “proposal”. Here are a fewzingers from the decision. “.... While a general proposal as contemplated by Congress may include hypothetical plans, they may not rely on investment costs and direct employment numbers that have no basis in reality....” “.... Once again, USCIS is not requiring the applicant to make up numbers but rather to provide a realistic estimate of the hotel size that could be constructed with the funds remaining after constructing the outlet. Otherwise the direct employment projections and. therefore, the indirect and induced employment projections, are meaningless.” “The proposal states that the EnviroSun research and development project would cost approximately $12 million and create 55 manufacturing jobs and 32 research and development jobs. The director questioned the source of these estimates. On appeal, counsel asserts that if a plan for this project existed, the applicant would have submitted it. Counsel asserts that the director provides no basis for questioning the above numbers. We acknowledge that the EnviroSun project was only submitted as a "hypothetical." The proposal, however, would have been bolstered by providing an Page 5 of 6
  6. 6. example of a similar completed project with similar costs and job requirements or some other basis for reaching these estimates.”All the number submitted were found to be way out of sync with anythingcomparable found in the real world. They were all fantasy or way off base andeven the ones that were identified were taken and presented out of context. Inaddition, the proposal was sort of “all over the place” (vague) about the concepts ofjob “preservation” in a “troubled business” vs. “expansion of an existing business”.Here is part of that exchange. In the request for additional evidence. the director inquired as to whether the [REDACTED] intended to rely on job preservation in a troubled business or new jobs through the expansion of an existing business. In response. counsel states: If [the applicant] selects[REDACTED] to be funded through [REDACTED], [REDACTED] will likely be treated by [the applicant] as both a "troubled business" and an "expansion of an existing business" but not be submitted to the [director] for pre-approval until a formal accounting statement is ordered to determine for certain that it is a "troubled business." * * * * * On appeal, counsel asserts that the applicant should be able to count jobs saved at a troubled business in addition to those created through an expansion of a troubled business. We concur with counsel insofar as the applicant need not demonstrate that [REDCATED] is a troubled business at this stage because the applicant is not yet seeking approval for this project as an exemplar. Nevertheless, it remains of concern that the proposal lacks any discussion of the amount of investment that might be required in this project or the type of jobs that might be saved or created.Please notice that what the applicant’s Counsel insists on referring to as “pre-approval” is in reality viewed by USCIS and AAO as an “exemplar”. In thiscontext, “exemplar” means a dummy I-526 filed as an I-924 amendmentapplication for a “specific project”. This dummy I-526 would contain the Matter ofHo-compliant Business Plan (BP) and an Economic Analysis (EA) deriving inputcategories and/or actual data from that BP based on the approved “reasonablemethodologies” previously examined in the I-924. Get it?I would enjoy any comments that anyone cares to offer.E-mail: joseph.whalen774@gmail.com Page 6 of 6