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Finally, in a decision posted as JUL092015_01K1610.pdf, AAO began to address
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18 MONTHS TO MAKE A 180 DEGREE TURN--AAO Seems to Have Seen the Light Regarding the Competencies for EB-5 Regional Centers

Published in: Investor Relations
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  1. 1. Page 1 of 4 18 MONTHS TO MAKE A 180 DEGREE TURN By Joseph P. Whalen (Saturday, September 12, 2015) Let’s compare these two AAO non-precedential Appeal Dismissals of I-924s. In a dismissal posted at this link: FEB212014_01K1610.pdf, AAO declined to tackle an issue that is near and dear to my heart. That issue relates to the competency of Regional Center applicants. In other words, I want applicants to demonstrate their knowledge, skills, and abilities (KSAs) to operate a Regional Center and provide services to their EB-5 investors. When they were presented with the issue as one of multiple bases for denial, AAO affirmatively and consciously chose not to address this issue. Here is what they wrote. “The director denied the application, determining the following: 1. The applicant was not an economic unit on the date it filed the proposal; 2. The proposal failed to sufficiently project job creation through the submission of business plans and an economic impact analysis; 3. The proposal did not explain how the applicant would promote economic growth within the selected geographic area or have a positive impact on the regional or national economy; 4. The record lacked a sufficient promotional and recruitment plan, and evidence that the regional center would perform adequate administrative oversight.” Id. at 2 * * * “Finally, with respect to the director's conclusion that the regional center proposal does not demonstrate that if USCIS approves and designates the applicant as a regional center, the regional center will provide administrative oversight, counsel notes that the applicant has submitted a "pro forma" Form I-924A Supplement and asserts that this submission demonstrates its ability to update USCIS on its activities in the future. The director determined that the proposal was deficient because it did not demonstrate how the regional center would maintain its approval by demonstrating its administration, oversight and monitoring of investment activities under its sponsorship. See 8 C.F.R. § 204.6(m)(6) (requiring that a regional center annually update USCIS with information demonstrating that it continues to promote economic growth, improved regional productivity, job creation, or increased domestic capital investment in the approved geographic area). As the application may not be approved on the other grounds the director identified, the AAO need not determine whether 8 C.F.R. § 204.6(m)(6) imposes evidentiary requirements on an applicant when it applies for designation as a regional center.” Id. at 10 I have previously written on the topic of an I-924 applicant’s KSAs because I feel that it is necessary to justify those huge “administrative fees” of $50,000 to $100,000 per EB-5 investor. The success or failure of an investor’s future request to lift conditions which will arise years away, will hinge on RC diligence in collecting data and evidence during the course of the investment. Without the evidence of proper use of funds and of meeting conditions precedent to justify prior job creation projections, I-829s are denied.
  2. 2. Page 2 of 4 Finally, in a decision posted as JUL092015_01K1610.pdf, AAO began to address the issue of “administrative oversight” and the need for a “business plan” for running the Regional Center itself. Here is what AAO had to say in this more recent case. “The chief denied the application, determining that the applicant did not submit a business plan for the regional center or provide any evidence of the regional center's administrative oversight. On appeal, the applicant submits a brief with additional documentation.” Id. at 2 * * * “I. ANALYSIS A. The Regional Center's Business Plan The regulation at 8 C.F.R. § 204.6(m)(3) requires the regional center applicant to submit a detailed proposal for the regional center rather than a general or hypothetical proposal. For instance, the proposal must clearly describe how the regional center focuses on a geographical region of the United States and how it will promote economic growth through increased export sales, improved regional productivity, job creation, and increased domestic capital investment. 8 C.F.R. § 204.6(m)(3)(i). In addition, the proposal must provide in verifiable detail how jobs will be created directly through increased exports. 8 C.F.R. § 204.6(m)(3)(ii). 1 Furthermore, the proposal must provide a comprehensive statement regarding the amount and source of capital which has been committed to the regional center, as well as a description of the promotional efforts taken and planned by the sponsors of the regional center. 8 C.F.R. § 204.6(m)(3)(iii). Moreover, the proposal must contain a thorough prediction regarding the manner in which the regional center will have a positive impact on the regional or national economy in general. 8 C.F.R. § 204.6(m)(3)(iv). Finally, the proposal must be supported by economically or statistically valid forecasting tools. 8 C.F.R. § 204.6(m)(3)(v).” Id. at 3-4 * * * “B. Administrative Oversight To ensure that a regional center continues to meet the requirements of section 610(a) of the Appropriations Act, as amended, the regulation at 8 C.F.R. § 204.6(m)(6) requires that the regional center provide USCIS with updated information by filing Form I-924A Supplement (Form I-924A) to demonstrate that the regional center continues to promote economic growth, including increased export sales, improved regional productivity, job creation, and increased domestic capital investment. The chief determined that the applicant did not submit any evidence of administrative oversight to determine the regional center's ability to monitor the immigrant investment activities in a manner that would allow the regional center to be fully responsive to the yearly information collection requirements of Form I-924A. The applicant's brief states that the { } "makes clear that the procedures have been laid out for { } to comply with the requirements of 8 CFR [§] 204.6(m)(6)." As indicated above, page two of the { } indicates that the president and vice president will "ensure that all necessary oversight is performed." In addition, the { } asserts that the president and vice president will hire bookkeepers, outside accountants, and a certified public account (CPA) to 1 It must be stated for the record that these regulations have not kept pace with statutory changes. The importance of exports changed and became optional instead of mandatory.
  3. 3. Page 3 of 4 prepare income and tax documents. Further, the { } asserts that although no firms have been retained for any of these purposes, it has been "in regular contact with many capable bookkeepers, accountants, and CPA's in and around the { }" The { } does not include specific, credible information as to how the applicant will collect information to perform the administrative oversight of the regional center. There is no indication of any budgeted funds to pay for the employment of financial consultants and employees or any other overhead costs and staffing needs. Although the { } makes general statements, it does not explain how it will monitor regional productivity, job creation, and domestic capital investment. Accordingly, for the reasons stated above, the applicant has not established that the regional center would be able to comply with the yearly reporting requirements set forth at 8 C.F.R. § 204.6(m)(6).” Id. at 6-7 While the above excerpts are a nice beginning, they fall far short of explaining what a decent Regional Center really needs to do in order to be effective. I once again feel a need to get up on my soapbox and expound that Regional Center Designation is in fact, licensure. The application needs to be treated like any other complex license application. USCIS and AAO have limited experience with license applications. That said, they are not without anything to draw upon. The agency has experience in this area from only one other form, I-905, Application for Authorization to Issue Certification for Health Care Workers. In addition, there is one AAO non-precedent posted online as: Nov092006_01M4212.pdf. In that single case, AAO recognized this request to obtain the agency’s permission to provide services to aliens as a request for licensure. “In the space on the I-905 application labeled "Occupations for which you are seeking authorization" the applicant entered, “{ } is one of the partner and member [sic] of evaluation team. We need approval of all medical profession." The applicant did not otherwise state the medical positions it is seeking licensure to certify and did not demonstrate that its evaluators are competent to certify the educational credentials of those medical professionals seeking such certifications.” Id. at 7. Perhaps if someone has the time to devote to tracing this theme through the Regional Center Decisions that are available, a more comprehensive framework could emerge. Or maybe not. I think that the I-924 instructions are more useful than the regulations on this particular issue. They state, in pertinent parts: The business plan should also identify any and all fees, profits, surcharges, or other like remittances that will be paid to the regional center or any of its principals or agents through EB-5 capital investment activities. …………….
  4. 4. Page 4 of 4 Provide a detailed description of the past, current and, future promotional activities for the regional center. Include a description of the budget for this activity, along with evidence of the funds committed to the regional center for promotional activities. Submit a plan of operation for the regional center which addresses how investors will be recruited and how the regional center will conduct its due diligence to ensure that all immigrant investor funds affiliated with its capital investment projects will be obtained from lawful sources. Provide a general prediction which addresses the prospective impact of the capital investment projects sponsored by the regional center, regionally or nationally, with respect to increases in household earnings; greater demand for business services, utilities, maintenance and repair; and construction both within and without the regional center. The application must fully describe and document the organizational structure of the regional center. In addition, it is helpful for the regional center to show that the capital investment offering instruments, business structure, and operating agreements of the proposed commercial enterprises that will be affiliated with the regional center are compliant with the EB-5 statutory and regulatory requirements, as well as the binding EB-5 precedent decisions. I must admit my bias towards using these form instructions. They are based on the “unofficial” “How to Apply” instructions that I wrote when I worked at USCIS as the Regional Center adjudicator before there was a form or fee. When the I-924 was created and Regional Center adjudications went to CSC, adjudicators became too demanding, too rigid, and unrealistic. After harsh criticism and backlash, the pendulum swung too far into the realm of “general proposals”. That swing allowed incompetence to find its niche. Such “low-balling” has to stop. Solid KSAs are necessary for Regional Center licensure. The recent “culling” of the lame Regional Centers following the annual demonstration of competence vs. incompetence and activity vs inactivity (I-924A filings) should reinforce the need to demand more about these basics/competencies up-front. What do you think?